Southern District of New York
Press releases recorded for this federal judicial district.
Former President of Guatemala, Alfonso Portillo, Pleads Guilty in Manhattan Federal Court to Laundering Millions of Dollars Through United States BanksRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALFONSO PORTILLO, the former President of Guatemala, pled guilty today in Manhattan federal court to 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. Portillo pled guilty to the sole charge in the Indictment before United States District Judge Robert P. Patterson.
Manhattan U.S. Attorney Preet Bharara said: “Former President Alfonso Portillo may have thought his position of power prevented him from having to answer for accepting multi-million dollar bribes to shape his country’s foreign policy, for embezzling money intended to benefit the Guatemalan people, and for using U.S. banks to launder the ill-gotten funds. But he was wrong. With his guilty plea today, Portillo now stands convicted in an American court for his criminal conduct. This Office will aggressively pursue and prosecute individuals, irrespective of their position or title, if they engage in violations of U.S. laws.”
According to the Indictment and PORTILLO’s guilty plea allocution today:
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 them 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. According to PORTILLO, 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.
PORTILLO, 62, pled guilty to one count of conspiracy to commit money laundering. He faces a maximum term of 20 years in prison and a maximum fine of the greater of $500,000, or twice the value of the monetary instruments or funds involved in the money laundering transactions. PORTILLO will be sentenced by Judge Patterson on June 23, 2014, at 4:00 p.m. 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 outstanding investigative work of the New York Field Office of the Internal Revenue Service, Criminal Investigation, the Drug Enforcement Administration’s (“DEA”) New York Organized Crime Drug Enforcement Strike Force – which is comprised of 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 this 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.
U.S. v. Alfonso Portillo Indictment
Manhattan U.S. Attorney Files Civil Rights Lawsuit Against Major Real Estate Developers and Architects to Remedy Pattern and Practice of Inaccessible Design and Construction of New York City Apartment BuildingsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States filed a federal civil rights lawsuit in Manhattan federal court alleging that RELATED COMPANIES, INC. (“RELATED”), a major real estate developer based in New York City, has engaged in a pattern and practice of developing rental apartment buildings that are inaccessible to persons with disabilities. The suit alleges that RELATED, along with its affiliates TRIBECA GREEN LLC and BPC GREEN LLC, and two architecture firms, ROBERT A. M. STERN ARCHITECTS, LLP, (the “STERN FIRM”) and ISMAEL LEVYA ARCHITECTS, P.C. (the “LEVYA FIRM”), designed and constructed One Carnegie Hill and Tribeca Green, two rental complexes in Manhattan with more than 750 units in total, in violation of the design and construction provisions of the federal Fair Housing Act. These provisions of the Fair Housing Act have been in effect since March 1991. The suit further alleges that the inaccessible conditions at One Carnegie Hill and Tribeca Green demonstrate a pattern and practice of discriminatory conduct by RELATED, which may result in inaccessible conditions at RELATED’s numerous other rental properties in New York City and elsewhere, and that, unless RELATED’s discriminatory practices are enjoined, the inaccessible conditions at One Carnegie Hill and Tribeca Green will likely be repeated in current projects, including the Hudson Yards luxury rental complex development.
Manhattan U.S. Attorney Preet Bharara said: “We will not allow developers and architects who deprive people with disabilities of accessible housing to evade the consequences of their failure to comply with clear, long-standing federal civil rights laws. When developers demonstrate an unwillingness to design and construct accessible housing in accordance with federal law, this Office will not hesitate to use its enforcement tools to compel the developers to make both their preexisting and future constructions accessible.”
According to the allegations contained in the Complaint and public information:
RELATED is one of the largest developers of rental housing in New York City. In addition to One Carnegie Hill and Tribeca Green, RELATED has developed numerous other high-profile rental complexes in New York City, including MiMA, 1 MiMA Tower, The Caledonia, and The Tate. Since 2010, Related also has been a co-developer for the Hudson Yards complex in Manhattan, which is expected to include a mixed rental-condominium tower at 15 Hudson Yards.
RELATED has engaged in a pattern and practice of developing its rental properties without regard to their accessibility to people with disabilities. For example, at One Carnegie Hill, which is located on Manhattan’s Upper East Side, RELATED designed and constructed a 475-unit rental complex with scores of inaccessible conditions, which include steps and excessively high thresholds that interfere with accessible routes in the common areas and within individual units; kitchens that lack sufficient width for maneuvering by people in wheelchairs; electrical outlets and mailboxes that are not fully usable by people in wheelchairs; and bathrooms that lack sufficient clear floor space for people in wheelchairs to maneuver. One Carnegie Hill was completed in 2006, 15 years after the accessible design and construction requirements in the Fair Housing Act came into effect.
Similarly, RELATED caused scores of inaccessible conditions at Tribeca Green, a 278-unit rental complex that RELATED designed and constructed in lower Manhattan. Those conditions include excessively high thresholds that interfere with accessible routes in the common areas and within individual units; bathroom fixtures that prevent installation of grab bars; doorways in the common areas that lack sufficient clearance; kitchens that lack sufficient width for maneuvering by people in wheelchairs; trash rooms that lack accessible hardware; electrical outlets and mailboxes that are not fully usable by people in wheelchairs; and bathrooms that lack sufficient clear floor space for people in wheelchairs to maneuver. Tribeca Green was completed in 2005, 14 years after the accessible design and construction requirements in the Fair Housing Act came into effect.
To ensure that RELATED’s current and future residential housing developments are accessible to people with disabilities and to redress its history of non-compliance with the Fair Housing Act, the United States seeks a court order enjoining RELATED from designing and constructing multi-family housing, such as 15 Hudson Yards, without the accessibility features required by federal law and requiring RELATED to retrofit the inaccessible conditions at all the rental properties it has developed to make them accessible. The United States also seeks damages for persons harmed by RELATED’s unlawful practices, and a civil penalty to vindicate the public interest.
In addition, the United States asserts claims against the STERN and LEVYA FIRMS based on their inaccessible designs for One Carnegie Hill and Tribeca Green, respectively. Specifically, the United States seeks to enjoin these architectural firms from designing multi-family housing without the accessibility features required by federal law, as well as damages for persons harmed by their inaccessible designs and civil penalties.
This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Li Yu, Carina H. Schoenberger, and Emily E. Daughtry are in charge of the case.
U.S. v. Related Companies, Inc. Complaint
Three Defendants Sentenced in Manhattan Federal Court for Roles in Immigration Asylum Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SONG LUO, ZEYUAN WANG, and YONG ZHANG were sentenced in Manhattan federal court in connection with their roles in a scheme to commit immigration fraud by creating and submitting applications for political asylum on behalf of Chinese nationals that contained false stories of persecution purportedly suffered by these applicants. LUO, WANG, and ZHANG were each sentenced to three months in prison. The defendants each previously pled guilty to one count of conspiring to commit immigration fraud, and were sentenced today by U.S. District Judge John G. Koeltl.
Manhattan U.S. Attorney Preet Bharara said: “As part of the immigration fraud scheme, Song Luo, Zeyuan Wang, and Yong Zhang aided others in exploiting this country’s asylum laws by coaching and assisting them to lie on their applications. The sentences imposed on the defendants today ensure that they will be punished 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:
LUO, WANG, and ZHANG worked as paralegals at a law firm located at 305 Broadway, New York, New York, and also did work for other law firms. As part of the scheme, LUO and ZHANG coached applicants on how best to portray their false persecution stories to asylum officers interviewing each applicant for political asylum. WANG assisted in the creation and submission of applications containing the false persecution stories.
In addition to the prison terms, LUO, 35, of Ridgewood, New York, WANG, 33, of Brooklyn, New York, and ZHANG, 50, of Flushing, New York, were also each ordered to pay $1,000 fines.
LUO, WANG, and ZHANG 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 United States Citizenship and Immigration Services (“USCIS”). To date, 30 defendants have been charged with participating in nine separate but overlapping immigration fraud schemes in New York City, including eight lawyers. Twenty-five of these defendants have been convicted for their roles in these schemes.
Mr. Bharara praised the investigative work of the FBI and USCIS.
The prosecution is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Brian Blais and Robert Boone are in charge of the prosecution.
New York Man Sentenced in Manhattan Federal Court to 61 Months in Prison for Fraudulent Investment SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that S. GEORGE MILTER was sentenced today in Manhattan federal court to 61 months in prison for participating in an investment scheme that defrauded foreign investors out of nearly $1 million. As part of the scheme, investors were lured with false promises that their funds would be safely invested in the U.S. financial markets through a legitimate broker-dealer. Instead, the money was misappropriated, used to pay certain expenses, and transferred to other entities and individuals, including MILTER and his family. MILTER pled guilty in November 2013 to one count of conspiracy to commit wire fraud and was sentenced by U.S. District Judge Katherine B. Forrest.
Manhattan United States Attorney Preet Bharara said: “Mr. Milter deliberately deceived investors, diverted their funds to members of his family and himself, and then lied when questions were asked. The sentence Judge Forrest imposed today ensures that Milter will spend substantial time behind bars paying for his fraud.”
According to the court filings and statements made in court:
MILTER held himself out as a President and Chief Executive Officer of Lempert Capital Management, Ltd., a corporation purportedly incorporated in the Cayman Islands, and Chief Executive Officer of Lempert Brothers, which was a registered broker-dealer. Starting in approximately 2005, foreign investors were lured into sending nearly $1 million to Lempert Capital’s purported management company Lempert Brothers under the pretense that those funds would be invested in the U.S. financial markets by Lempert Brothers To induce investors into wiring funds, among other false promises, MILTER told investors that the funds would be safeguarded, and that if the value of the funds dropped more than 20%, the money would be frozen and all remaining funds available for return to investors. In fact, the nearly $1 million of investor funds were misappropriated and diverted to, among other things, MILTER’s family and himself.
To keep the scheme going, MILTER sent fraudulent monthly account statements to the investors. These statements falsely reflected that the investors’ funds were invested and earning substantial income. When investors attempted to withdraw funds from their accounts, MILTER made additional false and fraudulent representations as to why the funds could not be returned when requested. For example, investors falsely were told that their money was illiquid because it had been invested in various companies that had not yet gone public.
In addition to the prison sentence of 61 months, Judge Forrest sentenced MILTER, 35, of New York, New York, to three years of supervised release and ordered him to pay a special assessment of $100. Judge Forrest also ordered restitution in the amount of $946,509, and forfeiture of the same amount, which amount represents the crime proceeds.
MILTER’s co-defendant Cliffe R. Bodden, 50, previously pled guilty and currently is serving his sentence of 74 months in prison.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecution.
Westchester Registered Sex Offender SentencedTo 19 and ½ Years in Prison for Attempting to EnticeA Minor to Engage in Sexual ActivityRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ROBERT OKAMURA, 46, was sentenced to 19 years and 7 months’ imprisonment by United States District Judge Edgardo Ramos for his attempted enticement of a minor to engage in sexual activity. Judge RAMOS also imposed a 10-year term of supervised release to follow the imprisonment.
According to documents filed in this case and statements made in related court proceedings:
On November 27, 2011, OKAMURA, a registered sex offender on supervised release from an offense involving the repeated sexual abuse of a child, responded to an online advertisement placed by law enforcement and designed to appeal to pedophiles. At the time he was living in a shelter in Valhalla, Westchester County. Following a series of chats with an undercover agent posing as a pedophile, the undercover agent “introduced” OKAMURA to “Allison,” who purported to be a 15-year old girl but was, in fact, the same undercover agent. Following a series of explicit chats in which OKAMURA described the sexual acts he wanted to perform on the girl, OKAMURA made a plan to meet the girl at a hotel so that he could engage in sexual activities with her. On December 14, 2011, OKAMURA went to the hotel to meet the girl and was arrested.
OKAMURA pleaded guilty on July 18, 2013. At his guilty plea proceeding, OKAMURA admitted that he communicated via the internet with a person he believed was a 15-year-old girl and persuaded her to meet him for the purpose of engaging in sexual activity.
In imposing the sentence, Judge RAMOS underscored the seriousness of the offense. Judge RAMOS stated, “This shocking and flagrant course of conduct speaks to either a basic lack of respect for authority or an uncontrollable compulsion or both.”
Mr. Bharara praised the efforts and assistance of the Westchester County District Attorney’s Office and U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”).
This case is being handled by the White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
Psychologist Found Guilty in Manhattan Federal Court of Mail and Health Care Fraud Charges in Connection with Multi-Year, No-Fault Automobile Insurance Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JAY SEITZ, a psychologist licensed to practice in the State of New York, was found guilty yesterday in Manhattan federal court of one count of conspiracy to commit mail fraud and health care fraud, one count of mail fraud, and one count of health care fraud in connection with his participation in a multi-year, no-fault automobile insurance fraud scheme. SEITZ was convicted after a six-day jury trial presided over by U.S. District Judge Sidney H. Stein.
Manhattan U.S. Attorney Preet Bharara said: “Jay Seitz was found by a unanimous jury not only to have betrayed the ethical obligations of his profession but to have committed fraud. His scheme reaped millions of dollars in unjust compensation. Now he may pay for that with the loss of his liberty.”
According to the Indictment filed in Manhattan federal court, other court documents, and statements made during related court proceedings:
Between 2006 and 2008, SEITZ purported to provide psychological services to patients at medical clinics located in the Bronx and Brooklyn, New York. SEITZ signed treatment notes that described the diagnoses he purportedly made and the services he purportedly provided to patients treated at these clinics. These treatment notes were used to generate claims that were submitted to no-fault insurance companies for reimbursement. These claims reflected that the psychological services for which reimbursement was sought were provided by SEITZ. In fact, SEITZ did not diagnose or treat the patients on whose behalf claims were submitted to no-fault insurance providers. Although the patients at the clinics with which SEITZ was associated sometimes received psychological screening and treatment, this treatment was provided by individuals who were not licensed psychologists or licensed social workers. In addition, the treatment duration reflected on the claims forms often exceeded the actual duration of services provided. No-fault insurance providers reimbursed over $3 million of claims submitted on behalf of two professional corporations associated with SEITZ, for patients purportedly treated by SEITZ.
SEITZ, 62, of New York, New York, faces a maximum sentence of 20 years in prison for each of the three counts on which he was convicted, and is scheduled to be sentenced by Judge Stein on June 18, 2014. 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 investigative work of the Federal Bureau of Investigation.
The case is being handled by the Office=s Organized Crime Unit. Assistant U.S. Attorneys Brian Blais and Kristy Greenberg are in charge of the prosecution.
U.S. v. Margaret Kinder and Jay Seitz Indictment
Manhattan U.S. Attorney and EPA Announce Agreement with Eastman Kodak Company for Clean up of Rochester, New York, Business Park and the Genesee RiverRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Judith A. Enck, Regional Administrator of the U.S. Environmental Protection Agency, announced today that the United States has entered into settlement agreements with EASTMAN KODAK COMPANY (“KODAK”) that resolve environmental claims and liabilities asserted by the United States against Kodak. After Kodak filed for Chapter 11 bankruptcy protection on January 19, 2012, the United States filed a proof of claim asserting Kodak’s responsibility for significant environmental claims and clean-up obligations. The first settlement resolves environmental liabilities at the Eastman Business Park in Rochester, New York, which is a hazardous waste site regulated under the Resource Conservation and Recovery Act (“RCRA”). The second settlement resolves liabilities under the Comprehensive Environmental Response, Compensation and Liability Act (also known as the Superfund law) at the Mercury Refining Superfund site in Colonie and Guilderland, New York, and the Fair Lawn Well Field Superfund site in Fair Lawn, New Jersey.
U.S. Attorney Preet Bharara said: “Today’s settlements will lead to the clean-up of more than a century of pollution by Kodak at the Eastman Business Park and Rochester’s Genesee River, while clearing the way for economic development at the Eastman Business Park. Kodak will also pay for contamination it caused at Superfund sites in New York and New Jersey. These resolutions demonstrate the commitment of the United States to prevent even bankrupt companies from escaping responsibility for environmental contamination.”
EPA Regional Administrator Judith A. Enck said: “The proposed legal agreements will provide funding to clean up the toxic legacy that Kodak has left in Rochester. They are designed to protect public health and the environment, including cleaning up the Genesee River, while supporting the creation of scores of much needed new jobs in Rochester. I encourage the public to comment on the agreement.”
Three agreements were filed in bankruptcy court today. Two of them – a settlement agreement between the United States and Kodak and a related funding agreement between the United States and the New York State Department of Environmental Conservation (“DEC”) – relate to environmental clean-up at the Eastman Business Park and the Genesee River. Pursuant to these agreements, Kodak commits to fund a trust with $49 million for clean-up at the Eastman Business Park site and the Genesee River; DEC agrees to fund any additional costs of clean-up between $49 million and $99 million; and Kodak and DEC each agree to pay half of any costs above $99 million. As described in the settlement agreement, EPA and DEC have also entered a publicly available agreement that sets forth a plan for the investigation of contamination in the Genesee River and the selection and implementation of a clean-up remedy. These arrangements build upon and strengthen an agreement that Kodak and DEC originally proposed to the bankruptcy court in June 2013. The Eastman Business Park settlement agreement also provides that Kodak will pay the United States more than $4 million, and an additional amount pursuant to the terms of Kodak’s plan of reorganization, to satisfy environmental liabilities for damages to natural resources in the Genesee River.
Since 1891, the Eastman Business Park has been Kodak’s primary photographic product manufacturing facility. In the course of Kodak’s operations, releases of hazardous waste occurred at the business park and into the nearby Genesee River. Kodak is responsible under federal environmental law for the management of this hazardous waste and clean-up of historic contamination at the site, and it is also responsible for damages for injury to natural resources in the Genesee River. Today’s agreements relating to the Eastman Business Park ensure that Kodak’s legacy of contamination will be addressed. In addition, these agreements will promote economic development at the Eastman Business Park by providing opportunities for new businesses to move to the park without bearing the burden of Kodak’s historic contamination.
The third agreement that the United States filed today is a settlement agreement between the United States and Kodak relating to Kodak’s environmental liabilities at the Fair Lawn Well Field Superfund Site and the Mercury Refining Superfund Site. Under this agreement, Kodak will provide the United States with $2,000,000 for the Fair Lawn site and approximately $750,000 for the Mercury Refining site, plus additional amounts for each site pursuant to the terms of Kodak’s plan of reorganization.
The settlement agreements will be filed with the Bankruptcy Court for a period of at least 30 days before their entry to provide public notice and to afford members of the public the opportunity to comment on the settlement agreements. Written comments must be submitted within 30 days of the publication of notice of the settlement agreements in the Federal Register and be emailed to [email protected] or mailed to Assistant Attorney General, U.S. DOJ – ENRD, P.O. Box 7611, Washington, D.C. 20044-7611.
Mr. Bharara praised the efforts of EPA and the Environment and Natural Resources Division of the U.S. Department of Justice in this case.
Assistant United States Attorneys Robert William Yalen and Christine S. Poscablo are in charge of the case, which has been handled by the Office’s Environmental Protection Unit and Tax and Bankruptcy Unit.
Former Accounting Firm Partner Sentenced in Manhattan Federal Court to 54 Months in Prison for Stealing Nearly $4 Million in Client PaymentsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CRAIG B. HABER, a former partner of a global accounting firm, was sentenced today in Manhattan federal court to 54 months in prison for stealing nearly $4 million in client payments intended for the accounting firm. HABER pled guilty in August 2013 to one count of mail fraud before U.S. District Judge P. Kevin Castel, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Craig Haber abused his position as partner of an accounting firm, stealing millions of dollars in client payments to fund his own personal expenses, including the mortgage on his Manhattan apartment. Haber’s efforts to conceal his fraud failed and, with today’s sentence, he will pay for his fraud with time in a federal prison and the forfeiture of his ill-gotten gains, including his apartment.”
According to the documents filed in Manhattan federal court and statements made in related court proceedings:
From 1993 through July 2012, HABER was a partner at a global accounting firm headquartered in Chicago, Illinois, (the “Accounting Firm”) that provided a variety of auditing, accounting, and tax preparation services to businesses and individuals in the U.S. and abroad. HABER worked at the Accounting Firm’s office in New York, New York, and provided tax preparation and advisory services to clients of the Accounting Firm.
The Accounting Firm’s bills to clients ordinarily included payment instructions directing clients to pay the firm by wire transfer or by sending checks to its headquarters in Chicago. However, on multiple occasions from 2004 through July 2012, HABER sent bills to clients containing payment instructions directing them to send checks to him at the Accounting Firm’s New York, New York, office instead of the Chicago headquarters.
Upon receiving those checks, HABER deposited a number of them into a bank account that he had opened in the name of a sham business that was very similar to the name of the Accounting Firm. HABER opened the bank account specifically to receive checks from clients that were intended for the Accounting Firm. After depositing the clients’ checks into that account, HABER then transferred the money from that account to two personal bank accounts which he used to pay various personal expenses, including mortgage payments for his residence in New York, New York. In total, HABER stole nearly $4 million in client payments.
In addition to his prison term, HABER, 60, of New York, New York, was sentenced to two years of supervised release, and ordered to forfeit $3,970,000 in cash, his Manhattan apartment, and his brokerage account.
Mr. Bharara praised the outstanding investigative work of the United States Postal Inspection Service.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Joseph Facciponti is in charge of the prosecution.
Software Company Ceo Pleads Guilty in Manhattan Federal Court to $2 Million Securities Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROBERT KELLY, the Chief Executive Officer of Wwebnet, Inc. (“Wwebnet”), a software development company, pled guilty today in Manhattan federal court to securities and wire fraud charges. KELLY diverted for his own personal use over $2 million in investor proceeds that was intended for the development of a software program capable of transmitting music, videos, and movies over the Internet. He used the money to trade options, to pay his personal income taxes, and for other purposes unrelated to software development or other legitimate business expenses. KELLY was originally charged in September 2012, and he pled guilty today before United States District Judge Paul A. Crotty.
Manhattan U.S. Attorney Preet Bharara stated: “Robert Kelly took more than $2 million of investor money, obtained through promises that it would be invested in his company’s new technology and in growing the business, and instead, used it to make unsuccessful options trades and to pay for his own personal income taxes. With today’s plea, Kelly has admitted to stealing and spending innocent investors’ money.”
According to the charging documents and related court proceedings:
From 2004 through November 2008, KELLY solicited investors to send money to Wwebnet, Inc., and related companies by misrepresenting that the funds would be used to develop software for transmitting music, videos, and movies over the Internet. Instead of using the millions of dollars in investor proceeds that he obtained for legitimate business purposes, KELLY diverted a substantial portion of the money that he raised for his own financial benefit. For example, KELLY transferred at least $2 million in investor funds into his personal trading account in the Cayman Islands, which he used to make a series of unsuccessful options trades. KELLY also used nearly $100,000 that he received from investors to pay his federal and state personal income taxes. At the same time that he was using investors’ money for his own personal benefit, KELLY falsely told his software development team that he was unable to allocate adequate resources for software development and could do so only when he was able to raise money from investors. As a result, Wwebnet lacked the necessary funds to develop its core product and the company ultimately failed.
KELLY, 57, formerly of New York, New York, resides in Raleigh, North Carolina. He pled guilty to one count of securities fraud and one count of wire fraud, which together carry a total maximum term of 40 years in prison. KELLY also agreed to forfeit $2,111,600 and, separately, pay $2,111,600 in restitution. The sentencing before U.S. District Judge Paul A. Crotty is scheduled for July 17, 2014, at 3:00 p.m. 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 investigative work of the Federal Bureau of Investigation and also thanked the Securities and Exchange Commission for its assistance.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Benjamin Naftalis and Zachary Feingold are in charge of the prosecution.
U.S. v. Robert Kelly Indictment
French Citizen Pleads Guilty in Manhattan Federal Court to Obstructing Criminal Investigation into Alleged Bribes Paid to Win Mining Rights in GuineaRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Mythili Raman, the Acting Assistant Attorney General for the Criminal Division, announced today the guilty plea of FREDERIC CILINS, a French citizen, for obstructing a federal criminal investigation into allegations of bribes paid to secure certain valuable mining rights in the Republic of Guinea. CILINS was arrested in April 2013 and pled guilty today before United States District Judge William H. Pauley, III.
According to the allegations contained in the superseding information and other documents filed in Manhattan federal court:
CILINS sought to obstruct an investigation being conducted by a federal grand jury sitting in the Southern District of New York into potential violations of the Foreign Corrupt Practices Act (“FCPA”) and money laundering. The investigation related to allegations that a mining company with which CILINS was affiliated paid bribes to officials of a former governmental regime of the Republic of Guinea to win valuable mining concessions in the Simandou region of Guinea. During monitored and recorded phone calls and face-to-face meetings, CILINS agreed to pay substantial sums of money to induce a witness to, among other things, destroy documents and turn over documents to Cilins for destruction, knowing that such documents were being sought by the Federal Bureau of Investigation (“FBI”) and were to be produced before a federal grand jury. Cilins sought to induce the witness to sign an affidavit containing false statements regarding matters under investigation by the grand jury.
Cilins pled guilty to a one-count superseding information filed today, which alleges that Cilins sought to induce the witness to give him documents so that he could destroy them. According to the superseding information, those documents related to allegations concerning the payment of bribes to obtain mining concessions in the Simandou region of the Republic of Guinea and were sought by FBI agents. Cilins admitted as part of his guilty plea that he tried to induce the witness to leave the United States to avoid being questioned by the FBI about these allegations.
CILINS, 51, a resident of France, pled guilty to one count of obstructing a criminal investigation. He 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. CILINS is scheduled to be sentenced by Judge Pauley on June 27, 2014, at 2:00 p.m.
Mr. Bharara praised the outstanding efforts of FBI in the investigation, which he noted is ongoing. He also thanked the Justice Department’s Office of International Affairs and Office of Enforcement Operations for their assistance in the investigation
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Elisha J. Kobre and Trial Attorney Tarek Helou of the Fraud Section of the Criminal Division are in charge of the prosecution.
US v. Frederic Cilins Superseding Info S2 13 Cr 315 (WHP)
Statement of Manhattan U.S. Attorney Preet BhararaOn the Verdict in United States V. James Rosemond and Rodney JohnsonRead the Press Release
“We are gratified that the jury reached a unanimous verdict finding Rodney Johnson guilty of narcotics distribution and possession of firearms in connection with a drug conspiracy. As for the charges on which the jury was not able to reach a unanimous verdict, the Government’s contention remains that James Rosemond and Rodney Johnson are responsible for the murder of Lowell Fletcher. We are currently considering our options with respect to a retrial.”
Provider of Services for Special Needs Preschool Students Pleads Guilty in Manhattan Federal Court to Fraud ChargeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHEON PARK, owner and executive director of Bilingual SEIT, a government-funded provider of special education services and preschool programs to New York City preschool children, pled guilty today for his role in defrauding the federal, New York State, and New York City governments of millions of dollars. PARK pled guilty in Manhattan federal court before the U.S. District Judge J. Paul Oetken.
Manhattan U.S. Attorney Preet Bharara said: “Cheon Park has admitted his role in a criminal scheme to enrich himself by taking federal, state, and city funds intended for special needs children and diverting them for his own personal use. With today’s guilty plea, he now stands convicted of a federal crime and faces the prospect of a substantial prison term.”
According to the Information, an earlier Criminal Complaint, and statements made at court proceedings:
Between 2005 and 2012, PARK deliberately inflated both the amount of compensation Bilingual SEIT paid certain of its employees and contractors, and the type of work performed by certain employees on annual certified consolidated fiscal reports (“CFRs”) and financial statements submitted to the New York State Education Department (“NYSED”) and the New York City Department of Education (“NYCDOE”).
PARK owned and operated Bilingual SEIT from at least 2005 to 2012. During that time, Bilingual SEIT had a contract with the NYCDOE to provide publicly funded special education services and preschool programs to New York City schoolchildren aged three to five with physical, emotional, and/or developmental disabilities. Specifically, Bilingual SEIT received funding to provide: (1) special education itinerant teacher, commonly referred to as SEIT, services; (2) special education classes in a center-based setting for preschool students with special needs; (3) individual evaluations for preschool students with disabilities; and (4) physical, occupational, and/or speech therapy for preschool students who qualified for such services. As of September 2012, Bilingual SEIT operated out of five locations in Manhattan, Queens, and Brooklyn.
During the seven-year period that Bilingual SEIT was under contract with the NYCDOE, it claimed reimbursement for and received approximately $94.5 million in federal, New York State, and New York City funding to provide the services described above. In order to receive such money, on behalf of Bilingual SEIT, PARK was required to file a CFR supported by audited financial statements with the NYSED. The CFR and audited financial statements represented the costs that Bilingual SEIT had incurred the previous year and the justification for those costs, and included compensation Bilingual SEIT purported to pay its employees and contractors. Each year, PARK signed the certification pages for the CFRs filed with the NYSED, which relied on the CFR and audited financial statements in determining the amount of public funds to pay Bilingual SEIT per student for the services Bilingual SEIT provided to New York City preschool students.
Beginning in approximately June 2011, the New York State Comptroller’s office (the “Comptroller”) conducted an audit of Bilingual SEIT to determine whether the costs reported by Bilingual SEIT on the CFRs for the years July 2007 through 2009 were properly calculated, justified, and allowable under guidance issued by the NYSED. In July 2012, the Comptroller issued a report that concluded that nearly $1.5 million of the costs that PARK certified for the two-year audit period should have been disallowed, including money paid to 26 employees whose time and attendance could not be substantiated. As a result of the Comptroller’s report, the NYCDOE cancelled Bilingual SEIT’s classes and declined to renew its contract with Bilingual SEIT.
In fact, PARK engaged in several schemes designed to inflate the costs Bilingual SEIT represented it incurred, resulting in more public money for Bilingual SEIT, much of which, as set forth below, was kicked back to PARK. PARK fraudulently received funds from New York State and New York City to pay multiple individuals who performed little or no work for Bilingual SEIT. At PARK’s request and direction, these individuals then kicked back as much as 50% of the salary they fraudulently received from Bilingual SEIT to PARK. PARK also fraudulently received funds from New York State and New York City to deliberately overpay other individuals who worked for Bilingual SEIT. At PARK’s request and direction, these individuals also kicked back a portion of the overpayment to PARK on a regular basis.
Further, in addition to receiving kickbacks, PARK used Bilingual SEIT funds for his personal benefit in other ways. PARK arranged for Bilingual SEIT to pay his ex-wife and ex-sister-in-law for work they did not perform, and also arranged for Bilingual SEIT to pay for tutoring for PARK’s children and for a Bilingual SEIT employee to clean PARK’s home twice a week.
PARK, 46, of Manhasset, New York, pled guilty to one count of mail fraud, which carries a maximum term of 20 years in prison. He is scheduled to be sentenced by Judge Oetken on July 29, 2014, at 2:00 p.m. 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 investigative work of the Office of the State Comptroller, the Special Commissioner of Investigation for New York City’s Department of Education, the Office of Inspector General for the United States Department of Education. He also thanked the Queens County District Attorney’s Office for its assistance.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Paul Krieger, Rebecca Ricigliano, and Martin Bell are in charge of the prosecution.
U.S. v. Cheon Park Information
Manhattan U.S. Attorney Announces Medicaid Fraud Charges Against Postal Employee and SpouseRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas O’Donnell, the Special Agent in Charge of the New York Office of the United States Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), today announced charges against ALEXANDER KNOBEL, an employee of the United States Postal Service the (“Postal Service”), and his spouse, YANA MALKINA, for Medicaid fraud. The Complaint alleges that KNOBEL and MALKINA repeatedly submitted fraudulent documents to obtain and continue to receive Medicaid for themselves and their family, defrauding the Medicaid Program of nearly $100,000, and causing resources designed for low-income individuals to be diverted to themselves. The defendants were arrested this morning and are expected to be presented today before U.S. Magistrate Judge James L. Cott.
Manhattan U.S. Attorney Preet Bharara said: “Defendants like Alexander Knobel, a U.S. Postal Service employee, and his wife, Yana Malkina, who allegedly manipulate and exploit the Medicaid system, divert valuable resources from those who truly need the assistance. Such allegedly criminal conduct is particularly troubling when committed by an employee of the federal government.”
HHS-OIG Special Agent in Charge Thomas O’Donnell said: “Scammers who corruptly take advantage of the Medicaid system and deprive poor and vulnerable beneficiaries of the care and support they need, take note: the Office of Inspector General, New York Regional Office will continue to work aggressively to eliminate such schemes - and those who perpetrate them - from our health care system.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:
Medicaid is a largely federally-funded program in the United States designed to provide low-income families with affordable health care. In New York State, the Department of Health administers the Medicaid Program, and the New York City Human Resources Administration oversees the program and processes applications in New York City.
In late 2008, KNOBEL, who had been employed by the Postal Service since the spring of 2006, and MALKINA, his wife, who had been employed as a home attendant for several years, submitted an application for Medicaid on behalf of themselves and their children in which they falsely stated that no adult in the household was employed. Based on this fraudulent application, KNOBEL, MALKINA, and their children were approved to receive Medicaid. Each year thereafter, KNOBEL and/or MALKINA submitted renewals to continue to receive Medicaid for themselves and their family. Each annual renewal form, signed by KNOBEL and/or MALINKA, contained multiple false statements, including with respect to KNOBEL’s employment, MALKINA’s employment and income, and whether KNOBEL and MALKINA were able to obtain health insurance through their employers. Further, in summer 2010, KNOBEL and MALKINA purchased a home for $445,000, but in multiple subsequent renewals, KNOBEL and MALKINA falsely stated that they did not own their home.
KNOBEL, 37, and MALKINA, 37, both of Brooklyn, New York, are each 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 defendants will be determined by the judge.
Mr. Bharara praised the investigative work of HHS-OIG, and thanked the United States Postal Service, Office of the Inspector General, and the New York City Human Resources Administration for their assistance in this investigation, which he noted is ongoing.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorney Daniel C. Richenthal is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Alexander Knobel and Yana Malkina Complaint
Former New York City Comptroller Candidate Pleads Guilty in Manhattan Federal Court to Illegally Distributing Prescription PillsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that KRISTIN DAVIS, a former candidate for New York City Comptroller, pled guilty today in Manhattan federal court to illegally distributing prescription pills. DAVIS, who was arrested in August 2013, entered her plea today before U.S. District Judge Edgardo Ramos.
Manhattan U.S. Attorney Preet Bharara said: “Kristin Davis now stands convicted of illegally selling hundreds of highly-addictive and dangerous prescription pills in exchange for cash. Abuse of illegally distributed prescription pills is the fastest-growing drug problem in the country, and this Office will do everything in its power to help combat this public health epidemic.”
According to the Complaint, Superseding Information, other information in the public record, and today’s plea proceeding:
On multiple occasions from January 2013 to March 2013, DAVIS sold hundreds of prescription pills containing amphetamine, alprazolam, zolpidem, and carisoprodol to a person she knew from prior purchases and sales to be a drug dealer. Unbeknownst to DAVIS, the person was a cooperating witness (the “CW”) with the Federal Bureau of Investigation (“FBI”) and was equipped with a recording device. During these sales, DAVIS was recorded saying that the pills she was selling were “Ambien,” “Soma,” and “Xanax.” On a fourth occasion, in April 2013, DAVIS arranged for another individual to sell approximately 180 oxycodone pills to the CW.
There is an illegal market for all of the drugs DAVIS sold and assisted another to sell. Oxycodone is a powerful painkiller with a high potential for addiction and abuse, and it is often used as a substitute for, or adjunct to, other illegal drugs, such as heroin. Amphetamine is a psycho-stimulant, often referred to as “speed,” and it often used as a substitute for, or adjunct to, other illegal drugs, including methamphetamine and cocaine. Alprazolam is a psychoactive drug often used as a substitute for, or adjunct to, other illegal drugs, such as LSD, heroin or opiates. Zolpidem is a sedative/hypnotic drug often used as a substitute for, or adjunct to, other illegal drugs, including amphetamine, methamphetamine, cocaine, and MDMA (commonly known as ecstasy). Carisoprodol is a skeletal muscle relaxant often used in conjunction with painkillers and so-called “date rape” drugs.
DAVIS, 38, of New York City, pled guilty to one count of distributing and possessing with intent to distribute controlled substances, specifically alprazolam, zolpidem, and carisoprodol. 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. DAVIS is scheduled to be sentenced by Judge Ramos on July 25, 2014.
DAVIS was one of several people arrested as part of an ongoing joint investigation conducted by the FBI, the New York City Police Department ("NYPD"), and the U.S. Attorney’s Office into the unlawful distribution of prescription drugs containing controlled substances in and around New York City:
- Thomas Rock was arrested on July 10, 2013, for distributing and conspiring to distribute oxycodone and alprazolam. He pled guilty on February 24, 2014, before U.S. District Judge Paul A. Engelmayer to distributing oxycodone and alprazolam, and is scheduled to be sentenced by Judge Engelmayer on June 6, 2014.
- Eugene Kurochkin was arrested on July 11, 2013, for distribution of oxycodone, alprazolam, amphetamine, and zolpidem. He pled guilty on November 1, 2013, to distributing oxycodone, alprazolam, amphetamine, and zolpidem, and was sentenced by U.S. District Judge Robert W. Sweet on February 10, 2014, to 12 months in prison.
- Raoul Goldberger and Rebecca Teman were arrested on July 29, 2013, for distributing and conspiring to distribute amphetamine, oxycodone, and vicodin. Goldberger pleaded guilty on August 21, 2013, to distributing amphetamine and oxycodone, and is scheduled to be sentenced by U.S. District Judge Colleen McMahon on March 12, 2014. Teman pleaded guilty on November 12, 2013, before U.S. Magistrate Judge Henry B. Pitman to misbranding a prescription drug, and is scheduled to be sentenced by Judge Pitman on March 11, 2014.
- Erik Pichardo, who was referred to as “Individual-1” in the Complaint against DAVIS, was arrested in August 2013 for distributing oxycodone. He pled guilty on December 12, 2013, before U.S. District Judge Harold Baer to conspiracy to distribute oxycodone, and is scheduled to be sentenced by Judge Baer on April 10, 2014.
- David J. Wright was arrested on October 3, 2013, in connection with this investigation on charges of distributing oxycodone, amphetamine, and carisoprodol, which charges are pending. The charges against Wright are merely accusations, and he is presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the FBI. He also thanked the United States Department of Health and Human Services, Office of Inspector General, and the NYPD for their assistance in the ongoing investigation.
The cases are being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Daniel C. Richenthal, Kristy J. Greenberg, and Edward A. Imperatore are in charge of the prosecutions.
U.S. v. Kristin Davis Superseding Information
Dutchess County Orthopedic Surgeon SentencedIn White Plains Federal Court to 54 Months ForMultimillion Dollar Health Care Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DR. SPYROS PANOS, an orthopedic surgeon, was sentenced today in White Plains federal court before U.S. District Judge Nelson S. Roman to serve 54 months in prison for operating a long-running health care fraud scheme in which PANOS defrauded Medicare, the New York State Insurance Fund, and numerous private health insurance providers (the “Health Insurance Providers”) out of over $2.5 million by systematically lying about the nature and scope of the surgical procedures that he performed. In addition, PANOS was ordered to forfeit $5 million. He was ordered to surrender to start serving his prison term in 30 days.
Manhattan U.S. Attorney Preet Bharara said: “Dr. Panos’s fraud was extensive, costing millions of dollars to federal, state, and private health insurance providers when he billed for thousands of surgical procedures that he falsely described or did not perform at all.”
According to the Information and other documents filed in this case:
PANOS was a board certified orthopedic surgeon licensed to practice medicine in the State of New York who was part a medical group with offices in Dutchess County, New York, (the “Medical Group”) and performed orthopedic surgical procedures (“Surgical Procedures”) at hospitals in Poughkeepsie, New York. From at least 2006 through July 2011, PANOS maintained a high-volume orthopedic practice, which enabled him to carry out his fraud scheme on a large scale. Panos performed thousands of Surgical Procedures, and often as many as 20 or more in a single day, for which he and the Medical Group submitted claims in excess of $35 million to Health Insurance Providers. Health Insurance Providers paid the Medical Group in excess of $13 million on these claims.
To receive payments for Surgical Procedures from the Health Insurance Providers, PANOS was required to submit, and caused the Medical Group to submit, information to the Health Insurance Providers regarding the nature and details of the Surgical Procedures. With respect to many of the Surgical Procedures he performed, PANOS furnished, and caused the Medical Group to furnish, false information to Health Insurance Providers that resulted in the Health Insurance Providers paying the Medical Group at least $2.5 million more than PANOS and the Medical Group were entitled to receive based on the true nature and details of the Surgical Procedures PANOS performed. Among PANOS’s false representations were the following:
a. PANOS claimed he performed open surgeries, when in fact PANOS performed the surgeries arthroscopically;
b. PANOS claimed he used certain techniques and procedures during the course of the Surgical Procedures, when in fact PANOS did not, either because they were not medically necessary or because PANOS used other techniques and procedures that would have resulted in lower payments, if any, from the Health Insurance Providers; and
c. PANOS removed body tissue, known in the medical field as loose bodies, in excess of certain size criteria, when in fact PANOS either removed no loose bodies or removed loose bodies that were smaller than the thresholds set by the Health Insurance Providers for payment.
PANOS, was compensated handsomely -- during the years 2007 through 2011, he was paid over $7.5 million by the Medical Group, a number that was inflated as a result of his fraud scheme.
Beginning in or about December 2010, PANOS attempted to conceal his scheme by, among other things, falsely representing to the Medical Group that the Fraudulent Claims were the result of clerical errors.
PANOS, 45, of Hopewell Junction, New York, also agreed to the entry of a $5 million order of forfeiture against him As a result of his conviction, PANOS is subject to mandatory exclusion from participation in any federal health care program, including Medicare and Medicaid. Following the uncovering of the scheme, Panos surrendered his New York State medical license. Judge Roman ordered PANOS to serve two years of supervised release upon completion of his prison term.
Mr. Bharara praised the work of the United States Postal Inspection Service, the United States Department of Health and Human Services – Office of Inspector General, and the Federal Bureau of Investigation, and thanked the United States Department of Health and Human Services, Office of Counsel to the Inspector General, the New York State Insurance Fund, the New York Workers’ Compensation Board Office of the Fraud Inspector General, and the National Insurance Crime Bureau for their extraordinary assistance in the investigation.
This case is being handled by the White Plains Division. Assistant United States Attorneys Lee Renzin and Daniel Filor are in charge of the prosecution.
Talent Agent Pleads Guilty in Manhattan Federal Court to Stealing over Half A Million Dollars from Actor ClientsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that PETER STRAIN, a talent agent for film, television, and Broadway actors, pled guilty today in Manhattan federal court to stealing more than half a million dollars from his clients, which he used to purchase personal luxury retail goods and artwork, among other things. STRAIN was originally charged in November 2013, and he pled guilty today before United States District Judge George B. Daniels.
Manhattan U.S. Attorney Preet Bharara said: “Peter Strain repeatedly lied to his clients about the payments for their acting work so that he could use the money for himself, as it suited his needs – including for personal luxury retail items. With today’s plea, Strain has admitted to his fraud, and he will be punished for his conduct.”
New York FBI Assistant Director-in-Charge George Venizelos said: “Peter Strain was making the old saying of robbing one person to pay someone else come to life. In this case he was robbing his clients and then paying himself, lying all along the way to try to cover his tracks. Embezzling more than a half a million dollars from clients is a serious offense. FBI will continue to investigate and bring those to justice who seek to do business in such a deceitful way.”
According to the allegations contained in a Superseding Information filed in Manhattan federal court and statements made in public court proceedings:
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 his trust account on behalf of a particular client (“Client-1”), an actor who earned that money for work on a currently broadcast television series. However, STRAIN failed to remit approximately $500,000 of this money to Client-1, and diverted it for his own 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.
As STRAIN knew, his statements to Client-1 regarding the lawsuit were false. In truth, 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, and rather than use his own money, STRAIN withdrew $30,000 from an account held in trust for his clients (“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, 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, and as STRAIN well knew, 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 (“Client-3”), an actor who has appeared in several television shows, including a currently broadcast television series. 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.
STRAIN, 64, of Studio City, California, pled guilty to one count of interstate transportation of stolen property, which carries a maximum term of 10 years in prison. He is scheduled to be sentenced before U.S. District Judge George B. Daniels on April 30, 2014, at 10:00 a.m. 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 outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys James Pastore, Jr., and Jason Hernandez are in charge of the prosecution.
Manhattan U.S. Attorney Announces New Chiefs of Public Corruption and Terrorism UnitsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the appointments of Brendan McGuire as Co-Chief of the Terrorism & International Narcotics Unit and Arlo Devlin-Brown as Chief of the Public Corruption Unit.
Mr. McGuire joined the U.S. Attorney’s Office in 2005. Prior to being named Co-Chief of the Terrorism & International Narcotics Unit, he served as Chief of the Public Corruption Unit and oversaw the successful prosecutions of former New York State Senator Carl Kruger, former New York City Council Member Larry Seabrook, former New York State Assemblyman Eric Stevenson, and the prosecution of individuals and entities involved in the CityTime fraud scheme. Previously, Mr. McGuire was a leading prosecutor in the Terrorism and International Narcotics Unit where he was part of the Southern District teams that successfully prosecuted Times Square bomber Faisal Shahzad and Somali pirate Abduwali Muse. Mr. McGuire was also a member of the trial teams that tried and convicted Russian arms trafficker Viktor Bout and Syrian arms dealer Monzer al Kassar for conspiring to kill Americans.
Prior to joining the U.S. Attorney’s Office, Mr. McGuire, 37, clerked for the Honorable Peter K. Leisure of the Southern District of New York and worked as an associate at Paul, Weiss, Rifkind, Wharton & Garrison and Stillman & Friedman PC in New York. He is a graduate of Williams College and New York University Law School.
Mr. Devlin-Brown joined the U.S. Attorney’s Office in 2005. Prior to being named Chief of the Public Corruption Unit, he served as Deputy Chief of the Unit. Mr. Devlin-Brown has also served as a member of the Securities & Commodities Fraud Unit, the Complex Frauds Unit, and the Organized Crime Unit. During his tenure, Mr. Devlin-Brown was part of the Southern District teams that prosecuted and convicted former portfolio manager Mathew Martoma and indicted four SAC Capital Management Companies for insider trading; he played a key role in the investigation and charging of JPMorgan Chase for Bank Secrecy Act violations in connection with Bernard L. Madoff’s multibillion-dollar Ponzi scheme that resulted in a $1.7 billion forfeiture to be used to compensate Madoff’s victims. Mr. Devlin-Brown successfully prosecuted one of the largest Medicare fraud schemes – approximately $100 million – perpetrated by a single criminal organization. He also handled the prosecution of 12 senior executives and others from three leading illegal Internet gambling companies, which resulted in the termination of U.S. operations of these companies and over $1.5 billion in forfeiture.
Prior to joining the U.S. Attorney’s Office, Mr. Devlin-Brown, 40, clerked for the Honorable Kermit V. Lipez, United States Court of Appeals for the First Circuit, and worked as an associate at WilmerHale in New York. He is a graduate of Columbia University and Harvard Law School.
In making these appointments, Mr. Bharara said: “Brendan McGuire and Arlo Devlin-Brown are talented and dedicated public servants who have already made significant and valuable contributions and served the residents of the Southern District in the highest traditions of this Office. I am confident they will continue to do the same in their new positions, and I am grateful for their service.”
Manhattan U.S. Attorney Announces Arrest of Brooklyn Rabbi for Distributing Child PornographyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the arrest of SAMUEL WALDMAN for distributing child pornography. WALDMAN, 52, a rabbi and a teacher at a girl’s seminary, was arrested by HSI agents this morning at his residence in Brooklyn, New York. He was presented today before U.S. Magistrate Judge James L. Cott in Manhattan federal court.
Manhattan U.S. Attorney Preet Bharara said: “Samuel Waldman’s position of trust in the community, as both a rabbi and a teacher, makes his alleged distribution of child pornography all the more disturbing. As we have said repeatedly, we have zero tolerance for the exploitation of children and we will prosecute and punish those who engage in this conduct.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Distributing child pornography is a serious crime made all the more disturbing when committed by an individual who has been implicitly entrusted as an educator. Through Operation Caireen, HSI New York and our partners will target individuals who abuse their positions of trust in our communities by committing crimes of sexual exploitation against children.”
According to the allegations in the criminal Complaint filed today in Manhattan federal court, in or about November 2013, WALDMAN distributed child pornography over the Internet by making available for downloading through file-sharing software multiple videos depicting minors engaged in sexual acts.
WALDMAN is charged with one count of transporting or distributing child pornography, which carries a mandatory minimum sentence of five years in prison, 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 maximum potential sentence in this case is prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of ICE HSI. He added that the investigation is continuing.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Patrick Egan is in charge of the prosecution.
The charge contained in the Complaint is merely an accusation, and the defendant is presumed innocent unless and until proven guilty.
ICE HSI encourages the public to report suspected child predators and any suspicious activity through its toll-free hotline at 1-866-347-2423. This hotline is staffed around the clock by investigators.
Suspected child sexual exploitation or missing children may be reported to the National Center for Missing and Exploited Children, an Operation Predator partner, at 1-800-843-5678 or http://www.cybertipline.com.
U.S. v. Samuel Waldman Complaint
Manhattan U.S. Attorney Sues Owner and Operator of Public Water System for Violations of Safe Drinking Water ActRead the Press Release
Part of Broader U.S. Attorney’s Office and EPA Effort to Ensure Safe Drinking Water Act Compliance
Preet Bharara, the United States Attorney for the Southern District of New York, and Judith A. Enck, the Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced the filing and settlement of a case in which the United States sued defendants EDWARD A. EHERTS (“Eherts”) and the PAINTED APRON WATER COMPANY, INC. (“Painted Apron”), for violations of the Safe Drinking Water Act (“SDWA”). The Court approved the settlement today.
Manhattan U.S. Attorney Preet Bharara stated: “Those in the business of providing drinking water to the public have a special responsibility to comply with water safety laws. Through this settlement, defendants have been called to account for longstanding violations of the Safe Drinking Water Act. This settlement also caps the efforts of our Office and EPA to ensure that the residents of the Painted Apron community in Orange County have access to water that complies with the law.”
EPA Regional Administrator Judith A. Enck stated: “Everyone has the right to clean drinking water, including customers of private water companies. This legal case will protect people’s health and remind all operators of private water companies that they must comply with the Safe Drinking Water Act.”
Defendant Painted Apron owned, and defendant Eherts operated, a public water system serving the Painted Apron development in the town of Deerpark in Orange County. As part of the settlement of this case, defendants “admit that they violated the SDWA, its implementing regulations and an administrative order issued by the EPA, by failing to monitor and treat water, make reports, take corrective action, and maintain a certified operator as required by applicable requirements of the SDWA and the administrative order.”
As alleged in the complaint, Eherts ignored repeated efforts by the EPA and state and local regulators to require him to bring this drinking water system into compliance. Rather than address the many violations, Eherts ultimately attempted to abandon the facility. “Defendants admit that “[a]s a result of” their “violations of the law, Defendants’ customers have been subjected to boil-water notices for multiple years.” These “boil-water” notices advised Painted Apron’s residents to boil their water before using it for human consumption or for food preparation. In addition to subjecting members of the community to these boil-water notices, Eherts’ violations also forced members of the community to spend their own time and money trying to keep the water system running as safely as possible.
In addition to admitting liability for these violations, the defendants have agreed to provide the Government with a lien on property in the amount of $50,000; to turn over all records relating to the water utility to new operators; and never again to serve as owners or operators of any public water system.
Beyond this settlement with the defendants, the U.S. Attorney’s Office and EPA have worked directly with the residents of the Painted Apron community to bring their drinking water into compliance with the SDWA. Through those efforts, a committee of residents was identified to replace Eherts as operator of the public water system and to bring the system into compliance. On July 22, 2013, the New York State Public Service Commission appointed this committee as the system’s temporary operator. As temporary operator, the committee is providing safe drinking water compliant with law, and the boil-water notices issued to these the residents have been lifted. Today’s settlement with Eherts and Painted Apron completes our Office’s efforts regarding the Painted Apron water system.
This Safe Drinking Water Act lawsuit follows a case brought by this Office and EPA in federal court against Westchester County earlier this year for Safe Drinking Water Act violations.
Mr. Bharara thanked EPA Region 2’s tireless efforts to work with this Office to restore safe drinking water to the Painted Apron community. Mr. Bharara also thanked the New York State Public Service Commission for its efforts to remedy the effects of defendants’ failure to comply with the law.
The case has been handled by the Office’s Environmental Protection Unit. Assistant U.S. Attorney Ellen London is in charge of the case.
U.S. v. Edward A. Eherts et al Stipulation of Settlement and Judgment
U.S. v. Edward A. Eherts et al ComplaintU.K. Computer Hacker Charged in Manhattan Federal Court with Hacking into Federal Reserve Computer SystemRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging LAURI LOVE, a citizen of the United Kingdom, with computer hacking and aggravated identity theft. The charges stem from LOVE’s efforts in late 2012 and early 2013 to secretly infiltrate computer servers belonging to the Federal Reserve Bank (the “Federal Reserve”), remove non-public information from those servers, and publicly disclose that information by posting it on certain websites.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Lauri Love is a sophisticated hacker who broke into Federal Reserve computers, stole sensitive personal information, and made it widely available, leaving people vulnerable to malicious use of that information. We place a high priority on the investigation and prosecution of hackers who intrude into our infrastructure and threaten the personal security of our citizens.”
Assistant Director-in-Charge George Venizelos said: “As alleged in the indictment, Love was part of a sophisticated network of criminals involved in computer intrusions. Fortunately, Love underestimated the level of sophistication and dedication maintained by the FBI Cyber Division to vigorously investigate and identify Love’s criminal hacking and identity theft. Cyber crime knows no boundaries and justice will not stop at international borders. The FBI is committed to working with private and public entities to stop computer intrusions and prevent hackers from harming victim companies and individuals. We thank the Federal Reserve Bank of New York for its assistance in this investigation.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:
LOVE is a sophisticated computer hacker who resides in the United Kingdom. From October 2012 through February 2013, LOVE worked with other computer hackers around the world to secretly gain access to the Federal Reserve’s computer servers in order to steal and then publicly disseminate confidential information found on those servers, including personal identification information of people using the Federal Reserve network.
LOVE and the other computer hackers communicated with each other by logging onto a restricted online “chat room” (the “Chat Room”) and sending messages to each other. As reflected in the Chat Room messages, in the months prior to the hack of the Federal Reserve servers, LOVE and the other hackers in the Chat Room were searching the Internet for computer servers that were running a particular software program (the “Program”). LOVE and the other hackers were aware that the Program contained a vulnerability that they could use to gain unauthorized access to those servers.
In October 2012, LOVE determined that certain of the servers that were running the Program belonged to the Federal Reserve. Thereafter, LOVE used a particular hacking method called a sequel injection to exploit the vulnerability in the Program and gain unauthorized access to certain Federal Reserve servers, including servers associated with the Federal Reserve Bank of New York. LOVE used his unauthorized access to locate and steal certain confidential information residing on the Federal Reserve servers, including the names, e-mail addresses, and phone numbers of users of the Federal Reserve computer system. LOVE then disseminated that information publicly by posting the information to a website that previously had been hacked and that he controlled.
LOVE, of Suffolk, England, has been charged with one count of computer hacking, which carries a maximum term of 10 years in prison, and one count of aggravated identity theft, which carries an additional sentence of two 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 investigative efforts of the FBI. He also thanked the Federal Reserve Bank of New York for its assistance in this investigation.
The case is being handled by the Office’s Complex Frauds Unit.
The charges in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Lauri Love Indictment
Sullivan County Hedge Fund President SentencedIn White Plains Federal Court to Five and A Half Years in Prison for $12 Million Securities FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LLOYD BARRIGER, former president and principal shareholder of the Gaffken & Barriger Fund LLC (the “Fund”), which was a hedge fund based in Monticello, Sullivan County, New York, was sentenced today in White Plains federal court by U.S. District Judge Cathy Seibel to serve five and a half years in prison for committing securities fraud, conspiracy to commit securities fraud, mail fraud, and conspiracy to commit mail fraud in connection with a $12 million investment fraud scheme. In addition, BARRIGER was ordered to forfeit $12,387,494.01 and make restitution of $9,370,416.08 to his victims. He was also ordered to surrender to start serving his prison term on April 28, 2014.
U.S. Attorney Preet Bharara stated: “The trust put in Lloyd Barriger, a Sullivan County hedge fund manager, by hopeful investors proved to be sadly misplaced. Barriger took in $12 million of investments by lying to investors about the hedge fund’s performance. We hope that the sentence imposed today will serve as deterrence for other fund operators who may be tempted to lie.”
According to the Superseding Indictment and other documents previously filed in White Plains federal court:
From July 2006 through March 2008, when he froze the Fund, BARRIGER solicited over $12 million dollars from approximately 70 investors by deceiving them about the Fund’s performance. During this time period, the Fund invested primarily in real estate collateralized commercial mortgage loans. BARRIGER described the Fund to prospective investors as a safe and liquid investment that paid a minimum return of 8% per year, which BARRIGER referred to as the “Preferred Return.” He then reported this Preferred Return to investors as income on periodic account statements produced by the Fund. In reality, the Preferred Return reported to the investors greatly exceeded the funds actual performance.
BARRIGER tricked investors into investing their money by concealing material information from them, including that (1) the Fund had incurred a loss of $600,000 in 2005; (2) the Fund lacked sufficient income to support the promised 8% Preferred Return; (3) the Fund only continued to pay the Preferred Return -- when it actually paid the return rather than simply credit it to investors’ accounts -- by funding payments with investor capital, rather than income; (4) the Fund disguised the lack of income by creating a large and growing deficit in BARRIGER’s capital account with the Fund; (5) as a result of the failure of its borrowers to repay their loans, the Fund experienced a severe liquidity crunch and could not meet a substantial amount of withdrawal requests; (6) the Fund had defaulted on its $20 million line of credit with a third party lender in March 2007 and remained in default for much of the period thereafter, which entitled the lender to prohibit distributions to investors and to seize the Fund’s assets; and (7) delinquencies on the Fund’s loan portfolio spiked to over approximately 25% in July 2007 and increased to approximately 34% in November 2007.
In a letter dated May 30, 2008, BARRIGER told the investors that the Fund wrote down the value of the portfolio by approximately 40% and that there was a total reduction in investors ‘capital accounts from $25,538,530 to $15,003,208.
Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the U.S. Securities and Exchange Commission for its extraordinary assistance in the investigation.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the White Plains Division. Assistant United States Attorney John P. Collins, Jr. is in charge of the prosecution.
U.S. v. Lloyd Barriger S1 Indictment
Resident of Spain Pleads Guilty in Manhattan Federal Court to $16 Million Investment Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ANTHONIE R. SPARROW pled guilty for his role in perpetrating a $16 million investment scheme that victimized hundreds of investors around the world. SPARROW, who was charged in December 2009 and extradited from Spain in August 2013, pled guilty today in Manhattan federal court before U.S. Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Preet Bharara said: “Anthonie Sparrow engaged in a flagrant fraud, stealing millions of dollars from hundreds of innocent victims around the world, and then fled to Spain to try to avoid the consequences of his crime. His prosecution, possible only through an extradition from Spain, shows this Office’s resolve in holding accountable those who victimize innocent investors.”
Assistant Director-in-Charge George Venizelos said: “Sparrow minted his own destiny by lying to investors and cheating them out of millions of dollars. When the game was up, Sparrow fled to Spain where he thought he was beyond the reach of the FBI. Today, Sparrow finds himself guilty as charged, agreeing to forfeit all 16 million dollars made in his illicit scheme.”
According to the allegations contained in the Indictment and statements made at court proceedings:
From 2002 to January 2005, SPARROW and co-defendant Masroor A. Khan (“Khan”) orchestrated and carried out an extensive fraudulent coin investment scheme. The defendants solicited victims to invest in rare, collectible coins through Lloyd’s & Associates Asset Management Ltd. (“LAM”), a purported collectible coin and precious metal business run by SPARROW. The victims were directed to wire funds – purportedly for investments in rare coins – to LAM bank accounts in New York that SPARROW controlled. Khan and SPARROW told the victims that these funds would be used to purchase coins and that the coins would then be held at Pinnacle Depository Service (“Pinnacle”), a purported coin depository and secure storage area, which was also run by SPARROW.
However, rather than purchase coins with the victims’ funds as the defendants had promised, SPARROW simply diverted the vast majority of the money, totaling approximately $16 million, to a bank account in Cyprus controlled by LAM. To prevent the victims from discovering the theft of their investments, SPARROW maintained a website where victims were given false information about the value of the coins they supposedly owned. SPARROW deliberately discouraged victims from coming to view their coins in person and, when certain victims insisted on doing so, he staged elaborate ruses to prevent them from seeing more than a few coins.
Beginning in late 2004, victims began to demand the return of their funds. In response, in January 2005, SPARROW closed the New York office of LAM and fled to Spain.
SPARROW, 53, of Estepona, Spain, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud. He faces a maximum sentence of 20 years in prison on each count. SPARROW is scheduled to be sentenced by Judge Robert W. Sweet on June 2, 2014, at 4:00 p.m. As part of his guilty plea, SPARROW also agreed to forfeit $16 million to the United States. 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.
Khan remains a fugitive from the charges contained in the Indictment.
Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the Spanish National Police for their assistance in the arrest and extradition of SPARROW.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Alexander J. Wilson is in charge of the prosecution.
The pending charges against Khan are merely accusations, and he is presumed innocent unless and until proven guilty.
U.S. v. Anthonie Sparrow and Masroor Khan Indictment
Liying Lin Found Guilty of Immigration Fraud Offenses Following One Week Jury Trial in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that LIYING LIN, a/k/a “the Deacon,” was found guilty yesterday in Manhattan federal court of one count of conspiracy to commit immigration fraud and two counts of immigration fraud. LIN was convicted after a seven-day jury trial presided over by U.S. District Judge Robert P. Patterson, Jr. She was acquitted of one count of immigration fraud.
Manhattan U.S. Attorney Preet Bharara said: “As a unanimous jury decided, Liying Lin fraudulently exploited a program designed to provide a safe haven for actual victims of persecution. She coached asylum seekers on how to lie on their applications and in immigration proceedings, even signaling applicants when they deviated from her fraudulent script.”
According to the Indictment filed in Manhattan federal court, other court documents, and the evidence admitted at trial:
LIN, a deacon at the Full Gospel Global Mission Church in Flushing, New York, trained applicants for political asylum on what questions about religious belief would be asked during these applicants’ asylum interviews and then coached the clients on how to answer. She conducted individual training sessions with certain applicants where she supplied the applicants with false details in support of their fraudulent asylum claims.
LIN also served as a translator during asylum interviews. LIN advised certain clients before their asylum interview that if they gave a wrong answer, she would kick them to alert them of their wrong answer.
LIN, 30, of Flushing, New York, faces a maximum sentence of five years in prison for the conspiracy count and a maximum sentence of 10 years in prison for each of the substantive immigration fraud counts; she is scheduled to be sentenced by Judge Patterson on June 2, 2014. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as the defendant’s sentence will be determined by the judge.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.
The case is being handled by the Office=s Organized Crime Unit. Assistant U.S. Attorneys Brian Blais and Rahul Mukhi are in charge of the prosecution.
U.S. v. Liying Lin Indictment
Twenty-Eight Members and Associates of Paterson Bloods Street Gang Charged in Manhattan Federal Court with Distributing Heroin, Crack Cocaine, and Powder Cocaine, and with Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Aaron T. Ford, the Special Agent-in-Charge of the Newark Field Office of the Federal Bureau of Investigation (“FBI”), William Fraher, the Acting Chief of Police of the Paterson Police Department, and Gary F. Giardina, the Chief of Police of the Clifton Police Department, today announced the unsealing of a superseding indictment charging 28 members and associates of the Bloods street gang operating in Passaic County, New Jersey, principally in the city of Paterson, with distribution and possession with the intent to distribute heroin, “crack” cocaine, and powder cocaine. The indictment also charges three of the defendants with brandishing firearms in furtherance of drug trafficking activity, and with being felons unlawfully in possession of firearms.
Of the 28 defendants named in the Superseding Indictment, nine were taken into custody in a weekend sweep. Those nine defendants were presented in Manhattan federal court this afternoon before U.S. Magistrate Judge Debra Freeman and detained. Five other defendants are presently detained in state custody on unrelated charges, and will be writted into federal custody. One defendant, HAKIM LOWERY, remains at large. The other 13 defendants were arrested on earlier occasions on the underlying indictments, and all remain detained.
Manhattan U.S. Attorney Preet Bharara said: “Once again we see the convergence of drugs, guns and violence that plagues neighborhoods, threatens their inhabitants, and spreads potentially lethal narcotics from city to city and across state lines. To keep our neighborhoods free of illegal drugs and gang violence, we will continue to work closely with our local law enforcement partners to vigorously enforce federal drug and firearms laws.”
FBI Special Agent-in-Charge Aaron T. Ford said: “Dismantling violent gangs is a continuing priority for the FBI. Our efforts to address gang violence are not new, but we are working with our partners with increased manpower and increased urgency to address current circumstances. Today’s arrests and charges are the result of a successful, long term investigation conducted by the FBI, and the Paterson and Clifton Police Departments.”
Paterson Police Department Acting Chief William Fraher said: “It is critically important for cities like Paterson to leverage their existing collaborative relationships with federal and local law enforcement to reduce not only the actual violence in our communities, but also reducing the perception of fear which can be just as important.”
Clifton Police Department Chief Gary F. Giardina said: “Problems faced by law enforcement do not stop at the city borders. What is one city’s problem most likely is the next city’s and at times overlaps into the next state. It is for these reasons that it is imperative that agencies work in partnership to be successful. In this case Clifton Police worked in partnership with the Paterson Police and FBI in order to bring this investigation to a successful conclusion.”
According to the allegations in the Superseding Indictment unsealed today in Manhattan federal court:
Various “sets” of the Bloods, particularly the Fruit Town Brims and Sex Money Murder, among others, operated in Paterson, often coordinating, collaborating, and working together (defined in the Indictment as the “Paterson Bloods”). Ranking members of the Paterson Bloods would often meet to resolve disputes between their respective “soldier” members of the sets, and could direct punishment against non-members. Among these punishments were that individuals were to be assaulted or killed by members of the Paterson Bloods.
The Paterson Bloods operated the drug markets in certain central locations in Paterson, New Jersey, including, in particular: North Main Street from East Main Street to Jefferson Street (an area known as “The Main”); Graham Avenue/Rosa Parks Boulevard from Lyon Street to Franklin Street (“The Boulevard”); Graham Avenue/Rosa Parks Boulevard from 12th Avenue to Hamilton Avenue; 12th Avenue from East 22nd Street to East 24th Street; 10th Avenue from East 26th Street to East 30th Street; Governor Street from Graham Avenue to Summer Street (“Up the Hill”); and Park Avenue from Madison Avenue to East 16th Street. Members of the Paterson Bloods were permitted to sell heroin and “crack” cocaine in these areas. Generally, non-members, outsiders, and rival narcotics dealers were prohibited or prevented from distributing narcotics in areas controlled by the Paterson Bloods. Certain individuals – such as people who had grown up in areas controlled by the Paterson Bloods, people of neutral gang or neighborhood group affiliation, or marijuana dealers who often sold to members of the Paterson Bloods – were permitted to distribute narcotics in areas controlled by the Paterson Bloods, but did so without the protection of the members of the Paterson Bloods, and at the risk of being robbed by members of the gang. For example, on June 17, 2013, a drug dispute broke out in the area of 12th Avenue and 22nd Street, during which the defendant RACHAUN PARKER, a member of the Fruit Town Brims set of the Bloods, assisted an individual who was considered a “neutral” from his neighborhood. Members of the Fruit Town Brims, including defendants HAKIM LOWERY and JAMAR EDWARDS, violently beat PARKER for violating the rules of the set.
Members of the Paterson Bloods and their associates committed and conspired, attempted, and threatened to commit acts of violence to protect and expand their drug trafficking operations, and to protect fellow members of the gang. These acts included beatings, stabbings, and shootings intended to prevent people not affiliated with the Paterson Bloods from distributing narcotics in areas controlled by the gang, or to dissuade members of rival gangs, such as the Latin Kings, from encroaching on territory controlled by the Paterson Bloods.
Members of the charged narcotics-distribution conspiracy agreed to possess and distribute heroin, “crack” cocaine, and cocaine powder in the Bronx, Manhattan, and New Jersey. On at least two occasions, certain defendants, armed with loaded guns, delivered what they believed to be approximately one kilogram of cocaine to an address in the Bronx in return for delivery fees.
Charts identifying the defendants, the charges, and the maximum penalties they face, as well as their ages and residences, are attached to this release. The case is assigned to U.S. District Judge Laura Taylor Swain. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the investigative work of the FBI, the Paterson Police Department, and the Clifton Police Department. The investigation is a result of the Department of Justice’s Organized Crime and Drug Enforcement Task Force program, and it combined the resources and expertise of its member federal agencies in cooperation with local law enforcement.
The Office’s Violent Crimes Unit is overseeing the case. Assistant U.S. Attorneys Justina L. Geraci and Michael D. Maimin are in charge of the prosecution. Assistant U.S. Attorney Carolina A. Fornos is in charge of the asset forfeiture components of the case.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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U.S. v. Brandon, Fields et al. S3 Indictment
Orange County Man Sentenced in White Plains Federal Court to 13 Years in Prison for Receiving and Possessing Child PornographyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MICHAEL LOCATENA was sentenced yesterday before United States District Judge Cathy Seibel in White Plains federal court to 13 years in prison for receiving and distributing child pornography.
U.S. Attorney Preet Bharara stated: “Those who receive and distribute child pornography endanger and victimize the most vulnerable in our communities. The stiff prison sentence imposed on Michael Locatena should serve to deter others who would engage in these crimes.”
According to the the Indictment and statements made during court proceedings:
LOCATENA, 46, of Chester in Orange County, New York, downloaded at least 1,400 images and videos of child pornography from the Internet using a peer-to-peer file-sharing program, and saved the child pornography on external hard drives.
Yesterday’s sentencing followed LOCATENA’s guilty plea on February 7, 2012, and a three-day sentencing hearing that began in July 2013 and continued over the last two days. At the sentencing hearing, Judge Seibel heard testimony from a minor victim concerning prior sexual abuse of the victim by LOCATENA. Judge Seibel concluded that the Government demonstrated by a preponderance of the evidence that the abuse occurred, and concluded that the conduct should be considered in determining the appropriate sentence for LOCATENA.
LOCATENA also testified at the hearing. He maintained that he did not engage in inappropriate activity with the minor victim, denied any sexual interest in children, and insisted that he had “inadvertently” downloaded all of the child pornography. In sentencing LOCATENA, Judge Seibel stated that much of LOCATENA’s testimony was “incredible” and “preposterous,” and she made a finding that he committed perjury during his testimony.
Mr. Bharara thanked the FBI, the Rockland County Computer Crimes Task Force, the New York State Police, the Orange County District Attorney’s Office, and the Orange County Child Protective Services for their work in the investigation.
In June 2011, LOCATENA was previously convicted, after a jury trial, in Orange County of Criminal Possession of a Loaded Firearm in the 2nd Degree and sentenced to 4 years’ imprisonment. That sentence will run concurrently with the sentence imposed today.
The case is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia Cohen is in charge of the prosecution.
Manhattan U.S. Attorney Announces Extension of Claims Process for Madoff Victim Fund to Give Victims Additional Time to File ClaimsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the claims deadline for petitions for remission of forfeiture to the Madoff Victim Fund (the “MVF”) will be extended to April 30, 2014. This extension was recommended by Special Master Richard C. Breeden, who is administering the MVF on behalf of the Department of Justice.
To date, the MVF has received approximately 9,000 claims from victims of the crimes committed in connection with the fraud at Madoff Securities. Approximately 94% of claims come from individuals who either did not file a bankruptcy claim or whose claim was denied as an indirect investor. Roughly 75% of claimants have recovered nothing, or less than 10% of their losses, since Madoff Securities collapsed. Approximately 60% of claims have come from residents of the United States, with the remaining 40% of claims coming from victims of the fraud in more than 75 countries.
In announcing the extension, Manhattan U.S. Attorney Bharara said: “We are very pleased at the response the Madoff Victim Fund has received from thousands of victims of this historic fraud. The MVF is reaching a much broader universe of victims than previous efforts, including many indirect investors who have not yet recovered anything in the five years since Madoff’s arrest. The theft of these victims’ savings was every bit as real as for direct investors, and we are determined to help every genuine victim who lost money as a result of the Madoff fraud.”
Special Master Breeden noted: “Claims are pouring in to MVF from all over the world. Many of these claims are proving quite complex, often with investments that flowed through three or more intermediaries. The average claim we have received to date includes more than 75 pages of transactions and financial records. Therefore, we believe that thousands of additional claimants will benefit from having a bit more time to complete and file properly documented claims.”
Information concerning MVF and its claim process is published at www.madoffvictimfund.com. Eligibility is open to all persons who invested their own money in Madoff Securities either directly, or indirectly through feeder funds, family trusts or other pooled investment vehicles, and who lost their funds as a direct result of the collapse of the firm. Claimants must be the “ultimate investors” who lost their own funds in the collapse of the firm, not intermediaries who managed money on behalf of others or claims purchasers after the fact. Thus, banks, insurance companies, feeder funds, trust companies, hedge funds and similar entities are generally not eligible to recover from MVF, while the actual individuals whose money was lost by investing through such firms are eligible to seek a recovery. Frequently Asked Questions on the MVF’s website outline the specific criteria for eligibility and measurement of net losses. Claim forms are available for download at www.madoffvictimfund.com. All final decisions concerning claims will be made by the Department of Justice.
After reading the materials published on the website, potential claimants can email additional questions to [email protected], or call MVF’s hotline at 001 (866) 624-3670.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The Madoff Securities cases are being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Matthew L. Schwartz, Randall W. Jackson, John T. Zach, Arlo Devlin-Brown, Christopher Frey, and Paul M. Monteleoni are in charge of the cases.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Insider Trading Charges Against Former Senior Managing Director of Investment BankRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a criminal Complaint charging FRANK PERKINS HIXON, JR., a former Senior Managing Director of Evercore Group, LLC, a subsidiary of Evercore Partners Inc. (“Evercore”), with insider trading offenses. Specifically, HIXON is alleged to have used inside information to trade and cause others to trade in the securities of Evercore, Westway Group Inc. (“Westway”), and Titanium Metals Corporation (“Titanium”). HIXON is also charged with making false statements to FBI agents. The defendant was arrested on these charges this morning at his apartment in New York, New York, and presented this afternoon in Manhattan federal court.
Manhattan U.S. Attorney Preet Bharara said: “As we have often said, those like Frank Perkins Hixon, Jr., who illegally manipulate the market by allegedly trading on material non-public information exploit law-abiding investors and traders. In this case, the alleged wrongdoing was compounded, when Hixon tried to evade detection by lying to investigators and to his company.”
Assistant Director-in-Charge George Venizelos said: “This is the same old song: Another high-ranking finance official allegedly broke the law and abused his position in a thinly veiled attempt to make illegal trades. The alleged use of material information gleaned through confidential meetings at Evercore was deceptive and more importantly illegal. When Hixon was confronted about his back door trades, he allegedly doubled down and lied to the FBI agents who interviewed him. The integrity of our markets remains a paramount concern of the FBI. We’ll continue to pursue these cases until that message is crystal clear.”
According to the allegations contained in the Complaint unsealed today in Manhattan federal court:
Between April 2010 and January 2014, HIXON was a Senior Managing Director with the Mining and Metals Group of Evercore Group, LLC. HIXON used material non-public information that he acquired as part of his employment with Evercore to trade and cause trades in brokerage accounts belonging to the mother of his young child (“Individual A”), who lived in Austin, Texas, and to HIXON’s close relative (“Individual B”), who lived in Johns Creek, Georgia.
In 2011, HIXON led an Evercore team in advising Westway about a non-public offer from another company (“Company A”) to purchase some of its business components and, more generally, in connection with potential transactions concerning Westway’s other business components. Company A’s offer was made in early September 2011, and a Special Committee was formed around that time to consider the offer and other strategic alternatives. Those developments were not announced publicly until December 15, 2011. Meanwhile, between October 21 and December 15, 2011, HIXON purchased, and caused to be purchased, 229,000 shares of Westway for Individual A’s brokerage account by logging into Individual A’s account from various locations, including Evercore’s Manhattan office. As the negotiations for the contemplated Westway transactions became protracted, HIXON sold and caused to be sold about 140,000 of the Westway shares that had accumulated in Individual A’s account, for a profit of approximately $260,000.
In October 2012, HIXON was invited, along with other Evercore personnel, to meet with a Special Committee of Titanium’s board of directors to discuss a potential engagement in connection with an unspecified $3 billion transaction. At the October 23, 2012, pitch meeting, which HIXON attended by teleconference from London, England, HIXON and the rest of the Evercore team learned that the transaction being considered was an acquisition of Titanium by Precision Castparts Corp. (“PCP”), a manufacturer of complex metal components and products. HIXON also learned the approximate offer price, and that the transaction was likely to close before year’s end.
Within approximately one hour of the meeting with the Special Committee, HIXON began buying 20,000 Titanium shares for Individual A’s account from a mobile device traced back to London, England. Eight days later, 20,000 more shares of Titanium were purchased for Individual A’s account. Most of the logins to the account corresponding with these purchases traced back to Evercore’s Manhattan office. That same day, 15,000 shares were purchased for Individual B’s account. After market close on November 9, 2012, Titanium announced PCP’s tender offer for its shares. The next trading day, November 12, 2012, all 40,000 of Individual A’s shares of Titanium were sold for a profit of approximately $180,000. Later that month, Individual B’s Titanium shares were sold for a profit of approximately $72,350.
On January 14, 2013, HIXON attended an Evercore partnership meeting at which he learned that Evercore would be announcing record financial results for the fourth quarter of 2012. After the partnership meeting that day, HIXON spoke to Individual B by phone. During the two days preceding the bank’s January 30, 2013, announcement, HIXON, logging into Individual A’s account from Evercore’s Manhattan offices and from his home in Manhattan, bought 27,000 shares of Evercore for the account. Meanwhile, the day before the announcement, 10,000 shares of Evercore were purchased for Individual B’s account. After Evercore’s earnings release, Individual A and Individual B sold all of the Evercore shares the next day, and reaped a combined profit of approximately $94,700.
In February 2013, Evercore asked HIXON to respond to a request from the Financial Industry Regulatory Authority (“FINRA”) and to identify any known names from a list of people and entities who had traded in Titanium stock prior to PCP’s tender offer. Although Individual A and B were both on the FINRA list, HIXON responded by email: “No known relationships.”
When Evercore confronted HIXON about his failure to identify Individual A – who, as noted above, is the mother of his young child – HIXON claimed not to know Individual A by her legal name, which was what appeared on the FINRA list, and to know her only by a different name she uses. Documents produced by Evercore, including text messages and emails between HIXON and Individual A, make clear that HIXON had, in fact, long been aware of Individual A’s legal name. And bank records show that he wrote numerous large checks to Individual A, in her legal name, from 2009 to 2010. On January 28, 2014, HIXON met with two FBI agents and told them, among other things, that he had never traded in or even accessed Individual A’s brokerage account.
When Evercore confronted HIXON about his failure to identify Individual B, his close relative, HIXON responded that the associated location given for Individual B on the FINRA list—Duluth, Georgia—was inaccurate, because Individual B lives in Johns Creek, Georgia. Johns Creek shares a zip code with portions of Duluth, and was only incorporated as its own city in December 2006. The city reflected on the brokerage account statements for Individual B’s account is Duluth.
HIXON, 55, of New York, New York, has been charged in the Complaint with five counts of securities fraud (Counts One through Three, Five, and Six), two counts of securities fraud in connection with a tender offer (Counts Four and Seven), and one count of making a false statement (Count Eight). The securities fraud and fraud in connection with a tender offer charges each carry a maximum term of 20 years in prison, and the false statement charge carries a maximum term of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action. Mr. Bharara also thanked Evercore for its cooperation in this matter.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Sarah E. McCallum is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Frank Perkins Hixon, Jr., Complaint
Disability Doctor Peter J. Lesniewski Sentenced in Manhattan Federal Court to Eight Years in Prison for His Role in LIRR Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that PETER J. LESNIEWSKI, a Board-certified orthopedist, was sentenced today in Manhattan federal court to eight years in prison for his role in the alleged massive fraud scheme in which Long Island Railroad (“LIRR”) workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. Between 1999 and 2008, LESNIEWSKI provided fraudulent medical narratives in support of the disability applications of at least 230 LIRR employees. In all, over 98% of the more than 400 LIRR employees he supposedly treated received disability benefits after seeing LESNIEWSKI. Following a three-week jury trial, LESNIEWSKI was convicted on August 6, 2013, on all 10 counts with which he was charged, including: one count of conspiracy to commit mail fraud, wire fraud and health care fraud; one count of conspiracy to defraud the Railroad Retirement Board (“RRB”); three counts of health care fraud; and five counts of mail fraud.
Manhattan U.S. Attorney Preet Bharara said: “In perpetrating this elaborate scheme, Dr. Lesniewski compromised both his professional and his personal integrity. Regrettably, Dr. Lesniewski is one of a number of healthcare professionals whose gross misconduct has depleted the RRB’s funds and diverted benefits from the rightful beneficiaries of its disability program.”
According to the Complaint, the Superseding Indictments, the evidence at trial, and statements made in court:
The RRB is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50 – the age of eligibility has since changed to 55 – if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. In addition, at full retirement age (between age 60 and age 65 depending on years of service) they are eligible to receive an RRB retirement pension. LIRR workers who retired at 50 with only an LIRR pension would receive less than their prior salary and substantially lower pension payments than those to which they would be entitled at full retirement age. However, LIRR employees who retired and claimed disability could receive a disability payment from the RRB on top of their LIRR pension, regardless of age. A retiree’s LIRR pension, in combination with RRB disability payments, can be roughly equivalent to the base salary earned during his or her career.
Hundreds of LIRR employees have allegedly exploited the overlap between the LIRR pension and the RRB disability program by pre-planning the date on which they would falsely declare themselves disabled so that it would coincide with their projected retirement date. These false statements, made under penalty of prosecution in disability applications, allowed LIRR employees to retire as early as age 50 with an LIRR pension, supplemented by the fraudulently obtained RRB disability annuity. From 1995 through 2011, more than 75% of retiring LIRR employees stopped working and began receiving RRB disability benefits, whereas during this same period, only 25% of retiring Metro-North employees stopped working and began receiving RRB disability benefits.
LESNIEWSKI was instrumental in helping LIRR retirees receive disability benefits to which they were not entitled. As part of the massive fraud scheme, LESNIEWSKI prepared false documentation purporting to show the LIRR employees’ steady decline toward disability exactly at the time they pre-planned their retirement. He then provided to those LIRR employees a narrative for submission to the RRB that claimed they should receive a disability annuity. These medical narratives were completely fabricated or grossly exaggerated so that LESNIEWSKI could recommend a set of restrictions that, if legitimate, would render it impossible for the LIRR employees to continue performing their jobs. Many of the purportedly “objective” findings from the tests he conducted showed nothing more than normal degenerative changes one would expect to see in patients within the relevant age bracket.
LESNIEWSKI received approximately $1,000, often in cash, for these fraudulent assessments and narratives, and hundreds of thousands of dollars in additional health insurance payments for unnecessary medical treatments. In turn, the 242 patients who obtained disability benefits with LESNIEWSKI’s assistance have received approximately $70 million in RRB disability benefit payments. In sentencing LESNIEWSKI, Judge Marrero found that the total intended losses from his fraud were over $90 million, and that the actual losses suffered by the RRB and insurance companies to date total over $70 million.
In addition to his prison term, LESNIEWSKI, 63, of Rockville Centre, New York, was also sentenced to three years of supervised release. He was also ordered to forfeit $70,947,699 and pay $70,632,900 in restitution.
Thirty-three people have been charged in connection with the LIRR disability fraud scheme, 28 of whom have pled guilty and five of whom were convicted after trial.
Mr. Bharara praised the Railroad Retirement Board’s Office of the Inspector General, the FBI, and the Metro Transit Authority’s Office of the Inspector General for their outstanding work in the investigation, which he noted is ongoing. He also acknowledged the previous investigation conducted by the New York State Attorney General’s Office into these pension fraud issues.
The Office’s Complex Frauds Unit is handling the case. Assistant U.S. Attorneys Justin Weddle, Daniel Tehrani, and Nicole Friedlander are in charge of the prosecution.
Former CEO of Luggage Manufacturer Charged in Manhattan Federal Court for Multimillion-Dollar Bank Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that MARVIN JEMAL, the former Chief Executive Officer of a Manhattan-based company that designed, imported and distributed luggage, business bags, backpacks, and accessories (the “Company”), was arrested today for a fraudulent scheme to obtain millions of dollars in loans by making false statements and providing false and fraudulent documents to a commercial bank based in New York (the “Bank”). JEMAL was arrested this afternoon at John F. Kennedy International Airport in New York, and is expected to be presented later today in Manhattan federal court before United States Magistrate Judge Gabriel W. Gorenstein.
MARK BERNSTEIN, the former Chief Financial Officer of the Company, was previously arrested in August 2013 and pled guilty in October 2013 before U.S. District Judge Robert P. Patterson for his role in the scheme.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, former CEO Marvin Jemal and another executive at his luggage company set out to fleece a bank into lending their company millions of dollars by submitting documents loaded with lies and backing them up with false statements. Those millions were then allegedly funneled to Jemal’s personal accounts and used for mortgage payments and payments on a Porsche, among other things.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged in the indictment, the defendant thought he could ‘beat the bank’ with lies and misrepresentations to support a lavish lifestyle. He obtained millions of dollars in loans by submitting falsified and fraudulent documents to his commercial lender, then diverted that money to his personal accounts. Bank fraud is a serious crime that weakens the economic integrity of our financial institutions. The defendant’s arrest today should send a clear message to the public that bank fraud cases such as this one are, and will continue to be, a high priority for the FBI. Individuals who try to line their pockets by engaging in financial fraud schemes should be reminded that their criminal activity will not go undetected and they will be held accountable.”
According to the allegations contained in the Indictment unsealed today and other documents previously filed in Manhattan federal court:
From 2007 through October 2009, JEMAL and BERNSTEIN engaged in a scheme to fraudulently induce the Bank to lend millions of dollars to the Company. Among other things, JEMAL and BERNSTEIN knowingly made false representations to the Bank, concealed material facts from the Bank, and submitted false and fraudulent documents to the Bank, including fabricated invoices and shipping documents. In total, the Company obtained approximately $6.9 million in loans from the Bank and defaulted on approximately $6 million of those loans.
Further, although the loans were purportedly for the benefit of the Company’s business, in fact, JEMAL diverted approximately $3.5 million of the loan proceeds to personal bank accounts and used the money to pay for various personal expenses, including mortgage payments on properties he owned, credit card bills, and payments on his Porsche.
The Factoring Agreement
The Company obtained the loans from the Bank as part of a secured credit facility, pursuant to a factoring agreement between the Company and the Bank. Under the terms of the factoring agreement, the Company would assign and sell the Company’s interest in its accounts receivable to the Bank and, in exchange, the Company could borrow from the Bank up to 85% of the value of those receivables. In addition, the Company could borrow up to 50% of the value of its inventory. In order to draw down on its secured credit facility, however, the Company was required to provide the Bank with, among other things, an accurate listing of all accounts receivable, as well as supporting documentation, including copies of (i) relevant underlying invoices and (ii) shipping documents or other proof of delivery.
The Scheme to Fraudulently Obtain Loans
To fraudulently obtain loans from the Bank under the factoring agreement, JEMAL and BERNSTEIN made false statements and submitted false and fraudulent documents to the Bank, including the following:
- JEMAL and BERNSTEIN sent duplicate and/or fabricated invoices to the Bank that purported to reflect the sale of certain products by the Company and, thus, an outstanding receivable for the Company. In truth, however, the sales reflected on those invoices were false, as those sales either had never occurred or had already been invoiced separately.
- JEMAL and BERNSTEIN provided fraudulent shipping documents to the Bank to substantiate the purported sales of products by reflecting that those products had been shipped to customers. In truth, however, those shipping documents were false and fraudulent, as the products had not, in fact, been shipped to the customers as reflected in the shipping documents.
- JEMAL and BERNSTEIN concealed material facts from the Bank, including credits that the Company had provided to certain of its customers (which thereby reduced the total accounts receivable associated with those customers) and instances in which the Company had directly collected and deposited payments from its customers on the same invoices the Company assigned to the Bank.
- JEMAL and BERNSTEIN provided inaccurate monthly inventory spreadsheets to the Bank which overstated the Company’s existing inventory.
Further, in order to conceal the scheme, JEMAL made various oral misrepresentations to certain representatives of the Bank when those representatives confronted him about irregularities and other issues that the Bank had discovered with respect to the Company’s assignment of its accounts receivable.
The Money Laundering Scheme
Between approximately May 2007 and February 2012, after fraudulently inducing the Bank to loan millions of dollars to the Company, JEMAL and BERNSTEIN arranged to divert more than $3.5 million in loan proceeds to personal bank accounts controlled by JEMAL. To conceal that the money was being diverted to JEMAL’s personal accounts, the defendants first moved the funds through bank accounts in the name of two shell corporations that JEMAL controlled. From those accounts, the money was transferred to JEMAL’s personal accounts and used to pay for personal expenses, including, among other things, mortgage payments on properties owned by JEMAL, bills from credit cards in the name of JEMAL and his wife, and payments on a Porsche driven by JEMAL.
JEMAL, 60, of Brooklyn, New York, is charged with one count of conspiracy to commit bank fraud, one count of bank fraud, and one count of making a false statement to influence bank action, each of which carries a maximum sentence of 30 years in prison, and one count of money laundering, which carries a maximum sentence of 20 years in prison. U.S. District Judge Valerie E. Caproni is assigned to the case.
BERNSTEIN, 63, of Belle Harbor, New York, pled guilty to one count of conspiracy to commit bank fraud, one count of bank fraud, and one count of making a false statement to influence bank action, each of which carries a maximum sentence of 30 years in prison. He also pled guilty to one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison. BERNSTEIN awaits sentencing.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Bharara praised the outstanding investigative work of the FBI.
The case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Christopher D. Frey is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and JEMAL is presumed innocent unless and until proven guilty.
U.S. Marvin Jemal Indictment
Livery Fleet Owner Sentenced in Manhattan Federal Court to 121 Months for Multimillion-Dollar Insurance ScamRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that SCOTT ERIC SANDERS was sentenced today in Manhattan federal court to 121 months in prison for his participation in a long-running automobile insurance fraud scheme and aggravated identity theft. As part of the scheme, SANDERS, who owns fleets of commercial vehicles, systematically misled insurance companies as to where the vehicles he owned were garaged and operated, and how those vehicles were being used, so that he could obtain automobile insurance for those vehicles at substantially lower premiums. SANDERS was convicted in April 2013 of one count of conspiracy to commit mail and wire fraud, five counts of mail fraud, and one count of aggravated identity theft following a four-week jury trial before U.S. District Judge Lewis A. Kaplan, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Scott Sanders was convicted of repeatedly falsifying insurance applications to save millions of dollars in premiums. He lied about where the insured vehicles were garaged and operated, as well as about what the vehicles were used for and who actually owned them. He also compounded the felony when he committed the same crime on behalf of other fleet owners. Now he will pay the consequences for his criminal conduct.”
According to evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
In New York State, owners of fleets of commercial vehicles, including livery cars and ambulettes, are required to obtain commercial automobile liability and physical damage insurance coverage. The automobile insurance policy premiums are based, in part, on where the insured vehicles are garaged and operated as well as how the vehicles are being used. Vehicles that are principally garaged or operated in New York City are charged substantially higher insurance premiums than vehicles that are principally garaged or operated elsewhere in New York and adjoining states. In addition, vehicles that are primarily used as livery cabs are charged substantially higher insurance premiums than vehicles that are operated for many other commercial purposes. Owners of livery fleets obtain automobile insurance through the voluntary insurance market or, when they are unable to obtain insurance through the voluntary market, through the New York Automobile Insurance Plan (“NYAIP”). The NYAIP assigns policy applications to insurance carriers doing business in New York State, who are then required to provide insurance coverage to the applicant.
From at least 2005 through 2010, SANDERS controlled fleets of commercial vehicles that were garaged and operated in New York City. During that time period, SANDERS engaged in a widespread scheme to defraud automobile insurance companies in order to obtain automobile insurance for his vehicles at lower premiums by misrepresenting where the vehicles were garaged and operated, and in some instances, how those vehicles were being used. Specifically, SANDERS caused to be submitted insurance applications to both NYAIP and directly to insurance companies that claimed that SANDERS’s vehicles were garaged and operated outside New York City, when they were not. In addition, on some of those applications, SANDERS represented that SANDERS’s vehicles were being used for commercial purposes other than as livery vehicles when these vehicles were, in fact, being used as livery vehicles. In these insurance applications, SANDERS also listed the names, and in some instances the dates of birth and driver’s license numbers, of other individuals, some of whom had previously rented livery vehicles from SANDERS, as the presidents and owners of SANDERS’s companies, when those individuals were not in fact the presidents or owners of those companies. Relying on these misrepresentations, the insurance companies issued insurance policies for the vehicles controlled by SANDERS at lower premiums than those for which the vehicles would have been eligible had the insurance companies been aware of the true locations of garaging and operation, as well as the true use, of the vehicles.
In addition, as part of the same scheme, SANDERS helped other commercial fleet owners whose vehicles operated in New York City obtain insurance at lower premiums using the same misrepresentations about how those vehicles were being used and where those vehicles were being garaged and operated. Over the course of SANDERS’s scheme, insurance companies lost millions of dollars in premiums that they would have otherwise charged had they been provided accurate garaging, operating, and usage information about the vehicles.
SANDERS was convicted of one count of conspiracy to commit mail and wire fraud, five counts of mail fraud, and one count of aggravated identity theft.
In addition to prison, SANDERS, 42, of Saddle River, New Jersey, was sentenced to three years of supervised release and ordered to pay a fine of $50,000, restitution of $4,878,592.30, and forfeiture of $4,878,592.30.
Mr. Bharara praised the work of the Postal Inspectors from the United States Postal Inspection Service and investigators from the New York Automobile Insurance Plan.
This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Paul Krieger and Brent Wible are in charge of the criminal case.
Former Sales Representative Pleads Guilty in Manhattan Federal Court to Multimillion-Dollar Scheme That Targeted Debt-Ridden ConsumersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that BORIS SHULMAN, a former sales representative of Mission Settlement Agency (“Mission”), pled guilty to fraud charges for his role in a multimillion-dollar scheme that victimized more than 1,200 debt-ridden individuals across the country. SHULMAN, who was charged in May 2013, pled guilty today in Manhattan federal court before U.S. District Judge Paul G. Gardephe. He is the fourth defendant to plead guilty in the case.
According to the allegations contained in the Indictment against Mission, SHULMAN, and three other Mission employees, other documents filed in Manhattan federal court, and statements made at related court proceedings:
Mission offered “debt settlement” services to financially disadvantaged individuals who were struggling or unable to pay their credit card debts. Like other purported debt settlement providers, Mission held itself out as a company that could successfully negotiate to lower the overall debt its customers owed to credit card companies and banks.
The defendants targeted financially disadvantaged individuals known to be struggling to pay credit card debt and reached out to them through telemarketing and mail solicitations. Thereafter, Mission’s sales representatives typically spoke to the prospective customers on the phone, describing Mission’s work and its ability to renegotiate debt.
From 2009 through May 2013, the defendants systematically exploited and defrauded over 1,200 financially disadvantaged individuals across the country who were struggling to pay their credit card debts. They tricked people into paying Mission for purported debt settlement services by lying to prospective customers about the agency’s ability to help settle their debts, the fees that Mission charged, and its purported affiliation with the federal government. In connection with the scheme, Mission received over $6.6 million in fees. For more than 1,200 of its customers, Mission took fees totaling nearly $2.2 million and never paid a penny to the customers’ creditors.
SHULMAN served as a Mission sales representative from 2009 through 2012. In that capacity, he solicited and lied to prospective customers about the agency’s fees in order to induce them to become Mission customers.
SHULMAN, 27, of Brooklyn, New York, pled guilty to one count of conspiracy to commit mail and wire fraud, one count of mail fraud, and one count of wire fraud. He faces a maximum sentence of 60 years in prison. SHULMAN is scheduled to be sentenced by Judge Gardephe on May 30, 2014 at 2:30 p.m. As part of his guilty plea, he agreed to forfeit $2,196,522 to the United States.
Mission and six individuals – including SHULMAN and Mission’s owner, Michael Levitis – were charged in connection with the scheme. Defendant Denis Kurlyand pled guilty to the Indictment in August 2013. Defendants Felix Lemberskiy and Zakhir Shirinov pled guilty to Informations in April 2013 in connection with this case. The charges against the remaining defendants are merely allegations, and they are all presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the United State Postal Inspection Service. He also thanked the Consumer Financial Protection Bureau for referring this case to this Office and for their assistance in this matter.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Nicole W. Friedlander and Edward A. Imperatore are in charge of the prosecution. Assistant United States Attorney Carolina A. Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
U.S. v. Mission Settlement Agency, et al Indictment
Staten Island Man Charged in Manhattan Federal Court for Multimillion-Dollar Scheme Related to Purchase of Maxim MagazineRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Steven G. Hughes, the Special Agent-in-Charge of the New York Office of the United States Secret Service, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that CALVIN DARDEN, JR., was arrested yesterday in connection with two schemes in which he defrauded victims of more than $8 million and attempted to defraud another victim of approximately $20 million. In one scheme, DARDEN tricked several lenders into providing more than $8 million in financing for the potential acquisition of Maxim Magazine and related assets. In the other scheme, DARDEN obtained $500,000 from a Taiwan-based company by falsely claiming that he was arranging for the New York Knicks to play an exhibition game in Taiwan. DARDEN surrendered yesterday to the Secret Service, and is expected to be presented later today in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Calvin Darden, Jr., sought to mislead and deceive his victims at virtually every opportunity, and he used the full spectrum of fraudulent devices, including false documents, 'spoofed' emails, and outright impersonation. This Office has zero tolerance for those who allegedly engage in this type of conduct, especially when it is to the tune of millions of dollars.”
Secret Service Special Agent-in-Charge Steven Hughes said: “Partnerships fostered by the Secret Service’s Electronic Crimes Task Force have allowed our agency to focus resources and respond quickly to criminal activity such as this. The investigation and subsequent arrest in this case is another example of how the Secret Service strives to combat fraud and provide a secure cyber environment.”
FBI Assistant Director-in-Charge George Venizelos said: “Like we’ve seen time and time again, the defendant was up to the same worn-out tricks in an elaborate scheme of fake emails, fictitious bank accounts, and fabricated statements all to rip off unwitting investors. Everyone deserves the right to make an honest living, but not by lying, cheating, or at the expense of others. Today, Mr. Darden finds himself under arrest and in trouble with the law.”
According to the allegations contained in the Criminal Complaint unsealed today in Manhattan federal court:
DARDEN carried out two separate schemes in which he concocted an elaborate set of lies that included, among other things, phony emails, fabricated bank account statements, and his repeated impersonation of his father, a former corporate executive who sits on the Board of Directors of several publicly-traded corporations in the United States, during phone calls and in emails , to defraud multiple victims of more than $8 million and to attempt to defraud another victim of approximately $20 million.
The Maxim Fraud Scheme
In connection with the potential purchase of Maxim Magazine (“Maxim”) by a media company (the “Media Company”) associated with DARDEN and his father, DARDEN attempted to secure financing from various lenders, lying extensively to them to trick them into funding the Media Company’s purchase of Maxim.
As part of the scheme, in order to trick one of the lenders into believing they would receive sufficient collateral for their loan, DARDEN provided the lender with a fabricated bank account statement. The fabricated statement purported to be for an account held by his father and purported to show his father’s holdings in the stocks of at least three publicly-traded companies for which DARDEN’s father serves as a Director. His father’s alleged stock holdings in these companies were supposed to serve as collateral for the loans. In truth, however, the bank account statement was fake. In addition, DARDEN created, and sent to a lender, a phony email that purported to be from an employee of a bank verifying his father’s stock holdings.
Further, after one of the lenders put approximately $5.5 million in escrow pending the transfer of collateral, DARDEN paid a Russia-based email “spoofing” service to send an unauthorized and fraudulent email to the escrow agent to secure the release of the funds. Specifically, DARDEN had the spoofing service send an email that appeared to come from the lender’s email account and that authorized the escrow agent to release the escrow money. As DARDEN well knew, however, the lender did not send the email and did not authorize the release of the funds. Based on its receipt of the email, the escrow agent released approximately $4.9 million of the lender’s money towards the Media Company’s purchase of Maxim.
DARDEN also provided certain lenders with bogus emails purporting to be from senior executives of certain companies, including at least one publicly held corporation for which DARDEN’s father is a member of the Board of Directors. In one bogus email, the senior executive purportedly verified the stock holdings of DARDEN’s father that were supposed to be provided as collateral for the loan. Separately, when another lender conditioned its $20,000,000 loan on the creation of a cable channel based in part on Maxim, DARDEN provided the lender with a bogus email purporting to be from a senior executive of a cable television company confirming that the company was interested in creating a cable channel in connection with the Media Company’s purchase of Maxim. In fact, both emails were completely fabricated, and had not been authored or authorized by either of the executives who purportedly wrote them.
Additionally, as a part of the scheme, DARDEN repeatedly impersonated his father during phone calls and in emails, and forged his father’s signature on documents related to the potential purchase of Maxim.
The NBA Fraud Scheme
In a separate scheme, DARDEN tricked a particular company located in Taiwan into paying him $500,000 by falsely and fraudulently representing that, through a particular company purportedly operated in part by his father, he would arrange an NBA exhibition game in Asia involving the New York Knicks.
As part of that scheme, DARDEN falsely represented to the victim company that he and his father had meetings and discussions with, among others, the owners of the New York Knicks and NBA officials about an exhibition game in Asia. As he did in the Maxim fraud scheme, DARDEN also impersonated his father in multiple email communications with the victim company and forged his father’s signature on documents.
DARDEN, 39, of Staten Island, New York, is charged with two counts of wire fraud, each of which carries a maximum term of 20 years in prison.
Mr. Bharara praised the outstanding investigative work of the Secret Service and FBI.
The case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney James Pastore, Jr., is in charge of the prosecution. Assistant U.S. Attorney Andrew Adams is handling the forfeiture aspects of the case.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Calvin Darden Complaint
Four Individuals Charged in Manhattan Federal Court with Participating in A Multi-State Robbery Crew That Stole More Than $1 Million in Luxury Watches and Other GoodsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William Bratton, the Police Commissioner of the City of New York (“NYPD”), announced the unsealing of a five-count Complaint yesterday charging four members of a robbery crew operating across New York, New Jersey, and Virginia with robbery conspiracy and robberies of high-end jewelry and watch stores, resulting in the theft of more than a million dollars in watches. Specifically, ALLEN WILLIAMS, 35, ROBERTO GRANT, 33, TERRELL RATLIFF, 22, and TYRONE DEHOYOS, 35, have each been charged with robbery conspiracy and one or more substantive robberies. DEHOYOS was arrested yesterday in Brooklyn, New York, and was presented before U.S. Magistrate Judge Andrew J. Peck. DEHOYOS was ordered detained pending trial. WILLIAMS, GRANT, and RATLIFF were all previously arrested by the NYPD and are expected to be transferred into federal custody to be presented on the charges contained in the Complaint.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants engaged in violent robberies of luxury jewelry stores in New York, New Jersey, and Virginia. They allegedly combined forethought with force, scouting out their targets and then terrorizing customers and employees by smashing display cases with hammers and stealing high-end timepieces. They will now face the consequences of their violent shopping spree.”
FBI Assistant Director-in-Charge George Venizelos said: “From Cartier on Manhattan’s Fifth Avenue to the Borgata Casino in Atlantic City, the defendants left no rock unturned, carrying out a series of brazen midday smash-and-grab robberies of high-end jewelers up and down the East Coast. It took sophisticated, modern crime fighting techniques to tie the heists together. Today, we see the result of diligent work by law enforcement from Virginia to New York to stop this violent, skilled crime syndicate.”
Police Commissioner William J. Bratton said: “Thanks to the collaborative efforts of investigators and prosecutors assigned to this case, four members of this smash and grab crew, which targeted businesses throughout New York City and in other states, have been shut down. Two of these criminals, Allen Williams and Roberto Grant, were quickly apprehended by members of the NYPD after they brazenly walked into a Manhattan Cartier store and stole more than $700,000 worth of watches.”
According to the allegations contained in the Complaint and statements made in court today:
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 three states, while customers and employees were in the stores, and stole more than a million dollars in luxury watches.
The robberies followed a simple but brazen pattern: On each occasion, three to five members of the crew entered a jewelry or watch store, began smashing glass display cases with hammers, grabbed luxury watches from those display cases, and then fled within minutes of entering the store into waiting getaway cars driven by members of the robbery crew. Each robbery occurred during business hours while store employees and customers were present. The crew used violence as necessary to carry out the scheme. For example, during one 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 $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; and Martin Jewelers in Cranford, New Jersey.
All four of the defendants are charged in Count One of the Complaint, conspiracy to commit robbery in interstate commerce, which carries a maximum sentence of 20 years in prison. WILLIAMS and GRANT are also charged with each of the robberies in interstate commerce in Counts Two through Five in the Complaint; RATLIFF is charged with the robbery in interstate commerce in Count Two of the Complaint; and DEHOYOS is charged with the robbery in interstate commerce in Count Four of the Complaint. Each of the substantive interstate robbery counts carries a maximum sentence of 20 years in prison.
Mr. Bharara praised the investigative work of the FBI and the NYPD. Mr. Bharara also thanked the Manhattan District Attorney’s Office, which brought charges against WILLIAMS and GRANT in connection with their participation in the January 30, 2014, robbery of Cartier. He also thanked the Richmond FBI Office and the Atlantic City Resident Agency of the Newark FBI Office, as well as the police departments of Cranford, New Jersey, Atlantic City, New Jersey, and Richmond, Virginia.
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 Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Allen Williams, et al. Complaint
U.S. Attorney’s Office for the Southern District of New York Recovers Nearly $4 Billion from Criminal and Civil Cases Since January 2013Read the Press Release
U.S. Attorney Also Announces Creation of Money Laundering and Asset Forfeiture Unit
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the Office obtained recoveries of more than $2.7 billion in forfeiture actions since January 2013. The Office also has collected or has entered into agreements to recover $1.06 billion in restitution, criminal fines, and special assessments, and has recovered $149.8 million from civil actions, since January 2013.
Manhattan U.S. Attorney Preet Bharara said: “Our Office’s nearly $4 billion in forfeitures, penalties, and fines since the beginning of 2013 stands for the principle that those who break the law or commit civil offenses, whether institutions or individuals, must not be allowed to profit from their misconduct. This is not only a matter of deterring bad conduct. A significant portion of the money recovered will go toward compensating victims of crime or other misconduct who suffered real financial loss. And collected assets help fund important state and local law enforcement programs. It is fair to say the taxpayers have gotten a great return on their investment – almost 8,000% – as this $4 billion represents nearly 80 times the Office’s annual budget.”
Forfeited funds are generally deposited into the Department of Justice Assets Forfeiture Fund (the “Assets Forfeiture Fund”) and the Department of Treasury Forfeiture Fund. The forfeited funds are used to restore money to crime victims and for a variety of law enforcement purposes. In 2013, the U.S. Attorney’s Office for the Southern District of New York returned more than $66 million to crime victims. Of the $2.7 billion forfeited since January 2013, in excess of $1.8 billion is expected to be restored to victims.
In recognition of the success that the Office’s Asset Forfeiture Unit has had in spearheading such record forfeitures, often by bringing some of the country’s most significant and innovative money-laundering prosecutions, the Office has renamed the unit the Money Laundering and Asset Forfeiture Unit. The change also reflects and coincides with the Office’s ongoing efforts in this area, including, among other things, the addition of a number of Special Assistant U.S. Attorneys from partner agencies to focus on anti-money laundering and asset forfeiture; the creation of a team of intelligence analysts and other professionals tasked with reviewing and analyzing Suspicious Activity Reports filed by financial institutions; and the use of more technologically sophisticated tools and software to analyze large volumes of relevant data.
The $149.8 million collected in civil actions came from a combination of cases in which the Office collected government money lost due to fraud or other misconduct, collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights, or environmental laws, or recovered funds owed to the Internal Revenue Service.
Nationally, in Fiscal Year 2013, approximately $5.9 billion was collected by the Justice Department’s litigating divisions and the 94 U.S. Attorneys’ offices in individually and jointly handled civil actions. The Department’s litigating divisions and U.S. Attorneys’ offices also collected approximately $2.2 billion in restitution, criminal fines, and felony assessments in criminal actions in satisfaction of criminal debts owed to the U.S. and to federal crime victims.
Below are summaries of some of the cases in which the Office obtained substantial forfeitures or other recoveries since January 2013:
JPMorgan Chase
$1.7 billion forfeited
On January 7, 2014, as part of a deferred prosecution agreement, JPMorgan Chase agreed to pay a non-tax deductible penalty of $1.7 billion, in the form of a civil forfeiture for its violations of the Bank Secrecy Act committed in connection with the Bernard Madoff multi-billion dollar Ponzi scheme. These funds will be used to compensate victims of the Madoff Ponzi Scheme.
SAC Capital Advisors, L.P.
$900 million forfeiture order; $284 million to be collected; total agreed-upon penalty of $1.8 billion
In July of 2013, the Government filed a civil money laundering and forfeiture action seeking the forfeiture of all of the assets of the SAC Companies (“SAC”) on the basis that SAC engaged in money laundering by commingling the illegal profits from insider trading with other assets, using the profits to promote additional insider trading, and transferring the profits with the assistance of financial institutions. In November of 2013, the Government entered into an agreement with SAC in which SAC, among other things, agreed to forfeit $900 million to the United States, including the $616 million payment to the Securities & Exchange Commission (“SEC”). The agreement also involved a criminal fine of another $900 million, resulting in a total penalty of approximately $1.2 billion, on top of the $616 million SEC fine.
PokerStars and Related Cases
$181.4 million forfeited
In July 2012, the United States reached an agreement with the two largest online poker companies in the United States, Full Tilt Poker and PokerStars. The United States had brought a civil forfeiture and money laundering action against these companies and their assets. Under the terms of the settlement, Full Tilt forfeited essentially all of its assets to the United States. PokerStars agreed to forfeit $547 Million, to be paid in several installments, and to reimburse the approximately $184 million owed by Full Tilt to foreign players. The settlement further provides that PokerStars will acquire the Forfeited Full Tilt Assets from the Government. In 2013, $181.4 million was forfeited to the United States. To date, in excess of $406.4 million has been forfeited in the PokerStars civil forfeiture action and related cases.
Ernst and Young
$123 Million forfeited
In March 2013, as part of a non-prosecution agreement, Ernst & Young LLP (“E&Y”) forfeited $123 million in connection with the firm’s participation, from 1999 to 2004, in four tax shelters that were used by approximately 200 E&Y clients in an effort to defer, reduce, or eliminate tax liabilities of more than $2 billion.
PartyGaming
$105 million forfeited
In April 2009, PartyGaming, an Internet gambling company entered into a non-prosecution agreement, wherein, among other things, the company agreed to forfeit a total of $105 million, to be paid in several installments. The $105 million represents proceeds of PartyGaming’s United States Internet gambling operations. In 2013, $105 million was forfeited to the United States.
Lebanese Canadian Bank
$102 million forfeited
In December 2011, this Office filed an in rem forfeiture and civil money laundering action alleging that Lebanese financial institutions, including the Lebanese Canadian Bank (“LCB”) and two exchange houses linked to Hizballah, used the U.S. financial system to launder narcotics proceeds through West Africa and back into Lebanon. Part of the scheme involved wiring funds from Lebanon to buy used cars in the U.S. which were then transported to West Africa and sold. Cash from the sale of the cars, along with the proceeds of narcotics trafficking, were then funneled to Lebanon through Hizballah-controlled money laundering channels. On June 25, 2013, the Government entered into a settlement agreement with LCB in which, among other things, LCB forfeited in excess of $102 million.
Insider Trading Cases
$63 million forfeited
In addition to the SAC forfeiture, in 2013 the Office has forfeited and collected in excess of $63 million from insider trading criminal prosecution and civil forfeitures actions, including the forfeiture of $53.8 million from Raj Rajaratnam.
Wegelin & Co.
$15.8 million forfeited; total penalty, including fine and restitution, exceeding $76 million
In March 2013, Wegelin & Co., a Swiss private bank pled guilty to conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret Swiss bank accounts and the income generated in these accounts from the Internal Revenue Service. In connection with the guilty plea, Wegelin agreed to the civil forfeiture of $15.8 million, representing the gross fees earned by the bank on the undeclared accounts of U.S. taxpayers. Together with the April 2012 forfeiture of over $16.2 million from Wegelin’s correspondent bank account, this amounts to a total forfeiture of $30 million.
650 Fifth Avenue
36-story Office Tower; appraised value $525 million
In November of 2009, the Office filed an amended civil forfeiture complaint seeking the forfeiture of, among other things, a 36-story office tower located at 650 Fifth Avenue in Manhattan. The Government alleged that 40% of the office tower was owned by Bank Melli Iran, a state-owned bank, through a shell company Assa Corp. The remaining 60% was owned by Alavi Foundation, a New York-based charitable foundation, which the Government alleged provided services to Iran. On September 11, 2013, the court granted summary judgment for the Government, finding that Assa and Alavi provided services to Iran and that the office tower was forfeitable as proceeds of violations of the International Emergency Economic Powers Act and as property involved in money laundering.
10th Century Cambodian Sculpture
The Office filed a civil forfeiture action seeking to forfeit and return to Cambodia a 10th century sandstone sculpture, known as the Duryodhana, that was allegedly stolen from the Prasat Chen Temple at Koh Ker in Cambodia in 1972 by an organized looting network, and ultimately imported into the United States and offered for sale by Sotheby’s Inc. (“Sotheby’s”). In December 2013, the United States entered into a settlement of the civil forfeiture action under which Sotheby’s and the customer selling the Duryodhana, Decia Ruspoli de Poggia Suasa, agreed to return the Duryodhana to Cambodia.
Tyrannosauras bataar and other dinosaur skeletons
In 2012, the Office filed a civil action seeking to forfeit and return to Mongolia a Tyrannosaurus bataar skeleton which was looted from the Gobi desert in Mongolia, imported into the United States in violation of law and put up for auction in Manhattan by a commercial paleontologist, Eric Prokopi (“Prokopi”). Prokopi was arrested for smuggling and interstate transportation of stolen property. Prokopi pled guilty and agreed to forfeit the Tyrannosaurus bataar skeleton, an additional Tyrannosaurus bataar skeleton and several other fossils. The investigation also led to the seizure and forfeiture for the purpose of returning them to Mongolia of additional dinosaur skeletons and fossils, including a Saurolophus skeleton, another Tyrannosaurus bataar skeleton, a Saurolophus Angustirostris skeleton, a Oviraptor matrix containing at least five Oviraptor skeletons and an additional Oviraptor skeleton. In 2013, all the dinosaur skeletons and fossils were forfeited. In May 2013, the United States returned the Tyrannosaurus bataar and other dinosaur skeletons to Mongolia.
Below are summaries of some of the civil actions in which the Office has obtained significant recoveries:
Ambac
$101.9 million paid to the United States
In April 2013, the Office entered into a settlement in bankruptcy court resolving a dispute arising out of the tax accounting methods used by Ambac, a financial guarantee insurance company, to account for the credit default swap contract losses it purportedly sustained in the wake of the 2008 financial crisis. The United States recovered $101.9 million pursuant to the settlement. The settlement also secured a $1 billion reduction of Ambac’s net operating losses attributable to the credit default swaps, thereby preventing the company from potentially reducing its tax burden by several hundred million dollars.
Delphi
$23.1 million paid to the United States
In November 2013, the Office settled environmental claims and liabilities asserted against DPH Holdings Corporation, formerly known as Delphi Corporation (one of the largest auto parts manufacturers in the world), and its corporate affiliates. Pursuant to the settlement agreement, filed in bankruptcy court, Delphi paid approximately $23.1 million in cash for the clean-up of four properties in Michigan and Ohio contaminated with hazardous waste.
Bioscrip
$2.3 million (out of $11 million total) paid to date to the United States
In January 2014, the Office filed, and simultaneously settled, a civil fraud lawsuit for $11 million against Bioscrip, Inc., for accepting kickbacks from Novartis Pharmaceuticals Corp. in connection with the distribution of Exjade, a Novartis prescription drug. The Complaint alleged that Bioscrip accepted kickbacks in the form of patient referrals and rebates in exchange for recommending to Exjade patients that they should order refills. As part of the settlement, Bioscrip made extensive admissions concerning this conduct and agreed to continue to cooperate in the Government’s continuing investigation. $2.3 million of the $11 million total has been paid to date.
US v. NY Institute of Technology and Cardean Learning Group, LLC
$2.5 million paid to the United States
In December 2012, the Office settled civil fraud lawsuits against New York Institute of Technology and against Cardean Learning Group, LLC, for submitting false claims in connection with federal student loans and grants. In the settlement agreements, NYIT and Cardean made admissions concerning certain conduct set forth in the complaint.
US v. SEEDCO et al.
$1.8 million paid to the United States
In December 2012, the Office settled a civil fraud lawsuit for $1.725 million against Structured Employment Economic Development Corporation, or SEEDCO, for fraud in connection with a federally-funded program to provide job placement assistance to unemployed and underemployed New York City residents. SEEDCO, a national not-for-profit corporation, operated two New York City Workforce1 Career Centers, which provided services to prepare and connect job candidates to job opportunities. The Government’s lawsuit, filed May 22, 2012, asserted False Claims Act violations against SEEDCO and seven former managers for fraud for, among other things, routinely falsifying entries in the government job placement reporting database. As part of the settlement SEEDCO made extensive admissions and instituted a compliance program. Subsequently in 2013, the Office obtained Consent Decrees and Orders of Settlement and Dismissal as to five settling defendants, each of whom made certain admissions regarding their conduct and made “ability to pay” payments totaling $86,000.
US v. Test Quest et al.
$1.725 million paid to the United States
In January 2013, the Office filed a lawsuit against TestQuest and Michael Logan (a manager at TestQuest) in connection with a scheme whereby TestQuest obtained federal funds for allegedly providing after-school tutoring services that it did not actually provide. At the same time, Logan was arrested. In June 2013, Logan pled guilty to one count of conspiring to defraud the United States and, pursuant to the plea agreement, agreed to pay the Government approximately $750,000 in restitution. In August 2013, the Office filed settlement agreements with TestQuest and Logan, and simultaneously filed an amended civil complaint naming three public school teachers who also participated in the fraud. Pursuant to the settlement agreements, TestQuest made admissions of wrongdoing and paid $1,725,000, and Logan made admissions of wrongdoing.
The Office’s Money Laundering and Asset Forfeiture Unit is led by Sharon Cohen Levin and handles all criminal and civil forfeiture actions for the U.S. Attorney’s Office for the Southern District of New York. Civil recoveries are handled by the Office’s Civil Division, which is led by Sara L. Shudofsky. Criminal and civil collections are handled by the Office’s Financial Litigation Unit, which is led by Kathleen Zebrowski.
For further information, the United States Attorneys’ Annual Statistical Reports can be found online at http://www.justice.gov/usao/resources/reports/.
Six Defendants Charged in Manhattan Federal Court for Jamaican Lottery Telemarketing Fraud Scheme Targeting Elderly U.S. CitizensRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced that NADEISHA BLAKE, RASHINA WATSON, CRYSTAL MOSS, KIMONA PETERKIN, MELISSA BLAKE, and SOPHIA BLAKE were arrested today for allegedly engaging in a lottery telemarketing fraud scheme that obtained over $400,000 from elderly victims in the United States between 2010 and March 2013. Five of the defendants – NADEISHA BLAKE, MOSS, PETERKIN, MELISSA BLAKE, and SOPHIA BLAKE – were arrested this morning in New York, and will be presented and arraigned in Manhattan federal court this afternoon before U.S. Magistrate Judge Andrew J. Peck. WATSON, the sixth defendant, was arrested this morning in Bladensburg, Maryland, and will be presented in federal court in Maryland this afternoon.
U.S. Attorney Preet Bharara said: “As alleged, the defendants sought out and preyed on the elderly through their lottery telemarking scam. This Office will aggressively pursue and prosecute fraudsters who seek to exploit our citizens for financial gain. Thanks to the cooperative efforts of law enforcement, both here and abroad, this alleged international fraud scheme was uncovered, and the defendants will now be made to face justice. Citizens should be wary of these types of fraudulent lottery schemes that sound too good to be true.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Foreign lotteries prey upon trusting individuals who believe they have won a large prize. Not only are they illegal, but those who choose to participate run the risk of criminal charges for their involvement, like these alleged defendants. Postal Inspectors will bring to justice anyone who uses the mail for their illegal enterprise, both foreign and domestic.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:
The defendants participated in a fraudulent scheme in which dozens of elderly victims in the United States were informed that they had won substantial cash prizes in an international sweepstakes lottery, but that in order to claim these prizes, they first needed to pay tens of thousand dollars in fees and taxes. In fact, there was no sweepstakes lottery and the victims never received any cash prize, even after victims sent cash and checks totaling up to $100,000 each to the defendants and their co-conspirators in Jamaica.
As part of this scheme to defraud, the defendants worked with several co-conspirators in Jamaica. The Jamaican co-conspirators bought lists containing information about elderly Americans, called them, and informed them that they had won the lottery. All the victims had to do to get their prizes, according to the Jamaican co-conspirators, was to send payments for certain “taxes” and “fees.” The victims were then instructed to send the money to the defendants by wire transfer or U.S. mail. Victims who sent money were often contacted again by the Jamaican co-conspirators and instructed to send additional money in order to claim their prizes. After receiving money from the victims, the defendants transmitted the funds to their Jamaican co-conspirators either through wire transfers or by carrying cash to Jamaica.
All of the defendants are charged with one count of conspiracy to commit mail and wire fraud, one substantive count of mail fraud, and one substantive count of wire fraud, which each carry a maximum sentence of 20 years in prison. A chart containing each defendant’s age and residence information is attached. The case is assigned to U.S. District Judge Victor Marrero.
The investigation into the lottery telemarketing fraud scheme is being conducted in New York by the USPIS, in cooperation with the Jamaican Constabulary Force (“JCF”). Mr. Bharara praised the investigative work of the USPIS and the JCF, and expressed his gratitude to the Office of International Affairs, United States Department of Justice Criminal Division, and the Consumer Protection Branch of the United States Department of Justice Civil Division for their cooperation in the investigation.
This case is being prosecuted by the Office’s General Crimes Unit. Assistant United States Attorneys Megan Gaffney and Tatiana R. Martins are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty
Click here to view chart(s)
U.S. v. Nadeisha Blake, et al. Indictment PR
Two More Adult Day Care Center Operators Sentenced in Manhattan Federal Court for Conspiring to Bribe Former New York State Assemblyman Eric StevensonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that IGOR BELYANSKY and DAVID BINMAN were sentenced today in Manhattan federal court to 20 and nine months in prison, respectively, for conspiring to pay approximately $20,000 in bribes to former New York State Assemblyman Eric Stevenson in exchange for Stevenson’s official acts, including drafting, proposing, and agreeing to enact legislation that favored the bribers’ business interests. BELYANSKY was also sentenced for conspiring to bribe former New York State Assemblyman Nelson Castro. BELYANSKY and BINMAN both pled guilty in September 2013 before U.S. District Judge William H. Pauley III, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Igor Belyansky and David Binman were more than willing to break the law by paying tens of thousands of dollars in bribes to Eric Stevenson to advance their own business interests and to buy favorable legislation. Today, they learned that their corruption of the legislative process comes at a cost, time behind bars in a federal prison.”
According to the Complaint and the Indictment filed in Manhattan federal court, and statements made in Court:
Stevenson began serving as a member of the New York State Assembly in 2011 representing District 79, which includes various neighborhoods in the Bronx. The four businessmen – BELYANSKY, BINMAN, Rostislav Belyansky (“Slava”), and Igor Tsimerman – are individuals who, during 2012 and 2013, were seeking to open and manage adult day care centers in the Bronx, New York, including a center on Westchester Avenue (the “Westchester Avenue Center”), within Stevenson’s Assembly District, and a second center on Jerome Avenue (the “Jerome Avenue Center”), within then-Assemblyman Castro’s Assembly 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 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, Slava 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, Slava and 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 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 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 Slava 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. Stevenson told the CW: “All you gotta do is tell me what you want in the bill, and the bill drafter will put it together…I just need you to tell me what they [the co-defendants] want; we prepare the bill. . . . You can write down the language, basically what you want.” Stevenson then asked: “Are Igor [BELYANSKY] and them putting together a nice little package [of money] for me, huh?” He said: “I got my inauguration I gotta take care of, I got a lot of sh*t man.” Stevenson then said to the CW, in reference to the legislation, “I’m telling you, it’s done. It’s no problem.” Subsequently, the CW met with Tsimerman and 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 Slava 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 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, BELYANSKY, BINMAN, Slava, and Tsimerman 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 expressed 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 BELYANSKY, BINMAN, Slava, and Tsimerman. 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, Slava 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.
On February 20, 2013, 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.
Two days later, in a meeting between the CW and BELYANKY, BINMAN, and Tsimerman, 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 addition to prison, BELYANSKY, 42, of Bronx, New York, was sentenced to three years of supervised release, and ordered to pay a $2,000 fine and a $200 special assessment fee. BINMAN, 52, of Glendale, New York, was also sentenced to three years of supervised release, and ordered to pay a $7,500 fine and a $100 special assessment fee.
Stevenson was convicted on January 13, 2014, of conspiring to commit honest services wire fraud, conspiring to commit federal programs bribery and to violate the Travel Act, committing federal programs bribery, and extortion under color of official right following a six-day jury trial before U.S. District Judge Loretta A. Preska. Stevenson is scheduled to be sentenced by Judge Preska on May 20, 2014.
Tsimerman and Slava pled guilty in September 2013 to conspiring to commit honest services wire fraud in connection with their payment of bribes to Stevenson before Judge Pauley. On January 24, 2014, Judge Pauley sentenced Tsimerman principally to 24 months in prison, and sentenced Slava principally to 18 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.
Statement of Manhattan U.S. Attorney Preet Bharara on the Conviction of Mathew MartomaRead the Press Release
“As the jury unanimously found, Mathew Martoma cultivated and purchased the confidence of doctors with secret knowledge of an experimental Alzheimer's drug, and used it to engage in illegal insider trading. Martoma bought the answer sheet before the exam – more than once – netting a quarter billion dollars in profits and losses avoided for SAC, as well as a $9 million bonus for him. In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty. Mathew Martoma becomes the 79th person convicted of insider trading after trial or by guilty plea in this District in the last four years.”
SAC Capital Portfolio Manager Mathew Martoma Found Guilty in Manhattan Federal Court of Insider Trading ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MATHEW MARTOMA, a former portfolio manager of CR Intrinsic Investors, LLC, a division of S.A.C. Capital, was found guilty today in Manhattan federal court in connection with his participation in the most lucrative insider trading scheme ever charged, involving approximately $275 million in illegal profits and avoided losses. MARTOMA was convicted after a four-week jury trial presided over by U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Preet Bharara said: “As the jury unanimously found, Mathew Martoma cultivated and purchased the confidence of doctors with secret knowledge of an experimental Alzheimer's drug, and used it to engage in illegal insider trading. Martoma bought the answer sheet before the exam – more than once – netting a quarter billion dollars in profits and losses avoided for SAC, as well as a $9 million bonus for him. In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty. Mathew Martoma becomes the 79th person convicted of insider trading after trial or by guilty plea in this District in the last four years.”
According to the allegations in the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
During the period of the insider trading scheme, MARTOMA was an S.A.C. Capital portfolio manager responsible for investment decisions in public companies in the health care sector, including pharmaceutical companies Elan and Wyeth, that were involved in the development of experimental drugs to combat Alzheimer’s Disease. At the time, scientists and investors alike were awaiting the results of a clinical trial being conducted by Elan and Wyeth for a drug called bapineuzumab, which offered a novel but untested approach to the treatment of Alzheimer’s Disease (the “Drug Trial”).
In order to obtain material nonpublic information (the “Inside Information”) about the Drug Trial, MARTOMA, shortly after starting his employment at S.A.C. Capital in the summer of 2006, began using expert networking firms to try to speak to doctors involved in the Drug Trial with access to confidential information. Through these efforts, MARTOMA arranged dozens of paid consultations with one of the Drug Trial’s principal investigators, Dr. Joel Ross, and the chairman of the Drug Trial’s Safety Monitoring Committee (“SMC”), Dr. Sidney Gilman. Through an exploitation of MARTOMA’s personal and financial relationships with these doctors, MARTOMA was able to obtain Inside Information about the Drug Trial.
The Inside Information that MARTOMA initially received from Dr. Ross included anecdotal reports concerning patients under Dr. Ross’s care. The Inside Information MARTOMA initially received from Dr. Gilman included generally positive safety data about which Dr. Gilman was aware through his chairmanship of the SMC. In fact, MARTOMA arranged a paid consultation shortly after each and every SMC meeting, in part to ensure that he would be among the first to learn if any substantial safety issues were emerging from the Drug Trial that could lead to the cancellation of the Drug Trial and decreases in the price of Elan and Wyeth stock. Based in part on the positive safety information, MARTOMA purchased and held shares of Elan and Wyeth, and further recommended that the owner of S.A.C. Capital (the “S.A.C. Capital Owner”) purchase and hold Elan and Wyeth securities, which the S.A.C Capital Owner did. By the spring of 2008, S.A.C. Capital held approximately $700 million worth of Elan and Wyeth equity securities.
Elan and Wyeth planned to release the full results of the Drug Trial to the investing public at the International Conference on Alzheimer Disease (the “ICAD Presentation”) on July 29, 2008. Dr. Gilman was selected to present the results on behalf companies and was “unblinded” to the full safety and efficacy results of the drug trial on July 15, 2008. Until that time, Dr. Gilman had only been privy to the safety results of the Drug Trial. On July 17, 2008, Dr. Gilman received a draft PowerPoint presentation that had been created for the ICAD meeting and that was marked “Confidential, Do Not Distribute.” The draft PowerPoint presentation showed that the Drug Trial results were negative, particularly in comparison with market expectations. The results raised serious questions about how well the drug worked and, in fact, whether it worked at all.
Later on July 17, 2008, MARTOMA called Dr. Gilman from his home and spoke to Dr. Gilman in detail about the draft PowerPoint presentation during a phone call that lasted one hour and forty-five minutes. Then, on Saturday, July 19, 20008, MARTOMA flew roundtrip from New York City to Detroit, Michigan, to meet Dr. Gilman in his University of Michigan office and review the draft PowerPoint presentation further.
The next day, Sunday, July 20, 2008, MARTOMA sent the owner of S.A.C. Capital (the “S.A.C. Capital Owner”) an email in which he wrote that “…It’s important [that we speak,]” which they did, for approximately 20 minutes. The S.A.C. Capital Owner then directed S.A.C Capital to sell Elan and Wyeth securities prior to the ICAD Presentation. Over the next seven days, S.A.C. Capital liquidated its entire equity position in Elan and almost all of its equity position in Wyeth – a total of 17.7 million shares worth approximately $700 million. S.A.C. Capital also shorted Elan and Wyeth by approximately 7.75 million shares. This trading represented over 20% of the reported U.S. trading volume in Elan and 11% of the volume in Wyeth.
MARTOMA also received information about the ICAD presentation from Dr. Joel Ross. In particular, on the evening of July 28, 2008, after Dr. Ross had been un-blinded to the Drug Trial results at a dinner for Principal Investigators, Dr. Ross met with MARTOMA in a hotel lobby to discuss the negative results. To Dr. Ross’s surprise, MARTOMA already seemed to have seen the Drug Trial results.
The day after the ICAD presentation, Elan stock closed approximately 42% lower, and Wyeth shares fell approximately 11%. Through this trading activity S.A.C. Capital earned profits and avoided losses of approximately $275 million.
MARTOMA, 39, was convicted of one count of conspiracy to commit securities fraud and two counts of securities fraud. He faces a maximum penalty of five years in prison for the conspiracy charge and 20 years in prison on each of the two securities fraud charges. With respect to the conspiracy charges, he faces a maximum fine of $250,000, or twice the gross gain or loss derived from the crimes, and for the securities fraud charges, he faces a maximum fine of $5 million, or twice the gross gain or loss derived from the crime on each charge.
Mr. Bharara praised the efforts of the FBI and also thanked the SEC for its assistance in the investigation. He added that the investigation is continuing.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Arlo Devlin-Brown, Eugene Ingoglia, Megan Gaffney, and Andrea Griswold are in charge of the prosecution.
U.S. v. Mathew Martoma S1 Indictment.pdf
Manhattan U.S. Attorney Charges Swiss Asset Manager with Conspiring to Hide Millions of Dollars in Swiss Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced the indictment today of PETER AMREIN, an asset manager at a Swiss asset management firm who assisted U.S. taxpayer-clients and others in hiding millions of dollars in offshore accounts from the IRS and evading U.S. taxes on the income earned in those accounts.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, from his post in Switzerland, Peter Amrein aided and abetted U.S. taxpayers in their efforts to skirt the tax code and conceal their assets in offshore accounts. As today’s charges make clear, tax evasion is a serious offense. This Office is committed to prosecuting individuals, both U.S. citizens and non-citizens like Amrein, who engage in this illicit conduct.”
IRS Special Agent-in-Charge Weirauch said: “Offshore tax enforcement remains a top priority for the Internal Revenue Service. Individuals who choose to hide income outside of the United States, as well as those who assist them in hiding their assets, expose themselves to a variety of criminal charges and severe penalties. As we continue to gain access to more and more information about individuals involved in offshore tax evasion, potential violators can expect us to use all of our enforcement tools to stop this abuse.”
According to the allegations contained in the Indictment, which was unsealed today in Manhattan federal court, as well as other court documents previously filed:
AMREIN worked as a client adviser at a Swiss bank (“Swiss Bank No. 3) and, later, as an asset manager at a Swiss asset management firm (the “Swiss Asset Management Firm”). In those roles, between 1998 and 2012, AMREIN helped U.S. taxpayers evade taxes and hide millions of dollars in undeclared accounts at various Swiss banks, including, among others, Wegelin & Co. (“Wegelin”), which previously pled guilty in Manhattan federal court for conspiring with U.S. taxpayers to evade taxes.
In 1998, AMREIN began to work with Edgar Paltzer, a Zurich-based attorney, in the management of undeclared accounts for a number of U.S. taxpayers (collectively, the “Amrein/Paltzer Clients”). Paltzer has previously pled guilty in the Southern District of New York to conspiring to help U.S. taxpayers evade taxes. AMREIN requested that Paltzer establish sham foundations, organized under the laws of non-U.S. countries, such as Liechtenstein, so that the assets of the Amrein/Paltzer Clients could be maintained in accounts held in the names of these foreign foundations rather than in the names of the clients themselves. AMREIN made this request in order to help clients conceal their ownership of these undeclared accounts from the IRS.
In 2006, AMREIN left his position as a client adviser at Swiss Bank No. 3, and began to work as an asset manager at the Swiss Asset Management Firm. When AMREIN left Swiss Bank No. 3, he transferred the undeclared accounts of the Amrein/Paltzer Clients to another Swiss bank (“Swiss Bank No. 4”). At Swiss Bank No. 4, the accounts continued to be held in the names of the sham foundations created by Paltzer, and continued to be hidden from the IRS.
In 2008, it became publicly known that UBS AG (“UBS”) was being investigated by United States law enforcement for helping U.S. taxpayers maintain undeclared accounts. Because of the investigation of UBS, Swiss Bank No. 4 informed AMREIN that it was going to close the undeclared accounts of the Amrein/Paltzer Clients. In order to assist his clients in continuing to maintain undeclared accounts, AMREIN searched for and found another bank in Switzerland (“Swiss Bank No. 1”) that would maintain undeclared accounts of the Amrein/Paltzer Clients.
Thereafter, in 2009, AMREIN opened undeclared accounts for the Amrein/Paltzer Clients at Swiss Bank No. 1 in the name of sham foundations and transferred his clients’ assets from Swiss Bank No. 4 to these accounts at Swiss Bank No. 1. For some of these clients, AMREIN, with Paltzer’s assistance, helped send funds back to the United States and to other foreign jurisdictions in ways that were designed to prevent U.S. authorities from discovering the existence of the clients’ undeclared accounts. For instance, AMREIN and Paltzer instructed a client adviser at Swiss Bank No. 1 to empty one of the accounts by sending checks in amounts smaller than $9,900 to the beneficial owner of the account, i.e., the U.S. taxpayer. On another occasion, AMREIN and Paltzer instructed the same client adviser to transfer the balance of one of the accounts, which was then valued at over $2.4 million, to another account controlled by the U.S. taxpayer in Belize City, Belize.
AMREIN, 52, a Swiss citizen, resides in Switzerland and has not been arrested.
AMREIN is charged with one count of conspiracy to defraud the United States and the IRS, and faces a maximum sentence of five years in prison, a maximum term of three years of supervised release, and a fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to the victims.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation, which he noted is ongoing. He also thanked the Department of Justice’s Tax Division for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Sarah E. Paul, Jason H. Cowley, and Jared Lenow are in charge of the prosecution.
The charge and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Manhattan U.S. Attorney Charges Swiss Asset Manager with Conspiring to Hide Millions of Dollars in Swiss Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced the indictment today of PETER AMREIN, an asset manager at a Swiss asset management firm who assisted U.S. taxpayer-clients and others in hiding millions of dollars in offshore accounts from the IRS and evading U.S. taxes on the income earned in those accounts.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, from his post in Switzerland, Peter Amrein aided and abetted U.S. taxpayers in their efforts to skirt the tax code and conceal their assets in offshore accounts. As today’s charges make clear, tax evasion is a serious offense. This Office is committed to prosecuting individuals, both U.S. citizens and non-citizens like Amrein, who engage in this illicit conduct.”
IRS Special Agent-in-Charge Weirauch said: “Offshore tax enforcement remains a top priority for the Internal Revenue Service. Individuals who choose to hide income outside of the United States, as well as those who assist them in hiding their assets, expose themselves to a variety of criminal charges and severe penalties. As we continue to gain access to more and more information about individuals involved in offshore tax evasion, potential violators can expect us to use all of our enforcement tools to stop this abuse.”
According to the allegations contained in the Indictment, which was unsealed today in Manhattan federal court, as well as other court documents previously filed:
AMREIN worked as a client adviser at a Swiss bank (“Swiss Bank No. 3) and, later, as an asset manager at a Swiss asset management firm (the “Swiss Asset Management Firm”). In those roles, between 1998 and 2012, AMREIN helped U.S. taxpayers evade taxes and hide millions of dollars in undeclared accounts at various Swiss banks, including, among others, Wegelin & Co. (“Wegelin”), which previously pled guilty in Manhattan federal court for conspiring with U.S. taxpayers to evade taxes.
In 1998, AMREIN began to work with Edgar Paltzer, a Zurich-based attorney, in the management of undeclared accounts for a number of U.S. taxpayers (collectively, the “Amrein/Paltzer Clients”). Paltzer has previously pled guilty in the Southern District of New York to conspiring to help U.S. taxpayers evade taxes. AMREIN requested that Paltzer establish sham foundations, organized under the laws of non-U.S. countries, such as Liechtenstein, so that the assets of the Amrein/Paltzer Clients could be maintained in accounts held in the names of these foreign foundations rather than in the names of the clients themselves. AMREIN made this request in order to help clients conceal their ownership of these undeclared accounts from the IRS.
In 2006, AMREIN left his position as a client adviser at Swiss Bank No. 3, and began to work as an asset manager at the Swiss Asset Management Firm. When AMREIN left Swiss Bank No. 3, he transferred the undeclared accounts of the Amrein/Paltzer Clients to another Swiss bank (“Swiss Bank No. 4”). At Swiss Bank No. 4, the accounts continued to be held in the names of the sham foundations created by Paltzer, and continued to be hidden from the IRS.
In 2008, it became publicly known that UBS AG (“UBS”) was being investigated by United States law enforcement for helping U.S. taxpayers maintain undeclared accounts. Because of the investigation of UBS, Swiss Bank No. 4 informed AMREIN that it was going to close the undeclared accounts of the Amrein/Paltzer Clients. In order to assist his clients in continuing to maintain undeclared accounts, AMREIN searched for and found another bank in Switzerland (“Swiss Bank No. 1”) that would maintain undeclared accounts of the Amrein/Paltzer Clients.
Thereafter, in 2009, AMREIN opened undeclared accounts for the Amrein/Paltzer Clients at Swiss Bank No. 1 in the name of sham foundations and transferred his clients’ assets from Swiss Bank No. 4 to these accounts at Swiss Bank No. 1. For some of these clients, AMREIN, with Paltzer’s assistance, helped send funds back to the United States and to other foreign jurisdictions in ways that were designed to prevent U.S. authorities from discovering the existence of the clients’ undeclared accounts. For instance, AMREIN and Paltzer instructed a client adviser at Swiss Bank No. 1 to empty one of the accounts by sending checks in amounts smaller than $9,900 to the beneficial owner of the account, i.e., the U.S. taxpayer. On another occasion, AMREIN and Paltzer instructed the same client adviser to transfer the balance of one of the accounts, which was then valued at over $2.4 million, to another account controlled by the U.S. taxpayer in Belize City, Belize.
AMREIN, 52, a Swiss citizen, resides in Switzerland and has not been arrested.
AMREIN is charged with one count of conspiracy to defraud the United States and the IRS, and faces a maximum sentence of five years in prison, a maximum term of three years of supervised release, and a fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to the victims.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation, which he noted is ongoing. He also thanked the Department of Justice’s Tax Division for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Sarah E. Paul, Jason H. Cowley, and Jared Lenow are in charge of the prosecution.
The charge and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Peter Amrein Indictment
Manhattan U.S. Attorney Announces Return to Poland of Johann Conrad Seekatz Painting Stolen by the Nazis During World War IIRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the return to the Polish Government of the Johann Conrad Seekatz painting, “St. Philip Baptizing a Servant of Queen Kandaki” (the “Seekatz Painting”), that was stolen from the National Museum of the City of Warsaw by Nazi forces during World War II.
Manhattan U.S. Attorney Preet Bharara said: “Decades ago, during World War II, this Johann Conrad Seekatz painting was removed from its home in a national Polish museum by Nazi forces. Since then it has crisscrossed the globe, but today, we are very pleased to finally be able to return this Polish national treasure to the country and its people.”
HSI New York Special Agent-in-Charge James T. Hayes, Jr. said: “We are deeply grateful to return this cherished painting to our partners from the Republic of Poland. Homeland Security Investigations will continue to work tirelessly to track down objects stolen during World War II and return them to their rightful owners.”
During World War II, Nazi forces invaded and occupied Poland and removed from the National Museum of the City of Warsaw numerous works of art, including the Seekatz Painting. The Seekatz Painting was never returned to the City of Warsaw following its removal by the Nazis during World War II. In 2006, the Seekatz Painting, erroneously labeled with another title, was sold to a gallery in London, England. In 2012, an evaluation of the Seekatz Painting was conducted and it was determined that it was, in fact, the painting stolen by the German Army from the National Museum of the City of Warsaw during World War II. On July 12, 2012, the U.S. Attorney’s Office submitted, and the U.S. District Court for the Southern District entered, a stipulation and order (the “Order”) providing for the seizure and return of the Seekatz Painting to the Republic of Poland. Subsequent to the entry of the Order, ICE HSI took possession of the painting in London, with the voluntary cooperation of the gallery in London, and returned the Seekatz Painting to New York.
The Seekatz Painting was returned to the Minister of Culture and National Heritage of Poland, Bogdan Zdrojewski, and the Polish Ambassador to the United States, Ryszard Schnepf, today at a repatriation ceremony at the Consulate General of the Republic of Poland in New York, New York. Its return to the Government of Poland marks the seventh time that the U.S. Attorney’s Office for the Southern District of New York, in conjunction with ICE HSI, has returned important historical and cultural property and art work stolen during either World War I or World War II to its rightful owner.
Mr. Bharara praised the investigative work of ICE HSI in this matter, and its ongoing efforts to find and repatriate stolen and looted art and cultural property.
The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorney Jason H. Cowley is in charge of the case.
Manhattan U.S. Attorney Announces Charges Against Owner of Bronx Clinic and 23 Other Individuals Involved in Illegal Distribution of More Than Five Million Oxycodone PillsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Bridget G. Brennan, the Special Narcotics Prosecutor for the City of New York (“SNP”), James J. Hunt, the Acting Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (“DEA”), and William Bratton, the Police Commissioner of the City of New York (“NYPD”), announced today the unsealing of an Indictment against 24 defendants in connection with a massive drug distribution ring that operated out of a purported medical clinic with multiple locations in the Bronx, New York, known as “Astramed,” and unlawfully distributed more than five million tablets of the prescription painkiller oxycodone over a three-year period. The participants in the distribution ring included doctors, clinic employees, and drug traffickers who oversaw crews of “patients” who they sent into the clinics in order to obtain medically unnecessary prescriptions. The prescriptions were then filled at pharmacies, and the resulting pills resold on the streets of New York and elsewhere.
Twenty-one defendants were arrested yesterday in connection with today’s charges. The defendants will be presented in Manhattan federal court before U.S. Magistrate Judge Gabriel W. Gorenstein later this afternoon. Related charges against one of the clinic doctors were also unsealed today by SNP. The defendant is expected to be arraigned later today in Manhattan Supreme Court before Judge Bruce Allen.
Manhattan U.S. Attorney Preet Bharara said: “The world of prescription drug trafficking is looking more and more like the world of old-school trafficking in narcotics like heroin, cocaine and crack. In this case, the drug spot was a clinic controlled by traffickers, often through intimidation and violence. The traffickers were supplied with prescriptions by corrupt doctors and clinic employees, dispensed to lower-level ‘pretend’ patients so that massive quantities of oxycodone could be distributed wherever the most money could be made, often in communities hundreds of miles away. This is poison by prescription, and the volume and money allegedly involved would make hardened illegal drug traffickers envious – over 31,000 medically unnecessary oxycodone prescriptions for 5.5 million tablets sold with a street value between $170 million and over half a billion dollars. Even legal drugs illegally obtained can be deadly, and more people have been dying from prescription drug abuse than heroin and cocaine combined. Unnecessary painkillers can simply end up being killers. This has to stop and we will do everything we can to stop it.”
Special Narcotics Prosecutor Bridget G. Brennan said: “These clinics have long been a source of community concern and complaints. Dr. Robert Terdiman is charged with selling prescriptions for highly addictive painkillers on a scale we have not seen before – flooding the black market with oxycodone carrying a street value of over $90 million. Not only is he charged with perpetuating a practice that did little to heal and much to harm, both he and The Clinic reaped huge profits. We would like to recognize the extraordinary commitment and dedication of all of the agencies that participated in this investigation.”
DEA Acting Special Agent in Charge James J. Hunt said, “Twenty two arrests, the dismantlement of the largest pill mill in the northeast and the ability for residents living near Southern Boulevard and Westchester Avenue in the Bronx to reclaim their neighborhood from drug dealers are the end results of unified police work by local, state and federal law enforcement in New York. I commend the diligent work of the numerous law enforcement agencies who participated in this investigation.”
NYPD Commissioner William Bratton said: “Instead of abiding by the Hippocratic Oath, these doctors scheduled pseudo physical exams for greed and self-profit. They fueled a criminal operation which distributed highly addictive prescription drugs in the Bronx community and surrounding areas. Thanks to the investigators and prosecutors in this case, Lowe and his crew will no longer traffic illegal drugs.”
According to the allegations contained in the Indictment and other documents unsealed today in Manhattan federal court:
Oxycodone is a highly addictive, prescription narcotic-strength opioid used to treat severe and chronic pain conditions. More than 13 million Americans abuse oxycodone, with the misuse of prescription painkillers such as oxycodone leading to as many as 500,000 annual emergency room visits. Oxycodone prescriptions have enormous cash value to street level drug dealers, who can fill the prescriptions at most pharmacies and resell the resulting pills at vastly inflated rates. Indeed, a single prescription for 180 30-milligram oxycodone pills has an average resale value in New York City of more than $6,000, and up to $18,000 in nearby states.
From approximately January 2011 until January 2014, a drug distribution ring centered at “Astramed,” a purported medical clinic with multiple locations in the Bronx, including a primary location on Southern Boulevard (the “Clinic”), unlawfully diverted and trafficked millions of oxycodone tablets, which netted participants in the distribution scheme hundreds of millions of dollars in proceeds.
Astramed was owned and operated by KEVIN LOWE, a medical doctor, who reaped millions of dollars by charging cash for the thousands of medically unnecessary prescriptions written by the clinic doctors (the “Doctors”). The Doctors were corrupt, Board-certified, state- licensed doctors who, in exchange for cash, were willing to write medically unnecessary prescriptions for large quantities of oxycodone. The Clinic typically charged $300 in the form of a money order for “doctor visits” that usually lasted just a minute or two, involved no actual physical examination, and consistently resulted in the issuance of a prescription for large doses of oxycodone, typically 180 30-milligram tablets, or a daily dosage of six 30-milligram tablets. Indeed, the Doctors, who worked directly for LOWE, were paid only for each prescription they wrote – rather than for each patient they saw – and they were paid nothing if they did not write a prescription.
Various employees of the Astramed clinics controlled access to the Doctors and created false documents in exchange for cash payments. To avoid detection by law enforcement, the Doctors sometimes asked the “patients” for medical documentation, such as MRIs, purporting to document injuries, or urine samples purporting to show that the “patient” was taking oxycodone. Fake MRIs and urine samples were sold by members of the conspiracy to Astramed’s “patients,” typically inside the Clinic or immediately outside its premises.
The Clinic itself bears little resemblance to a standard medical office. For example, on a daily basis during the time set forth in the Indictment, crowds of up to one hundred people gathered outside the Clinic, clamoring to see one of the doctors at the clinic and thereby get a prescription for oxycodone. The majority of these individuals had no medical need for oxycodone, or any legitimate medical record documenting an ailment for which oxycodone would be prescribed. Instead, most of these individuals were members of “crews” – that is, they were recruited and paid by high-level drug traffickers, oxycodone distributors (the “Crew Chiefs”), to pose as “patients” in order to receive medically unnecessary prescriptions from the Doctors. The Crew Chiefs then arranged for and oversaw the filling of the resulting prescription at various pharmacies and took possession of the oxycodone pills to be resold on the street. Crew Chiefs also paid the Clinic’s employees hundreds of dollars in cash at a time to get their Crew Members into the Clinic to see one of the Doctors. The Crew Chiefs maintained their joint control over the operations of the Clinic, in part, as a result of intimidation and the threat of violence.
In total, between approximately January 2011 and January 2014, Astramed Doctors issued approximately 31,500 medically unnecessary prescriptions for oxycodone, comprising nearly 5.5 million oxycodone tablets with a street value of up to $550 million. LOWE alone collected nearly $12 million in fees for “doctor visits” during this time period. Based on the street market value of the pills distributed, the participants in the distribution ring together made hundreds of millions of dollars as a result of the clinic fees charged and the proceeds obtained from the resale of the illegally obtained oxycodone.
All of the defendants are charged with one count of conspiracy to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison.
A chart containing each defendant’s age and residence information is attached. The case is assigned to U.S. District Judge Lorna G. Schofield.
Mr. Bharara thanked the DEA and the NYPD for their work in the 15-month investigation, which he noted is ongoing. Mr. Bharara also thanked, the Office of the Special Narcotics Prosecutor for the City of New York, the Town of Orangetown Police Department, the Westchester County Police Department, the United States Department of Health and Human Services, the United States Marshals Service, the New York State Health Department’s Bureau of Narcotic Enforcement, the Office of the Medicaid Inspector General, New York City's Human Resource Administration, the New York State Attorney General’s Office Medicaid Fraud Control Unit, Beacon New York Police Department, the Internal Revenue Service-Criminal Investigation and the El Dorado Task Force for their assistance.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Edward B. Diskant and Tatiana R. Martins are in charge of the prosecution. Assistant U.S. Attorney Micah Smith of the Office’s Asset Forfeiture Unit is responsible for the forfeiture of assets.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Kevin Lowe et al. Indictment
U.S. v. Kevin Lowe et al. Detention Memo
U.S. v. Kevin Lowe et al Defendant Ages and ResidencesManhattan U.S. Attorney Announces Arrests of Five Defendants for Conspiring to Defraud Consumers Through the Sale of Counterfeit Luxury GoodsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), today announced the unsealing of an Indictment in Manhattan federal court charging JOSEPH MOSSERI, ALBERT MOSSERI, ODED HAKIM, a/k/a “Eddie Hakim,” ELLIOT SHASHO, and ANDREW LI, for their alleged participation in a scheme that victimized hundreds of consumers and numerous credit card processers through the marketing and sale of counterfeit luxury handbags over the Internet. JOSEPH MOSSERI, HAKIM, SHASHO, and LI were arrested today. ALBERT MOSSERI also surrendered today to USPIS. JOSEPH MOSSERI will be presented in Manhattan federal court this afternoon before United States Magistrate Judge Gabriel W. Gorenstein, and the remaining defendants will be presented tomorrow.
U.S. Attorney Preet Bharara said: “I would like to thank our partners, the U.S. Postal Inspection Service, Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Customs and Border Protection, and the New York State Department of Taxation and Finance, for their outstanding investigative efforts and assistance in bringing this alleged counterfeiting scheme to light.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “When criminals counterfeit goods they harm the economy and legitimate businesses that pay their fair share in taxes and employ American citizens. It’s the same as identity theft, but only from a brand. Postal Inspectors have little tolerance for this type of theft and will aggressively investigate and bring to justice anyone who defrauds American consumers.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:
The defendants and others controlled a series of websites that advertised and sold luxury fashion and other name-brand items – primarily handbags – at prices of up to $3,000. The websites advertised that the goods offered for sale were authentic and that they were offered at a discount because of manufacturing defects that were, according to one of the websites, “infrequently noticeable to the consumer.” In fact, however, the defendants either never shipped goods to consumers who ordered them or shipped goods that were verifiably counterfeit.
In order to prevent the proceeds of their scheme from being eroded by credit card chargebacks initiated by deceived customers, the defendants also defrauded the credit card processors for the websites by misrepresenting the reasons for disputed charges and obstructing efforts by credit card processors to recover disputed funds. The losses attributable to such efforts exceeded, in some cases, hundreds of thousands of dollars.
JOSEPH MOSSERI, ALBERT MOSSERI, HAKIM, and SHASHO directed the scheme and managed its finances. LI supplied the counterfeit luxury goods that were sold on the websites.
JOSEPH MOSSERI, 43; ALBERT MOSSERI, 34; HAKIM, 46; SHASHO, 41; and LI, 34, all of Brooklyn, New York, are each charged with one count of conspiracy to commit wire fraud, one count of substantive wire fraud, and one count of trademark counterfeiting. Each of the fraud counts carries a maximum sentence of 20 years in prison. The trademark counterfeiting count carries a maximum sentence of 10 years in prison. U.S. District Judge Alvin K. Hellerstein has been assigned to the case.
Mr. Bharara praised the outstanding investigative work of the Postal Inspection Service. He also thanked U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Customs and Border Protection, and the New York State Department of Taxation and Finance for their assistance.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Scott A. Hartman is in charge of the prosecution.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Joseph Mosseri, et al. Indictment
International Narcotics Trafficker Pleads Guilty in Manhattan Federal Court to the Manufacture, Shipment, and Importation of Tons of Cocaine into the United States and Other CountriesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and James J. Hunt, Acting Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration, announced that YESID RIOS SUAREZ pled guilty yesterday in Manhattan federal court in connection with his role in overseeing the manufacture of tens of thousands of kilograms of cocaine in clandestine laboratories in Colombia, and the distribution and importation of tons of cocaine to the United States and other countries. RIOS SUAREZ, a citizen of Colombia, who was originally charged in September 2011, pled guilty yesterday before U.S. District Judge Katherine B. Forrest.
Manhattan U.S. Attorney Preet Bharara said: “Yesid Rios Suarez has admitted his role in the manufacture, distribution, and importation into the U.S. of tons of Colombian cocaine. As a man who stands convicted by guilty plea of spending two decades in the cocaine business, he now faces the prospect of a lengthy prison term.”
DEA Acting Special Agent-in-Charge James J. Hunt said: “This is a significant international drug trafficker responsible for facilitating addiction and heartache for individuals and communities across the country. Thanks to our vast network of law enforcement and sources throughout the world, DEA and our partners successfully infiltrated his prolific drug enterprise and Mr. Suarez will now face the consequences for his criminal life.”
According to the Indictment and statements made at related court proceedings:
Between in or about 1992 until his arrest in Venezuela in or about 2011, RIOS SUAREZ, along with his co-conspirators, oversaw the manufacture of tens of thousands of kilograms of cocaine in clandestine laboratories that they operated in the Arauca department of Colombia and other areas of Colombia near the Venezuelan border. During that time, RIOS SUAREZ and his co-conspirators also oversaw the distribution of tens of thousands of kilograms of cocaine from Colombia and Venezuela to the United States and other countries through various intermediate shipping points. Specifically, once the cocaine had been manufactured in laboratories in Colombia, RIOS SUAREZ worked with others to launch planes carrying multi-hundred-kilogram loads of cocaine from clandestine landing strips operated by RIOS SUAREZ and his co-conspirators in Colombia and Venezuela. All told, prior to his arrest in 2011, RIOS SUAREZ worked for nearly two decades overseeing critical steps in the manufacture, distribution, and importation into the United States and other countries of tons of cocaine.
RIOS SUAREZ, 46, of Colombia, pled guilty to one count of participating in a conspiracy to import cocaine into the United States, and to manufacture and distribute cocaine knowing and intending that it would be imported into the United States. RIOS SUAREZ faces a mandatory minimum sentence of ten years in prison and a maximum sentence of life in prison. RIOS SUAREZ is scheduled to be sentenced by Judge Forrest on June 6, 2014, at 10:00 a.m.
Mr. Bharara praised the outstanding efforts of the DEA’s New York Organized Crime Drug Enforcement Strike Force and the Bogota Country Office; the Government of the Republic of Colombia; and the U.S. Department of Justice’s Office of International Affairs.
The DEA’s New York Organized Crime Drug Enforcement Strike Force comprises agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA), which is a federally funded crime fighting initiative.
The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Adam Fee and Sean S. Buckley are in charge of the prosecution.
U.S. v. Didier Gerson Rios Galindo and Yesid Rios Suarez Indictment
Manhattan U.S. Attorney Sues and Settles with JPMorgan Chase for $614 Million for Fraudulent Mortgage Lending PracticesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Associate Attorney General Tony West, Stuart F. Delery, the Assistant Attorney General for the Justice Department’s Civil Division, Damon Smith, Acting General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), David A. Montoya, Inspector General of HUD, and Richard J. Griffin, Acting Inspector General of the U.S. Department of Veterans Affairs (“VA”), announced today that the United States has filed, and simultaneously settled, a civil fraud lawsuit against JPMORGAN CHASE & CO. and JPMORGAN CHASE BANK, N.A. (collectively, “JPMORGAN CHASE”), for improperly approving thousands of residential home mortgage loans for government insurance and refinancing. In the settlement, JPMORGAN CHASE admitted, acknowledged, and accepted responsibility for, among other things, submitting false certifications to HUD, the VA, and the Federal Housing Administration (a component of HUD, and, together with HUD, “HUD-FHA”) that: (1) induced HUD-FHA and the VA to accept for government insurance and refinancing thousands of loans that were not eligible for such insurance or refinancing; and (2) ultimately resulted in substantial losses to the Government when the loans defaulted. JPMORGAN CHASE also admitted to failing to self-report to HUD-FHA hundreds of loans that it had identified as fraudulent or otherwise deficient, and to submitting loan data to HUD-FHA that lacked integrity.
To resolve the United States’ claims, JPMORGAN CHASE has agreed to pay $614 million to the United States under the False Claims Act. In addition, JPMORGAN CHASE has agreed to implement an enhanced quality control program to address the misconduct concerning the integrity of loan data submitted to HUD-FHA. The settlement was approved today by United States District Judge J. Paul Oetken.
Manhattan U.S. Attorney Preet Bharara stated: “For years, JPMorgan Chase has enjoyed the privilege of participating in federally-subsidized programs aimed at helping millions of Americans realize the dream of homeownership. Yet, for more than a decade, it abused that privilege. JPMorgan Chase put profits ahead of responsibility by recklessly churning out thousands of defective mortgage loans, failing to inform the Government of known problems with those loans, and leaving the Government to cover the losses when the loans defaulted. With today’s settlement, however, JPMorgan Chase has accepted responsibility for its misconduct and has committed to reform its business practices. This settlement adds to the list of successful mortgage fraud cases this Office has pursued.”
Associate Attorney General Tony West said: “The resolution announced today is a product of the Justice Department’s continuing efforts to hold accountable those whose conduct contributed to the financial crisis. This settlement recovers wrongfully claimed funds for vital government programs that give millions of Americans the opportunity to own a home and sends a clear message that we will take appropriately aggressive action against financial institutions that knowingly engage in improper mortgage lending practices.”
Stuart F. Delery, Assistant Attorney General for the Justice Department’s Civil Division, said: “The Department of Justice will continue to hold accountable financial institutions whose irresponsible mortgage lending undermines the housing market and costs the taxpayers many millions of dollars. I thank U.S. Attorney Bharara and his team for their stellar efforts in this case and look forward to our coordinated efforts in these cases.”
HUD Acting General Counsel Damon Smith said: “This settlement with JP Morgan Chase will enable HUD to recover funds lost due to Chase’s past unacceptable mortgage underwriting practices. In addition, Chase must now institute new and tighter controls to prevent abuses of FHA’s automated underwriting system. HUD will continue working with the Department of Justice to ensure that lenders are held accountable and are required to institute practices that will benefit both borrowers and the FHA insurance fund.”
HUD Inspector General David A. Montoya said: “The agreement reached with JPMC was possible due to the dedication of the U.S. Attorney’s Office for the Southern District of New York and the hard work of the talented staff at the Office of Inspector General. It also demonstrates the combined commitment of the Justice Department and the Office of Inspector General to continuing efforts to enforce FHA mortgage insurance requirements.”
Richard J. Griffin, Acting Inspector General for the Office of Inspector General, Department of Veterans Affairs, said: “I commend the efforts of the United States Attorney’s Office for the Southern District of New York to hold lenders accountable for conduct that defrauds the Government and deserving veterans who rely on VA’s loan guaranty program to purchase their homes.”
According to the Complaint filed in Manhattan federal court:
Since at least 2002, JPMORGAN CHASE has been a participant in the HUD-FHA Direct Endorsement Lender program (“DEL Program”) and the VA Home Loan Guaranty program (“Loan Guaranty Program”) – federal programs authorizing private-sector mortgage lenders to approve mortgage loans for insurance or refinancing by the Government. If a lender approves a mortgage loan for insurance and refinancing pursuant to the DEL Program or the Loan Guaranty Program and the loan later defaults, the holder of the loan may submit an insurance claim to FHA-HUD or the VA for the costs associated with the defaulted loan, which HUD-FHA or the VA must then pay. Under both the DEL Program and the Loan Guaranty Program, neither HUD-FHA nor the VA reviews a loan before it is approved for government insurance or refinancing. Consequently, it is crucial that lenders follow the rules of the DEL Program and the Loan Guaranty Program. Those rules require lenders to follow HUD-FHA’s and the VA’s underwriting requirements in determining which loans to approve for insurance or refinancing. The rules also require lenders to self-report loans that they identify as having been affected by fraud or other material deficiencies. The rules further require lenders to refrain from manipulating the loan data they submit to TOTAL Mortgage Scorecard (“TOTAL”) – a credit-rating software application maintained by HUD-FHA that determines whether a given loan qualifies for government insurance.
Notwithstanding the importance of following the rules of the DEL Program and the Loan Guaranty Program, during the period January 1, 2002, through the present (the “Covered Period”), JPMORGAN CHASE routinely violated those rules. Specifically, JPMORGAN CHASE: (1) approved thousands of loans for government insurance or refinancing that did not meet one or more of the requirements of the DEL Program or the Loan Guaranty Program; (2) failed to self-report hundreds of loans that it identified as having been affected by fraud or other material deficiencies; and (3) regularly submitted to TOTAL loan data that lacked integrity – the data was not based on documents or other information possessed by JPMORGAN CHASE employees at the time they submitted it. This conduct prompted HUD-FHA and the VA to accept for government insurance and refinancing thousands of loans that did not, in fact, qualify. When those loans ultimately defaulted, HUD-FHA and the VA suffered substantial losses that, but for JPMORGAN CHASE’s conduct, would not have occurred.
As part of the settlement, JPMORGAN CHASE has admitted, acknowledged, and accepted responsibility for the following conduct alleged in the Government’s complaint:
- It failed to self-report to HUD-FHA 582 loans that, from 2007 through 2009, it identified as having been affected by borrower or correspondent fraud or other material deficiencies.
- It approved for government insurance or refinancing thousands of loans that did not meet one or more rules of the DEL Program or the Loan Guaranty Program, and therefore were not eligible for government insurance or refinancing.
- Certain of its employees submitted data to TOTAL that lacked integrity. Specifically, when loans did not receive an “accept/approve” rating from TOTAL, these employees re-submitted the loans through TOTAL multiple times over a short period, each time entering into TOTAL hypothetical data that had not been corroborated by documents or other information possessed by the employees in order to determine data values that would generate an “accept/approve” rating. These employees communicated the qualifying data values to borrowers, thus increasing the risk of borrower fraud.
- As a result of the conduct described above, JPMORGAN CHASE induced HUD-FHA and the VA to accept for government insurance or refinancing thousands of loans that were not eligible for such insurance or refinancing, and that HUD-FHA and the VA otherwise would not have accepted for insurance or refinancing, and this resulted in substantial losses to the Government when the loans ultimately defaulted.
Pursuant to the settlement, JPMORGAN CHASE will pay the United States $614 million within 30 days of the settlement.
Under the settlement, JPMORGAN CHASE has also agreed to comply with all of the rules applicable to participants in the DEL Program and the Loan Guaranty Program, including the DEL Program requirement that it ensure the “integrity of the data supplied” to TOTAL. To ensure compliance with that data integrity requirement, JPMORGAN CHASE has agreed to implement an enhanced quality control program to review loans that it underwrites using TOTAL. Pursuant to this program, JPMORGAN CHASE must implement certain controls designed to detect instances where its employees submit to TOTAL data that is not supported by documents or other information possessed by the employees at the time the data is submitted. The details of the enhanced quality control program are subject to approval by this Office.
The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud, including mortgage fraud.
By filing this case, the Government joined a private whistleblower lawsuit that had previously been filed against JPMORGAN CHASE under the False Claims Act.
The case filed today against JPMORGAN CHASE represents the eighth civil fraud lawsuit brought by this Office since May 2011 alleging fraudulent lending practices by residential mortgage lenders. In February 2012, this Office settled with Citimortgage (a subsidiary of Citibank) and Flagstar Bank. In May 2012, the Office settled with Deutsche Bank and a number of its subsidiaries. In October 2013, a jury returned a verdict against Countrywide, Bank of America, and Rebecca Mairone. Litigation is pending against Wells Fargo Bank and Kurt Lofrano; Allied Home Mortgage, Jim Hodge, and Jeanne Stell; and Golden First Mortgage and David Movtady.
The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
Mr. Bharara thanked HUD-OGC, HUD-OIG and VA-OIG for their extraordinary assistance in this case. He also expressed his appreciation for the support of the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C.
Assistant U.S. Attorney Christopher B. Harwood is in charge of the case.
U.S. v. JPMorgan 13 Civ 0220 Government Complaint
U.S. v. JPMorgan 13 Civ 0220 Executed Stipulation of Settlement and JudgmentManhattan U.S. Attorney Announces the Indictment of Ross Ulbricht, the Creator and Owner of the “Silk Road” WebsiteRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the indictment in Manhattan federal court of ROSS WILLIAM ULBRICHT, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” in connection with his operation and ownership of Silk Road, a hidden website designed to enable its users to buy and sell illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. ULBRICHT was arrested in San Francisco, California, on October 1, 2013, pursuant to a criminal Complaint filed in Manhattan federal court.
According to the allegations in today’s Indictment and other documents previously filed in Manhattan federal court:
ULBRICHT created Silk Road in approximately January 2011, and owned and operated the underground website until it was shut down by law enforcement authorities in October 2013. Silk Road emerged as the most sophisticated and extensive criminal marketplace on the Internet, serving as a sprawling black-market bazaar where unlawful goods and services, including illegal drugs of virtually all varieties, were bought and sold regularly by the site’s users. While in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a hundred thousand buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.
ULBRICHT deliberately operated Silk Road as an online criminal marketplace intended to enable its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement. ULBRICHT sought to anonymize transactions on Silk Road in two principal ways. First, ULBRICHT operated Silk Road on what is known as “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the networks’ users. Second, ULBRICHT designed Silk Road to include a Bitcoin-based payment system that served to facilitate the illegal commerce conducted on the site, including by concealing the identities and locations of the users transmitting and receiving funds through the site.
The vast majority of items for sale on Silk Road were illegal drugs, which were openly advertised as such on the site. As of September 23, 2013, Silk Road had nearly 13,000 listings for controlled substances, listed under such categories as “Cannabis,” “Dissociatives,” “Ecstasy,” “Intoxicants,” “Opioids,” “Precursors,” “Prescription,” “Psychedelics,” and “Stimulants.” From November 2011 to September 2013, law enforcement agents made more than 100 individual undercover purchases of controlled substances from Silk Road vendors. These purchases included heroin, cocaine, ecstasy, and LSD, among other illegal drugs, and were filled by vendors believed to be located in more than ten different countries, including the United States, Germany, the Netherlands, Canada, the United Kingdom, Spain, Ireland, Italy, Austria and France.
In addition to illegal narcotics, other illicit goods and services were openly bought and sold on Silk Road as well. For example, as of September 23, 2013, there were: 159 listings under the category “Services,” most of which offered computer-hacking services, such as a listing by a vendor offering to hack into social networking accounts of the customer’s choosing; 801 listings under the category “Digital goods,” including malicious software, hacked accounts at various online services, and pirated media content; and 169 listings under the category “Forgeries,” including offers to produce fake driver’s licenses, passports, Social Security cards, utility bills, credit card statements, car insurance records, and other forms of false identification documents.
Using the online moniker “Dread Pirate Roberts,” or “DPR,” ULBRICHT controlled and oversaw every aspect of Silk Road, and managed a small staff of paid, online administrators who assisted with the day-to-day operation of the site. Through his ownership and operation of Silk Road, ULBRICHT reaped commissions worth tens of millions of dollars generated from the illicit sales conducted through the site. ULBRICHT also demonstrated a willingness to use violence to protect his criminal enterprise and the anonymity of its users. ULBRICHT even solicited six murders-for-hire in connection with operating the site, although there is no evidence that these murders were actually carried out.
To date, approximately 173,991 Bitcoins (worth over $150 million at present exchange rates) have been seized in the course of the investigation, including approximately 29,655 Bitcoins recovered from servers used to run the Silk Road website, and approximately 144,336 Bitcoins recovered from computer hardware belonging to ULBRICHT seized upon his arrest. On January 15, 2014, the Bitcoins recovered from the Silk Road servers were ordered forfeited in connection with a civil action previously filed in Manhattan federal court on September 30, 2013, seeking the forfeiture of all assets of Silk Road, including its website and all of its Bitcoins, because those assets allegedly were used to facilitate money laundering and constitute property involved in money laundering. ULBRICHT has filed a claim in the civil action, asserting that he is the owner of the Bitcoins found on his computer hardware, and contesting the forfeiture of those Bitcoins.
ULBRICHT, 29, of San Francisco, California, is charged with one count of narcotics conspiracy, which carries a maximum sentence of life imprisonment and a mandatory minimum sentence of 10 years; one count of engaging in a continuing criminal enterprise, which carries a maximum sentence of life imprisonment and a mandatory minimum sentence of 20 years in prison; one of count of conspiracy to commit computer hacking, which carries a maximum sentence of five years in prison; and one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison.
In December 2013, an Indictment filed in Manhattan federal court was unsealed charging three individuals, Andrew Michael Jones, a/k/a “Inigo,” Gary Davis, a/k/a “Libertas,” and Peter Phillip Nash, a/k/a “Samesamebutdifferent,” a/k/a “Batman73,” a/k/a “Symmetry,” a/k/a “Anonymousasshit,” for their alleged roles in assisting Ulbricht in the operation of Silk Road.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation and its New York Special Operations and Cyber Division, as well as the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the IRS, the New York City Police Department, U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and NY Department of Taxation. Mr. Bharara also thanked the ICE-HSI Chicago-O’Hare office for its assistance and support, as well as the Department of Justice’s Computer Crime and Intellectual Property Section and Office of International Affairs. Additionally, Mr. Bharara praised the foreign law enforcement partners whose contributions to the success of the investigation and prosecution have been invaluable, namely, the Australian Federal Police, the Irish Republic’s Computer Crime Investigation Unit of the An Garda Siochana, the Reykjavik Metropolitan Police of the Republic of Iceland, and the French Republic’s Central Office for the Fight Against Crime Linked to Information Technology and Communication.
Mr. Bharara also noted that the investigation remains ongoing.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
US v. Ross Ulbricht Indictment
Dutchess County Woman Convicted in White Plains Federal Court of Wire Fraud, Filing False Claims, Bank Fraud, and Corruptly Interfering with the IRSRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELANIE FERREIRA, 61, was found guilty on all counts of a four-count Indictment today that charged her with engaging in a series of frauds, which included cheating the Internal Revenue Service (“IRS”) out of nearly half a million dollars, and perpetrating a bank fraud scheme. The verdict came following a seven-day jury trial in White Plains Federal Court before U.S. District Judge Cathy Seibel.
U.S. Attorney Preet Bharara stated: “Melanie Ferreira thought she could enjoy the fruits of law-abiding taxpayers’ money while evading the tax laws and defrauding the government. Through today’s jury verdict, she learned how wrong she was.”
According to the Indictment and the evidence at trial:
On October 15, 2009, FERREIRA filed a U.S. Individual Income Tax Return, Form 1040, for the year 2008 (“2008 Return”). In her 2008 Return, she falsely reported interest income of $661,600 from three different banks. She then falsely claimed that she had paid taxes in the amount of $661,536 to the IRS for Tax Year 2008. On that basis, she claimed a refund of $440,924. In reality, she actually earned only $17 in interest income in 2008. Further, contrary to her claim on her 2008 Return that she had already paid $661,536 in federal taxes, she actually paid only $236.
On October 23, 2009, the IRS wired $440,924 to FERREIRA’s bank account. That same day, FERREIRA wired $44,100 to the individual listed on her tax return as her “tax preparer” and $88,172 to the individual who introduced her to the “tax preparer.”
The following spring, on April 15, 2010, FERREIRA tried to carry out the same type of scheme – requesting of a refund of over $332,033 – when she filed her Form 1040 for the year 2009, but this time, the IRS rejected her refund request. Thereafter, when the IRS notified FERREIRA that she was required to pay back the $440,924 plus interest and penalties, FERREIRA sent the IRS a series of incomprehensible documents and a worthless check for $759,033.05 written on a closed account.
In addition, FERREIRA also perpetrated a bank fraud scheme against the Bank of America (“BOA”), which was the bank that held the mortgage for her house in Dutchess County, New York (“House 1”). In May 2010, she caused a forged cashier’s check for $316,966.05, purporting to be drawn on the Federal Reserve Bank of Cleveland, Ohio (“Check 1”), to be sent to BOA in satisfaction of the mortgage on House 1. Believing that Check 1 was legitimate, BOA filed a satisfaction of mortgage. BOA subsequently determined that Check 1 was fraudulent and filed suit in New York State Supreme Court in order to have the mortgage reinstated. On June 2, 2012, FERREIRA sent a personal check in the amount of $305,000 (“Check 2”) to BOA, purporting, again, to pay off the balance of her mortgage. On the memo line of Check 2, FERREIRA wrote, in red ink, “FOR DISCHARGE OF DEBT EFT ONLY.” Check 2 was written on a bank account that had been closed two years before.
As reflected in papers filed in Court: FERREIRA’s schemes – sometimes known as a 1099-OID scheme and an electronic funds transfer or “EFT” scheme – are schemes often used by adherents to the Sovereign Citizens Movement, a group comprised of individuals who, although they reside in the United States, assert the position that they do not have to answer to any government authority, including courts, taxing entities, motor vehicle departments or law enforcement.
FERREIRA faces a maximum sentence of 58 years in prison and a maximum fine of $1,000,000, or twice the gross gain or gross loss from the offense. Judge Seibel set a sentencing date of May 20, 2014 at 2 p.m.
FERREIRA lived in Lagrangeville, New York, until her conviction today. Judge Seibel remanded her following the conviction.
Mr. Bharara praised the outstanding investigative work of the law enforcement partners involved in the investigation, including the FBI’s Joint Terrorism Task Force and the IRS.
This prosecution is being handled jointly by the Office’s Terrorism and International Narcotics Unit and the White Plains Division. Assistant United States Attorneys Jason P.W. Halperin and Marcia S. Cohen are in charge of the prosecution.
U.S. v. Melanie Ferreira Superseding Indictment
Long Island Man Found Guilty in Manhattan Federal Court of Scheme to Defraud Insurance Companies by Intentionally Causing Dozens of Car CrashesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that MAXO JEAN was found guilty on Friday, January 31, 2014, by a jury in Manhattan federal court of conspiracy to commit mail, wire, and health care fraud for orchestrating and carrying out a multi-year scheme to intentionally cause more than 30 car crashes, obtain unnecessary medical treatment, and file fraudulent claims for insurance benefits. JEAN was convicted after a one-week trial before U.S. Court of Appeals Judge Denny Chin, sitting by designation. After JEAN’s conviction, Judge Chin remarked that he was “appalled at the level of corruption” involved in the scheme, and remanded JEAN into the custody of the United States Marshals.
According to the Indictment and the evidence presented at JEAN’s trial:
From 2007 through 2011, JEAN engaged in a scheme to cause more than 30 intentional car crashes in order to fraudulently obtain insurance benefits. JEAN orchestrated the scheme by finding cars, recruiting crews of drivers and passengers, and then sending the crews out to hit cars driven by innocent victims. JEAN paid the drivers and passengers he recruited, and directed them to crash into cars driven by innocent people so that the supposed “accidents” would appear to be real accidents. Following the crashes, JEAN took his recruits to corrupt medical clinics and directed them to submit to unnecessary treatment, including unnecessary surgeries, for their non-existent injuries, so that the treatments could be billed to car insurance companies. JEAN encouraged his recruits to submit to treatments that he thought were likely to result in the largest payments from insurance companies, such as unnecessary back and shoulder surgeries. JEAN and his recruits then filed fraudulent no-fault insurance claims and insurance claims that fraudulently alleged pain and suffering. He profited from the scheme by collecting more than $150,000 in insurance company payouts and in kickbacks from the corrupt medical clinics.
JEAN, 52, of West Hempstead, New York, was convicted of one count of conspiracy to commit mail, wire, and health care fraud. He faces a maximum penalty of twenty years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. JEAN is scheduled to be sentenced by Judge Chin on May 29, 2014, at 10:00 a.m.
Mr. Bharara praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Sarah E. Paul and Alexander J. Wilson are in charge of the prosecution.
U.S. v. Maxo Jean S1 Indictment
Sales Broker Sentenced in Manhattan Federal Court to 18 Months in Prison for Fraudulent Mark-Up SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, today announced that MAREK LESZCZYNSKI, a former sales broker, was sentenced in Manhattan federal court to 18 months in prison on charges of conspiracy to commit securities fraud and wire fraud. LESZCZYNSKI – along with Benjamin Chouchane and Henry Condron – defrauded clients out of millions of dollars by misrepresenting the prices at which securities were bought and sold. In doing so, the brokerage firm for which they worked earned illegitimate and illegal trading profits, and LESZCZYNSKI, Chouchane, and Condron were awarded lucrative bonuses. LESZCZYNSKI pled guilty to charges of conspiracy to commit securities fraud and wire fraud in August 2013, and was sentenced today by U.S. District Judge John F. Keenan.
Manhattan U.S. Attorney Preet Bharara said: “Marek Leszczynski blatantly defrauded his firm’s clients by providing them with distorted prices for trade executions in order to inflate firm profits and help procure himself and his cohorts hefty bonuses. With today’s sentence, he has learned that prison time is one’s reward for engaging in such illicit conduct.”
According to the Complaint, Indictment, statements made during LESZCZYNSKI’s guilty plea, and other court documents:
From 2005 through November 2010, LESZCZYNSKI, Chouchane, and Condron worked at a broker-dealer that was headquartered in London, England, with offices in major cities in Europe, Asia, and the United States (“Broker-Dealer 1”). Among other services offered, Broker-Dealer 1 bought and sold securities on behalf of institutional clients, such as commercial banks and investment firms located throughout the United States and in various European cities.
LESZCZYNSKI and Chouchane worked as sales brokers for Broker-Dealer 1’s Cash Equity Desk in New York, New York. In that capacity, they were responsible for receiving orders to buy or sell securities from Broker-Dealer 1’s clients, relaying those orders to traders who executed the trades, communicating with clients as their orders were being filled, and sending trading confirmations to the clients that showed the prices at which securities were bought or sold – including any commissions that Broker-Dealer 1 charged. Condron worked as an execution trader and a middle office manager. In that capacity, Condron was responsible for executing buy and sell orders at the instructions of sales brokers, such as LESZCZYNSKI and Chouchane, and inputting trading data into Broker-Dealer 1’s bookkeeping system.
From 2005 until December 2008, LESZCZYNSKI, Chouchane, and Condron misrepresented the execution prices at which securities were bought and sold. For example, when Broker-Dealer 1 received a buy order from a client, the defendants and their co-conspirators caused the purchase price of the security that would be reported back to the client to be “marked up” from its actual purchase price. Conversely, when Broker-Dealer 1 received a sell order from a client, the defendants and their co-conspirators caused the sale price of the security that would be reported back to the client to be “marked down” from its actual sale price. The difference between the actual execution prices and the false prices reported to clients was hidden from Broker-Dealer 1’s clients, enabling Broker-Dealer 1 to earn millions in trading profits to which it was not entitled. As a result of the fraudulent scheme, LESZCZYNSKI, Chouchane, and Condron were paid inflated bonuses.
In addition to the prison term, Judge Keenan sentenced LESZCZYNSKI, 44, of Miami, Florida, to two years of supervised release. LESZCZYNSKI was also ordered to forfeit $1.5 million, to make restitution in the amount of $1.5 million, and to pay a $100 special assessment fee.
Chouchane, 39, of Miami, Florida, who previously pled guilty to one count of conspiracy to commit securities fraud and wire fraud, was sentenced on November 15, 2013, by Judge Keenan to two years in prison and two years of supervised release, and was ordered to forfeit $5 million and to make restitution in the amount of $5 million. Condron, 34, of New York, New York, who previously pled guilty to one count of securities fraud and two counts of conspiracy to commit securities fraud, is scheduled to be sentenced on February 5, 2014, by U.S. District Judge Naomi Reice Buchwald.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission for its assistance.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Benjamin Naftalis is in charge of the prosecution.
Manhattan U.S. Attorney Files and Simultaneously Settles Lawsuit Against Nederlander Organization Covering Nine of Broadway’S Most Historic TheatersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the filing and settlement of a lawsuit in Manhattan federal court against NEDERLANDER ORGANIZATION, the owners and operators of nine of Broadway’s most historic theaters, the BROOKS ATKINSON, the GERSHWIN, the LUNT FONTANNE, the MARQUIS, the MINSKOFF, the NEDERLANDER, the NEIL SIMON, the PALACE, and the RICHARD RODGERS, involving violations of the Americans With Disabilities Act (the “ADA”). The settlement, in the form of a consent decree, was entered today by U.S. District Judge Katherine Polk Failla.
Manhattan U.S. Attorney Preet Bharara said: “Today’s resolution marks the culmination of years of work to ensure that one of New York City’s leading cultural and entertainment treasures – Broadway theater – is accessible to people with disabilities. As a result of this suit and settlement, coupled with a similar lawsuit filed by the Office against the Shubert Theaters in 2003, over twenty of the leading Broadway theaters, operated by the two largest Broadway theater organizations, will be more accessible than ever before.”
According to the Complaint and Consent Decree filed in Manhattan federal court:
In the course of an investigation and negotiation over several years, the U.S. Attorney’s Office identified numerous ADA violations at each of the nine theaters operated by NEDERLANDER ORGANIZATION. Two of the theaters were constructed over one hundred years ago, in the 1910s; four of the theaters were constructed during the 1920s; and the remainder were constructed in the early 1970s and the 1980s. The ADA generally requires that, under these circumstances, barriers to accessibility be removed where it is readily achievable to do so. Throughout the Government’s investigation and the negotiation of the Consent Decree, NEDERLANDER ORGANIZATION agreed to remove hundreds of barriers to accessibility.
Under the Consent Decree, NEDERLANDER ORGANIZATION agrees to continue and eventually conclude its efforts to improve accessibility at its theaters over the next three years, as the schedules of shows at the theaters permit. NEDERLANDER ORGANIZATION will do the following:
- provide a total of 70 wheelchair accessible seating locations, and direct its ticket vendors to accord priority to persons with disabilities in selling those seating locations;
- provide a total of 134 aisle transfer seating locations for persons who are able to transfer from a wheelchair into a seat, and direct its ticket vendors to accord priority to persons with disabilities in selling those seating locations; and
- eliminate over 500 individual barriers to accessibility in theater restrooms, concession counters, waiting areas, and box offices.
In addition, NEDERLANDER ORGANIZATION will pay a $45,000 civil penalty to the United States.
Since President George H.W. Bush signed the ADA into law in 1990, the U.S. Attorney’s Office for the Southern District of New York has played a significant role in bringing numerous New York City institutions into compliance with the ADA regulations. They include Avery Fisher Hall at Lincoln Center, the Metropolitan Opera, Yankee Stadium, Madison Square Garden, the Apollo Theater, the Puck Building, the Shubert Theaters, the Rainbow Room, and Radio City Music Hall.
To file a complaint alleging that any place of public accommodation within the Southern District of New York is not accessible to persons with disabilities, use the Civil Rights Complaint Form available on the United States Attorney’s Office’s website, www.usdoj.gov/usao/nys. Complaints should be sent to:
U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York, 10007
Attention: Chief, Civil Rights Unit
Assistant U.S. Attorneys David J. Kennedy and Rebecca C. Martin are in charge of the case.
U.S. v. Nederlander Organization Consent Decree Exhibits
US v. Nederlander Organization, Inc Signed Consent Decree
U.S. v. Nederlander Complaint