Southern District of New York
Press releases recorded for this federal judicial district.
Con Artist Who Craved A Life of Luxury SentencedIn White Plains Federal Court to Six Years in Prison for Operating A Long-Term Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALICIA HOLMES was sentenced today in White Plains federal court by United States District Judge Kenneth M. Karas to six years in prison for defrauding individuals and businesses of hundreds of thousands of dollars in accommodations, goods, services, and money. HOLMES pled guilty on March 1, 2013, to one count of wire fraud, one count of mail fraud, and one count of providing a false address in furtherance of fraud before Judge Karas.
Manhattan U.S. Attorney Preet Bharara stated: “Many of us would enjoy some of the finer things in life – a lavish home, luxurious hotel suites – and would work for those goals. Alicia Holmes took a huge shortcut with her fraudulent schemes. With today’s sentence, her next address will far more basic.”
According to the Indictment and documents filed in court proceedings:
Holmes’ scheme spanned from approximately April 2007 through May 2011. To attain a life of luxury, Holmes told scores of lies to real estate brokers, property builders, home owners, hotel managers and staff, and school administrators, among others, including lies about her net worth, about where she lived, and about having access to a vast “overseas trust” within a short period of time. To live in hotels with her husband and two sons, Holmes had the bills paid for by friends who trusted her and by real estate brokers who believed she would soon be purchasing multimillion-dollar homes, which would lead to large commissions for the brokers. Holmes also conned hotel employees into letting her and her family stay at their hotels for months at a time without payments. To keep the scheme going, Holmes impersonated lawyers, bankers, and an FBI agent. Additionally, Holmes instructed victims not to cooperate with federal law enforcement agents who were investigating her scheme.
In addition to the prison term imposed on HOLMES, 49, Judge Karas ordered HOLMES to forfeit $542,343.51, to pay restitution to her victims in the amount of $894,205.01, and to serve three years of supervised release.
Mr. Bharara praised the outstanding investigative work of the United States Postal Inspection Service and the Federal Bureau of Investigation.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Ilan Graff and Lee Renzin are in charge of the prosecution.
Holmes Alicia.S2
Bankruptcy Court Awards Between $5.1 Billion and $14.1 Billion Against Subsidiaries of Anadarko Petroleum Corp. for Fraudulent Conveyance Designed to Evade Environmental LiabilitiesRead the Press Release
Largest Bankruptcy Award Ever for Governmental Environmental Claims and Liabilities, and One of the Largest Environmental Enforcement Awards Ever
Preet Bharara, the United States Attorney for the Southern District of New York (“SDNY”), Robert G. Dreher, the Acting Assistant Attorney General for the Justice Department’s Environment and Natural Resource Division (“ENRD”), Cynthia Giles, the Assistant Administrator for the Office of Enforcement and Compliance of the U.S. Environmental Protection Agency (“EPA”), and Judith Enck, Regional Administrator of the EPA’s Region 2, announced today that the United States Bankruptcy Court for the Southern District of New York has awarded between $5.1 billion and $14.1 billion against defendant Kerr-McGee Corporation and certain related defendant companies (“Kerr-McGee” or “New Kerr-McGee”), all of which are subsidiaries of the Anadarko Petroleum Corporation, in a fraudulent conveyance case brought by the United States and co-plaintiff Anadarko Litigation Trust (the “Trust”) in the bankruptcy of Tronox, Inc., and its subsidiaries (“Tronox”). The Court found that in 2005 the historic Kerr-McGee Corporation (“Old Kerr-McGee”) fraudulently conveyed assets to New Kerr-McGee to evade its debts, including its liability for environmental clean-up at toxic sites around the country. This is the largest award ever in a bankruptcy for governmental environmental claims and liabilities, and one of the largest environmental enforcement awards ever.
Manhattan U.S. Attorney Preet Bharara said: “The United States will not let polluters evade their environmental liabilities through a corporate shell game. For decades, the Old Kerr-McGee Corporation dumped toxic chemicals across the United States, and then it tried to dump its obligation to clean up this mess on an insolvent company. In its wake, Old Kerr McGee left a legacy of contamination in communities across the nation, which has affected homes, places of worship, and town centers. The Court’s decision means that Kerr-McGee will finally have to pay for its pollution, and will fund clean-up in contaminated communities across the nation.”
Acting Assistant Attorney General Robert G. Dreher said: “We are very pleased with this outcome, which will appropriately and fairly account for past pollution and replenish funds for tomorrow’s cleanups. This court decision also sends a clear message that polluters cannot simply walk away from a toxic legacy and leave federal, state, and tribal governments to pick up the tab. This ruling will keep the financial burden on the responsible party, and not allow it to be shifted to the American taxpayer.”
EPA Assistant Administrator Cynthia Giles said: “The Court’s decision makes a strong statement that companies should take responsibility for the toxic pollution they cause. Those that manipulate their assets and leave American taxpayers to foot the bill to clean up their mess will be held accountable. This is a huge win for public health and the environment, as proceeds from the decision will fund needed cleanups across America.”
EPA Regional Administrator Judith Enck said: “This legal victory illustrates EPA’s commitment to cleaning up toxic waste sites in communities and ensuring that polluters, not taxpayers, pay for the environmental remediation. This was a complex case and the outcome ensures that billions of dollars will be channeled to advance toxic cleanups.”
The Fraudulent Conveyance
According to the complaints of the Government and the Trust and the written opinion of U.S. Bankruptcy Judge Allan L. Gropper:
Old Kerr-McGee operated numerous businesses, which included uranium mining, the processing of radioactive thorium, creosote wood treating, and manufacture of perchlorate, a component of rocket fuel. These operations left contamination across the nation, including radioactive uranium waste across the Navajo Nation; radioactive thorium in Chicago and West Chicago, Illinois; creosote waste in the Northeast, the Midwest, and the South; and perchlorate waste in Nevada.
In the years prior to 2005, Old Kerr-McGee concluded that the liabilities associated with this environmental contamination were a drag on its “crown jewel” business, the exploration and production of oil and gas. With the intent of evading these and other liabilities, Old Kerr-McGee created a new corporate entity – defendant New Kerr-McGee – and, through a series of corporate transactions in 2005 and 2006, transferred its valuable oil and gas exploration assets to the new company. The legacy environmental liabilities were left behind in the old company, which was re-named Tronox. As a result of these transactions, Tronox was rendered insolvent and unable to address its environmental and other liabilities. In 2009, Tronox went into bankruptcy.
The United States and the bankruptcy estate (now represented by the Trust) brought this lawsuit to require the defendants to repay the value of the assets fraudulently conveyed from Old Kerr-McGee.
In its decision, the Court found that Old Kerr-McGee transferred assets with the intent to hinder or delay creditors, including particularly environmental creditors, and also transferred those assets for less than their fair value, which left Tronox insolvent, unable to pay its debts when they came due, and undercapitalized. Among other things, the Court concluded that:
- “[T]here can be no dispute that Kerr-McGee acted to free substantially all its assets – certainly its most valuable assets – from 85 years of environmental and tort liabilities.”
- “[O]verhelming” evidence demonstrated that “Defendants devised, carried out and had complete knowledge that [the transfer of Old Kerr-McGee’s oil and gas exploration and production assets was] part of ‘a single integrated scheme’ to create a ‘pure play’ E&P business free and clear of the legacy liabilities.”
- “[T]here is no credibility to the uniform testimony of the inner circle [of Old Kerr-McGee management] that isolation of the oil and gas assets from the chemical business had nothing to do with an effort to cleanse the E&P assets from the legacy liabilities.”
- “The record is replete with evidence that Kerr-McGee misapplied [the] standard [for setting reserves for environmental claims under Generally Accepted Accounting Principles] and thereby understated its liabilities for GAAP purposes.”
- Statements by former Old Kerr-McGee employees that the cost of this environmental pollution would decline after the spin-off were “not rooted in reality.”
The Court concluded that the net proceeds of the fraudulent transfer were $14,459,000,000, and that, depending on a question of bankruptcy law still to be decided in further proceedings, will result in a damages award of between $5,150,490,000 and $14,166,148,000. The bankruptcy court will conduct further proceedings to determine the amount of damages within this range.
Prior Bankruptcy Settlement and Distribution of Fraudulent Conveyance Recovery
In 2011, in connection with Tronox’s Plan of Reorganization, the estate paid approximately $270 million to fund environmental response trusts created to own and clean-up contaminated property. Additionally, pursuant to the Plan of Reorganization and agreements signed at that time, approximately 88% of the recovery in this lawsuit, net of Trust expenses, will be distributed to the environmental trusts and to the federal, state, and local environmental creditors for environmental clean-up of contaminated sites around the nation.
As a result of these agreements, some of the key environmental recoveries for environmental claims and for clean-up of environmental sites are estimated to be the following:
- Between $1.1 billion and $3.1 billion for the Multistate Environmental Response Trust created in the bankruptcy to clean up more than two dozen contaminated sites around the country, including the Kerr-McGee Superfund Site in Columbus, Mississippi.
- Between $1.1 billion and $3.1 billion to be paid to the Nevada Environmental Response Trust created in the bankruptcy to clean up the perchlorate and other contamination resulting from operations at an industrial park near Lake Mead in Nevada.
- Between $880 million and $2.4 billion to be paid to EPA for clean-up of contamination from uranium mining on the Navajo Nation.
- Between $220 million and $620 million to be paid to EPA for clean-up of thorium contamination at the Welsbach Superfund Site in Gloucester, New Jersey.
- Between $213 million and $601 million to be paid to the federal Superfund in repayment of costs previously incurred by EPA cleaning up the Federal Creosote Superfund Site in Manville, New Jersey.
Additional amounts will be paid for numerous other environmental claims and sites at issue in this case.
Mr. Bharara thanked the Trust, its trustee, and its counsel for their critical work on this case. Mr. Bharara also thanked the many federal, state, and tribal officials who worked tirelessly on this matter. The litigation of this case was assisted by EPA personnel from around the country; the U.S. Fish & Wildlife Service and Bureau of Land Management of the U.S. Department of the Interior; the National Oceanic and Atmospheric Administration of the U.S. Department of Commerce; the U.S. Nuclear Regulatory Commission; and the U.S. Forest Service of the U.S. Department of Agriculture, as well as numerous state governments and the Navajo Nation.
This case was handled by the Environmental Protection Unit and Tax and Bankruptcy Unit of the Office’s Civil Division. Assistant U.S. Attorneys Robert William Yalen and Joseph Pantoja, along with Alan S. Tenenbaum, Katherine Kane, Frederick S. Phillips, Marcello Mollo, and Erica Pencak of ENRD, are in charge of this case.
Manhattan U.S. Attorney Files and Settles Civil Rights Lawsuit Against Westchester County Landlord for Discrimination Against African-AmericansRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed and settled a federal civil rights lawsuit under the Fair Housing Act against 61 MAIN STREET CORPORATION and ROSARIO MACRI for discriminating against African-Americans seeking to rent apartments at an apartment complex located at 123 South Broadway in Irvington, New York. The settlement, in the form of a consent decree, was approved today by U.S. District Judge Kenneth M. Karas.
Manhattan U.S. Attorney Preet Bharara said: “Nobody should be deprived of housing opportunities based on his or her race or color. This case should be a wake-up call to any landlord or building owner who discriminates. Racial discrimination in housing is not only antithetical to the principles of fairness and equality, it is against the law.”
The apartment complex at 123 South Broadway is a 22-unit residential apartment complex located in the Village of Irvington, in Westchester County, New York. The apartment complex is owned by 61 MAIN STREET CORPORATION. ROSARIO MACRI is the president of 61 MAIN STREET CORPORATION and manages the apartment complex. According to the Complaint filed in federal court in Manhattan, since at least August 2012, 61 MAIN STREET CORPORATION and ROSARIO MACRI have engaged in conduct constituting discrimination on the basis of race and color under the Fair Housing Act.
Specifically, the United States alleges that 61 MAIN STREET CORPORATION and ROSARIO MACRI have engaged in racially discriminatory housing practices, including failing to inform African-American prospective tenants about available apartments, while telling Caucasian prospective tenants, even on the same day, that apartments were in fact available. The Complaint also alleges that 61 MAIN STREET CORPORATION and ROSARIO MACRI failed to show available apartments and give rental applications to African-American prospective tenants, but showed available apartments and gave rental applications to Caucasian prospective tenants, even on the same day. In addition, the Complaint alleges that 61 MAIN STREET CORPORATION and ROSARIO MACRI provided higher rent prices and less favorable security deposit terms to African-American prospective tenants than those offered to similarly situated Caucasian prospective tenants.
The Consent Decree requires 61 MAIN STREET CORPORATION and ROSARIO MACRI, among other things, to refrain from discriminating on the basis of race in their rental practices, and to implement a non-discrimination policy and non-discriminatory standards and procedures, as set forth in the Consent Decree, at the apartment complex at 123 South Broadway. In addition, 61 MAIN STREET CORPORATION and ROSARIO MACRI will pay $60,000 into a fund for the compensation of victims of their discriminatory conduct, as well as a $32,000 civil penalty to the United States.
The case is being handled by the Office’s Civil Rights Unit. Assistant United States Attorney Rebecca S. Tinio is in charge of the case.
U.S. v. 61 Main Street Corporation and Rosario Marci Consent Decree
Manhattan U.S. Attorney Announces Arrest of Indian Consular Officer for Visa Fraud and False Statements in Connection with Household Employee’s Visa ApplicationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, today announced the arrest of DEVYANI KHOBRAGADE on charges that KHOBRAGADE allegedly caused a materially false and fraudulent document to be presented, and materially false and fraudulent statements to be made, to the United States Department of State in support of a visa application for an Indian national employed as a babysitter and housekeeper at KHOBRAGADE’s home in New York, New York. KHOBRAGADE is currently employed as the Deputy Consul General for Political, Economic, Commercial and Women’s Affairs at the Consulate General of India in New York, New York.
Manhattan U.S. Attorney Preet Bharara said: “Foreign nationals brought to the United States to serve as domestic workers are entitled to the same protections against exploitation as those afforded to United States citizens. The false statements and fraud alleged to have occurred here were designed to circumvent those protections so that a visa would issue for a domestic worker who was promised far less than a fair wage. This type of fraud on the United States and exploitation of an individual will not be tolerated.”
According to the allegations in the criminal complaint unsealed today in Manhattan federal court:
Diplomats and consular officers may obtain A-3 visas for their personal employees, domestic workers, and servants if they meet the requirements set out in 9 Foreign Affairs Manual (“FAM”) 41.22. As part of the application process, an interview at the embassy or consulate is required. Proof is required that the applicant will receive a fair wage, sufficient to support himself financially, comparable to that being offered in the area of employment in the U.S. To apply for an A-3 visa, the visa applicant must submit an employment contract signed by both the employer and the employee which must include, among other things, a description of duties, hours of work, the hourly wage – which must be the greater of the minimum wage under U.S. federal and state law, or the prevailing wage – for all working hours, overtime work, and payment.
DEVYANI KHOBRAGADE prepared and electronically submitted an application for an A-3 visa (the “Visa Application”) through the website for the U.S. Department of State’s Consular Electronic Application Center for an Indian national (“Witness-1”), who was to be the personal employee of KHOBRAGADE beginning in November 2012 at an address in New York, New York. The Visa Application stated that Witness-1 was to be paid $4,500 per month in U.S. dollars. KHOBRAGADE and Witness-1 also signed an employment contract (the “First Employment Contract”) for Witness-1 to bring to Witness-1’s interview at the U.S. Embassy in India in connection with the Visa Application, which Witness-1 did at KHOBRAGADE’s direction. The First Employment Contract stated, among other things, that KHOBRAGADE would pay Witness-1 the prevailing or minimum wage, whichever is greater, resulting in an hourly salary of $9.75.
KHOBRAGADE knew that the First Employment Contract that KHOBRAGADE caused Witness-1 to submit to the U.S. State Department in connection with Witness-1’s Visa Application contained materially false and fraudulent statements about, among other things, Witness-1’s hourly wage and hours worked. Prior to the signing of the First Employment Contract, KHOBRAGADE and Witness-1 had agreed that KHOBRAGADE would pay 30,000 rupees per month, which at the time was equivalent to $573.07 U.S. At 40 hours per week, with approximately 4.3 weeks in a month, $573.07 equates to a rate of $3.31 per hour. However, KHOBRAGADE instructed Witness-1 to say that she would be paid $9.75 per hour, and not to say anything about being paid 30,000 rupees per month. KHOBRAGADE also instructed Witness-1 to say that Witness-1 would work 40 hours per week, and that Witness-1’s duty hours would be 7 a.m. to 12:30 p.m., and 6:30 p.m. to 8:30 p.m. She told Witness-1 that the First Employment Contract was a formality to get the visa.
After the First Employment Contract was submitted to the United States Department of State, KHOBRAGADE told Witness-1 that Witness-1 needed to sign another employment contract (the “Second Employment Contract”). KHOBRAGADE and Witness-1 signed the Second Employment Contract, which provided that Witness-1’s maximum salary per month including overtime allowance will not exceed 30,000 rupees per month. The Second Employment Contract does not contain any provision about the normal number of working hours per week or month.
Witness-1 worked for KHOBRAGADE as a household employee in New York, New York, from approximately November 2012 through approximately June 2013. Notwithstanding the terms of the First Employment Contract, Witness-1 worked far more than 40 hours per week, and Witness-1 was paid less than $9.75 per hour by KHOBRAGADE. In fact, notwithstanding the terms of the oral agreement between KHOBRAGADE and Witness-1 and the terms of the Second Employment Contract, Witness-1 was paid less than 30,000 rupees per month, or $3.31 per hour.
KHOBRAGADE, 39, was charged with one count of visa fraud and one count of making false statements, which carry maximum sentences of ten years and five years in prison, respectively. She is expected to appear this afternoon before U.S. Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Bharara thanked the Department of Justice’s Human Trafficking Prosecution Unit for playing an integral role in this investigation, and for providing ongoing support in this prosecution.
The Office’s Organized Crime Unit is handling the case. Assistant U.S. Attorneys Amanda Kramer and Kristy Greenberg are in charge of the prosecution.
The charges contained in the complaint are merely an accusation, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Devyani Khobragade Complaint
Leader of Poughkeepsie Heroin Ring That Operated Out of A Cellphone Store Sentenced to 15 Years in Prison in White Plains Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SHABARI FISHER was sentenced in White Plains federal court to 15 years in prison for his leadership role in a drug conspiracy that distributed heroin across the City of Poughkeepsie, including out of a cellphone store on Main Street. FISHER pled guilty in October 2013 to one count of conspiracy to distribute heroin. He is one of 11 individuals charged by an Indictment in September 2012, six of whom have pleaded guilty. FISHER is the second defendant to be sentenced in the case by U.S. District Judge Kenneth M. Karas. On December 6, 2013, Shateek Parker, the second-in-command of the heroin conspiracy, was sentenced by Judge Karas to 135 months in prison.
U.S. Attorney Preet Bharara said: “Shabari Fisher and his accomplices should have stuck with cellphones because they made a huge mistake when they decided to enter the grim business of selling heroin. They now know there is no safe front for peddling heroin and destroying lives, families, and communities. Today’s sentence is a clear signal: If you see in our Hudson Valley an opportunity to profit from drugs, then you are leading yourself and your followers to long terms behind bars.”
According to the Indictment and information presented for purposes of Fisher’s guilty plea and sentencing:
From at least January 2011 through September 2012, a drug trafficking organization (the “FISHER Organization” or the “organization”) was operating in Poughkeepsie, New York. The FISHER Organization distributed heroin at several locations in and around Poughkeepsie. The locus of the organization’s heroin distribution was a cellphone store on Main Street in Poughkeepsie. At the cellphone store, members of the conspiracy concealed heroin, sold heroin to customers, and met with heroin customers to direct them to other locations for heroin transactions. On September 27, 2013, during execution of a search warrant, FBI agents recovered a .44 caliber handgun and ammunition concealed in the front of the store.
The FISHER Organization distributed heroin using, among other things, a succession of cellphones that individuals seeking heroin regularly called (the “Dispatch Phones”). Different members of the FISHER Organization held the Dispatch Phones at different times, receiving calls from heroin customers and arranging to meet with the customers at locations in Poughkeepsie to conduct heroin transactions. The bags of heroin distributed by the Fisher Organization were often stamped with brand-like names, such as “True Religion,” “Gucci,” “Rated R,” “Red Bull,” “Coors Light,” “Scarface,” and “Bomb.”
FISHER and Parker, the defendants, were leaders of the FISHER Organization who directed the activity of other members. FISHER and Parker participated in, among other things, obtaining supplies of heroin, providing heroin to other members of the FISHER Organization for further distribution, and steering heroin customers who approached FISHER to other members of the organization to conduct heroin transactions.
In addition to his prison term, FISHER, 34, of Poughkeepsie, New York, was also sentenced to five years of supervised release, and was ordered to pay forfeiture of $100,000.
Mr. Bharara praised the outstanding work of the FBI, the Poughkeepsie Police Department, the Dutchess County Sheriff's Office, the Drug Enforcement Administration, Immigration and Customs Enforcement, the United States Marshal’s Service Fugitive Unit, the New York State Police – CNET, the Orange County Sheriff’s Office, the Newburgh Police Department, the Middletown Police Department, the Beacon Police Department, the Dutchess County Probation Office, the Dutchess County Jail, and the New York Department of Correctional Services.
The charges against the remaining defendants contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Benjamin Allee and Michael Gerber are in charge of the prosecution.
Member of Albanian Drug Gang Called the “Wolfpack” Sentenced in Manhattan Federal Court to 135 Months in Prison in Connection with Narcotics and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that FRANKIE FROKAJ, a leader of an Albanian drug gang called the “Wolfpack,” was sentenced today by United States District Judge George B. Daniels to 135 months in prison in connection with his role in the organization. FROKAJ pled guilty in April 2013 to one count of conspiring to distribute 1,000 kilograms and more of marijuana. All thirteen members and associates of the Wolfpack originally charged in this case in September 2012 have pled guilty, and 10 have now been sentenced to terms ranging from probation to 168 months in prison.
Manhattan U.S. Attorney Preet Bharara said: “Today, Frankie Frokaj became the latest member of the Wolfpack organization to be punished for his role in this Bronx-based narcotics trafficking crew, whose members also illegally carried and sold dangerous firearms. All 13 defendants charged in this case have been convicted, several have been sentenced to significant prison time, and the Bronx neighborhood streets are safer as a result.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case:
The Wolfpack was a criminal organization composed primarily of individuals of Albanian descent that operated from at least 2008 until August 2012 in the Bronx, New York. The group planned and committed a variety of criminal acts as opportunities arose, including narcotics distribution and weapons possession. For example, the group maintained dedicated phones over which customers could order cocaine and marijuana, and coordinated the use of cars to deliver cocaine and marijuana to its customers. Members and associates of the Wolfpack used these “drug routes” to distribute at least 1,000 kilograms of marijuana and 500 grams of cocaine. The group also distributed prescription pills containing oxycodone, a Schedule II controlled substance.
Wolfpack members, including Christopher Nrecaj, David Nrecaj, Joseph Camaj, and FROKAJ, carried firearms in furtherance of their narcotics crimes and engaged in the sale of firearms. To date, the Government has recovered eight firearms and ammunition from members of the Wolfpack through sales involving a confidential informant and during their arrests, including:
- a Sig Sauer nine millimeter handgun, a Bushmaster rifle, a Mac 11 machine pistol, and ammunition purchased by the CI from David Nrecaj;
- a Taurus PT99 AF nine millimeter handgun and ammunition purchased by the CI from David Nrecaj and Corry Lombardi;
- two nine millimeter handguns and a pump action shotgun recovered during the course of Christopher and David Nrecaj’s arrests; and
- a .22 caliber handgun recovered during the course of Driton Haxhijaj’s arrest. Haxhijaj was found hiding in a closet, and the handgun and roughly one pound of marijuana were found in the same closet.
The Government has further recovered a bullet-proof vest, quantities of cocaine and marijuana, drug ledgers, digital scales, and other drug paraphernalia from various members and associates of the Wolfpack.
In addition to the prison term, FROKAJ, 29 of the Bronx, New York, was also sentenced to five years of supervised release and ordered to forfeit $3,000,000.
The earlier sentencings of Wolfpack members and associates included the following:
- On December 3, 2013, Christopher Nrecaj was sentenced to 168 months in prison on narcotics and firearms charges;
- On December 3, 2013, Corry Lombardi was sentenced to 70 months in prison on narcotics charges;
- On December 3, 2013, Driton Haxhijaj was sentenced to 60 months in prison on narcotics charges;
- On August 7, 2013, Joseph Camaj was sentenced to 70 months in prison on narcotics charges;
- On August 3, 2013, Deda Frokaj was sentenced to 63 months in prison on narcotics charges;
- On April 18, 2013, George Cekaj was sentenced to 151 months in prison on narcotics charges;
The three remaining defendants are scheduled for sentencing in January and February 2014.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the New York City Police Department.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Peter M. Skinner and Rebecca G. Mermelstein are in charge of the prosecution.
Defendant Who Supplied Three Rocket-Propelled Grenade Launchers Pleads Guilty in Manhattan Federal Court to Attempting to Provide Material Support to TerroristsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the Drug Enforcement Administration (DEA), announced that IOANNIS VIGLAKIS, a/k/a “Pablo,” pled guilty yesterday in Manhattan federal court to attempting to provide material support to the Fuerzas Armadas Revolucionarias de Colombia (“FARC”), a Colombian terrorist organization. VIGLAKIS, a citizen of Greece, was arrested in Panama City, Panama, in coordination with Panamanian authorities during August 2012. He waived extradition and was subsequently turned over to the custody of the United States. VIGLAKIS pled guilty before U.S. District Judge Katherine B. Forrest.
Manhattan U.S. Attorney Preet Bharara said: “By providing functioning rocket-propelled grenade launchers and other military-grade weapons to an individual he believed to be a FARC associate, Ioannis Viglakis was attempting to arm a known terrorist organization that he understood would use those weapons against Americans and Colombians. This Office will not stop its efforts to pursue and prosecute those who agree to provide weapons to a terrorist organization knowing that they might be used to attack American forces.”
DEA Administrator Michele M. Leonhart said: “This investigation clearly demonstrates DEA’s unique ability to disrupt and dismantle the arms-trafficking networks that supply weapons to the most significant global narco-terror organizations. DEA will continue to aggressively pursue international arms dealers and narco-terrorists who are focused on harming our nation's security.”
According to the Indictment previously unsealed in this case:
Beginning in November 2011, VIGLAKIS had a series of meetings with a DEA confidential source (the “CS”) who represented himself to be an associate of the FARC. During those meetings, which took place in Europe and Central America, the CS informed VIGLAKIS that he was seeking weapons for use by the FARC to attack American forces in Colombia. VIGLAKIS offered to provide the FARC with functional, bona fide, military-grade weapons – including assault rifles, rocket-propelled grenade (“RPG”) launchers and surface-to-air missiles – in exchange for cocaine and cash. During the meetings, VIGLAKIS and the CS also discussed the FARC’s use of these weapons to fight the Colombian and American governments, including by shooting down American aircraft in Colombia.
During the following months, VIGLAKIS indicated that he would provide the CS with several RPG launchers as a sample. On July 18, 2012, VIGLAKIS successfully arranged for the delivery in Europe of six live RPGs and three working RPG launchers, which were received by a DEA undercover agent.
VIGLAKIS, 53, pled guilty to one count of attempting to provide material support to the FARC. He faces a maximum sentence of 15 years in prison, and is scheduled to be sentenced by Judge Forrest on April 11, 2014, at 11:00 a.m.
Mr. Bharara praised the outstanding work of the Special Operations Division of the DEA, as well as the DEA Panama Country Office, the DEA Madrid Country Office, and the DEA Copenhagen Country Office. Mr. Bharara also thanked the U.S. Department of Justice Office of International Affairs and National Security Division, the U.S. Department of State, and the Government of the Republic of Panama.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Christian R. Everdell, Aimee Hector, and Michael Lockard are in charge of the prosecution.
U.S. v. Ioannis Viglakis S1 Indictment
Twenty-Three Defendants Charged in Manhattan Federal Court in Connection with Counterfeit Credit Card SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Steven G. Hughes, the Special Agent-in-Charge of the New York Office of the United States Secret Service, announced today the unsealing of an Indictment and a Complaint charging 23 individuals for their alleged participation in a large-scale counterfeit credit card scheme. As part of the scheme, the defendants allegedly obtained more than 1,000 stolen credit and debit card numbers, created counterfeit credit and debit cards with the stolen account information, and then utilized teams of “shoppers” to make more than $2 million of unauthorized purchases at retail stores located throughout the United States. In a coordinated operation early this morning, agents of the Secret Service and the Drug Enforcement Administration arrested 19 defendants in Flushing, Queens, and one defendant in Los Angeles, California. Agents also executed six search warrants and recovered counterfeit credit card manufacturing equipment and supplies. The defendants arrested in Queens will be presented before U.S. Magistrate Judge Debra Freeman in Manhattan federal court later today, and the defendant arrested in Los Angeles will be presented in federal court in the Central District of California this afternoon. An additional defendant is already in state custody in New York on other charges, and the two remaining defendants, Bing Lin and Ling Fu Shi, are at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants used classic cyber-crime techniques of computer intrusions and accessing carding websites to obtain account numbers and then rake in millions of dollars through shopping sprees funded by counterfeit credit cards created with the stolen personal account numbers. Today’s arrests are a testament to our continued commitment to prosecuting cyber and identity theft crimes and holding the perpetrators of them to account.”
U.S. Secret Service Special Agent-in-Charge Steven G. Hughes said: “Today’s cyber criminals are increasingly targeting the personal and financial information of ordinary citizens, and the proprietary information of companies engaged in e-commerce. In order to combat emerging cyber threats, the U.S. Secret Service has adapted our investigative techniques and implemented a variety of innovative, operational capabilities. The U.S. Secret Service will continue to cooperate with partners from the Drug Enforcement Administration, Homeland Security Investigations, and the U.S. Attorney’s Office in the Southern District of New York in order to prevent further online, criminal activity.”
According to the allegations in the Indictment and Complaint unsealed today in Manhattan federal court:
From at least June 2013 through December 2013, the defendants and their co-conspirators obtained stolen credit/debit card information that had been obtained through computer intrusions and “carding” websites, which are Internet-based forums where users sell and exchange stolen credit and debit card information. Using the stolen account information, they manufactured counterfeit credit/debit cards that were encoded with the stolen account information and embossed with the names of “shoppers”—i.e., co-conspirators responsible for making unauthorized purchases with the counterfeit cards.
Other members of the conspiracy acted as “drivers,” who coordinated teams of “shoppers” and transported them to retail stores located throughout the country, including Texas, North Carolina, Virginia, Pennsylvania, and New Jersey. The “shoppers” were given dozens of counterfeit credit/debit cards and used them to make purchases of retail items, including gift cards, electronics, cosmetics, clothing, and other merchandise worth thousands of dollars. To convert these items to cash, the defendants then transported the goods to New York and California, where they were sold to co-conspirators who, in turn, sold the items or had others exchange them for refunds.
As part of the scheme, the defendants and their co-conspirators obtained stolen account information for more than 1,000 credit/debit card accounts and used that stolen information to make, or attempt to make, more than $2 million in unauthorized purchases.
The defendants, who all reside in Flushing, Queens, are each charged with one count of conspiracy to commit access device fraud, which carries a maximum penalty of seven-and-a-half years in prison, and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.
A chart identifying the defendants’ ages and residences is attached.
Mr. Bharara praised the outstanding investigative work of the Secret Service. He also thanked the Drug Enforcement Administration for its assistance during the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Timothy T. Howard and Andrew C. Adams are in charge of the prosecution.
The charges contained in the Indictment and Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
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U.S. v. Ze Xi Qiu, et al. Indictment
U.S. v. Yichao Chen, et al. ComplaintOwner of Gourmet Food Markets Sentenced in Manhattan Federal Court to Five Years in Prison for Participating in Massive Tax Fraud Scheme That Concealed over $50 Million in Income from the IRS and for Witness TamperingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ADEM ARICI was sentenced today in Manhattan federal court by Chief United States District Judge Loretta A. Preska to five years in prison for his role in a long-running tax fraud conspiracy in which more than $50 million in gross receipts from six gourmet food markets in New York, New Jersey, and Connecticut was hidden from federal, state, and local tax authorities. ARICI was one of the leaders of the scheme and was one of the two of the nine defendants charged in the case with ownership interests in all six markets. ARICI pled guilty on June 4, 2013, before U.S. Magistrate Judge Paul E. Davison to one count of conspiracy to commit tax and fraud offenses, four counts of subscribing to false and fraudulent federal personal income tax returns, nine counts of aiding and assisting in the preparation of false and fraudulent federal corporate, partnership, and payroll tax returns, and one count of witness tampering in connection with a federal investigation of individuals engaging in prohibited transactions in which a Cuban national had an interest.
Manhattan U.S. Attorney Preet Bharara stated: “Those who cheat on their taxes impose an unfair burden on everyone else who dutifully pay their fair share. Adem Arici used the cover of his popular, gourmet markets to engage in tax and other fraud. Today, he learned the price he must pay for his crimes.”
According to the Indictment and statements made during court proceedings:
ARICI had an ownership interest and played an active management role in the following gourmet food markets (the “Markets”):
- Zeytuna, also known as Idaho Farmers Market, Inc., located at 59 Maiden Lane, New York, New York.
- The Amish Market, also known as Potato Farms LLC, located at 53 Park Place, New York, New York.
- Zeytinia Gourmet, also known as Forest Market LLC, located at 56 Maple Street, Croton-on-Hudson, New York.
- Zeytinia Fine Food Store, also known as Oakland Fine Food, Inc., located at 350 Ramapo Valley Road, Oakland, New Jersey.
- Zeytinia Fine Food Store, also known as Zeytinia LLC, located at 2801 Pacific Avenue – Units 203-204, Atlantic City, New Jersey.
- Zeytinia Gourmet Market, also known as Wilton Farms LLC, located at 14 Danbury Road – Suite 11, Wilton, Connecticut.
The Markets’ customers typically paid for their purchases with either cash or credit cards. Credit card payments, and on occasion a small portion of the cash receipts, were deposited into bank accounts maintained by each particular Market. The remaining cash was diverted from the books and records of the Markets. The owners of the Markets used this cash to pay business expenses, including cash payroll, as well as to line their own pockets. They paid numerous employees, including undocumented foreign citizens, in cash. The owners of the Markets failed to withhold and pay to the IRS the withheld payroll taxes, and caused the preparation and filing with the IRS of forms that falsely and fraudulently understated the true salaries paid to employees. In many cases, they failed to report the salaries of employees entirely.
The cash that was left over after paying business expenses was divided up among the owners of the Markets for their own personal uses. The owners of the Markets maintained a “second set of books” and other records that recorded the true income and expenses of the Markets and reflected the cash skimmed from each of the Markets. These books showed that the owners of the Markets failed to report in excess of $50 million in gross receipts during the years 2004 through 2009.
In addition to depriving federal, state, and local governments of approximately $5 million in corporate, payroll, and sales taxes, ARICI himself avoided paying over $1 million in personal income taxes.
With respect to the witness tampering count, on or about November 18, 2011, ARICI counseled an individual with whom he had traveled to Cuba unlawfully to falsely tell law enforcement agents with the Department of Homeland Security, among other things, that the individual did not travel to Cuba, did not know ARICI, and had not met with ARICI in Cuba.
In addition to the prison term imposed on ARICI, 51, of Easton, Connecticut, Chief Judge Preska ordered ARICI to forfeit $7 million and to serve three years of supervised release.
On September 12, 2013, co-defendant Jody Vitale was sentenced to time served followed by two years of supervised release, and ordered to forfeit $354,166. On October10, 2013, Josefina Caraballo was sentenced to one year of probation, and ordered to forfeit $41,331. Defendants Omer Ipek and Atilla Yayla are fugitives. All other defendants are awaiting sentencing.
Mr. Bharara praised the outstanding efforts of the Internal Revenue Service, Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Lee Renzin and Perry A. Carbone are in charge of the prosecution.
The charges contained in the Indictment against the fugitive defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
Former Top Officers of Vitesse Semiconductor Corporation Sentenced in Manhattan Federal Court for Conspiring to Obstruct an Impending Federal InvestigationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LOUIS TOMASETTA, the founder and former CEO of Vitesse Semiconductor Corporation (“Vitesse”), a publicly-traded company, and EUGENE HOVANEC, the former Chief Financial Officer and Vice President of Vitesse, were sentenced today in Manhattan federal court to three years of probation for conspiring to destroy, alter, or falsify records relating to Vitesse’s April and October 2001 stock option grants with the intent to obstruct a contemplated investigation by the U.S. Securities and Exchange Commission (“SEC”). TOMASETTA and HOVANEC pled guilty in August 2013, and were sentenced today by U.S. District Judge Jed S. Rakoff.
According to the Superseding Information and evidence in court proceedings:
During 2001 to 2006, Vitesse’s Board of Directors, specifically the Compensation Committee of the Board (the “Compensation Committee”), administered shareholder-approved stock options plans (the “Plans”) and had the authority under the Plans to grant stock option awards. Vitesse’s public filings for the 2001 to 2005 year-end period indicated that the exercise price of all stock options was at least equal to the fair market value of Vitesse’s stock price on the date of the grant. During this time period, TOMASETTA, HOVANEC, and others generally initiated and oversaw the option grant process.
In November 2005, Yatin Mody, then Vitesse’s Chief Financial Officer, contacted Vitesse’s then-outside law firm (“Law Firm-1”) concerning a press inquiry about Vitesse’s stock option practices. After reviewing documents related to stock option grants in April 2001 and October 2001, Law Firm-1 advised Mody and TOMASETTA that it had concerns about those option grants, and specifically concern about whether Vitesse had properly accounted for these option grants. For example, Vitesse’s April 12, 2001, Compensation Committee meeting minutes memorialized option grants with an exercise price at the April 6, 2001, closing price of Vitesse’s stock, which was lower than the April 12 closing price. These minutes raised a question about whether the options were in fact granted on the day of the meeting (April 12) or on the earlier date (April 6), and potentially affected the accounting treatment of the options in a way that would require adjustments to Vitesse’s financial reports. Similarly, the Compensation Committee meeting minutes from October 25, 2001, memorialized option grants with an exercise price at the October 2, 2001, closing price, which was lower than the October 25 closing price.
In late November 2005, after discussions with TOMASETTA and HOVANEC, Mody created minutes of the Compensation Committee meetings allegedly held on April 6, 2001, and October 2, 2001. Mody then provided copies of these minutes to Law Firm-1, and specifically advised Law Firm-1 that they were prepared in November 2005 to reflect what had actually occurred at those meetings.
Tomasetta and Hovanec Alter and Fabricate Records Regarding the 2001 Option Grants
On March 18, 2006, the Wall Street Journal published an article that raised questions about stock option practices at various companies, including Vitesse. Following the article, Law Firm-1 raised concerns to Vitesse’s directors and management, including TOMASETTA and HOVANEC, about Vitesse’s option grants and specifically about the fact that Compensation Committee minutes had been created years after the fact. Law Firm-1 informed TOMASETTA and HOVANEC that because of the Wall Street Journal article, there was a significant possibility of an SEC investigation into Vitesse’s option practices and disclosures.
At a meeting on April 11, 2006, Law Firm-1 also advised Vitesse’s directors and management, including TOMASETTA and HOVANEC, that Mody’s after-the-fact creation of Compensation Committee meeting minutes raised questions about whether the meetings had actually occurred. That same day, Vitesse’s Audit Committee retained a law firm (“Law Firm-2”) to conduct an independent investigation into Vitesse’s stock option grants. Law Firm-2 requested that Vitesse provide it with access to the computer used by the Vitesse employee who was responsible for actually typing the minutes of the Compensation Committee meetings when they occurred (the “Assistant’s Computer”).
With an understanding that Law Firm-2 would access the Assistant’s Computer, on April 12, 2006, TOMASETTA, HOVANEC, and Mody created documents that purported to be minutes of meetings of Vitesse’s Compensation Committee on April 6, 2001 and October 2, 2001, authorizing option grants at those meetings. After creating these documents, they transferred electronic copies of the documents containing the two recently created sets of minutes to the Assistant’s Computer and, in an effort to make it appear that the minutes were created at an earlier time, TOMASETTA, HOVANEC, and Mody reset the computer’s internal clock to backdate the creation date of these purported minutes. TOMASETTA and HOVANEC engaged in this action to obstruct Law Firm-2’s internal investigation, knowing that there was likely to be an SEC investigation of Vitesse’s option grant practices and disclosures.
In addition to their sentences, TOMASETTA, 64, of Ojai, California, and HOVANEC, 61, of Westlake Village, California, were each fined $30,000.
Yatin Mody, 50, of Westlake Village, California, pled guilty in December 2010, before U.S. District Judge John G. Koeltl, to securities fraud, making false entries in the financial records of a corporation, and conspiracy, pursuant to a cooperation agreement with the Government. Mody awaits sentencing.
Mr. Bharara praised the investigative work of the U.S. Postal Inspection Service and the Criminal Investigators of the U.S. Attorney’s Office, which jointly investigated this case. He also thanked the SEC 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 is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed 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 John J. O’Donnell, Katherine R. Goldstein, and David I. Miller are in charge of the prosecution.
Former Goldman Sachs Vice President Sentenced in Manhattan Federal Court to Nine Months in Prison for Fraudulently Amassing and Concealing Trading PositionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MATTHEW TAYLOR, formerly a vice president at Goldman, Sachs & Co. (“Goldman Sachs”) and a trader on Goldman Sachs’s Capital Structure Franchise Trading (“CSFT”) desk, was sentenced today in Manhattan federal court to nine months in prison for fraudulently amassing and concealing an approximately $8.3 billion trading position in an account that TAYLOR managed at Goldman Sachs. TAYLOR pled guilty in April 2013 to one count of wire fraud in connection with the scheme, and was sentenced by U.S. District Judge William H. Pauley III.
According to the Information to which TAYLOR pled guilty, and statements made in court proceedings:
While employed at Goldman Sachs as a vice president, TAYLOR was a member of the CSFT desk and was responsible for a trading account called the CSFT Equity Volatility Portfolio (the “Trading Account”), which included trading in equity derivatives products. Among the products that TAYLOR traded on the CSFT desk were Standard & Poor’s E-mini futures contracts (“S&P E-mini futures”), which are futures contracts tied to the S&P 500 stock index. TAYLOR traded in S&P E-mini futures using an electronic trading platform called “Globex.”
In November 2007, TAYLOR had lost a significant portion of the profits that he had accumulated in the Trading Account earlier that year. As a result, he was instructed by his supervisors to reduce the overall risk in the Trading Account. These supervisors had previously informed TAYLOR and other traders on the CSFT desk about risk limits for the CSFT desk and acceptable risk levels and trading limits.
Despite these instructions to reduce the risk in the Trading Account, on December 13, 2007, TAYLOR significantly increased the notional value of his long position in S&P E-mini futures by entering a series of electronic trades through Globex. In so doing, he amassed a position that far exceeded all trading and risk limits set by Goldman Sachs, not only for individual traders, but for the entire CSFT desk. TAYLOR increased the profitability of the Trading Account in order to restore his professional reputation within Goldman Sachs and to increase his performance-based compensation.
At the same time that TAYLOR increased his S&P E-mini futures position, he actively concealed this position from others at Goldman Sachs. He recorded multiple false entries for S&P E-mini futures trades that he never made in a manual trade entry system (the “Manual Trade Entry System”), which was typically intended to be used by traders for recording trades that – unlike S&P E-mini futures – could not be executed through the Globex electronic trading platform. TAYLOR recorded multiple false trading entries in the Manual Trade Entry System that were in the opposite direction of the electronic trades he made in the Trading Account. Where TAYLOR purchased S&P E-mini futures in the Trading Account via Globex, he then manually entered fictitious S&P E-mini futures sales in the Manual Trade Entry System. The purpose of entering these fabricated trades was to conceal and understate the true size of the S&P E-mini futures position within the Trading Account, as the fictitious sales functioned to offset portions of TAYLOR’s actual purchases.
In addition, at the end of the trading day on December 13, 2007, TAYLOR prepared a false profit and loss report for the Trading Account (the “December 13, 2007, P&L Report”) that served to conceal his actual oversized position and market risk. He then forwarded the December 13, 2007, P&L Report to his supervisors and others at Goldman Sachs. By the morning of December 14, 2007, however, various employees at Goldman Sachs had detected a significant discrepancy between TAYLOR’s actual position in the Trading Account and what TAYLOR had falsely reported in the December 13, 2007, P&L Report. In response to questioning from these employees, TAYLOR made various false statements about his position and risk in the Trading Account. His fraudulent scheme resulted in significant losses to Goldman Sachs.
In addition to his prison term, TAYLOR, 34, of West Palm Beach, Florida, was also sentenced to three years of supervised release and ordered to pay $118 million in restitution.
The United States Attorney’s Office for the Southern District of New York first learned of the Taylor matter on November 10, 2012. Less than five months later, on April 3, 2013, Taylor was charged in an Information and pled guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Commodity Futures Trading Commission. 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 Steve Lee is in charge of the prosecution.
Manhattan U.S. Attorney Sues Co-Op for Refusing to Allow Disabled Shareholder to Keep an Assistance AnimalRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed a lawsuit against EAST RIVER HOUSING CORP., (“EAST RIVER”), a housing cooperative located at 573 Grand Street in Manhattan, for violating the Fair Housing Act. The Government alleges that EAST RIVER discriminated against a disabled tenant of the cooperative, Stephanie Aaron, by failing to permit a reasonable accommodation of the tenant’s psychiatric disability.
Manhattan U.S. Attorney Preet Bharara said: “The Fair Housing Act plainly allows tenants with disabilities to keep assistance animals, and we will not hesitate to file suit to combat discrimination in this area.”
As alleged in the Complaint filed in Manhattan federal court:
Aaron suffers from chronic major depression, anxiety, and post-traumatic stress disorder. In August 2012, Aaron took in a stray dog, and, within a few days, began to notice improvement in the symptoms of her lifelong mental illness. A few weeks later, EAST RIVER ordered Aaron to remove the dog. Aaron requested that EAST RIVER allow her to keep the dog as a reasonable accommodation of her psychiatric disability, submitting a psychiatrist’s letter in support of her request.
EAST RIVER did not respond to the request for reasonable accommodation and instead gave Aaron a deadline to vacate her apartment. Aaron then submitted another request for reasonable accommodation, again attaching the letter from her psychiatrist. EAST RIVER denied this request. A few days later, Aaron was notified that EAST RIVER had commenced an eviction proceeding against her. Aaron’s attorney then sent a third reasonable accommodation request to EAST RIVER, attaching the psychiatrist’s letter for a third time. Two months later, Aaron’s psychiatrist and psychologist sent additional letters to EAST RIVER. EAST RIVER did not respond to those letters. Instead, it continued the eviction proceeding against Aaron.
Aaron initially filed an administrative complaint with the Department of Housing and Urban Development (“HUD”). Upon investigation, HUD determined that there was reasonable cause to believe that the Fair Housing Act had been violated. Thereafter, EAST RIVER elected pursuant to the Fair Housing Act to have HUD’s determination resolved in federal court.
In these circumstances, the Fair Housing Act authorizes the Department of Justice to commence an action in United States District Court on behalf of Aaron. The Complaint seeks declaratory, injunctive, and monetary relief for Aaron.
Mr. Bharara thanked HUD for its efforts in the investigation.
The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorney Elizabeth M. Tulis is in charge of the case.
U.S. v. East River Housing Corp. Complaint 13 Civ 8650
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Health Care Fraud Charges Against Current and Former Russian Diplomats and Their SpousesRead 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”), today announced charges against 49 defendants for participating in a widespread fraud scheme from 2004 to August 2013 to illegally obtain nearly half a million dollars in Medicaid benefits. Each of the defendants charged in the Complaint unsealed today is a current or former Russian diplomat or the spouse of a diplomat employed at either the Russian Mission to the United Nations (the “Mission”), the Russian Federation Consulate General in New York (the “Consulate”), or the Trade Representation of the Russian Federation in the USA, New York Office (the “Trade Representation”). The Complaint alleges that each of the defendants and their unnamed co-conspirators participated in a widespread scheme to illegally obtain Medicaid benefits for prenatal care and related costs by, among other things, falsely underreporting their income or falsely claiming that their child was a citizen of the United States.
Manhattan U.S. Attorney Preet Bharara said: “Diplomacy should be about extending hands, not picking pockets in the host country. Here, as alleged, a multitude of Russian diplomats and their spouses ran a scam on a health care system designed to help Americans in need. As the Complaint alleges, the scam exploited a weakness in the Medicaid system, and the charges expose shameful and systemic corruption among Russian diplomats in New York.”
FBI Assistant Director-in-Charge George Venizelos said: “The United States Government values its long-standing relationship with foreign diplomats and diplomatic establishments for cooperation on many issues. Unfortunately, as detailed in the complaint, some Russian officials in New York allowed these defendants to take advantage of that relationship. Motivated by greed and the purchase of high-end luxury items, these defendants allegedly perpetrated a fraud to illegally obtain Medicaid benefits to which they were not entitled. The unsealing of the complaint today highlights the criminal activities of these defendants and reminds the public that health care fraud remains an ongoing problem in our country. The FBI and our law enforcement partners, including the New York City Human Resources Administration and the New York State Department of Health, are committed to preventing and prosecuting health care fraud at all levels.”
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 assist low-income families afford 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 New York State, pregnant women can receive immediate prenatal care following a preliminary assessment of the pregnant woman’s, and, if applicable, her spouse’s, income. If the pregnant woman provides an income level that is higher than the Medicaid eligibility threshold, the provider will generally not process the Medicaid application. Proof of United States citizenship is not required for a pregnant woman to receive Medicaid benefits because the unborn child is presumed to acquire United States citizenship by virtue of being born in the United States. Once completed, the pregnant woman is entitled to Medicaid benefits pursuant to the original application until the 60th post-partum day, and the newborn child is entitled to benefits on the mother’s initial application until the child’s first birthday. Diplomats, their spouses and children are generally not entitled to Medicaid benefits except in cases of emergency.
While in the United States, the individuals employed by the Mission, Consulate, and Trade Representation are paid a salary by the Russian government, which is not subject to United States federal, state, or local taxes. Employees of the Mission and Consulate generally live in housing, the vast majority of which is paid for by the Russian government. The Mission and Consulate historically have also paid for the medical expenses of their employees, including hospital and doctor bills, as well as dental expenses. Each of the defendants named in the Complaint is a Russian diplomat who works or worked at the Mission, Consulate, or Trade Representation, or was married to such an individual. As a result of an international convention among multiple nations and a bilateral agreement between the United States and Russia, children born in the United States to Russian diplomats generally do not acquire United States citizenship.
The investigation revealed the widespread submission of falsified applications for Medicaid benefits associated with medical costs for prenatal care, birth, and young children by the defendants, which enabled the defendants to obtain Medicaid benefits that they were not otherwise entitled to receive. Approximately $1,500,000 in fraudulently received benefits were obtained by the defendants and dozens of other co-conspirators not named in the Complaint. In general, the defendants underreported their income to an amount below or at the applicable Medicaid eligibility level in order to qualify for Medicaid benefits. In support of the underreported income, the defendants generally submitted letters signed by employees of the Mission, Consulate, or Trade Representation, purporting to corroborate that the falsely underreported income was the true income amount. The defendants’ true income was often hundreds, if not thousands, of dollars more per month than what was falsely reported to Medicaid. Moreover, before, during, and after the time that the defendants received Medicaid benefits, several of the defendants opened credit card accounts in which they reflected salaries thousands of dollars higher than they reported to Medicaid.
In addition, one set of defendants failed to disclose their marriage on their initial Medicaid application – falsely claiming that they were brother and sister instead of husband and wife. As a result, those defendants failed to disclose any income the husband earned from the Mission. Because of their lies, they received almost $21,000 in Medicaid income to which they were not entitled. Three other defendants falsely claimed that their children – Russian nationals residing in the United States pursuant to visas issued by the Department of State reflecting their Russian citizenship – were citizens of the United States in order to obtain Medicaid benefits for their children. To support these lies, a United States social security card was provided for one application, and both a United States Social Security Card and a birth certificate issued by the New York City Department of Mental Health and Hygiene was provided in support of another application.
Moreover, before, during, and after the time that the defendants applied for and received hundreds of thousands of dollars in Medicaid benefits, they spent tens of thousands of dollars on luxury items, including cruise vacations and purchases such as watches, shoes, and jewelry, at stores such as Tiffany & Co., Jimmy Choo, Prada, Bloomingdale’s, and Burberry.
For example, TIMUR SALOMATIN, a former diplomat at the Mission, and his wife, NAILYA BABAEVA, applied for Medicaid pregnancy benefits in November 2010 and represented SALOMATIN’s salary to be $3,000 a month, and submitted a renewal application in June 2011 in which they claimed that SALOMATIN made $4,400 a month. In support of both applications, they submitted a letter signed by MIKHAIL KORNEEV, formerly a Counselor at the Mission, in which KORNEEV falsely confirmed the underreported income amount. However, beginning in June 2011, SALOMATIN began to receive direct payroll deposits from the Russian government into his bank account. Between June 2011 and December 2011, SALOMATIN received an average of $5,160 a month – over $2,000 more than he reported to Medicaid on the initial application. In February 2011, shortly after SALOMATIN and BABAEVA applied for Medicaid benefits, and shortly before they applied for renewal benefits, SALOMATIN applied for a credit card and represented his salary to be $8,333 a month. In December 2011, while BABAEVA’s and SALOMATIN’s children continued to receive Medicaid benefits, SALOMATIN represented his salary to be $60,000 a year, or $5,000 a month. During the period between February 2012 and December 2012, while their children continued to receive Medicaid benefits, SALOMATIN and BABAEVA made and paid for over $50,000 in purchases, including over $8,400 from Apple, and over $10,000 from retailers including, among others, Prada and Bloomingdale’s. BABAEVA and her children obtained almost $31,000 in Medicaid benefits to which they were not entitled.
ANDREY ARTASOV and NATALIYA ARTASOVA falsely represented to Medicaid that ARTASOV made only $2,900 a month (or approximately $34,800 a year) in salary in November 2008. In March 2007 – over a year and a half prior to ARTASOVA applying for Medicaid, ARTASOV reported to a credit card company that he made $60,000 a year in salary. In 2008, the year that ARTASOVA received Medicaid benefits, ARTASOV and ARTASOVA made and paid for over $48,000 in purchases on this credit card, spending thousands of dollars at Swarovski and Apple, among other things.
Each of the defendants was charged with one count of conspiracy to commit health care fraud and one count of conspiracy to steal government funds and make false statements relating to health care matters, which carry maximum sentences of ten years and five years in prison, respectively.
Of the 49 defendants, 11 are currently in the United States. Five of those individuals are diplomats working at the Mission. Five of those individuals are the spouses of the diplomats. One is currently employed at the Russian Federation’s embassy in Washington, D.C., but at the time of the charged offenses, was employed at the Consulate. The remaining 38 no longer reside in the United States.
Manhattan U.S. Attorney Bharara praised the investigative work of the FBI, and thanked the New York City Human Resources Administration and the New York State Department of Health for their assistance in this investigation.
The Office’s Public Corruption and Terrorism and International Narcotics Units are handling the case. Assistant U.S. Attorneys Rebecca Ricigliano, Shane Stansbury, and Ian McGinley are in charge of the prosecution.
The charges contained in the Complaint are merely an accusation and the defendants are presumed innocent unless and until proven guilty.
Kuleshov, Mikhail et al. 13 MAG 2711 Complaint
Four More Defendants Plead Guilty in Manhattan Federal Court for Their Roles in Two International SportsbooksRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that NOAH SIEGEL pled guilty today in Manhattan federal court to transmission of wagering information in interstate commerce. His co-defendants MOSHE ORATZ and JONATHAN HIRSCH pled guilty to the same offense earlier this week on December 3 and 4, 2013, respectively. An additional co-defendant, MICHAEL SALL, also pled guilty on December 4, 2013, to interstate travel in aid of an unlawful activity – illegal gambling. SIEGEL, ORATZ, HIRSCH, and SALL were charged in April 2013 along with 30 other alleged members and associates of two Russian-American organized crime enterprises in an indictment that included racketeering, money laundering, extortion, and various gambling offenses. All four defendants pled guilty before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “Noah Siegel, Moshe Oratz, Jonathan Hirsch, and Michael Sall are the latest defendants convicted for their roles in this highly lucrative, underground gambling operation. Their guilty pleas bring us ever closer to bringing each and every person involved to justice.”
According to the Indictment, other documents filed in Manhattan federal court and statements made at various proceedings in this case, including today’s guilty plea:
Illya Trincher and Hillel Nahmad, SIEGEL, ORATZ, and HIRSCH’s co-defendants, ran a high-stakes illegal gambling business that catered primarily to millionaire and billionaire clients. Their business utilized several online gambling websites that operated illegally in the United States to generate tens of millions of dollars of sports bets each year. SIEGEL was a partner of Trincher and Nahmad in their sportsbook and helped select wagers and handicap bets. ORATZ assisted Trincher and Nahmad’s sportsbook by providing them with accounts at illegal online betting websites, and HIRSCH worked for Trincher and Nahmad’s sportsbook as an accountant and bookkeeper.
The Taiwanchik-Trincher Organization, operated by Anatoly Golubchik and Vadim Trincher, is a nationwide criminal enterprise with strong ties to Russia and Ukraine. The leadership of the organization ran an international sportsbook that catered primarily to Russian oligarchs living in Russia and Ukraine and throughout the world. The Taiwanchik-Trincher Organization laundered tens of millions of dollars in proceeds from the gambling operation from Russia and the Ukraine through shell companies and bank accounts in Cyprus, and from Cyprus into the United States. Once the money arrived in the United States, it was either laundered through additional shell companies or invested in seemingly legitimate investments, such as hedge funds or real estate. SALL helped Golubchik and Trincher invest the proceeds of their illegal international gambling activities into various domestic investments.
SIEGEL, 31, of New York, New York, faces a maximum of two years in prison and one year of supervised release. As part of his plea agreement, SIEGEL agreed to forfeit $400,000. He is scheduled to be sentenced by Judge Furman on April 10, 2013 at 3:45 p.m.
ORATZ, 38, of Brooklyn, New York, faces a maximum of two years in prison and one year of supervised release. As part of his plea agreement, ORATZ, agreed to forfeit $325,000. He is scheduled to be sentenced by Judge Furman on April 8, 2014 at 3:00 p.m.
HIRSCH, 30, of New York, New York, faces a maximum of two years in prison and one year of supervised release. As part of his plea agreement, HIRSCH agreed to forfeit $80,600. He is scheduled to be sentenced by Judge Furman on April 10, 2013 at 3:00 p.m.
SALL, 68, of Sunny Isles Beach, Florida, faces a maximum of five years in prison and three years of supervised release. As part of his plea agreement, SALL agreed to forfeit $1,300,000. He is scheduled to be sentenced by Judge Furman on April 9, 2014 at 3:00 p.m.
ORATZ, HIRSCH, SIEGEL, and SALL are the 20th, 21st, 22nd, and 23rd defendants in this case to plead guilty. The defendants who have pled to date have agreed to forfeit, in total, more than $68,000,000.00. The following defendants previously pled guilty and have been or await sentencing:
- Bryan Zuriff pled guilty to gambling charges on July 26, 2013 and was sentenced on November 25, 2013;
- William Barbalat pled guilty to gambling charges on August 14, 2013;
- Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
- Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
- Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
- Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
- Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
- Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013;
- Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
- Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013;
- Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013;
- Hillel Nahmad pled guilty to gambling charges on November 12, 2013;
- Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013;
- Eugene Trincher pled guilty to gambling charges on November 14, 2013;
- Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013;
- Illya Trincher pled guilty to gambling charges on November 15, 2013; and
- Ronald Uy pled guilty to structuring financial transactions on November 25, 2013.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter Skinner, and Kristy J. Greenberg of the Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorneys Alexander Wilson and Christine Magdo of the Office’s Asset Forfeiture Unit are responsible for the forfeiture aspects of the case.
U.S. v. Alimzhan Tokhtakhounov, et al. Indictment
Charging Document: U.S. V. Mikhail Kuleshov, Et Al.Read the Press Release
Kuleshov, Mikhail et al. 13 MAG 2711 Complaint
Antiques Dealer Sentenced to 37 Months in Prison for Wildlife SmugglingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Robert G. Dreher, the Acting Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, and Dan Ashe, the Director of the U.S. Fish and Wildlife Service, announced today that QIANG WANG, a/k/a Jeffrey Wang, a New York antiques dealer, was sentenced in Manhattan federal court to 37 months in prison for his role in a conspiracy to smuggle Asian artifacts made from rhinoceros horns and ivory and violate wildlife trafficking laws. WANG was arrested in February 2013 as part of “Operation Crash,” a nation-wide crackdown on the illegal trafficking in rhinoceros horns, for his role in smuggling libation cups carved from rhinoceros horns from New York to China. He pled guilty in August 2013 and was sentenced today by U.S. District Judge Katherine B. Forrest.
Manhattan U.S Attorney Preet Bharara said: “With his sentence today, Qiang Wang is held accountable for his role in feeding the flourishing black market for artifacts made from endangered species. This Office will continue its work to prosecute those who contribute to the illegal wildlife trade, and to uphold the rules designed to protect wildlife.”
Acting Assistant Attorney General Robert Dreher said: “Wang and others like him involved in smuggling these artifacts made from rhino horn and ivory have helped to create a market for wildlife products that is not sustainable.
This is an active and ongoing investigation that is designed to send a clear message to buyers and sellers that we will vigorously investigate and prosecute those who are involved in this devastating trade.”
U.S. Fish and Wildlife Service Director Dan Ashe said: “We’re reaching a tipping point, where the unprecedented slaughter of rhinos and elephants happening now threatens the viability of these iconic species’ wild populations in Africa. This slaughter is fueled by illegal trade, including that exposed by Operation Crash. We will continue to work relentlessly across the United States government and with our international partners to crack down on poaching and wildlife trafficking.”
According to the Information, WANG’s guilty plea, and statements made during court proceedings:
In China, there is a tradition dating back centuries of intricately carving rhinoceros horn cups. Drinking from such a cup was believed by some to bring good health, and antique carvings are highly prized by collectors. Libation cups and other ornamental carvings are particularly sought after in China and in other Asian countries, as well as in the United States. The escalating value of such items has resulted in an increased demand for rhinoceros horn that has helped fuel a thriving black market, including fake antiques made from recently, and often illegally, hunted rhinoceros.
Between approximately January 2011 and February 2013, WANG conspired with at least two others to smuggle objects containing rhinoceros horn and elephant ivory out of the United States knowing that it was illegal to export such items without required permits. Due to their dwindling populations, all rhinoceros and elephant species are protected under international trade agreements. WANG made and used false United States Customs Declarations for the packages containing rhinoceros horn and ivory objects in order to conceal the true contents of the packages, and did not declare them to the U.S. Fish & Wildlife Service U.S. Customs and Border Protection as required under U.S. law and international trade agreements.
Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under United States and international law. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 170 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets.
Operation Crash is a continuing investigation being conducted by the Department of the Interior’s Fish and Wildlife Service (FWS), in coordination with other federal and local law enforcement agencies including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns
In sentencing WANG, Judge Forrest said that his behavior helped “create and sustain a marketplace for goods made from endangered wildlife.” Judge Forrest also said that WANG’s conduct was “illegal and extremely troubling.”
In addition to the prison term, Judge Forrest ordered WANG, 34, of Flushing, New York, to forfeit certain ivory goods in his possession, and banned him from all future trade in elephant ivory and rhino horn. Wang was also sentenced to serve a term of three years of supervised release.
Mr. Bharara and Mr. Dreher commended the U.S. Fish and Wildlife Service and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations for their outstanding work in this investigation. They also thanked the New York State Department of Environmental Conservation Division of Law Enforcement for their assistance.
The case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Janis M. Echenberg and Senior Counsel with the Environmental Crimes Section of the United States Department of Justice Richard A. Udell are in charge of the prosecution.
Marijuana Dealer Found Guilty in Manhattan Federal Court of Three MurdersRead 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 that KEVIN VENTURA was found guilty yesterday in Manhattan federal court of murder in connection with an arson and a marijuana distribution conspiracy, two counts of murder in connection with a marijuana distribution conspiracy, conspiracy to commit murder-for-hire, and murder-for-hire. VENTURA was convicted after a twelve-day jury trial before U.S. District Judge John G. Koeltl.
Manhattan U.S. Attorney Preet Bharara said: “This case is a prime example of how federal resources can successfully be brought to bear on ‘cold case’ murders in New York. We are proud to work with our partners at ICE’s Homeland Security Investigations and the NYPD to bring justice to victims and their families after so many years of waiting.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “The defendant in this case protected his drug smuggling empire through violence, including arson and murder, and terrorized New York City neighborhoods for years. The verdict holds the defendant accountable for his crimes and demonstrates HSI's commitment to working with our law enforcement partners in combating violent drug organizations that value profits more than human lives.”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
In the mid-1990s, VENTURA managed the day-to-day operations of his father’s marijuana distribution business in the vicinity of 207th Street and Sherman Avenue in northern Manhattan. On April 11, 1995, VENTURA and a number of his associates in the marijuana business went to a discount store at 3856 10th Avenue that was operating a rival marijuana business, intending to set a fire in the store to shut down the competition. One of VENTURA's associates shot and killed the store clerk, Noel Montanez, while VENTURA set fire to the store.
In the summer of 1996, VENTURA hired two brothers to kill VENTURA’s cousin, Eugene Garrido, in exchange for $10,000, because of a dispute over the family marijuana business. On August 19, 1996, one of the two brothers shot and killed Garrido in the lobby of his apartment building at 34 Bogardus Place in northern Manhattan. A bystander, Carlos Penzo, who attempted to stop the fleeing shooter, was also shot and died from his injuries approximately a week later.
VENTURA, 42, of New York, New York, faces a mandatory minimum sentence of life in prison. He is scheduled to be sentenced by Judge Koeltl on March 14, 2014 at 2:30 p.m.
Mr. Bharara praised the investigative work of ICE HSI and also thanked the New York City Police Department for its assistance in the case.
This case is being prosecuted by the Office’s Violent Crimes Unit. Assistant United States Attorneys Margaret Garnett and Ryan P. Poscablo are in charge of the prosecution.
U.S. v. Kevin Ventura S3 Indictment
New York Man Sentenced in Manhattan Federal Court to Three Months in Prison for Exporting High-Grade Carbon Fiber to ChinaRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PETER GROMACKI, a U.S. citizen, was sentenced in Manhattan federal court to three months in prison for exporting high-grade carbon fiber to China. GROMACKI pled guilty in July 2013 before United States District Judge Edgardo Ramos to one count of conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”), one count of violating the IEEPA, and one count of making false statements. Judge Ramos also imposed today’s sentence.
According to the Indictment, statements made during GROMACKI’S guilty plea proceeding, and the Government’s sentencing submission:
From at least 2006 through 2012, GROMACKI conspired to transship carbon fiber from the United States to China, including a shipment of U.S.-made, high-grade T-700 carbon fiber. T-700 carbon fiber has applications in aerospace and nuclear engineering. High-grade carbon fiber is particularly well-suited for gas centrifuges used for uranium enrichment.
In order to evade United States restrictions on export of this type of carbon fiber to China, GROMACKI enlisted the help of co-conspirators in Europe and China and made false statements on U.S. customs forms.
GROMACKI, 54, resides in Orange County, New York.
Mr. Bharara praised the investigative work of the New York Offices of the Federal Bureau of Investigation; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; and the Office of Export Enforcement, Bureau of Industry and Security, of the U.S. Department of Commerce. Mr. Bharara also thanked the U.S. Department of Justice’s National Security Division.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Jason P.W. Halperin and Andrea L. Surratt are in charge of the prosecution.
Founder and Leader of Newburgh Latin Kings Sentenced to Life Plus 85 Years in Prison for Murder, Racketeering, Drug Distribution, and Other CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that WILSON PAGAN, 27, the founder and top leader of the Latin Kings gang in Newburgh, New York (the “Newburgh Latin Kings”), was sentenced today by U.S. District Judge Cathy Seibel in White Plains federal court to life plus 85 years in prison. PAGAN was convicted of murder; racketeering; conspiracy to distribute crack, cocaine, and heroin; assault, and using and carrying firearms in connection with violent crimes. PAGAN is one of 35 members and associates of the gang who were charged in the case, all of whom have been convicted, 28 of whom have thus far been sentenced.
U.S. Attorney Preet Bharara stated: “Mr. Pagan was a gang leader, and what he led his followers to was a gang member’s life filled with death, blood, guns, drugs, and jail – and for him the gangster life in the street has become the inmate’s life in prison, forever. Gang leaders, members, associates, and wannabes in Newburgh and throughout the Hudson Valley need to understand: We will not tolerate gang violence. You will go to prison for it, potentially for the rest of your life.”
According to the Indictment and evidence presented at trial:
PAGAN founded the Newburgh Latin Kings, and grew the gang from roughly a dozen members in 2008 to more than 50 members and associates by early 2010. On May 6, 2008, PAGAN ordered aspiring gang members to go on a so-called mission, during which they committed a drive-by shooting and killed, mistakenly, Jeffrey Zachary, a 15-year old boy who was an innocent bystander. PAGAN sold crack and heroin, and helped other members and associates of his gang sell drugs, including at spots the Latin Kings controlled, such as the corner of Benkard Avenue and William Street in Newburgh. PAGAN also assaulted rivals of his gang, and carried guns and instructed others to carry guns to protect PAGAN and the Newburgh Latin Kings’ drug turf. In leading the gang, PAGAN recruited and inducted new members, instructed the members how to behave in order to protect and conceal the gang’s criminal activities, and issued orders to gang members to shoot and assault others. PAGAN organized and led gang meetings for this purpose. During one such meeting, according to papers filed with the court, PAGAN told more than 20 assembled gang members: “[W]e don’t even live by rules of society. . . .”
Mr. Bharara thanked the Hudson Valley Safe Streets Task Force for their work on the Latin Kings investigation. The Task Force is led by the Federal Bureau of Investigation (“FBI”), and combines the resources of dozens of law enforcement officers from federal, state, and local agencies and departments, including: agents and officers of the FBI; the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives; the City of Newburgh Police Department; Immigration and Customs Enforcement’s Homeland Security Investigations; the Middletown Police Department; the Orange County Sheriff’s Office, and the New York State Police.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Benjamin Allee, Abigail Kurland, and Nicholas McQuaid are in charge of the prosecution.
Former President and Chief Executive Officer of Software Company Pleads Guilty in Manhattan Federal Court to Perpetrating Multimillion-Dollar 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 SCOT ZARKIEWICZ, the co-founder, President, Chief Executive Officer, Treasurer, and principal owner of SingleClick Systems Corp. (“SingleClick”), a Delaware-incorporated, New Jersey-based software company, pled guilty today in Manhattan federal court to charges arising from a scheme to defraud SingleClick investors. From mid-2009 through June 2013, ZARKIEWICZ solicited several investors to purchase millions of dollars of privately-held SingleClick stock based on fraudulent misrepresentations about the company’s operations and financial performance. ZARKIEWICZ was arrested on these charges on October 9, 2013. He pled guilty today before U.S. District Judge Denise L. Cote.
Manhattan U.S. Attorney Preet Bharara said: “For four years Scot Zarkiewicz told the investors of his software company one lie after another and swindled them out of millions of dollars. But his fraud scheme was ultimately exposed for the sham that it was, and now he will be punished for his crimes.”
Assistant Director-in-Charge George Venizelos said: “Scot Zarkiewicz brought a whole new meaning to cooking the books. He often exaggerated and sometimes totally made up numbers on his company’s balance sheet. Like we’ve seen time and time again, Zarkiewicz ripped off dozens of unwitting victims to fund his lavish lifestyle. Today, Mr. Zarkiewicz finds himself guilty, under his own admission, of these crimes.”
According to the Information filed in this case, statements made during the defendant’s guilty plea, and other court documents:
SingleClick is a privately-held software company that was engaged in the business of providing individuals and businesses with network software products that facilitate content access and network and systems management from any internet-connected device. From mid-2009 through June 2013, ZARKIEWICZ solicited investor contributions to, and caused investors to maintain their investment in, SingleClick based on fraudulent misrepresentations.
Specifically, during the relevant period, ZARKIEWICZ told SingleClick investors, in both oral and written communications, that SingleClick had several large corporate clients, millions of dollars in annual revenue, and millions of dollars in cash in bank and brokerage accounts, when, in truth and in fact, and as ZARKIEWICZ well knew, SingleClick conducted minimal business operations, collected significantly less than a million dollars in annual revenue, and did not have more than approximately $513,000 in cash on hand. ZARKIEWICZ made these misrepresentations to induce potential investors to purchase SingleClick shares, and to induce existing investors to purchase additional shares and/or refrain from requesting redemptions of their investments. ZARKIEWICZ made these misrepresentations by, among other means, distributing fabricated bank, brokerage, financial, and tax statements to investors. As a result of his fraudulent scheme, ZARKIEWICZ collected and maintained approximately $5.5 million from approximately 30 victims.
In May and June 2013, investors learned that SingleClick had very little cash available and confronted ZARKIEWICZ. ZARKIEWICZ admitted to investors that he lied about SingleClick’s business performance, fabricated records, and misled investors about the number of investors in, and operation of, SingleClick. Notwithstanding representations made in preceding years by ZARKIEWICZ that SingleClick had millions of dollars in revenue – including representations that SingleClick had generated $48 million in revenue in 2012 – since mid-2009, SingleClick has actually been generating thousands of dollars in revenue, not millions, and SingleClick’s total aggregate bank account balances have not exceeded approximately $513,000. In August 2013, after admitting his fraudulent conduct, ZARKIEWICZ resigned as CEO of SingleClick.
ZARKIEWICZ, 41, of Toms River, New Jersey, pled guilty to a two-count Information charging him with securities fraud and wire fraud. Each of the charges carries a maximum term of 20 years in prison. In addition, ZARKIEWICZ agreed to forfeit $5.5 million as well as any remaining proceeds in SingleClick bank accounts, and pay restitution as ordered by the Court. ZARKIEWICZ is scheduled to be sentenced by Judge Cote on March 28, 2014, at 11:00 a.m.
Mr. Bharara praised the investigative work of the FBI.
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 David I. Miller is in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture related to the prosecution.
Former Branch Manager at Manhattan Bank Pleads Guilty in Manhattan Federal Court to Assisting Leader of International Sportsbook with Structuring Financial TransactionsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that RONALD UY pled guilty today in Manhattan federal court to assisting Illya Trincher, a leader of an international sportsbook with ties to Russian-American organized crime, with structuring financial transactions. Trincher previously pled guilty in Manhattan federal court in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. UY was charged in April 2013 along with 33 other alleged members and associates of two Russian-American organized crime enterprises in an indictment that included racketeering, money laundering, extortion, and various gambling offenses. UY pled guilty before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “Ronald Uy consorted with Illya Trincher, a leader of a high-stakes gambling operation with ties to Russian-American organized crime, and broke the law when he aided Trincher in concealing the enterprise’s ill-gotten gains. But thanks to the efforts of law enforcement, Uy, like the 18 others before him, has admitted his guilt and now stands convicted.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including today’s guilty plea:
Trincher and co-defendant Hillel Nahmad ran a high-stakes illegal gambling business that catered primarily to millionaire and billionaire clients. Their business utilized several online gambling websites that operated illegally in the United States to generate tens of millions of dollars of sports bets each year. UY was a branch manager at a bank in Manhattan (the “Bank”). UY assisted Illya Trincher on several occasions in structuring deposits at the Bank so as to avoid triggering reporting requirements at the bank.
UY, 33, of Queens, New York, faces a maximum of five years in prison and three years of supervised release. He is scheduled to be sentenced by Judge Furman on March 27, 2014, at 3:00 p.m.
UY is the 19th defendant in this case to plead guilty. The defendants who have pled to date have agreed to forfeit, in total, more than $66,000,000.00. The following defendants previously pled guilty and await sentencing:
- Bryan Zuriff pled guilty to gambling charges on July 26, 2013;
- William Barbalat pled guilty to gambling charges on August 14, 2013;
- Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
- Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
- Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
- Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
- Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
- Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013;
- Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
- Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013;
- Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013;
- Hillel Nahmad pled guilty to gambling charges on November 12, 2013;
- Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013;
- Eugene Trincher pled guilty to gambling charges on November 14, 2013;
- Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013; and
- Illya Trincher pled guilty to gambling charges on November 15, 2013.
The charges against the remaining defendants who have not pled guilty are merely accusations, and they are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, New York City Police Department, and Internal Revenue Service – Criminal Investigation.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter Skinner, and Kristy J. Greenberg of the Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorneys Alexander Wilson and Christine Magdo of the Office’s Asset Forfeiture Unit are responsible for the forfeiture aspects of the case.
U.S. v. Alimzhan Tokhtakhounov, et al. Indictment
Former Branch Manager at Manhattan Bank Pleads Guilty in Manhattan Federal Court to Assisting Leader of International Sportsbook with Structuring Financial TransactionsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that RONALD UY pled guilty today in Manhattan federal court to assisting Illya Trincher, a leader of an international sportsbook with ties to Russian-American organized crime, with structuring financial transactions. Trincher previously pled guilty in Manhattan federal court in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. UY was charged in April 2013 along with 33 other alleged members and associates of two Russian-American organized crime enterprises in an indictment that included racketeering, money laundering, extortion, and various gambling offenses. UY pled guilty before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “Ronald Uy consorted with Illya Trincher, a leader of a high-stakes gambling operation with ties to Russian-American organized crime, and broke the law when he aided Trincher in concealing the enterprise’s ill-gotten gains. But thanks to the efforts of law enforcement, Uy, like the 18 others before him, has admitted his guilt and now stands convicted.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including today’s guilty plea:
Trincher and co-defendant Hillel Nahmad ran a high-stakes illegal gambling business that catered primarily to millionaire and billionaire clients. Their business utilized several online gambling websites that operated illegally in the United States to generate tens of millions of dollars of sports bets each year. UY was a branch manager at a bank in Manhattan (the “Bank”). UY assisted Illya Trincher on several occasions in structuring deposits at the Bank so as to avoid triggering reporting requirements at the bank.
UY, 33, of Queens, New York, faces a maximum of five years in prison and three years of supervised release. He is scheduled to be sentenced by Judge Furman on March 27, 2014, at 3:00 p.m.
UY is the 19th defendant in this case to plead guilty. The defendants who have pled to date have agreed to forfeit, in total, more than $66,000,000.00. The following defendants previously pled guilty and await sentencing:
- Bryan Zuriff pled guilty to gambling charges on July 26, 2013;
- William Barbalat pled guilty to gambling charges on August 14, 2013;
- Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
- Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
- Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
- Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
- Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
- Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013;
- Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
- Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013;
- Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013;
- Hillel Nahmad pled guilty to gambling charges on November 12, 2013;
- Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013;
- Eugene Trincher pled guilty to gambling charges on November 14, 2013;
- Anatoly Golubchik pled guilty to conspiring to commit racketeering on November 15, 2013; and
- Illya Trincher pled guilty to gambling charges on November 15, 2013.
The charges against the remaining defendants who have not pled guilty are merely accusations, and they are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, New York City Police Department, and Internal Revenue Service – Criminal Investigation.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter Skinner, and Kristy J. Greenberg of the Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorneys Alexander Wilson and Christine Magdo of the Office’s Asset Forfeiture Unit are responsible for the forfeiture aspects of the case.
Two More Defendants Plead Guilty in Manhattan Federal Court in Connection with Scheme to Control Waste-Hauling IndustryRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CARMINE FRANCO and ANTHONY PUCCIARELLO pled guilty today in Manhattan federal court in connection with their roles in an illegal scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. FRANCO and PUCCIARELLO, who were among 32 defendants charged in January 2013 in connection with the scheme, pled guilty today before U.S. District Judge P. Kevin Castel.
Manhattan U.S. Attorney Preet Bharara said: “With today’s guilty pleas, Carmine Franco and Anthony Pucciarello become the latest defendants to be held to account for their roles in a criminal racketeering enterprise that encircled the waste-hauling industry in the New York City area and parts of New Jersey. This Office will continue working with our law enforcement partners to pry loose the tentacles of organized crime from around the industries it tries to control.”
According to the Indictment against FRANCO and PUCCIARELLO, other documents filed in Manhattan federal court, and statements made at related court proceedings:
FRANCO, who is an associate of the Genovese Crime Family, participated in a criminal enterprise, along with other members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino, and Luchese Crime Families – to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the enterprise engaged in various crimes in furtherance of the enterprise’s aims, including extortion, loansharking, mail and wire fraud, and stolen property offenses. As part of his guilty plea, FRANCO, who had been barred by the State of New Jersey from participating in the waste hauling industry, acknowledged his membership in the criminal enterprise and his agreement with others to undertake at least two racketeering acts in furtherance of the enterprise. Specifically, FRANCO acknowledged that he committed mail and wire fraud by overbilling customers of a waste transfer station that he controlled in West Nyack, New York. He also acknowledged that he and his associates transported large volumes of stolen cardboard across state lines.
As part of his involvement in the scheme, PUCCIARELLO, an associate of the Genovese Crime Family, was aware that other members of the scheme were conspiring to use extortion to obtain an ownership percentage in a business owned by a cooperating Government witness (“CW-1”). PUCCIARELLO did not report this extortion to law enforcement authorities and agreed to conceal the percentage of CW-1’s business that PUCCIARELLO would own following the extortion.
FRANCO, 78, of Ramsey, New Jersey, pled guilty to one count of racketeering conspiracy, one count of conspiracy to commit mail and wire fraud, and one count of conspiracy to transport stolen goods interstate, and faces a maximum sentence of 45 years in prison. As part of his plea agreement, FRANCO has agreed to forfeit $2,500,000 to the United States. He is the fifteenth defendant in this matter to plead guilty, and is scheduled to be sentenced by Judge Castel on March 19, 2014, at 2:30 p.m.
PUCCIARELLO, 78, of Bloomfield, New Jersey, pled guilty to one count of misprision of extortion, and faces a maximum sentence of three years in prison. He is the sixteenth defendant in this matter to plead guilty, and is scheduled to be sentenced by Judge Castel on March 21, 2014, at 2:00p.m.
The charges against the remaining defendants are merely accusations, and these defendants are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Westchester County Police Department.
The prosecution of this case is being handled by the Office’s Organized Crime Unit.
Assistant United States Attorneys Brian R. Blais, Natalie Lamarque, and Patrick Egan are in charge of the prosecution. Assistant United States Attorney Micah Smith of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
Statement of Manhattan U.S. Attorney Preet Bharara on the Guilty Verdicts of Mark Mazer, Gerard Denault, and Dimitry AronshteinRead the Press Release
“The jury has found what this Office alleged from the outset: these defendants were at the heart of a conspiracy to steal from New York City and its taxpayers. Awarded a lucrative contract to design a streamlined payroll system for the City, instead they built a money-making machine for themselves. These three defendants and their partners in crime thought they had made off with nearly $100 million in taxpayer money, far more than they could have made by burglarizing banks, with a fraction of the effort. What they now stand to reap is lengthy prison terms.”
Former Credit Suisse Managing Director Sentenced in Manhattan Federal Court to 30 Months in Prison in Connection with Scheme to Hide Losses in Mortgage-Backed Securities Trading BookRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that KAREEM SERAGELDIN, the former Managing Director/Global Head of Structured Credit in the Investment Banking Division of Credit Suisse Group (“Credit Suisse”), was sentenced today to 30 months in prison in connection with a scheme to hide more than $100 million in losses in a mortgage-backed securities trading book at Credit Suisse. The bonds at issue in Credit Suisse’s trading book comprised subprime residential mortgage backed securities (“RMBS”) and commercial mortgage backed securities (“CMBS”). Once discovered, SERAGELDIN’s manipulation of these bond prices contributed to Credit Suisse taking a $2.65 billion write-down of its 2007 year-end financial results. In April 2013, SERAGELDIN was extradited from the United Kingdom and pled guilty to conspiring to falsify the books and records of the bank before U.S. District Judge Alvin K. Hellerstein. SERGAGELDIN’s co-conspirators, David Higgs and Salmaan Siddiqui, have also pled guilty and are awaiting sentencing.
Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence Kareem Serageldin will now pay a steep price for the role he played in a conspiracy to cover up more than one hundred million dollars in subprime mortgage-related losses – the loss of his liberty.”
According to the Indictment filed against SERAGELDIN and the Informations to which Higgs and Siddiqui pled guilty, other court documents, and statements made during court proceedings:
SERAGELDIN was employed at Credit Suisse as a Managing Director. He held the position of Global Head of the Structured Credit Group in the Securities Department of Credit Suisse’s Investment Banking Division, and divided his time between the company’s New York and London offices. The Structured Credit Group held and traded ABS (“Asset Backed Security”) cash bonds, which included RMBS and CMBS. SERAGELDIN oversaw and
managed a number of trading books, including a trading book known as “ABN1.” The ABN1 book comprised primarily several thousand individual long and short subprime-related positions, as well as other securities. The long positions consisted of, among other things, various types of cash securities, including AAA-rated and non-AAA-rated cash bonds. Until March 2008, ABN1 had a net asset value of approximately $5.35 billion, approximately $3.71 billion of which consisted of ABS cash bonds, including RMBS and CMBS positions.
Pricing of Mortgage-Backed Securities
Credit Suisse traders were required at all relevant times to price securities they held at their fair value, that is, on a “mark-to-market” basis, which was determined by reference to either the current market price of the asset or liability, or the current price for a similar asset or liability. In the absence of a liquid market, Credit Suisse traders were required to look to other indicia in order to determine the fair value of the assets on their books. During this time, the ABX Index served as a benchmark for certain securities backed by home loans. It was widely understood within Credit Suisse that traders were to consult the corresponding ABX indices when pricing RMBS bonds and related products.
The Bond Pricing Scheme
The deterioration throughout 2007 of the real estate market in the United States, including the subprime housing market, led to significant reductions in valuations of mortgage-backed securities. As mortgage delinquencies increased across the country, the value of the securities backed by these mortgages decreased and the market for them became increasingly illiquid.
By late November 2007, SERAGELDIN was aware that the market for mortgage-backed securities had declined enormously. On November 28, 2007, SERAGELDIN told Higgs, Siddiqui, and a co-conspirator (“CC-1”) that “the housing market [was] going down the tubes” and that they had to “find a way to sell these bonds,” i.e., mortgage-backed bonds in ABN1. As SERAGELDIN recognized, “[t]hose bonds are going to start trading worse than the [ABX] Index.” SERAGELDIN and his co-conspirators did not sell the bonds because the market prices for the bonds were substantially below the inflated value at which they marked the bonds.
From August 2007 through February 2008, SERAGELDIN, Higgs, Siddiqui, and their co-conspirators artificially increased the price of bonds in order to create the false appearance of profitability in the ABN1 trading book. Specifically, SERAGELDIN directed Higgs on numerous occasions to reach specific Profit & Loss (“P&L”) targets on a daily and month-end basis. Higgs, in turn, instructed Siddiqui and another unnamed co-conspirator to mark the books so as to achieve the particular P&L targets specified by SERAGELDIN, rather than to reflect the fair value of the bonds.
Credit Suisse’s ABN1 Trading Book Was Falsely Inflated as a Result of the Scheme
As a result of the scheme, there was a growing disparity between the values ascribed to the marks in the ABN1 book and the available external benchmarks such as the ABX Index. From August 2007 through the end of that year, as ABX Index prices fell, bond prices in ABN1 that were supposed to reflect the ABX Index remained effectively stable, thereby giving the false impression to Credit Suisse senior management that the ABN1 book was profitable. On one occasion in January 2008, SERAGELDIN expressed concern to Higgs that the overpriced bonds were at risk of being discovered: “We should mark these down because someone is going to spot this,” he said.
The February 2008 Mark-Down
On March 20, 2008, Credit Suisse issued a press release that announced completion of its internal review and stated that the fair value reduction, or write-down, of the ABS positions – which included, but was not limited to, the ABNl book – was approximately $2.65 billion. Approximately $540 million of this write-down was attributable to the ABN1 trading book, and included ABS cash bonds for the fourth quarter 2007 that SERAGELDIN manipulated and inflated in connection with his scheme.
In addition to the prison term, Judge Hellerstein sentenced SERAGELDIN, 40, a citizen of the United Kingdom, to two years of supervised release. SERAGELDIN also was ordered to pay forfeiture in the amount of $1 million, a $150,000 fine, and a $100 special assessment.
Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance in the investigation of this case.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Eugene Ingoglia is in charge of the prosecution. 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.
Demolition Company Operators Found Guilty in Manhattan Federal Court of Scheme to Underpay Employees in Violation of Federal Prevailing Wage LawRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOVER NARANJO, the owner and president of Enviro & Demo Masters, Inc. (“Enviro”), and LUPERIO NARANJO, SR., a foreman for Enviro, were found guilty today in Manhattan federal court of perpetrating a scheme to underpay employees in violation of the federal prevailing wage law. The jury also found that JOVER NARANJO and LUPERIO NARANJO, SR., tampered with witnesses and used other people’s identities to further their fraudulent scheme. In addition, the jury found that JOVER NARANJO made false statements to a government agent in connection with the scheme. They were convicted after a two-week trial before U.S. District Judge Jed S. Rakoff.
Manhattan U.S. Attorney Preet Bharara said: “Today, Jover Navanjo, and Luperio Naranjo, Sr. stand convicted of deceiving government agencies through fraudulent payrolls that hid the unlawful underpayment of their employees, and then concealing their fraud. The Office has zero tolerance for contractors who unlawfully take advantage of their staff, abuse federal funds, and then lie about it to cover their tracks. With today’s verdict, Jover Naranjo and Luperio Naranjo, Sr., will be punished for their conduct.”
According to the Complaint and the Superseding Indictment filed in Manhattan federal court and the evidence presented at trial:
In August 2009, Enviro was awarded a sub-contract by the general contractor on a New York City project (the “Project”) to demolish five buildings in Manhattan (the “Contract”) that was funded in part with federal stimulus money. From August 2009 through February 2010, JOVER NARANJO and LUPERIO NARANJO, SR., participated in a scheme to submit fraudulent certified payrolls to the New York City Department of Housing Preservation and Development (“HPD”) and the U.S. Department of Labor in connection with the Contract. These certified payrolls were fraudulent in at least three respects. First, they listed relatives as the demolition workers on the Project, when in fact, these relatives did no work. Second, the certified payrolls did not list the actual individuals who worked on the Project. Third, the certified payrolls misrepresented the wages being paid to Enviro’s workers.
In this regard, the fraudulent certified payrolls indicated that Enviro was paying its employees the federal prevailing wage, as required by federal law, but in reality, they were being paid far less. Although the applicable federal prevailing wages for Enviro employees working on the Contract were approximately $49 and $33 per hour for demolition laborers, JOVER NARANJO and LUPERIO NARANJO, SR., paid their demolition workers as little as $13 per hour. The total amount of salary underpaid by the defendants to Enviro employees working on the Contract was in excess of approximately $650,000.
JOVER NARANJO and LUPERIO NARANJO, SR., also employed a number of measures to conceal their fraud. For example, they submitted supporting documentation with the certified payrolls that included time sheets on which they forged workers’ signatures, and canceled checks that they had doctored to make it appear that workers were earning the prevailing wage. In addition, they hid their workers from investigators and told some to lie about their identities, work schedules, and/or pay rates if they were questioned by investigators. When an employee truthfully told investigators that the employee was paid below the prevailing wage, JOVER NARANJO and LUPERIO NARANJO, SR., fired the employee and the employee’s relative.
JOVER NARANJO, 37, and LUPERIO NARANJO, SR., 65, both of Queens, New York, were each convicted of mail fraud, conspiracy to commit mail fraud, witness tampering, conspiracy to commit witness tampering, and aggravated identity theft. JOVER NARANJO was also convicted of one count of making false statements.
JOVER NARANJO faces a total maximum sentence of 87 years in prison, including a mandatory minimum sentence of two years. LUPERIO NARANJO, SR., faces a total maximum sentence of 82 years in prison, including a mandatory minimum sentence of two years. The defendants also each face a maximum fine of $250,000 or twice the gross gain or loss from the offense on each count except aggravated identity theft.
The defendants are scheduled to be sentenced by Judge Rakoff on March 24, 2014 at 4:00 p.m.
Mr. Bharara praised the outstanding investigative work of the New York Field Office of the U.S. Department of Labor’s Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, the New York City Department of Investigation, and the United States Environmental Protection Agency Criminal Investigation Division.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Brian A. Jacobs and Brent S. Wible are in charge of the prosecution.
Manhattan U.S. Attorney Charges 14 Defendants in Connection with $8 Million Bank Fraud SchemeRead the Press Release
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”), today announced charges against 14 defendants for engaging in a bank fraud scheme involving deposits of thousands of counterfeit checks and withdrawals of at least $8 million in fraudulent proceeds. Seven defendants were arrested this morning and are expected to be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon. Two additional defendants were arrested – one in Buffalo, New York, and one in Lawrenceville, Georgia. Defendants HAMID KHAN, AKTHER RAHMAN, ABDUR RAZZAK, KHAIRUL ISLAM and MD REZA are still at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, for three years the 14 defendants charged in this multimillion-dollar check-kiting scheme attempted to fly under the radar and conceal their illicit activity through false identification documents, counterfeit checks, and sham companies. But law enforcement uncovered their alleged bank fraud, and now they will be made to answer for their actions.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “The defendants arrested today are alleged to have perpetrated a scheme involving the theft of at least $8,000,000 from 15 financial institutions. HSI New York’s El Dorado Task Force, the largest financial investigation task force in the world, partners with prosecutors and law enforcement agencies every day to detect and dismantle transnational criminal organizations working to steal from financial institutions and disrupt America’s economic system.”
The following allegations are based on the Indictment unsealed today in Manhattan federal court:
From approximately June 2009 through November 2012, the defendants and their co-conspirators allegedly engaged in a bank fraud scheme in which they created counterfeit checks, deposited those counterfeit checks into bank accounts they had opened in the names of sham companies in order to fraudulently inflate the balances in those accounts, and then withdrew funds from those bank accounts before the financial institutions were able to determine the fraudulent nature of the checks. The scheme entailed the deposit of thousands of counterfeit checks into bank accounts at approximately 15 different banks, resulting in aggregate losses to those banks of at least $8 million.
As part of the scheme, the defendants incorporated sham companies and then opened bank accounts in the names of those sham companies. The individuals opening the accounts (the “accountholders”) often used false identities, including names and social security numbers, and presented false identification documents, including fake United States visas. The accountholders were generally instructed to make small legitimate deposits at first so that the banks would make funds immediately available upon future fraudulent deposits.
The defendants obtained copies of legitimate checks and then used the payor account information that appeared on those checks to create counterfeit checks made payable to the sham companies they had incorporated as part of the scheme. The accountholders deposited the counterfeit checks into the sham company bank accounts at various banks. The accountholders often made deposits at numerous branches of the same bank on the same day. These deposits often were made on a Thursday or Friday so that the defendants could withdraw the illegal proceeds over the weekend when the banks were closed and were less likely to determine that the checks were counterfeit.
Once the defendants confirmed that funds from the counterfeit checks were available for withdrawal, the accountholders were directed to withdraw the funds from the counterfeit checks, typically over the weekend and often in amounts just under $10,000. The defendants often withdrew the funds from global cash access machines at casinos in Atlantic City, New Jersey, which did not have daily withdrawal limits. The accountholders often used false identification documents, including fake United States visas, when making the withdrawals.
Each of the defendants was charged with one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison. Certain of the defendants were also charged with one count of conspiracy to commit fraud in connection with identification documents, which carries a maximum sentence of 15 years in prison. A chart listing the age, place of residence, and charges for each of the 14 charged defendants is attached.
In addition to the defendants charged in the Indictment unsealed today, six other defendants have been charged and have pled guilty in connection with the scheme.
Manhattan U.S. Attorney Bharara praised the investigative work of ICE HSI. He also thanked the Queens County District Attorney’s office, the New Jersey State Police, the New York City Police Department, the New York State Police, the United States Secret Service, and the New York City Taxi and Limousine Commission for their assistance in the matter.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Lisa Korologos and Elisha Kobre, and Special Assistant United States Attorney Jason Wong, 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. Zaman Mahabub, et al. Indictment 13 cr 908.
Manhattan U.S. Attorney Charges 16 Defendants with Defrauding Federal Program for Low-Income Pregnant Women, Mothers, and Young ChildrenRead the Press Release
In Parallel State Prosecution, New York State Attorney General Charges 10 Additional Defendants
Preet Bharara, the United States Attorney for the Southern District of New York, James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), Nirav Shah, the Commissioner of the New York State Department of Health (“NYS DOH”), and Eric T. Schneiderman, the New York State Attorney General, today announced charges against 16 defendants for defrauding the federal Special Supplemental Nutrition Program for Women, Infants and Children (“WIC”) out of millions of dollars. All of the defendants, who were owners or employees of nine different grocery stores in Manhattan, Queens, and Brooklyn, New York, were charged with participating in fraud schemes from 2011 to the present in which they exchanged WIC vouchers for cash while keeping a portion of that cash for themselves. Ten of the defendants charged today are married couples or family members. Twelve defendants were arrested this morning and are expected to be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon. An additional defendant was also arrested and will be presented at a later date. Defendants QIGUANG ZHANG, HUILAN LIU, and LAN LU JIANG are still at large. In a parallel state prosecution, today the New York State Attorney General’s Office arrested 10 additional individuals who were owners and employees of stores located in Brooklyn, Queens, and Manhattan.
A civil forfeiture complaint was also filed this morning in the Southern District of New York against 19 businesses in the New York City area, real property located at 6101 Fifth Avenue, Brooklyn, New York, and 19 bank accounts. The 19 bank accounts were seized by law enforcement, as they contained proceeds of the WIC fraud described herein and were used to promote and conceal the WIC fraud.
Manhattan U.S. Attorney Preet Bharara said: “As alleged in the complaints unsealed today, the defendants defrauded a vital federal program that provides a lifeline to women, mothers, and young children in need throughout New York. This Office will continue its work to prosecute corruption and protect taxpayer-funded programs, particularly at this time of scarce government resources and where it involves vulnerable victims.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Business owners and their employees arrested today allegedly committed a series of fraud against the American taxpayer. We will continue to work hard to ensure that social programs meet the needs of their intended beneficiaries.”
New York State Department of Health Commissioner Nirav Shah said: "New York State takes an aggressive stance against any and all fraud. This case is a testament to the effectiveness of the collaborative investigation by the State Health Department, the NYS Office of the Attorney General, the US Department of Homeland Security, and the U.S. Attorney’s Office – Southern District of New York. We are committed to protecting public funds through fraud prevention, detection and prosecution to support this critical program which serves 500,000 women, infants and children throughout New York State.”
New York State Attorney General Eric Schneiderman said: “These crimes are a betrayal of the trust of the people of New York and those who rely on the WIC program to ensure the health and well-being of their children. This joint investigation by my office in conjunction with the New York State Department of Health, the United States Department of Homeland Security and the United States Attorney’s Office for the Southern District of New York sends a clear message that fraud against New York State benefits programs will not be tolerated. The conduct charged here is particularly egregious in light of the fact that the defendants stole monies intended to provide nutrition for infants, young children and pregnant mothers. My office is dedicated to seeking justice against perpetrators who defraud the public and to preserving the integrity of important benefits programs such as WIC.”
The following allegations are based on the Complaints unsealed today in Manhattan federal court:
The “WIC” Program and the Defendants’ Scheme to Defraud
WIC is a federally funded program through which the U.S. Department of Agriculture provides grants to states for supplemental foods, health care referrals, and nutrition education for low-income pregnant women, mothers of young children, and children up to age five who are found to be at nutritional risk. Grants are administered in New York by the New York State Department of Health, Division of Nutrition (the “NYS DOH”). Participants in the WIC program receive vouchers which may only be used to purchase certain specified food items such as infant formula, milk or juice. Participants can exchange these vouchers for food items specified on the vouchers at grocery stores run by licensed vendors.
Only vendors who are licensed by the state may accept WIC vouchers. Because the purpose of the program is to provide food to low-income women, mothers, and children at nutritional risk, WIC vendors are prohibited from exchanging WIC vouchers for cash, but instead must provide specified food items in exchange for WIC vouchers.
The 16 defendants named in the three Complaints unsealed today are the owners, operators, or employees of nine grocery stores located in Manhattan, Queens, and Brooklyn, New York. The schemes to defraud charged in these Complaints involve store owners and employees purchasing WIC vouchers for cash—typically paying 80-85 percent of the face value of the WIC vouchers—and then redeeming those WIC vouchers from the NYS DOH for their full face value. Grocery stores involved in these schemes accepted WIC vouchers regardless of whether they were licensed by the state. In the aggregate, the corrupt owners, operators, and employees of these nine grocery stores have redeemed approximately $30 million worth of WIC vouchers.
The “Six-Store Network” Complaint
TUNG CHA YO, SUNG MAN CHAN, YING ZHENG, QIGUANG ZHANG, FENG ZHENG, SAU WA YEUNG, SAU CHAN, ZHAOJUN LIN, HUILAN LIU, and YU WANG were the owners, operators, or employees of six grocery stores located in Manhattan, Brooklyn, and Queens, New York, only two of which had WIC licenses that were active and in use in 2013. YO and SAU CHAN are married to one another. YEUNG is the mother of SAU CHAN and SUNG MAN CHAN. SUNG MAN CHAN is married to FENG ZHENG, whose sister is YING ZHENG.
Owners or employees at each of those six grocery stores purchased WIC vouchers for cash from confidential informants on numerous occasions between March and November 2013. All of those checks were funneled to one of the stores that had a WIC license, which redeemed them, received payment from the WIC program, and then distributed the proceeds to the other members of this network of stores.
Since 2009, these defendants have opened and closed grocery stores in different names at the same locations. In many instances, the defendants obtained WIC licenses, redeemed significant volumes of WIC checks using those licenses, and then terminated those licenses only to use a different store to obtain a WIC license and repeat this pattern. Based on figures obtained from the NYS DOH, it is estimated that these six stores and their predecessors redeemed more than $19 million from the WIC program since 2009.
All of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison. TUNG CHA YO, SAU WA YEUNG, and ZHAOJUN LIN are charged with theft of government funds, which carries a maximum term of 10 years in prison. TUNG CHA YO, SUNG MAN CHAN, YING ZHENG, and QIGUANG ZHANG are also charged with conspiracy to commit money laundering and money laundering, which both carry a maximum term of 20 years in prison.
The “Two-Store” Network Complaint
GIGI DONG, SHUMIN DONG, LAN LU JIANG, and ANIY LI were the owners, operators, or employees of two grocery stores located in Brooklyn, one of which had a WIC license that was active and in use after March 2013. SHUMIN DONG and GIGI DONG are married to one another. Owners or employees at both of those stores purchased WIC vouchers for cash from confidential informants on numerous occasions between March and November 2013. All of those checks were funneled to the store that had a WIC license, which redeemed them and received payment from the WIC program.
These defendants engaged in a fraudulent scheme similar to the scheme described in the first Complaint, only this time alternating their WIC license between stores at two locations. Based on figures obtained from the NYS DOH, it is estimated that these two stores and their predecessors redeemed more than $9 million from the WIC program since 2009.
All of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison.
B & B Grocery Commits WIC Fraud
YONG LIN and QIAO FANG ZHENG operate a grocery store located in Brooklyn, New York. LIN and ZHENG are married to one another. LIN obtained a WIC license in February 2010, and over $1.3 million worth of WIC vouchers were redeemed through that store until the license was terminated in February 2012. ZHENG then obtained a new WIC license in the name of a different store at the same location, and redeemed over $540,000 worth of WIC vouchers. ZHENG purchased WIC vouchers for cash from confidential informants on numerous occasions between April and September 2013.
Both of these defendants are charged with conspiracy to commit theft of government funds, which carries a maximum term of five years in prison.
A chart listing the age, place of residence, and charges for each of the 16 charged defendants is attached.
Manhattan U.S. Attorney Bharara praised the investigative work of ICE HSI, the United States Department of Agriculture, Office of the Inspector General, the New York State Department of Health, Division of Nutrition, as well as the New York State Attorney General’s Office.
The Office’s General Crimes Unit is handling the case. Special Assistant U.S. Attorney Jason Wong and Assistant U.S. Attorneys Patrick Egan and Richard Cooper are in charge of the prosecution. Assistant U.S. Attorney Carolina A. Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
The charges contained in the Complaints are merely accusations and the defendants are presumed innocent unless and until proven guilty.
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WIC Fraud Complaints
WIC Fraud Civil Forfeiture ComplaintManhattan U.S. Attorney Announces Arrests of Five Defendants for Conspiring to Import 100 Kilograms of North Korean Methamphetamine into the United StatesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, Administrator of the United States Drug Enforcement Administration (“DEA”), today announced the arrests of five defendants – SCOTT STAMMERS and PHILIP SHACKELS, citizens of the United Kingdom; YE TIONG TAN LIM, a citizen of the People’s Republic of China; KELLY ALLAN REYES PERALTA, a citizen of the Philippines; and ALEXANDER LNU, a/k/a “Alexander Checov,” a/k/a “Alexander Semencov,” a resident of Thailand (“ALEXANDER”). STAMMERS, SHACKELS, LIM, REYES PERALTA, and ALEXANDER are each charged with conspiring to import 100 kilograms of North Korean-produced methamphetamine into the United States.
Each of the defendants was arrested in Thailand in September. The five defendants were extradited from Thailand, arrived in the Southern District of New York yesterday evening, and are expected to be presented in U.S. Magistrate Court later today.
Manhattan U.S. Attorney Preet Bharara said: “Methamphetamine is a dangerous, potentially deadly drug, whatever its origin. If it ends up in our neighborhoods, the threat it poses to public health is grave whether it is produced in New York, elsewhere in the U.S., or in North Korea. This investigation shows our determination to close a potential floodgate of supply.”
DEA Administrator Michele M. Leonhart said: “Like many international criminal networks, these drug traffickers have no respect for borders, and no regard for either the rule of law or who they harm as a result of their criminal endeavors. This investigation continued to highlight the emergence of North Korea as a significant source of methamphetamine in the global drug trade. I wish to thank the Thai Government for their outstanding efforts and partnership in completely dismantling this sophisticated and dangerous international criminal enterprise.”
According to the allegations in the Indictment against STAMMERS, SHACKELS, LIM, REYES PERALTA, and ALEXANDER:
In 2012, LIM and REYES PERALTA – members of a Hong Kong-based criminal organization – sold over 30 kilograms of methamphetamine that had been produced in North Korea. STAMMERS and SHACKELS were responsible for storing the methamphetamine after it had been sold by LIM and REYES PERALTA. This North Korean methamphetamine was later seized by law enforcement agents in Thailand and in the Philippines. The North Korean methamphetamine tested at more than 99% pure.
In 2013, LIM and REYES PERALTA again agreed to provide North Korean methamphetamine, this time agreeing to supply 100 kilograms of the methamphetamine to confidential sources working at the direction of the DEA (the “CSes”) for importation to the United States. As LIM explained, his criminal organization is the only one currently able to obtain methamphetamine from North Korea: “Because before, there were eight [other organizations]. But now only us, we have the NK product. . . . [I]t’s only us who can get from NK.” LIM further explained that, because of recent international tensions, the North Korean government had destroyed some methamphetamine labs, leaving behind only the labs of LIM’s organization: “And all the, the NK government already burned all the labs. Only our labs are not closed. . . . To show Americans that they [the North Korean government] are not selling it any more, they burned it. Then they transfer to another base.” LIM explained that his organization had stockpiled one ton of North Korean methamphetamine in the Philippines for storage, “[b]ecause we already anticipated this thing would happen . . . [whereby] we cannot bring out our goods right now.”
As a prelude to the 2013 100-kilogram methamphetamine deal described above, LIM and REYES PERALTA arranged to have a sample of the methamphetamine delivered to SHACKLES, who sent that sample (along with a second sample from another supplier) to an address from which the methamphetamine samples would be sent to the United States. These two methamphetamine samples tested at more than 98% and more than 96% pure.
LIM and REYES PERALTA agreed to deliver the 100 kilograms of North Korean methamphetamine in Thailand, from where they understood it would be shipped to the United States by boat. LIM and REYES PERALTA arranged for a “dry run,” sending a shipping container of tea leaves from the Philippines to Thailand in order to test delivery channels that would later be used for the shipment of methamphetamine.
STAMMERS, SHACKELS, and ALEXANDER agreed to provide security, transportation, and storage for the 100 kilograms of methamphetamine once it arrived in Thailand. ALEXANDER, the Sergeant-at-Arms of the Outlaw Motorcycle Club (“OMC”) in Thailand, was to be the “ground commander,” supervising an armed crew of OMC members providing security for the methamphetamine. STAMMERS and SHACKELS were to arrange for the 100 kilograms to be taken to a warehouse, counted, re-packaged, and delivered to a marina in Thailand, to be transferred to a boat that would deliver the methamphetamine to the United States.
In September 2013, LIM and REYES PERALTA traveled to Thailand in order to receive payment for the 100 kilogram methamphetamine deal. STAMMERS, LIM, PERALTA REYES, SHACKELS, and ALEXANDER were each arrested by Thai law enforcement on September 25, 2013.
STAMMERS, 44, LIM, 53, REYES PERALTA, 41, SHACKELS, 30, and ALEXANDER, 43, have each been charged with conspiracy to import methamphetamine into the United States. The case is assigned to United States District Judge Andrew L. Carter, Jr.
If convicted, each of the defendants faces a mandatory minimum sentence of ten years’ imprisonment and a maximum term of life imprisonment.
Mr. Bharara praised the outstanding work of the Special Operations Division of the DEA. Mr. Bharara also thanked DEA’s Bangkok, Manila, Ghana, Pretoria, Bucharest, Nassau, and Copenhagen Country Offices; the Thai Police Narcotics Suppression Bureau and Crime Suppression Division; the Royal Thai Immigration Bureau; the Royal Thai Attorney General's Office; the Republic of Liberia’s National Security Agency; the Republic of Liberia’s Attorney General's Office; the Romanian National Police; Interpol; and the U.S. Department of Justice Office of International Affairs
This prosecution is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael D. Lockard, Aimee Hector and Anna M. Skotko 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.
US v Stammers et al S8 13 Cr 579 Indictment
SEC Compliance Examiner Charged in Manhattan Federal Court for Making False Statements Related to Prohibited Financial HoldingsRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and Carl W. Hoecker, Inspector General of the Securities and Exchange Commission, Office of the Inspector General (“SEC-OIG”), today announced charges against STEVEN GILCHRIST, a Securities and Exchange Commission (“SEC”) Compliance Examiner in the SEC’s New York Regional Office, for making false statements to the SEC regarding his ownership of various securities he was prohibited from holding under SEC ethical rules. GILCHRIST was arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As an SEC examiner, Steven Gilchrist had a duty to avoid conflicts of interest that might compromise or even appear to compromise his integrity. Instead, as alleged, he violated the SEC’s internal rules about stock ownership and repeatedly lied to the SEC about his holdings. We will not tolerate abuses of trust and violations of law by individuals tasked with safeguarding our markets.”
SEC Inspector General Carl Hoecker said: “Making false statements to government agencies undermines the foundation of public integrity. My office investigates these matters thoroughly and today’s arrest exemplifies our commitment to working with the SEC to improve and protect its programs and operations.”
According to the allegations contained in the Criminal Complaint unsealed today:
Among a Compliance Examiner’s duties in the SEC’s New York Regional Office are overseeing broker-dealers, investment advisers, investment companies, clearing agencies, and others regarding their compliance with the nation’s securities laws. As an SEC employee, Gilchrist is subject to rules promulgated by the SEC (“SEC Ethical Rules”) designed to prevent conflicts of interest between employees’ conduct and the SEC’s mission of enforcing the securities laws and regulating the markets.
Beginning in August 2010, changes to the SEC Ethical Rules prohibited SEC employees from purchasing or holding stock in entities directly regulated by the SEC, and required employees to submit any proposed personal transactions in securities to the SEC prior to executing them. The prohibited securities included those of several banks and broker-dealers, including banks with broker-dealer subsidiaries. Individuals who held such stock at the time the changes were implemented were directed to divest their holdings, and provided with instructions on how to do so.
GILCHRIST held stock in several such prohibited companies. As the rule changes took effect, GILCHRIST did not divest his holdings as required. Instead, he transferred his stocks into a new joint brokerage account he shared with a family member and over which he had complete control (the “Joint Account”). In addition, he purchased additional prohibited stock (the “Additional Stock”) without pre-clearing the purchase with the SEC.
On three occasions in 2013, GILCHRIST made false statements to the SEC regarding his stock holdings. First, in January 2013, he falsely certified through an electronic SEC compliance system that as of December 31, 2012, his holdings were in compliance with SEC regulations. Second, on February 13, 2013, he submitted an Executive Branch financial disclosure form that falsely stated that he “no longer held” certain of his prohibited stock holdings, and that omitted any mention of the Additional Stock. Third, on February 22, 2013, GILCHRIST falsely certified through an electronic SEC compliance system that he had sold certain other prohibited stocks. In reality, GILCHRIST continued to hold prohibited stock in six different companies at all relevant times throughout this period. Specifically, the stocks that GILCHRIST claimed he no longer held had only been transferred to the Joint Account, which he controlled.
GILCHRIST, 48, of Bethpage, New York, is charged with three counts of making false statements. He faces a maximum sentence of 15 years in prison.
Mr. Bharara praised the investigative work of the SEC-OIG, and the Criminal Investigators of the United States Attorney’s Office. He also thanked the SEC for its assistance in the investigation.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
SEC Compliance Examiner Charged in Manhattan Federal Court for Making False Statements Related to Prohibited Financial HoldingsRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and Carl W. Hoecker, Inspector General of the Securities and Exchange Commission, Office of the Inspector General (“SEC-OIG”), today announced charges against STEVEN GILCHRIST, a Securities and Exchange Commission (“SEC”) Compliance Examiner in the SEC’s New York Regional Office, for making false statements to the SEC regarding his ownership of various securities he was prohibited from holding under SEC ethical rules. GILCHRIST was arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As an SEC examiner, Steven Gilchrist had a duty to avoid conflicts of interest that might compromise or even appear to compromise his integrity. Instead, as alleged, he violated the SEC’s internal rules about stock ownership and repeatedly lied to the SEC about his holdings. We will not tolerate abuses of trust and violations of law by individuals tasked with safeguarding our markets.”
SEC Inspector General Carl Hoecker said: “Making false statements to government agencies undermines the foundation of public integrity. My office investigates these matters thoroughly and today’s arrest exemplifies our commitment to working with the SEC to improve and protect its programs and operations.”
According to the allegations contained in the Criminal Complaint unsealed today:
Among a Compliance Examiner’s duties in the SEC’s New York Regional Office are overseeing broker-dealers, investment advisers, investment companies, clearing agencies, and others regarding their compliance with the nation’s securities laws. As an SEC employee, Gilchrist is subject to rules promulgated by the SEC (“SEC Ethical Rules”) designed to prevent conflicts of interest between employees’ conduct and the SEC’s mission of enforcing the securities laws and regulating the markets.
Beginning in August 2010, changes to the SEC Ethical Rules prohibited SEC employees from purchasing or holding stock in entities directly regulated by the SEC, and required employees to submit any proposed personal transactions in securities to the SEC prior to executing them. The prohibited securities included those of several banks and broker-dealers, including banks with broker-dealer subsidiaries. Individuals who held such stock at the time the changes were implemented were directed to divest their holdings, and provided with instructions on how to do so.
GILCHRIST held stock in several such prohibited companies. As the rule changes took effect, GILCHRIST did not divest his holdings as required. Instead, he transferred his stocks into a new joint brokerage account he shared with a family member and over which he had complete control (the “Joint Account”). In addition, he purchased additional prohibited stock (the “Additional Stock”) without pre-clearing the purchase with the SEC.
On three occasions in 2013, GILCHRIST made false statements to the SEC regarding his stock holdings. First, in January 2013, he falsely certified through an electronic SEC compliance system that as of December 31, 2012, his holdings were in compliance with SEC regulations. Second, on February 13, 2013, he submitted an Executive Branch financial disclosure form that falsely stated that he “no longer held” certain of his prohibited stock holdings, and that omitted any mention of the Additional Stock. Third, on February 22, 2013, GILCHRIST falsely certified through an electronic SEC compliance system that he had sold certain other prohibited stocks. In reality, GILCHRIST continued to hold prohibited stock in six different companies at all relevant times throughout this period. Specifically, the stocks that GILCHRIST claimed he no longer held had only been transferred to the Joint Account, which he controlled.
GILCHRIST, 48, of Bethpage, New York, is charged with three counts of making false statements. He faces a maximum sentence of 15 years in prison.
Mr. Bharara praised the investigative work of the SEC-OIG, and the Criminal Investigators of the United States Attorney’s Office. He also thanked the SEC for its assistance in the investigation.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Fourteen Charged with Kilogram-Quantity Heroin Trafficking in City of MiddletownRead 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”), Ramon Bethencourt Jr., the Chief of the City of Middletown Police Department, and Joseph A. D’Amico, the Superintendent of the New York State Police, announced the arrest of 14 defendants and the unsealing of an Indictment charging a conspiracy to distribute kilogram quantities of heroin in and around Middletown, New York.
U.S. Attorney Preet Bharara stated: “This case is yet another example of this Office’s unrelenting efforts at purging the Hudson Valley of alleged violent drug trafficking gangs through the coordinated efforts of the FBI and our state and local law enforcement partners.”
FBI Assistant Director-in-Charge George Venizelos stated: “The arrests today target individuals who allegedly were involved in moving heroin into Middletown. These types of crimes are all too common in this area and the FBI’s Safe Streets Taskforce will continue to work with our partners to eradicate violent gangs and drugs in our communities.”
Middletown Police Department Chief Ramon Bethencourt Jr. stated: “Along with Mayor DeStefano, I want to praise the work of all of the law enforcement agencies involved. Once again our commitment to working together will have a positive influence on the quality of life for our residents. By ridding our streets of these drugs we are reducing the violent crimes that go along with them, making the City of Middletown a safer community.”
New York State Police Superintendent Joseph A. D’Amico stated: “A significant amount of heroin will not make it onto the streets of Middletown as a result of the dedication and due diligence of local, state and federal investigators and prosecutors working collaboratively to put a stop to these types of drug operations. It is through this cooperative effort among our partners in law enforcement that we will continue to target, and remove from our streets those who choose to engage in this type of illegal and dangerous activity. I thank all of the members of this team for their hard work and dedication to the citizens of New York.”
According to allegations in the Indictment unsealed in White Plains federal court today:
Fourteen people, MIGUEL MARGOLLA, 29, JESUS IRIZARRY NEGRON, a/k/a/ “Pablo,” 22, MARIO MARGOLLA, 32, ROBERTO MARGOLLA, 22, CARLOS MARTINEZ, a/k/a “B-Way,” 33, SHARLIM OMAR MORALES, a/k/a “Moreno,” 32, RICARDO RAMOS-MENDEZ, a/k/a “Keeke,” a/k/a “Brian,” 23, TEDDY RIVERA, a/k/a “Teddy Guns,” a/k/a “TG,” 20, CHRISTINA RODRIGUEZ, 23, JOHNATHAN RODRIGUEZ, a/k/a “J-Whispers,” a/k/a “Bigz,” 26, MANUEL SANTIAGO, 28, JESSICA SLOCUM, 24, ALEX TORRES, a/k/a “Broccoli,” a/k/a “Broc,” 28, and CHRISTIAN VERA MALDONADO, 22, are charged with conspiring to distribute, and possess with intent to distribute, kilogram quantities of heroin. As the Indictment describes, the defendants operated a large-scale heroin trafficking organization that distributed heroin throughout Middletown, New York since at least 2007. As further alleged, during the investigation, the defendants unwittingly sold heroin to confidential informants and an agent in an undercover capacity. As further alleged, one member of the conspiracy also discussed the possible murder of two individuals in or around Middletown.
The charge against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release.
All of the defendants charged in the Indictment were arrested last night or today, or have previously been taken into custody. Twelve of the defendants are to be presented in White Plains federal court this afternoon before U.S. Magistrate Judge Lisa Margaret Smith. One defendant is to be presented in the United States District Court for the District of New Hampshire, and one defendant is to be presented in the United States District Court for the District of Puerto Rico.
Mr. Bharara praised the outstanding investigative work of the FBI, the City of Middletown Police Department, the New York State Police, the Orange County Sheriff’s Department, the Town of Wallkill Police Department, and the Town of Ramapo Police Department. Mr. Bharara also thanked the Orange County District Attorney’s Office for its invaluable coordination and continuing support.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Michael Gerber is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Founder and Leader of Newburgh Latin Kings Sentenced to Life Plus 85 Years in Prison for Murder, Racketeering, Drug Distribution, and Other CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that WILSON PAGAN, 27, the founder and top leader of the Latin Kings gang in Newburgh, New York (the “Newburgh Latin Kings”), was sentenced today by U.S. District Judge Cathy Seibel in White Plains federal court to life plus 85 years in prison. PAGAN was convicted of murder; racketeering; conspiracy to distribute crack, cocaine, and heroin; assault, and using and carrying firearms in connection with violent crimes. PAGAN is one of 35 members and associates of the gang who were charged in the case, all of whom have been convicted, 28 of whom have thus far been sentenced.
U.S. Attorney Preet Bharara stated: “Mr. Pagan was a gang leader, and what he led his followers to was a gang member’s life filled with death, blood, guns, drugs, and jail – and for him the gangster life in the street has become the inmate’s life in prison, forever. Gang leaders, members, associates, and wannabes in Newburgh and throughout the Hudson Valley need to understand: We will not tolerate gang violence. You will go to prison for it, potentially for the rest of your life.”
According to the Indictment and evidence presented at trial:
PAGAN founded the Newburgh Latin Kings, and grew the gang from roughly a dozen members in 2008 to more than 50 members and associates by early 2010. On May 6, 2008, PAGAN ordered aspiring gang members to go on a so-called mission, during which they committed a drive-by shooting and killed, mistakenly, Jeffrey Zachary, a 15-year old boy who was an innocent bystander. PAGAN sold crack and heroin, and helped other members and associates of his gang sell drugs, including at spots the Latin Kings controlled, such as the corner of Benkard Avenue and William Street in Newburgh. PAGAN also assaulted rivals of his gang, and carried guns and instructed others to carry guns to protect PAGAN and the Newburgh Latin Kings’ drug turf. In leading the gang, PAGAN recruited and inducted new members, instructed the members how to behave in order to protect and conceal the gang’s criminal activities, and issued orders to gang members to shoot and assault others. PAGAN organized and led gang meetings for this purpose. During one such meeting, according to papers filed with the court, PAGAN told more than 20 assembled gang members: “[W]e don’t even live by rules of society. . . .”
Mr. Bharara thanked the Hudson Valley Safe Streets Task Force for their work on the Latin Kings investigation. The Task Force is led by the Federal Bureau of Investigation (“FBI”), and combines the resources of dozens of law enforcement officers from federal, state, and local agencies and departments, including: agents and officers of the FBI; the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives; the City of Newburgh Police Department; the U.S. Department of Homeland Security, Homeland Security Investigations; the Middletown Police Department; the Orange County Sheriff’s Office, and the New York State Police.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Benjamin Allee, Abigail Kurland, and Nicholas McQuaid are in charge of the prosecution.
Manhattan U.S. Attorney Announces Claims Process for $2.35 Billion Madoff Victim FundRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the start of the process for victims of the fraud perpetrated through Bernard L. Madoff Investment Securities LLC (“Madoff Securities”) to make claims against the $2.35 billion Madoff Victim Fund (the “MVF”). Victims may file claims under this process immediately. The MVF is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.
The MVF also announced Department of Justice-approved eligibility criteria for granting victim claims. For the first time since Madoff Securities collapsed in December 2008, victims of the Madoff Securities fraud who invested through “feeder funds,” investment groups, and other pooled investment vehicles will be eligible to recover for their losses alongside direct investors in Madoff Securities.
Manhattan U.S. Attorney Bharara said: “This was an epic fraud and the process of compensating victims has been complex, but significant steps have been taken, and the Government is continuing its investigation to ensure that assets are recovered for the benefit of Madoff’s victims. With today’s announcement, we take a great step forward in returning the $2.35 billion collected so far to Madoff’s victims, and we hope to return even more. The process we have put in place opens the door for thousands of defrauded victims who otherwise might never have recovered anything. We have made eligibility to recover far more inclusive, and more equitable, than ever before. We will continue to work tirelessly with our partners from the FBI and the IRS to track down any and all proceeds of Madoff’s Ponzi scheme and return them to their rightful owners.”
Of the approximately $2.35 billion currently in the MVF, approximately $2.2 billion was collected as part of the historic December 2010 civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff, and their co-conspirators. In addition, there are a number of pending civil and criminal matters being pursued by the U.S. Attorney’s Office that, along with other pending matters, could lead to further collections and resultant distributions from the MVF.
Under the eligibility criteria announced today, subject to limited exceptions, anyone that lost his or her own funds that were invested in Madoff Securities at the time of its collapse, and who can document their net loss, will be eligible to recover from the MVF. That may include the more than 10,000 investors whose claims were denied in the Madoff Securities bankruptcy as “indirect” claims. Victim claims must be received by the MVF no later than February 28, 2014. Information about the MVF, including detailed eligibility criteria and instructions for filing a claim, can be found on its website at www.madoffvictimfund.com. Further questions about the eligibility criteria or filing procedures should be directed to the office of the Special Master, by phone, at (866) 624-3670, or by e-mail, at [email protected].
Mr. Bharara praised the work of the FBI and the IRS in connection with collecting the funds to be distributed, and thanked the Asset Forfeiture and Money Laundering Section of the Department of Justice for its assistance in the remission proceedings.
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 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 Announces Claims Process for $2.35 Billion Madoff Victim FundRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the start of the process for victims of the fraud perpetrated through Bernard L. Madoff Investment Securities LLC (“Madoff Securities”) to make claims against the $2.35 billion Madoff Victim Fund (the “MVF”). Victims may file claims under this process immediately. The MVF is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.
The MVF also announced Department of Justice-approved eligibility criteria for granting victim claims. For the first time since Madoff Securities collapsed in December 2008, victims of the Madoff Securities fraud who invested through “feeder funds,” investment groups, and other pooled investment vehicles will be eligible to recover for their losses alongside direct investors in Madoff Securities.
Manhattan U.S. Attorney Bharara said: “This was an epic fraud and the process of compensating victims has been complex, but significant steps have been taken, and the Government is continuing its investigation to ensure that assets are recovered for the benefit of Madoff’s victims. With today’s announcement, we take a great step forward in returning the $2.35 billion collected so far to Madoff’s victims, and we hope to return even more. The process we have put in place opens the door for thousands of defrauded victims who otherwise might never have recovered anything. We have made eligibility to recover far more inclusive, and more equitable, than ever before. We will continue to work tirelessly with our partners from the FBI and the IRS to track down any and all proceeds of Madoff’s Ponzi scheme and return them to their rightful owners.”
Of the approximately $2.35 billion currently in the MVF, approximately $2.2 billion was collected as part of the historic December 2010 civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff, and their co-conspirators. In addition, there are a number of pending civil and criminal matters being pursued by the U.S. Attorney’s Office that, along with other pending matters, could lead to further collections and resultant distributions from the MVF.
Under the eligibility criteria announced today, subject to limited exceptions, anyone that lost his or her own funds that were invested in Madoff Securities at the time of its collapse, and who can document their net loss, will be eligible to recover from the MVF. That may include the more than 10,000 investors whose claims were denied in the Madoff Securities bankruptcy as “indirect” claims. Victim claims must be received by the MVF no later than February 28, 2014. Information about the MVF, including detailed eligibility criteria and instructions for filing a claim, can be found on its website at www.madoffvictimfund.com. Further questions about the eligibility criteria or filing procedures should be directed to the office of the Special Master, by phone, at (866) 624-3670, or by e-mail, at [email protected].
Mr. Bharara praised the work of the FBI and the IRS in connection with collecting the funds to be distributed, and thanked the Asset Forfeiture and Money Laundering Section of the Department of Justice for its assistance in the remission proceedings.
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 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.
High-Ranking Bank Official at Venezuelan State Development Bank Pleads Guilty in Manhattan Federal Court to Participating in Bribery SchemeRead 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 of the United States Department of Justice (“DOJ”), announced today that MARIA DE LOS ANGELES GONZALEZ DE HERNANDEZ (“GONZALEZ”) pled guilty in Manhattan federal court to charges relating to a scheme in which GONZALEZ, formerly a foreign official at Banco de Desarrollo Económico y Social de Venezuela (“BANDES”), a state economic development bank in Venezuela, accepted bribes from officers and agents of a New York-based broker-dealer (the “Broker-Dealer”) in exchange for GONZALEZ directing BANDES’s security-trading business to the Broker-Dealer. GONZALEZ pled guilty today before U.S. District Judge Paul A. Engelmayer to conspiring to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses.
According to the Information against GONZALEZ, the allegations in a previously filed criminal Complaint, statements made during the plea proceedings, and other documents filed in Manhattan federal court:
At all times relevant to the charges, BANDES was a state-run economic development bank in Venezuela. The Venezuelan government had a majority ownership interest in BANDES and provided it with substantial funding. GONZALEZ was an official at BANDES and oversaw the development bank’s overseas trading activity. At her direction, BANDES conducted substantial trading through the Broker-Dealer. Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged the bank a mark-up on purchases and a mark-down on sales.
From early 2009 through 2012, GONZALEZ participated in a bribery scheme in which she directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer shared the revenue the Broker-Dealer generated from this trading business with GONZALEZ. During this time period, the Broker-Dealer generated over $60 million in mark-ups and mark-downs from trades with BANDES. Agents and employees of the Broker-Dealer devised a split with GONZALEZ of the commissions paid by BANDES to the Broker-Dealer. Emails, account records, and other documents collected from the Broker-Dealer and other sources reveal that GONZALEZ received a substantial share of the revenue generated by the Broker-Dealer for BANDES-related trades. Specifically, GONZALEZ received millions in bribe payments from Broker-Dealer agents and employees.
In addition, GONZALEZ paid a portion of the bribe payments she received to another BANDES employee who was also involved in the scheme.
To further conceal the scheme, the kickbacks to GONZALEZ were often paid using intermediary corporations and offshore accounts that GONZALEZ and others held in Switzerland, among other places.
GONZALEZ, 55, of Caracas, Venezuela, pled guilty to five offenses. A chart containing the charges and maximum penalties is attached. Sentencing for GONZALEZ is scheduled for August 15, 2014 before Judge Engelmayer.
Previously, three former officers or employees of the Broker-Dealer, Ernesto Lujan, Jose Alejandro Hurtado, and Tomas Alberto Clarke Bethancourt, each pled guilty in Manhattan federal court to conspiring to violate the Foreign Corrupt Practices Act (the “FCPA”), to violate the Travel Act, and to commit money laundering, as well as substantive counts of these offenses relating, among other things, to the scheme involving bribe payments to GONZALEZ. Sentencing for Lujan and Clarke is scheduled for February 11, 2014, before U.S. District Judge Paul G. Gardephe. Hurtado is scheduled for sentencing before U.S. District Judge Harold Baer, Jr., on October 30, 2014.
Mr. Bharara praised DOJ’s Criminal Division Fraud Section and Office of International Affairs, and the Federal Bureau of Investigation, for their work in the investigation. Mr. Bharara also thanked the U.S. Securities and Exchange Commission for its assistance in this case, and noted that the investigation is continuing.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force and the Fraud Section of the DOJ Criminal Division. Assistant United States Attorneys Harry A. Chernoff and Jason H. Cowley, and Fraud Section Assistant Chief James Koukios and Trial Attorney Maria Gonzalez Calvet, are in charge of the prosecution. Assistant United States Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.
Additional information about the Justice Department’s FCPA enforcement efforts can be
found at www.justice.gov/criminal/fraud/fcpa.
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US v Maria Gonzalez 13 Cr 901 (PAE) Criminal Information
Two More Defendants Plead Guilty in Manhattan Federal Court in Connection with Russian-American Organized Crime Gambling EnterpriseRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANATOLY GOLUBCHIK pled guilty today in Manhattan federal court to participating in a racketeering conspiracy in connection with his role as a member of a Russian-American organized crime enterprise. ILLYA TRINCHER also pled guilty today in Manhattan federal court in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. GOLUBCHIK and TRINCHER were charged in April 2013 along with 32 other alleged members and associates of two Russian-American organized crime enterprises in an indictment that included racketeering, money laundering, extortion, and various gambling offenses. They pled guilty before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “With Anatoly Golubchik and Illya Trincher’s guilty pleas today, 18 of the 34 defendants charged in this case now stand convicted. We remain committed to making sure that everyone charged in connection with this alleged Russian-American organized crime ring is held to account for their crimes.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including today’s guilty plea:
The Taiwanchik-Trincher Organization is a nationwide criminal enterprise with strong ties to Russia and Ukraine. The leadership of the organization ran an international sportsbook that catered primarily to Russian oligarchs living in Russia and Ukraine and throughout the world. The Taiwanchik-Trincher Organization laundered tens of millions of dollars in proceeds from the gambling operation from Russia and the Ukraine through shell companies and bank accounts in Cyprus, and from Cyprus into the United States. Once the money arrived in the United States, it was either laundered through additional shell companies or invested in seemingly legitimate investments, such as hedge funds or real estate. GOLUBCHIK was a U.S.-based participant in the enterprise. As part of his plea, GOLUBCHIK acknowledged that in furtherance of the Taiwanchik-Trincher Organization, GOLUBCHIK laundered the proceeds of their international sportsbook and assisted in the operation of the illegal gambling business.
TRINCHER and co-defendant Hillel Nahmad ran a high-stakes illegal gambling business that catered primarily to millionaire and billionaire clients. Their business utilized several online gambling websites that operated illegally in the United States to generate tens of millions of dollars of sports bets each year. The gambling operation was financed through a host of American and international bank accounts, including accounts associated with Nahmad , defendants John Hanson and Noah Siegel, a/k/a “The Oracle,” and a plumbing company in the Bronx that was acquired in repayment of a $2 million gambling debt. As part of his guilty plea, TRINCHER acknowledged that he was a leader and organizer of the illegal sports gambling business, he supervised the illegal gambling business, and he conducted numerous financial transactions on behalf of the illegal gambling business.
GOLUBCHIK, 57, of Fort Lee, New Jersey, faces a maximum of 20 years in prison and three years of supervised release. As part of his plea agreement, GOLUBCHIK agreed to forfeit cash and property worth over $20,000,000.00. He is scheduled to be sentenced by Judge Furman on March 25, 2014, at 3:00 p.m.
TRINCHER, 28, of Los Angeles, California, faces a maximum of five years in prison and three years of supervised release. As part of his plea agreement, TRINCHER agreed to forfeit cash and property worth over $6,000,000.00 and a black 2012 Porsche Cayenne. He is scheduled to be sentenced by Judge Furman on March 25, 2014, at 3:45 p.m.
GOLUBCHIK is the 17th defendant in this case to plead guilty. TRINCHER is the 18th defendant in this case to plead guilty. The defendants who have pled to date have agreed to forfeit, in total, more than $66,000,000.00. The following defendants previously pled guilty and await sentencing:
- Bryan Zuriff pled guilty to gambling charges on July 26, 2013;
- William Barbalat pled guilty to gambling charges on August 14, 2013;
- Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
- Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
- Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
- Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
- Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
- Anatoly Shteyngrab pled guilty to conspiring to commit money laundering on October 17, 2013;
- Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
- Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013;
- Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013;
- Hillel Nahmad pled guilty to gambling charges on November 12, 2013;
- Vadim Trincher pled guilty to conspiring to commit racketeering on November 14, 2013; and
- Eugene Trincher pled guilty to gambling charges on November 14, 2013.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter Skinner, and Kristy J. Greenberg of the Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorneys Alexander Wilson and Christine Magdo of the Office’s Asset Forfeiture Unit are responsible for the forfeiture aspects of the case.
U.S. v. Alimzhan Tokhtakhounov, et al. Indictment
New Jersey Man Pleads Guilty in Manhattan Federal Court in Connection with Waste-Hauling Industry Extortion SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PETER LECONTE pled guilty in Manhattan federal court to participating in a conspiracy to commit extortion in connection with his role in a scheme to exert control over the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. LECONTE, who was among 32 defendants charged in the case in January 2013, pled guilty today before U.S. District Judge P. Kevin Castel.
Manhattan U.S. Attorney Preet Bharara said: “Today, Peter Leconte became the fourteenth defendant to be convicted in this scheme to control parts of the waste disposal industry that reached across the New York City metropolitan area and into New Jersey. We remain committed to ensuring that all those connected to this conspiracy are held to account.”
According to the Indictment against LECONTE, other documents filed in Manhattan federal court, and statements made at related court proceedings:
LECONTE who is a made member of the Genovese Crime Family, participated in a scheme, along with other members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino, and Luchese Crime Families – to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey. Members of the scheme engaged in various crimes including extortion, loansharking, mail and wire fraud, and stolen property offenses. As part of his involvement in the scheme, LECONTE demanded that a waste disposal company owner turn over a percentage of his company to LECONTE and his associates by threatening that the waste hauling company would be economically harmed if the owner did not comply with LECONTE’s demands.
LECONTE, 43, of Lodi, New Jersey, pled guilty to one count of participating in a conspiracy to commit extortion, and he faces a maximum sentence of 20 years in prison. LECONTE is scheduled to be sentenced by Judge Castel on April 4, 2014, at 11:00 a.m.
Eight other defendants have also recently pled guilty before Judge Castel in connection with this case:
- JONATHAN GREENE, 48, of Teaneck, New Jersey, pled guilty on September 19, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on March 7, 2014, at 2:00 p.m.
- JOSEPH BERTOLINO, 47, of Wantage, New Jersey, pled guilty on September 26, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on March 28, 2014, at 2:30 p.m.
- ROBERT ZARZUELA, 39, of North Bergen, New Jersey, pled guilty on September 26, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on March 28, 2014, at 11:30 a.m.
- WILLIAM RIVERA, 48, of Queens Village, New York, pled guilty on October 18, 2013, to misprision of extortion. He faces a maximum sentence of three years in prison and is scheduled to be sentenced on March 14, 2014, at 11:00 a.m.
- BRIAN PETROLL, 47, of Columbia, New Jersey, pled guilty on October 21, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on March 20, 2014, at 11:00 a.m.
- ROBERT FRANCO, 51, of Hartsdale, New York, pled guilty on October 21, 2013, to one count of participating in a conspiracy to transport stolen waste hauling containers across state lines and one count of participating in a conspiracy to transport stolen cardboard across state lines. He faces a maximum sentence of five years in prison on each count and is scheduled to be sentenced on March 21, 2014, at 12:00 p.m.
- STEPHEN MOSCATELLO, 53, of Piermont, New York, pled guilty on November 4, 2013, to participation in a conspiracy to transport stolen waste hauling containers across state lines. He faces a maximum sentence of five years in prison and is scheduled to be sentenced on April 11, 2014, at 2:00 p.m.
- HOWARD ROSS, 54, of Brooklyn, New York, pled guilty on November 5, 2013, to participation in a conspiracy to commit extortion. He faces a maximum sentence of 20 years in prison and is scheduled to be sentenced on March 26, 2014, at 11:00 a.m.
The charges against the remaining defendants are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Westchester County Police Department.
The prosecution of this case is being handled by the Office’s Organized Crime Unit.
Assistant United States Attorneys Brian R. Blais, Natalie Lamarque, and Patrick Egan are in charge of the prosecution. Assistant United States Attorney Micah Smith of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
U.S. v. Carmine Franco et al. Indictment
Manhattan Man Found Guilty in Federal Court of Sex Trafficking Three Minors and Possessing Child PornographyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROYCE CORLEY, of New York, New York, was found guilty today in Manhattan federal court of sex trafficking of minors and possessing child pornography. CORLEY was convicted after a four-day jury trial before U.S. District Judge Robert P. Patterson.
U.S. Attorney Preet Bharara stated: “Sexually exploiting underage runaways by selling them for prostitution is a heinous and unfortunately all too common crime. Today’s guilty verdict against Royce Corley is a victory for the vulnerable girls he exploited, and for the larger fight to put an end to the sex trafficking of children.”
According to the Superseding Indictment filed in Manhattan federal court, other court filings, and the evidence presented at trial:
Between at least June 2011 and January 2012, using the alias “Ron Iron,” the defendant ran a prostitution ring in Manhattan that sold underage girls for sex. CORLEY’s victims included at least three 16-year-old runaway girls who had no place to stay when they met CORLEY (the “Minor Victims”). He prostituted each of his Minor Victims using the same methods. CORLEY photographed them in sexually-explicit poses, created advertisements for prostitution on Backpage.com, provided the Minor Victims with cell phones to communicate with potential clients, and furnished them with apartments all over Manhattan in which they were to meet clients for paid sex. CORLEY posted the advertisements to Backpage.com from his home and work computers.
For six months in the fall of 2011, CORLEY made thousands of dollars a week from trafficking his Minor Victims for sex on Backpage.com, all while CORLEY knew that they were each 16 years old.
On January 25, 2011, CORLEY was arrested by members of the New York City Police Department following an undercover sting which rescued one of the Minor Victims. At the time of his arrest, CORLEY had in his pocket a thumb drive, which contained child pornography of one of his Minor Victims.
CORLEY, 29, of Manhattan, New York, was found guilty of three counts of sex trafficking of minors and one count of possessing child pornography. He faces a mandatory minimum term of 10 years in prison, and a maximum term of life in prison. CORLEY is scheduled to be sentenced by Judge Patterson on February 20, 2014.
Mr. Bharara praised the efforts of the Federal Bureau of Investigation, the New York City Police Department, and the New York County District Attorney’s Office for their work in this case.
This case is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Tatiana R. Martins and Amanda Kramer are in charge of the prosecution.
Jeremy Hammond Sentenced to 10 Years in Prison for Hacking into the Stratfor Website and Other Company, Federal, State, and Local Government WebsitesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JEREMY HAMMOND, a/k/a “Anarchaos,” was sentenced in Manhattan federal court to 10 years in prison in connection with his role in, among other hacks, the December 2011 hack of Strategic Forecasting, Inc. (“Stratfor”), a global intelligence firm in Austin, Texas, that affected hundreds of thousands of victims, including employees and subscribers. HAMMOND was also sentenced in connection with his involvement in multiple additional hacks, including computer intrusions into the Federal Bureau of Investigation’s Virtual Academy, the Arizona Department of Public Safety, the Boston Police Patrolmen’s Association, and the Jefferson County, Alabama, Sheriff’s Office. HAMMOND pled guilty in May 2013, and was sentenced today by Chief U.S. District Judge Loretta A. Preska.
Manhattan U.S. Attorney Preet Bharara stated: “As he admitted through his plea of guilty, Jeremy Hammond launched a series of computer hacks that stole confidential information pertaining to companies, law enforcement agencies, and thousands of innocent individuals. His sentence underscores that computer hacking is a serious offense with damaging consequences for victims, and this Office is committed to punishing the perpetrators of such crimes.”
According to the Complaint, the Superseding Indictment, the Superseding Information, and statements made in other public filings and in court:
In December 2011, HAMMOND and other members of “AntiSec” – an off-shoot of “Anonymous,” a loose confederation of computer hackers and others – hacked into computer systems used by Stratfor. HAMMOND and his co-conspirators stole confidential information from those computer systems, including Stratfor employees’ emails as well as account information for approximately 860,000 Stratfor subscribers or clients. HAMMOND and his co-conspirators also stole credit card information for approximately 60,000 credit card users and used some of the stolen data to make more than $700,000 in unauthorized charges.
In addition, at his guilty plea, HAMMOND admitted his involvement in multiple additional hacks, including: the June 2011 hack of computer systems used by the Federal Bureau of Investigation’s Virtual Academy; the June 2011 hack of computer systems used by the Arizona Department of Public Safety, a state law enforcement agency in Arizona; the July 2011 hack of computer systems owned by Brooks-Jeffrey Marketing, Inc., a company based in Mountain Home, Arkansas, and various law enforcement-related websites; the August 2011 hack of computer systems used by Special Forces Gear, a company based in California; the August 2011 hack of computer systems used by Vanguard Defense Industries, a company based in Texas; the October 2011 hack of computer systems used by the Jefferson County, Alabama Sheriff’s Office; the October 2011 hack of computer systems used by the Boston Police Patrolmen’s Association; and the February 2012 hack of computer systems used by the Combined Systems, Inc., a company based in Pennsylvania.
HAMMOND and his co-conspirators publicly disclosed some of the confidential information they had stolen from these various hacks, including personal information such as the home addresses of hundreds of current and retired law enforcement officers and financial information such as the credit card data of thousands of individuals.
HAMMOND, 28, of Chicago, Illinois, was sentenced in connection with his guilty plea to one count of conspiracy to engage in computer hacking. Restitution will be determined at a later date.
The Office’s Complex Frauds Unit is handling the case.
Chief Executive Officer and President of Investment Fund Sentenced in Manhattan Federal Court for Orchestrating $10 Million Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ABDUL WALJI and RENIERO FRANCISCO, the Chief Executive Officer and President, respectively, of Arista LLC (“Arista”), a California investment fund, were sentenced today in Manhattan federal court to 151 months and 97 months, respectively, in connection with a multimillion-dollar fraud scheme. WALJI and FRANCISCO defrauded 40 investors of approximately $10 million through a series of misrepresentations concerning the nature and performance of the investment fund, and issued fraudulent account statements to investors to cover up massive losses. WALJI also perpetrated a separate multimillion-dollar scheme involving pension plan funds that he managed through three California-based trusts: Allied Benefits, Inc., Allied Benefits Trust, and Stone Lamm Trust (collectively, the “Trusts”). Both defendants were charged in December 2012, and pled guilty on July 2, 2013 before U.S. District Judge Denise Cote, who also imposed today’s sentences.
Manhattan U.S. Attorney Preet Bharara said: “Abdul Walji and Reniero Francisco defrauded dozens of investors who put trust – and millions of dollars – in their hands. The crimes they committed have earned them more than two decades of collective prison time.”
According to the three-count Superseding Information to which WALJI pled guilty, the Indictment to which FRANCISCO pled guilty, the defendants’ plea agreements, other documents in the public record, and statements made during their guilty pleas:
The Arista Fraud Scheme
Arista began operations as an investment firm in February 2010, with its principal place of business in Newport Coast, California. In April 2011, Arista became a registered commodity pool operator with the United States Commodity Futures Trading Commission (“CFTC”), and a member of the National Futures Association.
In early 2010, WALJI and FRANCISCO began to solicit individuals to invest in Arista. From 2010 through 2011, the defendants carried out a fraudulent scheme through three main methods. First, WALJI and FRANCISCO misrepresented to several Arista investors the nature of the company’s investments and the returns that investors would receive from investing in Arista. For example, WALJI and FRANCISCO falsely told investors that their money would be invested in safe, risk-free securities, when in fact much of the money was invested in options and futures. Second, WALJI and FRANCISCO sent fraudulent account performance statements to Arista investors that misrepresented the value of their investments. In an effort to secure additional contributions, the defendants also concealed Arista’s trading losses, and told investors that they were profiting from their investments when they were actually losing money. Finally, WALJI and FRANCISCO misappropriated at least $2.7 million from Arista’s investors through fees to which they were not entitled, and which WALJI and FRANCISCO diverted for their own personal benefit. Based on their false representations, WALJI and FRANCISCO collected $10 million from 40 investors, and they ultimately misappropriated a large portion of the money.
Walji’s Pension Plan Fraudulent Scheme
From early 2008 through June 2013, WALJI also perpetrated a separate fraudulent scheme using pension plan funds that he administered. Similar to the scheme set forth above, WALJI executed his fraudulent scheme through three principal methods. First, WALJI made oral misrepresentations to existing and potential clients of the Trusts concerning: (i) the nature of the Trusts’ pension plan investments; (ii) the investment value and past performance of the pension plans; and (iii) the source of funds distributed to plan participants who had reached retirement and/or who had requested distributions. Second, WALJI distributed fraudulent statements to clients concerning the value of their accounts and the prior performance of their pension plans in order to forestall redemption requests, to induce new clients to contribute to the plans, and to induce existing clients to make additional contributions. As selected clients reached retirement age or requested disbursements, WALJI sent those clients money that he represented to be proceeds of their individual pensions, when in fact he knew that the purported disbursements were often funds contributed by other clients. Third, WALJI misappropriated approximately $300,000 of client funds for his personal use. In total, this scheme caused losses to approximately 40 additional victims in an aggregate amount of approximately $11.3 million.
In addition to their prison terms, Judge Cote sentenced WALJI to three years of supervised release, and FRANCISCO to three years of supervised release. WALJI was also ordered to forfeit $13.6 million and to pay over $21 million in restitution. FRANCISCO was ordered to forfeit $4.1 million. The defendants also agreed to forfeit the proceeds of several bank and trading accounts.
WALJI, 60, of San Juan Capistrano, California, pled guilty in July 2013 to one count of conspiracy to commit securities fraud and wire fraud, one count of commodities fraud, and one count of securities fraud. FRANCISCO, 57, of Newport Coast, California, pled guilty in July 2013 to one count of conspiracy to commit securities fraud and wire fraud and one count of securities fraud.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and also thanked the CFTC 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.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys David I. Miller and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the forfeiture-related aspects of the case.
Sales Broker Sentenced in Manhattan Federal Court to Two Years 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 BENJAMIN CHOUCHANE, a former sales broker, was sentenced in Manhattan federal court to two years in prison on charges of conspiracy to commit securities fraud and wire fraud. CHOUCHANE – along with Marek Leszczynski 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 CHOUCHANE, Leszczynski, and Condron were awarded lucrative bonuses. CHOUCHANE pled guilty to conspiracy to commit securities fraud and wire fraud in June 2013, and was sentenced today by U.S. District Judge John F. Keenan.
Manhattan U.S. Attorney Preet Bharara said: “Benjamin Chouchane misrepresented the price of trade executions in order to make illegal profits for his firm and to increase his own bonus. With his sentence today, he joins the ranks of disgraced professionals to be punished for abusing the trust of clients.”
According to the Complaint, Indictment, statements made during CHOUCHANE’s guilty plea, and other court documents:
From 2005 through November 2010, CHOUCHANE, Leszczynski, 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, CHOUCHANE, Leszczynski, 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, CHOUCHANE, Leszczynski, and Condron were paid inflated bonuses.
In addition to the prison term, Judge Keenan sentenced CHOUCHANE, 39, of New York, New York, to two years of supervised release. CHOUCHANE was also ordered to forfeit $5 million, to pay a $100 special assessment fee, and to make restitution in an amount to be fixed at a later date.
Leszczynski, 44, of Miami, Florida, who previously pled guilty to one count of conspiracy to commit securities fraud and wire fraud, is scheduled to be sentenced on December 19, 2013, by Judge Keenan. 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 January 16, 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 U.S. Attorney 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 is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed 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.
Founder of Investment Advisory Firm Pleads Guilty in Manhattan Federal Court to Mail Fraud and Conspiracy to Obstruct Justice in Connection with Attempt to Defraud NBA Players UnionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOSEPH LOMBARDO, the founder and managing director of Prim Capital Corporation (“Prim”), pled guilty in Manhattan federal court to mail fraud and conspiracy to obstruct a grand jury investigation in connection with an attempt to defraud the National Basketball Players Association (“NBPA”) through the use of a fraudulent retention contract. LOMBARDO, who was arrested in April 2013, along with Carolyn Kaufman, a principal at Prim, pled guilty today before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “Joseph Lombardo engaged in an elaborate fraud involving the creation of a fake contract with the professional basketball players who had entrusted him to manage their union’s assets. He then lied to a federal grand jury about his illegal actions and told others to do the same. His guilty plea today shows that such fraud and obstruction will not go unpunished.”
According to the Complaint, Indictment, previously filed documents, and today’s plea proceeding:
Prim was founded by LOMBARDO. From 2001 until 2013, Prim was the primary outside investment advisory firm entrusted with the NBPA’s investments and finances. In that capacity, Prim performed various services for the NBPA, including assisting with the management of up to $250 million of the NBPA’s assets, reviewing the investments of individual NBA players, and conducting financial seminars for NBA players.
In May of 2012, as part of a U.S. Department of Labor (“DOL”) investigation, Prim was served with a grand jury subpoena requesting, among other things, copies of all agreements between Prim and the NBPA. In response, Prim produced a copy of a 2005 contract between the NBPA and Prim, under which Prim’s fee was $350,000 per year. The 2005 contract was signed by the Executive Director of the NBPA, the Treasurer of the NBPA, and LOMBARDO, and was renewable annually upon agreement of the parties. That was the only contract that Prim produced at the time.
Several months later, in January of 2013, after Prim learned that a law firm’s review of the NBPA was going to be made public in the near future, Prim then produced to the DOL a previously undisclosed contract with the NBPA (the “Purported 2011 Contract”). Prim’s fee under this contract was $602,000 per year for a five-year term, for a total of $3,010,000. The Purported 2011 Contract also contained a provision indicating that it could not be cancelled for any reason by the NBPA. The Purported 2011 Contract was purportedly signed in March 2011 by LOMBARDO, Gary Hall, the former NBPA General Counsel, and one other NBPA employee.
An investigation revealed that the signature of Hall was not authentic, and that the Purported 2011 Contract was actually created at Prim months after the death of Gary Hall. The investigation also revealed that LOMBARDO arranged for the creation of a signature stamp capable of stamping the signature “Gary A. Hall,” and used the stamp to falsify Hall’s signature months after his death.
In addition, the investigation revealed that LOMBARDO and Kaufman had agreed and attempted to obstruct a grand jury investigation. During the course of the investigation, both LOMBARDO and Kaufman appeared before the grand jury and provided false and misleading testimony. Kaufman testified, among other things, that she had not spoken with anyone regarding her testimony prior to testifying. However, in a recorded conversation prior to appearing before the grand jury, LOMBARDO gave her specific instructions on how to answer questions before the grand jury, and said that his “life is in [her] hands.” In another recorded conversation, LOMBARDO instructed another individual that, if he provided certain false information to the grand jury about the creation of the contract,“[w]e’re home free.” In a third recorded conversation, LOMBARDO instructed another individual to provide false information and said, “It’s important that we didn’t doctor this document up, okay?”
LOMBARDO, 72, of Gates Mills, Ohio, pled guilty to one count of mail fraud and one count of conspiracy to obstruct justice. He faces a maximum sentence of 20 years in prison on the mail fraud count, a maximum sentence of five years in prison on the conspiracy to obstruct justice count, and a maximum fine of $250,000, or twice the gross gain or gross loss from the offense, on each count. LOMBARDO is scheduled to be sentenced by Judge Furman on March 20, 2014.
Kaufman has been charged in a superseding indictment with one count of conspiracy to obstruct justice, one count of obstruction of justice, and one count of perjury for her alleged role in the agreement to obstruct, and obstruction of, the grand jury investigation. She is scheduled to stand trial beginning on December 2, 2013, before Judge Furman.
Mr. Bharara praised the outstanding investigative work of the U.S. Department of Labor’s Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, and the U.S. Department of Labor’s Office of Labor-Management Standards. Mr. Bharara added that the investigation is continuing.
This case is being handled by the Public Corruption Unit of the U.S. Attorney’s Office. Assistant United States Attorneys Daniel C. Richenthal and Paul M. Krieger are in charge of the prosecution.
The pending charges against Kaufman are merely accusations, and she is presumed innocent unless and until proven guilty.
Lombardo, Joseph and Carolyn Kaufman Indictment 13 Cr 411.
Defendants Plead Guilty in Manhattan Federal Court to Participating in Racketeering Conspiracy with Russian-American Organized Crime Enterprise Operating International Sportsbook and to Participating in A Gambling RingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that VADIM TRINCHER pled guilty today in Manhattan federal court to participating in a racketeering conspiracy in connection with his role as a member of a Russian-American organized crime enterprise. VADIM TRINCHER’s son, EUGENE TRINCHER, also pled guilty today to operating an illegal gambling business. VADIM TRINCHER and EUGENE TRINCHER were charged in April 2013 along with 32 other alleged members and associates of two Russian-American organized crime enterprises in an indictment that included racketeering, money laundering, extortion, and various gambling offenses. They pled guilty before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “Vadim Trincher played a critical role in the Taiwanchik-Trincher Organization – by helping both to launder tens of millions of dollars in proceeds from the organization's sportsbook and to run the illegal gambling business. His son Eugene ran a high stakes illegal card game in New York City for more than two years. We will not stop until, like Vadim and Eugene Trincher, everyone involved in this international crime ring is held to account.”
According to the Indictment, other documents filed in Manhattan federal court, and statements made at various proceedings in this case, including today’s guilty pleas:
The Taiwanchik-Trincher Organization is a nationwide criminal enterprise with strong ties to Russia and Ukraine. The leadership of the organization ran an international sportsbook that catered primarily to Russian oligarchs living in Russia and Ukraine and throughout the world. The Taiwanchik-Trincher Organization laundered tens of millions of dollars in proceeds from the gambling operation from Russia and the Ukraine through shell companies and bank accounts in Cyprus, and from Cyprus into the United States. Once the money arrived in the United States, it was either laundered through additional shell companies or invested in seemingly legitimate investments, such as hedge funds or real estate. VADIM TRINCHER was a U.S.-based participant in the enterprise. As part of his plea, VADIM TRINCHER acknowledged that he, in furtherance of the Taiwanchik-Trincher Organization, laundered the proceeds of the organization’s international sportsbook and assisted in the operation of the illegal gambling business.
EUGENE TRINCHER ran a high stakes illegal poker game in New York City from 2010 through April 2013. At these games, the pots frequently reached tens of thousands of dollars or more. The operators of these poker games, including EUGENE TRINCHER, collected percentages of the pots known as Arakes.@ Each of the poker games employed at least five or more people to assist with the operation of the poker games, payments of debts, and collection of debts.
VADIM TRINCHER, 52, of New York, New York, faces a maximum of 20 years in prison and three years of supervised release. As part of his plea agreement, VADIM TRINCHER agreed to forfeit cash and property worth over $20 million. He is scheduled to be sentenced by Judge Furman on March 20, 2014, at 3:45 p.m.
EUGENE TRINCHER, 27, of Beverly Hills, California, faces a maximum of five years in prison and three years of supervised release. As part of his plea agreement, EUGENE TRINCHER agreed to forfeit the proceeds of his illegal gambling business. He is scheduled to be sentenced by Judge Furman on March 24, 2014, at 3:00 p.m.
VADIM TRINCHER is the 15th defendant in this case to plead guilty. EUGENE TRINCHER is the 16th defendant in this case to plead guilty. The following defendants previously pled guilty and await sentencing:
- Bryan Zuriff pled guilty to gambling charges on July 26, 2013;
- William Barbalat pled guilty to gambling charges on August 14, 2013;
- Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
- Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
- Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
- Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
- Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
- Anatoly Shteyngrab pled guilty to conspiring to commit money laundering on October 17, 2013;
- Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
- Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013;
- Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013; and
- Hillel Nahmad pled guilty to gambling charges on November 12, 2013.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, New York City Police Department, and Internal Revenue Service.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter Skinner, and Kristy J. Greenberg of the Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorneys Alexander Wilson and Christine Magdo of the Office’s Asset Forfeiture Unit are responsible for the forfeiture aspects of the case.
U.S. v. Alimzhan Tokhtakhounov, et al. Indictment
Leader of Massive Tax Refund Fraud Scheme Sentenced in Manhattan Federal Court to 10 Years in Prison for Orchestrating $50 Million Tax Refund FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELVIN DUARTE was sentenced today in Manhattan federal court to 10 years in prison for his role in a scheme to fraudulently generate and then steal more than $50 million in federal tax refund checks. DUARTE was originally arrested in 2008 and subsequently fled the U.S. He was extradited from the Dominican Republic and arrived in the U.S. in January 2013. DUARTE pled guilty in June 2013 to one count of conspiracy to defraud the United States, one count of conspiracy to steal mail, and one count of mail theft, and he was sentenced today by U.S. Circuit Court Judge Denny Chin, sitting by designation.
Manhattan U.S. Attorney Preet Bharara said: “Melvin Duarte stole Puerto Rican identities and used those identities fraudulently to obtain more than $50 million in federal tax refund checks to which he was not entitled. In doing so, he contributed to the millions of dollars in losses to the IRS resulting from this case. Duarte’s integral role in one of the largest known tax refund fraud schemes has now earned him a prolonged stay in prison.”
According to the Indictment and other documents filed in Manhattan federal court:
DUARTE was charged as part of an investigation into a massive tax and mail theft scheme. As part of the scheme, co-conspirators operating out of the Dominican Republic and other places electronically filed thousands of fraudulent federal tax returns, seeking tens of millions of dollars in tax refunds. The fraudulent returns were filed using Social Security numbers and other identifying information stolen from residents of Puerto Rico. Participants in the scheme targeted Social Security numbers assigned to residents of Puerto Rico because they are generally not required to file federal tax returns with the Internal Revenue Service (“IRS”), as long as their income is derived solely from Puerto Rican sources. In so doing, the co-conspirators minimized the risk that legitimate federal tax returns were already filed by the holders of the Social Security numbers that they were using in the scheme.
Each of the tax returns at issue falsely represented that the taxpayer resided at an address in the Bronx, New York, where the refund check requested in the return was to be sent. The checks were then stolen by letter carriers assigned to the mail routes where the checks were sent who had been recruited beforehand to participate in the scheme. The letter carriers participating in the scheme were paid a kickback for each check they stole. The letter carriers passed the checks on to other co-conspirators, who cashed them at various banks and check-cashing businesses located in the U.S. and the Dominican Republic.
Over the course of the scheme, thousands of false and fraudulent federal tax returns were filed seeking more than $50 million of fraudulent tax refunds from the IRS.
DUARTE was previously convicted in 2002 for conspiracy to steal federal funds, based on substantially similar conduct, and was sentenced to three years of probation.
In addition to the prison term, Judge Chin ordered DUARTE, 38, to pay forfeiture of $15 million and to serve a term of three years of supervised release to follow his prison sentence.
Mr. Bharara praised the work of the Internal Revenue Service, Criminal Investigation, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the United States Postal Service Office of Inspector General, and thanked them for their work in this case. He also thanked the Dominican National Police for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Serrin Turner is in charge of the prosecution.
Manhattan U.S. Attorney Files and Settles Lawsuit Against Owners and Operators of Carmine’s Restaurants for Violations of the Americans with Disabilities ActRead 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 against the owners and operators of the two Manhattan locations of the popular Carmine’s restaurant chain for violations of the Americans With Disabilities Act of 1990 (“ADA”). The defendant owners and operators of the Carmine’s Restaurants and owners of the buildings in which the Carmine’s Restaurants are located are GREYSTONE OWNER LLC, CARMINE’S BROADWAY FEAST INC., PARAMOUNT LEASEHOLD L.P., LITTLE FISH CORP., and THE ALICART RESTAURANT GROUP. The settlement, in the form of a consent decree, was docketed today, November 12, 2013 and approved Friday November 8, 2013 by U.S. District Judge Kimba M. Wood.
The lawsuit was brought as part of the Manhattan Restaurants ADA Compliance Initiative, announced in September 2011. As part of the initiative, the U.S. Attorney’s Office is reviewing and evaluating the ADA compliance of the “most popular” restaurants in Manhattan as designated by the 2011 Zagat Guide. Pursuant to the initiative, the U.S. Attorney’s Office resolved its lawsuit against three ROSA MEXICANO locations by Consent Decree entered on January 30, 2013.
Manhattan U.S. Attorney Preet Bharara said: “As this suit and settlement demonstrate, we remain committed to ensuring that the owners and operators of New York City’s restaurants and cultural venues comply with the ADA.”
According to the Complaint and Consent Decree filed in Manhattan federal court:
The U.S. Attorney’s Office identified numerous violations of the ADA at each of Carmine’s Manhattan locations: 2450 Broadway (“Carmine’s Upper West Side”) and 200 West 44th Street (“Carmine’s Theater District”). Most significantly, Carmine’s Upper West Side lacks an accessible main entrance, its “alternate entrance” is also non-compliant in several respects, and it lacks an accessible restroom. The accessible restrooms in Carmine’s Theater District are also non-compliant in multiple respects.
The Consent Decree requires the restaurants to improve the accessibility of their entrances, waiting areas, bar areas, dining areas, restrooms, coat checks, and hostess stations. The Consent Decree provides for renovations to the main and alternate entrances and construction of an accessible restroom at Carmine’s Upper West Side, and alterations to the restrooms at Carmine’s Theater District. In addition, the owners and operators of the restaurants will pay a $10,000 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 taken a leading 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.
Mr. Bharara thanked the Disability Rights Section of the Department of Justice, in particular its architectural staff, for their assistance in this matter.
The Restaurants Initiative is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Amy A. Barcelo, Christopher Connolly, and Cristine Irvin Phillips are in charge of the Initiative.
To file a complaint alleging that a restaurant or any other 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
U.S. v. Greystone Owners, LLC, et al. Complaint
U.S. v. Greystone Owners, LLC, et al. Executed Consent Decree 2013.11.8Defendant Pleads Guilty in Manhattan Federal Court to Being an Organizer and Leader of an Illegal Sports Gambling BusinessRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that HILLEL NAHMAD, a/k/a “Helly,” pled guilty today in Manhattan federal court in connection with his leadership role in the operation of a high-stakes illegal sports gambling business. NAHMAD was charged in April 2013 in a 34-defendant indictment charging members and associates of two Russian-American organized crime enterprises with various crimes including racketeering, money laundering, extortion, and gambling offenses. He pled guilty before U.S. District Court Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “Helly Nahmad headed an illegal sports gambling business with ties to a Russian-American organized crime ring. Nahmad bet that he would never get caught and he lost. His guilty plea today has dealt a substantial blow to this international enterprise.”
According to the Indictment, other documents filed in this case and statements made at various conferences in this case, including today’s guilty plea:
NAHMAD is the son of a billionaire art dealer from Europe, and he operates the Helly Nahmad Gallery out of the Carlyle Hotel in New York, New York. NAHMAD and defendant Illya Trincher ran a high-stakes illegal gambling business that catered primarily to millionaire and billionaire clients. Their business utilized several online gambling websites that operated illegally in the United States to generate tens of millions of dollars of sports bets each year. The gambling operation was financed through a host of American and international bank accounts, including accounts associated with NAHMAD, defendants John Hanson and Noah Siegel, a/k/a “The Oracle,” and a plumbing company in the Bronx that was acquired in repayment of a $2 million gambling debt. As part of his guilty plea, NAHMAD acknowledged that he was a leader and organizer of the illegal sports gambling business, that he was the primary source of financing for that business, and that he was entitled to a substantial share of its profits.
NAHMAD, 35, of New York, New York, faces a maximum sentence of five years in prison and three years of supervised release. As part of his plea agreement, NAHMAD agreed to forfeit $6,427,000.00 and all right, title and interest of the defendant in the painting Carnaval à Nice, 1937 by Raoul Dufy to the United States. NAHMAD is scheduled to be sentenced by Judge Furman on March 19, 2014 at 3:00 p.m.
NAHMAD is the 14th defendant in this case to plead guilty. The following defendants previously pled guilty and await sentencing:
- Bryan Zuriff pled guilty to gambling charges on July 26, 2013;
- William Barbalat pled guilty to gambling charges on August 14, 2013;
- Kirill Rapoport pled guilty to gambling charges on August 16, 2013;
- Edwin Ting and Justin Smith pled guilty to gambling charges on September 4, 2013;
- Dmitry Druzhinsky and David Aaron pled guilty to gambling charges on October 4, 2013;
- Alexander Zaverukha pled guilty to gambling charges on October 10, 2013;
- Nicholas Hirsch pled guilty to conspiring to commit wire fraud on October 16, 2013;
- Anatoly Shteyngrob pled guilty to conspiring to commit money laundering on October 17, 2013;
- Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 2013;
- Stan Greenberg pled guilty to conspiring to commit racketeering on October 22, 2013; and
- Arthur Azen pled guilty to conspiring to commit money laundering and conspiring to collect extensions of credit by extortionate means on November 5, 2013.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Internal Revenue Service.
The case is being prosecuted by the Office=s Organized Crime Unit. Assistant U.S. Attorneys Harris M. Fischman, Joshua A. Naftalis, Peter Skinner, and Kristy J. Greenberg of the Organized Crime Unit are in charge of the prosecution. Assistant U.S. Attorneys Alexander Wilson and Christine Magdo of the Office=s Asset Forfeiture Unit are responsible for the forfeiture aspects of the case.
U.S. v. Alimzhan Tokhtakhounov, et al. Indictment
Court Authorizes Irs to Issue Summonses for Records Relating to U.S Taxpayers with Offshore Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Justice Department’s Tax Division, and Danny Werfel, the Acting Commissioner of the Internal Revenue Service (“IRS”), announced today that U.S. District Judge Kimba M. Wood entered an order on November 7, 2013, authorizing the IRS to issue summonses requiring Bank of New York Mellon (“Mellon”) and Citibank, NA (“Citibank”), to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by holding interests in undisclosed accounts at Zurcher Kantonalbank and its affiliates (collectively, “ZKB”) in Switzerland; and U.S. District Judge Richard M. Berman entered an order today authorizing the IRS to issue summonses requiring Mellon, Citibank, JPMorgan Chase Bank, NA (“JPMorgan”), HSBC Bank USA, NA (“HSBC”), and Bank of America, NA (“Bank of America”), to produce similar information in connection with undisclosed accounts at The Bank of N.T. Butterfield & Son Limited and its affiliates (collectively, “Butterfield”) in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland, and the United Kingdom.
In these actions, the Court granted the IRS permission to serve what are known as “John Doe” summonses on Mellon, Citibank, JPMorgan, HSBC, and Bank of America. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses direct these five banks to produce records identifying U.S. taxpayers with accounts at ZKB, Butterfield, and their affiliates, including other foreign banks that used ZKB and Butterfield’s U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.
Manhattan U.S. Attorney Preet Bharara said: “These actions show that the use of foreign banks for tax evasion remains a high investigative priority of this Office and U.S. citizens should understand that loud and clear. By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who try to evade their legal responsibility to pay taxes.”
Assistant Attorney General Kathryn Keneally said: “These cases once again demonstrate the Department’s resolve to uncover and identify taxpayers who tried to hide money overseas as a way to avoid federal taxes. These John Doe Summonses will provide information about individuals using financial institutions from Switzerland to the Cayman Islands to Hong Kong to avoid their U.S. tax obligations. U.S. taxpayers still holding accounts who have not come clean should come forward and do the right thing before it’s too late.”
IRS Acting Commissioner Danny Werfel said: “International issues remain a major focus for the IRS, and we are continuing our efforts to fight tax evaders who use offshore accounts to skirt the law. These John Doe summonses for correspondent account records show our determination to pursue evaders using offshore accounts even if the person hiding money overseas chooses a bank that has no offices on U.S. soil.”
IRS Offshore Voluntary Disclosure programs and initiatives enable U.S. taxpayers to resolve their tax liabilities and minimize their chances of criminal prosecution by voluntarily disclosing previously undisclosed foreign accounts and income. To date, U.S. taxpayers have identified 371 previously undisclosed accounts at ZKB and 81 such accounts at Butterfield. In addition, a number of U.S. taxpayers with beneficial ownership and control over funds held in accounts at ZKB and Butterfield have admitted failure to report income earned from their offshore accounts on their federal tax returns. The IRS has reason to believe that other U.S. taxpayers who held or presently hold similar accounts at ZKB, Butterfield, and their affiliates have done the same, in violation of federal tax law. In December 2012, three employees of ZKB were indicted for conspiring with U.S. taxpayers and others to hide at least $423 million from the IRS in secret Swiss bank accounts.
Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.
These cases are being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney Tomoko Onozawa is in charge of the Butterfield case and Assistant U.S. Attorney Christopher B. Harwood is in charge of the ZKB case.
Court Authorizes IRS to Issue Summonses for Records Relating to U.S Taxpayers with Offshore Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Justice Department’s Tax Division, and Danny Werfel, the Acting Commissioner of the Internal Revenue Service (“IRS”), announced today that U.S. District Judge Kimba M. Wood entered an order on November 7, 2013, authorizing the IRS to issue summonses requiring Bank of New York Mellon (“Mellon”) and Citibank, NA (“Citibank”), to produce information about U.S. taxpayers who may be evading or have evaded federal taxes by holding interests in undisclosed accounts at Zurcher Kantonalbank and its affiliates (collectively, “ZKB”) in Switzerland; and U.S. District Judge Richard M. Berman entered an order today authorizing the IRS to issue summonses requiring Mellon, Citibank, JPMorgan Chase Bank, NA (“JPMorgan”), HSBC Bank USA, NA (“HSBC”), and Bank of America, NA (“Bank of America”), to produce similar information in connection with undisclosed accounts at The Bank of N.T. Butterfield & Son Limited and its affiliates (collectively, “Butterfield”) in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland, and the United Kingdom.
In these actions, the Court granted the IRS permission to serve what are known as “John Doe” summonses on Mellon, Citibank, JPMorgan, HSBC, and Bank of America. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses direct these five banks to produce records identifying U.S. taxpayers with accounts at ZKB, Butterfield, and their affiliates, including other foreign banks that used ZKB and Butterfield’s U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.
Manhattan U.S. Attorney Preet Bharara said: “These actions show that the use of foreign banks for tax evasion remains a high investigative priority of this Office and U.S. citizens should understand that loud and clear. By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who try to evade their legal responsibility to pay taxes.”
Assistant Attorney General Kathryn Keneally said: “These cases once again demonstrate the Department’s resolve to uncover and identify taxpayers who tried to hide money overseas as a way to avoid federal taxes. These John Doe Summonses will provide information about individuals using financial institutions from Switzerland to the Cayman Islands to Hong Kong to avoid their U.S. tax obligations. U.S. taxpayers still holding accounts who have not come clean should come forward and do the right thing before it’s too late.”
IRS Acting Commissioner Danny Werfel said: “International issues remain a major focus for the IRS, and we are continuing our efforts to fight tax evaders who use offshore accounts to skirt the law. These John Doe summonses for correspondent account records show our determination to pursue evaders using offshore accounts even if the person hiding money overseas chooses a bank that has no offices on U.S. soil.”
IRS Offshore Voluntary Disclosure programs and initiatives enable U.S. taxpayers to resolve their tax liabilities and minimize their chances of criminal prosecution by voluntarily disclosing previously undisclosed foreign accounts and income. To date, U.S. taxpayers have identified 371 previously undisclosed accounts at ZKB and 81 such accounts at Butterfield. In addition, a number of U.S. taxpayers with beneficial ownership and control over funds held in accounts at ZKB and Butterfield have admitted failure to report income earned from their offshore accounts on their federal tax returns. The IRS has reason to believe that other U.S. taxpayers who held or presently hold similar accounts at ZKB, Butterfield, and their affiliates have done the same, in violation of federal tax law. In December 2012, three employees of ZKB were indicted for conspiring with U.S. taxpayers and others to hide at least $423 million from the IRS in secret Swiss bank accounts.
Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.
These cases are being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney Tomoko Onozawa is in charge of the Butterfield case and Assistant U.S. Attorney Christopher B. Harwood is in charge of the ZKB case.
ZKB Order
Butterfield OrderStatement of Manhattan U.S. Attorney Preet Bharara on the Guilty Plea of the SAC Capital CompaniesRead the Press Release
“Subject to the Court’s acceptance, today four SAC Capital companies pled guilty to serious federal crimes that undermined the integrity of our securities markets. Financial institutions should know that they are not automatically immune from prosecution, and we will hold companies, as well as individuals, accountable wherever appropriate.”