Southern District of New York
Press releases recorded for this federal judicial district.
SAC Capital Management Companies Plead Guilty to Insider Trading Charges in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that S.A.C. CAPITAL ADVISORS, L.P. (“SAC Capital LP”), S.A.C. CAPITAL ADVISORS, LLC (“SAC Capital LLC”), CR INTRINSIC INVESTORS, LLC (“CR Intrinsic”), and SIGMA CAPITAL MANAGEMENT, LLC (“Sigma Capital”), collectively (the “SAC Companies”) that are responsible for the management of a group of affiliated hedge funds, collectively (the “SAC Hedge Fund” or “SAC”), pled guilty to each count in which they are charged in an indictment (the “Indictment”) unsealed in July of this year. The Indictment charges the SAC Companies with securities fraud and wire fraud in connection with a large-scale insider trading scheme. The SAC Companies pled guilty today before U.S. District Judge Laura T. Swain, pursuant to a plea agreement. Sentencing is scheduled for March 14, 2014, before Judge Swain, who reserved on the decision of whether to accept the pleas.
Manhattan U.S. Attorney Preet Bharara said: “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.”
As alleged in the Indictment, from 1999 through at least 2010, numerous employees of the SAC Companies obtained and traded on material, non-public information that they were not permitted to have (“Inside Information”), or recommended trades based on such information to SAC Portfolio Managers (“SAC PMs”) or the SAC Owner. Specifically, the Indictment charges the SAC Companies with insider trading offenses committed by numerous employees, occurring over the span of more than a decade, and involving the securities of more than 20 publicly-traded companies across multiple sectors of the economy. As charged in the Indictment, the systematic insider trading engaged in by SAC PMs and Research Analysts was the predictable and foreseeable result of multiple institutional failures. The failures alleged included hiring practices heavily focused on recruiting employees with networks of public company insiders, the failure of SAC management to question employees about trades that appeared to be based on Inside Information, and ineffective compliance measures that failed to prevent or detect such trading, particularly prior to late 2009.
The plea agreement in this case was one of two component parts of an overall Agreement (the “Agreement”) reached by the parties and announced earlier this week. The Agreement imposes an additional $1.184 billion financial penalty on the SAC Companies, on top of the $616 million the SAC Companies have already agreed to pay to the U.S. Securities & Exchange Commission (“SEC”). The financial penalty – the largest insider trading penalty in history – is split between a fine in the criminal case (the “Criminal Case”), and a forfeiture judgment in a civil money laundering and forfeiture action (the “Forfeiture Action”) filed by the Government simultaneously with the criminal charges. It also provides that the SAC Companies and their affiliates will no longer accept outside investor funds and will shut down operations as an investment adviser.
The Agreement between the Government and the SAC Companies to plead guilty to all of the charges in the Indictment in which they are charged and resolve the Forfeiture Action was submitted to the Courts subject to judicial review and approval. Judge Swain received the pleas in the Criminal Case, United States v. S.A.C. Capital Advisors, L.P., et al., 13 Cr 541 (LTS), earlier today. U.S. District Judge Richard J. Sullivan, who is presiding over the Forfeiture Action, captioned United States v. S.A.C. Capital Advisors, L.P., et al., 13 Civ. 5182 (RJS), approved on Wednesday, November 6, 2013, the stipulation and proposed order to resolve the civil money laundering and forfeiture claims in the Forfeiture Action.
The remaining terms of the Agreement provide for the following:
- The total financial penalty is $1.8 billion, consisting of a $900 million fine in the Criminal Case and a $900 million judgment in the Forfeiture Action. Because the SAC Companies have already agreed to pay $616 million to the SEC to resolve related civil insider trading charges, that amount will be credited against the $900 million judgment in the Forfeiture Action, and therefore, the additional payment required under this Agreement will be approximately $1.184 billion. The SAC Companies have further agreed that neither they nor any other person or entity paying any portion of the financial penalty shall claim any tax deduction or credit for any money paid in resolving the Criminal Case and the Forfeiture Action.
- The SAC Companies will no longer accept third party investor funds and will terminate operations as an investment adviser.
- The SAC Companies will each be sentenced to a five-year term of probation – the maximum allowed by law – with a provision to end probation earlier if the SAC Companies cease operating entirely. The terms of probation will require, among other conditions, that the SAC Companies employ appropriate compliance measures to identify and prevent insider trading. Additionally, the insider trading compliance measures of the SAC Companies and any related entities trading securities will be reviewed by an independent compliance expert who will direct the SAC Companies to correct identified deficiencies.
The Agreement resolves the criminal charges against the SAC Companies but does not provide any individual with immunity from prosecution. Under the terms of the Agreement, the Government is not prevented from charging any individual with insider trading offenses and seeking the maximum prison term authorized by law for such offenses.
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 Arlo Devlin-Brown, Antonia M. Apps and John T. Zach are in charge of the prosecution, and Assistant U.S. Attorneys Sharon Cohen Levin, Chief of the Asset Forfeiture Unit, Micah Smith and Christine Magdo are responsible for the forfeiture aspects of the case.
The pleas announced today relate only to the pending charges against the SAC Companies and relate only to the guilt of the SAC Companies. The pleas do not include any admissions pertaining to individual defendants. All criminal defendants are presumed innocent unless and until proven guilty.
U.S. v. SAC Capital Advisors LLP, et al. Cover Ltr, Plea Agt, and Stip
NYPD Detective Pleads Guilty in Manhattan Federal Court to Computer HackingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that EDWIN VARGAS, a detective with the New York City Police Department (“NYPD”), pled guilty to computer hacking crimes. Specifically, VARGAS paid others to hack into e-mail accounts, including e-mail accounts belonging to other NYPD officers and employees, and also accessed a federal law enforcement database without authorization to obtain information about other NYPD officers. VARGAS was arrested in Bronxville, New York, in May 2013. He pled guilty before U.S. District Judge P. Kevin Castel.
Manhattan U.S. Attorney Preet Bharara said: “Detective Edwin Vargas broke the law, instead of upholding it as he swore to do. He accessed a law enforcement database without authorization and paid hackers to illegally obtain e-mail login information for his fellow officers and others. Vargas’s guilty plea today and his forthcoming punishment make clear that those who illegally invade others’ privacy, including members of law enforcement, will not escape prosecution. ”
According to the Complaint and Information filed against VARGAS in Manhattan federal court and statements made in related court proceedings:
Between April 2010 and October 2012, VARGAS, an NYPD detective assigned to a precinct in the Bronx, hired e-mail hacking services to hack into various e-mail accounts so he could obtain log-in credentials, such as the password and username, for those accounts. In total, VARGAS purchased hacks of at least 43 personal e-mail accounts and one cellular phone belonging to at least 30 different individuals, including 20 current or former NYPD officers and an NYPD administrative employee. After receiving the log-in credentials he had purchased from the e-mail hacking services, VARGAS accessed at least one personal e-mail account belonging to an NYPD officer. VARGAS paid a total of more than $4,000 to entities associated with the e-mail hacking services.
VARGAS also admitted to accessing the National Crime Information Center (NCIC) database, a federal database, to obtain information about at least two NYPD officers without authorization to do so. The e-mail accounts of those two officers were among the e-mail accounts VARGAS paid the e-mail hacking services to hack into so he could obtain log-in credentials.
VARGAS, 42, of Bronxville, New York, pled guilty to one count of conspiring to commit computer hacking and one count of computer hacking. Each count carries a maximum sentence of one year in prison. He is scheduled to be sentenced by Judge Castel on March 14, 2014, at 2:00 p.m.
Mr. Bharara praised the investigative work of the FBI and thanked the Internal Affairs Bureau of the New York City Police Department for its cooperation and assistance in the investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Rosemary Nidiry is in charge of the prosecution.
U.S. v. Edwin Vargas Information
Manhattan U.S. Attorney Announces Civil Action Seeking Forfeiture of Four Bank Accounts and 47 Cars Tied to Auto Export SchemeRead 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”), today announced the filing of a civil complaint seeking the forfeiture of four bank accounts and 47 luxury cars tied to a scheme to purchase new cars for immediate export overseas through a fraud on car dealerships and car insurance companies. The civil forfeiture complaint (the “Complaint”) was filed in Manhattan federal court following the seizure of approximately $3.7 million from the four bank accounts, and the seizure of 20 of the 47 luxury cars, which include BMWs and Mercedes Benzes. The scheme described in the Complaint is alleged to have been carried out by a vehicle broker known as Efans Trading Corporation (“Efans”), which recruited straw buyers to purchase luxury cars that were paid for in full on the date of the sale by cashier’s checks draw on an Efans bank account. The straw buyers, according to the Complaint, did not use, and frequently never even saw, the cars, which were exported by sea immediately after being purchased and netted double or triple their domestic value when sold in overseas markets. The Complaint further alleges that when the cars were purchased, Efans caused materially false statements to be made to the dealerships and insurance companies, in an effort to remove the cars from the dealerships without revealing that they were being purchased for immediate export overseas, rather than for the use of drivers in the United States.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Efans defrauded dealerships, insurance companies, and authorities in its scheme to export luxury automobiles in violation of the law. With this forfeiture complaint, this Office continues its work to protect the markets and consumers from illegal export schemes.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Consumers are the ultimate victims of fraud schemes like the one these perpetrators allegedly carried out. The HSI New York BEST task force brings law enforcement agencies together in New York City to put criminal organizations who seek profit from unlawful cross-border activity out of business.”
According to the allegations in the Complaint:
Automobile manufacturers generally have contractual agreements with their dealerships that new cars made for sale within the United States may not be sold to individuals or companies intending to export the new cars outside the United States. Automobile manufacturers impose this prohibition on exporting new automobiles because unauthorized exports of their new automobiles cause numerous financial problems to the manufacturers by circumventing the manufacturers’ distribution markets, causing market infringement issues, harming franchise dealerships, and complicating the process of vehicle recall registration and service. The contractual agreements between automobile manufacturers and dealerships often carry monetary penalties, commonly called “charge backs,” which automobile manufacturers may assess against dealerships if the manufacturers determine that dealerships are selling new automobiles to purchasers who intend to export them rather than use them in the United States. To avoid the appearance that a car is intended for immediate export, a vehicle broker, such as Efans, will recruit a straw buyer to purchase and title the car. The straw buyers are typically unwitting individuals who receive minimal compensation for their cooperation.
Efans directed the straw buyers it recruited to go to car dealerships and purchase luxury cars, which were paid for in full on the date of the purchase by cashier’s checks drawn on an Efans bank account. The straw buyers purchased the cars, typically without test driving them or negotiating price, and immediately upon the purchase of the cars the straw buyers turned them over to Efans for immediate export from the country. Efans exported the cars from the country, typically to destinations in China, where the cars could be sold for double or triple their domestic value. As part of Efans’ scheme to purchase the cars in this manner, Efans caused materially false statements to be made to the car dealerships concerning the straw buyers’ intended use of the cars. In some cases, for instance, the straw buyer signed a form representing to the dealership that the car would not be exported out of the United States for a period of at least twelve months. Moreover, before the car could leave the dealership, the straw buyer was usually required to show that he or she had purchased insurance for the car. Accordingly, Efans caused an insurance policy for the car to be acquired in the name of the straw buyer, which, typically, was cancelled after the car left the dealership but before any payments were made on the policy. When the insurance policy was acquired, materially false statements were made to the insurance company with respect to the straw buyer’s intended use of the vehicle, for example, that the car would be garaged at the home of the straw buyer, even though the car would never even arrive at the straw buyer’s home. After the cars were purchased and the false statements were made, Efans caused Shippers Export Declarations for the cars to be submitted to U.S. Customs and Border Protection, which furthered the scheme to defraud by concealing the cars’ Vehicle Identification Numbers, thus preventing automobile manufacturers from tracking which cars were leaving the country.
The Complaint seeks the forfeiture of the four bank accounts and the 47 cars on several bases, including that Efans attempted to export the cars from the United States contrary to law, and that the bank accounts were used to facilitate the purchase of, and contain the proceeds of, cars that Efans exported from the United States contrary to law.
Mr. Bharara thanked HSI’s Border Enforcement Security Task Force and the NYPD for their leadership and work on this investigation, which he noted is ongoing. Mr. Bharara also thanked U.S. Customs and Border Protection for its work.
This matter is being handled by the Office’s Asset Forfeiture Unit. Assistant U. S. Attorney Sarah E. Paul is in charge of the case.
Efans Trading Corporation et al. Complaint
Manhattan U.S. Attorney Announces Charges Against Senior South American Counterterrorism Figure for Attempting to Support HezbollahRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Michelle M. Leonhart, the Administrator of the Drug Enforcement Administration (DEA), today announced the unsealing of a Superseding Indictment against DINO BOUTERSE, a citizen of Suriname who held himself out as Commander of that country’s Counter-Terrorism Unit, for attempting to provide material support and resources to Hezbollah, a designated terrorist organization. BOUTERSE and a second defendant (“Defendant-1”) were previously charged with conspiring to import cocaine into the United States, and BOUTERSE was also previously charged with using, carrying, and brandishing a rocket launcher during, and in relation to, the cocaine importation conspiracy. BOUTERSE was arrested in Panama on August 29, 2013, and arrived in the United States on August 30, 2013. The case is assigned to United States District Judge Shira A. Scheindlin.
Manhattan U.S. Attorney Preet Bharara said: “Today we add an additional charge of attempting to support Hezbollah to Dino Bouterse’s alleged crimes connected to a cocaine-smuggling conspiracy. We will be relentless in our efforts, working with our law enforcement partners around the world, to pursue and prosecute those who seek to support terrorist organizations.”
DEA Administrator Michelle M. Leonhart said: “Drug trafficking organizations and terror networks are joined at the hip in many parts of the world. DEA must relentlessly pursue these dangerous individuals and criminal groups that attempt to use drug trafficking profits to fuel and fund terror networks, such as Hezbollah. Alleged criminals like Bouterse and his facilitators pose a direct threat to the safety and security of the United States. Together with our law enforcement partners, DEA is dismantling narco-terror around the world and putting the criminals responsible behind bars where they belong.”
According to the allegations contained in the Indictment unsealed in Manhattan federal court:
In 2013, BOUTERSE used his position to assist individuals he believed were members of Hezbollah. In exchange for a multimillion-dollar pay-off, BOUTERSE agreed to allow large numbers of purported Hezbollah operatives to use Suriname as a permanent base for, among other things, attacks on American targets. In furtherance of his efforts to assist Hezbollah, BOUTERSE supplied a false Surinamese passport for the purpose of making clandestine travel easier, including travel to the United States; began determining which heavy weapons he might provide to Hezbollah; and indicated how Hezbollah operatives, supplied with a Surinamese cover story, might enter the United States.
In June 2013, BOUTERSE and Defendant-1 met in Suriname with DEA confidential sources (the “CSes”), in a local government office. During the meeting, BOUTERSE showed the CSes a rocket launcher and a kilogram of cocaine.
Approximately one month later, BOUTERSE and Defendant-1 worked to provide transportation and security for cocaine being sent through Suriname to the United States. As a test run, BOUTERSE and Defendant-1 sent ten kilograms of cocaine on a commercial flight departing from Suriname. BOUTERSE personally verified the arrangements for the 10-kilogram cocaine shipment in a text message. The cocaine was intercepted by law enforcement officials after it departed Suriname.
In July 2013, BOUTERSE met with one of the CSes to discuss opening Suriname to the CSes’ purported Hezbollah associates.
Later that month, BOUTERSE met in Europe with one of the CSes and with two other men who purported to be associated with Hezbollah. During this meeting, BOUTERSE discussed initially hosting 30 to 60 Hezbollah members in Suriname for training and operations. He also indicated that he wanted a Hezbollah cell in Suriname to, in part, act as a kind of personal armed force. BOUTERSE confirmed his understanding that the purported Hezbollah operatives would operate in South America against American targets, and he agreed to supply Surinamese passports to the operatives—and to assist with their applications for visas to travel from South America into the United States. In addition, in response to a request for surface-to-air missiles and rocket-propelled grenades, BOUTERSE stated that he would need “two months” and that he would provide a list of what he could supply. Finally, at the July 2013 meeting in Europe, BOUTERSE agreed to create a false Surinamese passport for one of the purported Hezbollah operatives, so that BOUTERSE and the Hezbollah operative could travel to Suriname to inspect the facilities that BOUTERSE had agreed to prepare for the Hezbollah contingent.
At a subsequent meeting in August 2013, BOUTERSE delivered a Surinamese passport with false identifying information. As had been discussed at the July 2013 meeting in Europe, one of the purported Hezbollah operatives was to use the fraudulent passport to travel to Suriname. BOUTERSE indicated that everything was ready in Suriname for the arrival of the purported Hezbollah members, and that some “toys,” or weapons, would be available for inspection.
The Indictment charges BOUTERSE in three Counts. Count One charges BOUTESRE with attempting to provide material support to Hezbollah, a designated foreign terrorist organization. Court Two charges BOUTERSE (and also Defendant-1) with conspiring to import cocaine into the United States and to distribute cocaine, knowing and intending that it would be imported to the United States. Count Three charges BOUTERSE with using, carrying, and brandishing firearms and a destructive device – a rocket launcher – during and in relation to the narcotics conspiracy alleged in Count Two.
If convicted, BOUTERSE faces a maximum sentence of 15 years in prison on Count One and a maximum sentence of life in prison on each of Counts Two and Three. Counts Two and Three also carry a total mandatory minimum term of 40 years in prison.
Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA. Mr. Bharara also thanked the DEA’s Miami Field Division, Panama City Country Office, Port-of-Spain Country Office, and Bogota Country Office; the Government of the Republic of Panama; and the U.S. Department of Justice’s Office of International Affairs and its National Security Division.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Edward Y. Kim, Michael D. Lockard, and Adam Fee are in charge of the prosecution.
The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Dino Bouterse S2 Indictment
Former Delphi Corporation to Pay $23.3 Million to Clean up Polluted Sites in Michigan and OhioRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States, the State of Michigan, and the State of Ohio have settled environmental claims and liabilities asserted against DPH HOLDINGS CORPORATION, formerly known as Delphi Corporation (“Delphi”), and its corporate affiliates (collectively, “DPH”), under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act (also known as the Superfund law), and state environmental laws.
U.S. Attorney Preet Bharara stated: “As a result of today’s settlement, Delphi will pay for the clean-up of four sites contaminated with hazardous waste. This settlement demonstrates again that the United States will pursue all available remedies to prevent polluters from escaping their environmental liabilities through the bankruptcy process.”
Under the Settlement Agreement filed today in bankruptcy court in White Plains, DPH will pay approximately $23.1 million in cash for the clean-up of four properties in Michigan and Ohio contaminated with hazardous waste. The remaining approximately $158,000 will be paid to the United States to reimburse the United States Environmental Protection Agency (“EPA”) for prior environmental clean-up work performed at an additional property in Ohio.
In October 2005, Delphi, one of the largest auto parts manufacturers in the world, filed chapter 11 bankruptcy petitions in the United States Bankruptcy Court for the Southern District of New York; Delphi expects to complete its bankruptcy process and dissolve by year-end. The four properties that are the subject of the settlement are among the last assets owned by DPH. Under the settlement, an environmental response trust will be established to take ownership of, and oversee clean-up at, the four properties. The $23.1 million payment by DPH will fund the administrative costs of the trust and the clean-up of the properties.
Three of the four properties are the sites of former auto parts manufacturing plants: the former Delphi Automotive Systems Dort Highway Flint East Plant 400 and Plant 500 in Flint, Michigan, and the former Delphi Saginaw Division Plant 2 in Saginaw, Michigan. Through the settlement, DPH will pay for the clean-up of both soil and groundwater contamination at these sites. The fourth site is an inactive asbestos landfill in Rootstown, Ohio, formerly operating under Delphi’s Packard Electric/Electronic Architecture Division. The funds provided by DPH in the settlement will pay for groundwater monitoring and ensure continued public safety and security at this property.
The Settlement Agreement will be filed with the Bankruptcy Court for a period of 15 days before its entry to provide public notice and to afford members of the public the opportunity to comment on the Settlement Agreement.
This is the second environmental settlement in this bankruptcy. In 2011, the United States recovered more than $857,000 in a settlement of other environmental liabilities in the case.
Mr. Bharara praised the efforts of EPA, the State of Michigan, the State of Ohio, and the Environment and Natural Resources Division of the U.S. Department of Justice in this case.
Assistant United States Attorney Cristy Irvin Phillips is in charge of the case, which has been handled by the Office’s Environmental Protection Unit and Tax and Bankruptcy Unit.
In re DPH Holdings - Settlement Agreement with Exhibit A
Equity Research Analyst Pleads GuiltyIn Manhattan Federal Court to Insider Trading ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SANDEEP AGGARWAL, a former equity research analyst for a financial services firm located in San Francisco, California (“the Firm”), pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The scheme involved the improper disclosure of material, nonpublic information (“Inside Information”) concerning a strategic partnership in internet search and advertising between Microsoft Corporation and Yahoo! Inc. (the “Partnership”). AGGARWAL was arrested in connection with this scheme on July 29, 2013, and he pled guilty today before U.S. Magistrate Judge Ronald L. Ellis, pursuant to a cooperation agreement.
According to the Superseding Information to which AGGARWAL pled guilty, statements made during today’s guilty plea proceeding and other court documents:
From April 2008 up through March 2010, AGGARWAL was a senior internet analyst at the Firm. The Inside Information concerning the Partnership originated from an executive in Microsoft’s internet search business (the “Microsoft Insider”), who was a friend of AGGARWAL. On various occasions between March 2009 and July 2009, AGGARWAL had discussions with the Microsoft Insider about the likelihood of the Partnership. During this same period, two senior sales executives at the Firm arranged meetings and telephone calls between AGGARWAL and the Firm’s clients. These meetings and calls were for the purpose of facilitating the transmission of information AGGARWAL learned about the status of the Partnership.
For example, on the evening of July 9, 2009, AGGARWAL learned from the Microsoft Insider that discussions about the Partnership had recommenced and that a transaction was likely within the next few weeks. The very next day, on July 10, AGGARWAL provided the Inside Information about the Partnership to the senior sales executives at the Firm, who then arranged for AGGARWAL to provide the Information to representatives of certain hedge fund clients of the Firm. One of the representatives to whom AGGARWAL provided the Information was Richard Lee, then a portfolio manager at S.A.C. Capital Advisors, L.P.
On July 10, 2009, following the conversations AGGARWAL had with hedge fund clients, the portfolios managed by certain portfolio managers of those clients, including Richard Lee, purchased shares of Yahoo securities. Following press reports confirming that a transaction between Microsoft and Yahoo could be announced within one week, the portfolios managed by certain of the portfolio managers, including Richard Lee, sold Yahoo stock and generated substantial profits.
AGGARWAL, 40, of Gurgon, India, pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000, or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a fine of the greater of $5,000,000, or twice the gross gain or loss from the offense. AGGARWAL will be sentenced on May 15, 2014 before United States District Judge Colleen McMahon.
Richard Lee pled guilty on July 23, 2013, to an Information charging him with one count of conspiracy and one count of securities fraud in connection with insider trading between April 2009 and 2010.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission. He also noted that the investigation is continuing.
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. Attorneys John J. O’Donnell and Arlo Devlin-Brown are in charge of the prosecution.
Former Chief Executive Officer of Hospital for Special Surgery Sentenced in Manhattan Federal Court to 18 Months in Prison for Participating in Fraudulent Kickback SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOHN R. REYNOLDS, the former Chief Executive Officer (“CEO”) of the Hospital for Special Surgery (the “Hospital”), was sentenced today in Manhattan federal court to 18 months in prison for participating in a fraudulent scheme in which he was paid nearly $300,000 in undisclosed kickbacks from a subordinate Hospital employee. REYNOLDS pled guilty in July 2013 to one count of wire fraud and one count of making false statements to a law enforcement agent. He was sentenced by U.S. District Judge Harold Baer, Jr.
Manhattan U.S. Attorney Preet Bharara said: “During his tenure as CEO of a world-renowned New York hospital, John Reynolds shamelessly put his own personal interests above those of the institution he was charged with running. The successful prosecution of Mr. Reynolds reaffirms the Office’s unwavering commitment to stamping out corruption, particularly by those who abuse positions of power and authority.”
According to the allegations in the Indictment and Superseding Information filed in Manhattan federal court, as well as statements made during court proceedings:
From 1986 until 1997, REYNOLDS served as the Chief Financial Officer of the Hospital, the oldest orthopedic hospital in the United States. In 1997, he was promoted to the position of CEO, and served in that capacity as a full-time Hospital employee until October 2006. In order to effectuate a smooth transition in Hospital leadership to a newly hired CEO, REYNOLDS served as a contract employee in the same position from October 2006 through December 2008.
Between 2000 and 2005, REYNOLDS demanded and received approximately $298,500 in kickbacks from a subordinate employee of the Hospital in exchange for negotiating payment of that employee’s annual bonus. During this same time period, REYNOLDS also repeatedly made false statements to, and deliberately withheld information from, the Hospital’s board of directors about certain conflicts of interest, including his undisclosed financial arrangement with the subordinate Hospital employee.
In addition, in May 2008, during the course of the investigation of his involvement in this fraudulent scheme, REYNOLDS made a number of false statements to an agent of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), about his relationship with that Hospital employee and the funds he had received from that employee.
In addition to his prison term, REYNOLDS, 64, of Venice, Florida, was sentenced to two years of supervised release. REYNOLDS was also ordered to forfeit $718,500. A final determination on restitution is scheduled before Judge Baer on December 11, 2013 at 10:30 a.m.
Mr. Bharara praised the investigative work of the HHS-OIG.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Christopher D. Frey is in charge of the prosecution.
Manhattan U.S. Attorney Announces Fraud Charges Against Provider of Services for Special Needs Preschool StudentsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Thomas P. DiNapoli, the New York State Comptroller, Richard Condon, the Special Commissioner of Investigation for New York City’s Department of Education, and Brian M. Hickey, the Special Agent-in-Charge of the Northeastern Region of the United States Department of Education’s Office of Inspector General (“ED-OIG”), announced today the arrest of CHEON PARK, owner and executive director of Bilingual SEIT, a federal, New York State, and New York City funded provider of special education services and preschool programs to New York City preschool children. PARK was arrested this afternoon and presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis.
Manhattan U.S. Attorney Preet Bharara said: “Cheon Park allegedly orchestrated multiple schemes to enrich himself by taking funds intended for special needs children and diverting them into his own coffers. As today’s arrest makes clear, we will not tolerate individuals who cheat local, state, and federal government under the guise of helping children, and will do everything in our power to hold them accountable.”
New York State Comptroller Thomas P. DiNapoli said: “As alleged, Cheon Park blatantly ripped off taxpayers for hundreds of thousands of dollars, partly through kickbacks, to support his lavish lifestyle, even going as far as using the public’s money to clean his house. Our audits and investigations of special education providers have uncovered too much fraud and abuse that is depriving students with special needs of the resources intended for them. I urge the Governor to sign our bill that mandates an audit of every provider and give taxpayers assurance their money is being well-spent. I commend U.S. Attorney Preet Bharara for prosecuting Park and bringing abusers of the special education system to justice. I look forward to continuing this partnership.”
SCI Special Commissioner Richard J. Condon said: “As alleged, Park, through Bilingual SEIT, used a contract with the New York City Department of Education to misappropriate public funds for his own benefit. At the same time, Park allegedly deprived the neediest of preschool students of essential mandated services. This is one of a series of investigations that my office is conducting with the U.S. Attorney for the Southern District of New York.”
ED-OIG Special Agent-in-Charge Brian M. Hickey said: “Today’s arrest relates to allegations that Mr. Park not only knowingly and willfully abused his position of trust for personal gain, but did so at the expense of special needs students. That is completely unacceptable. Tracking down those who would cheat the children and families that rely on special education programs is a priority of our office.”
The following allegations are based on the Complaint unsealed today in Manhattan federal court:
Between 2005 and 2012, PARK engaged in a conspiracy to defraud the federal government, New York State, and New York City of millions of dollars by deliberately inflating both the amount of compensation Bilingual SEIT paid certain of its employees and contractors, and the type of work performed by certain employees on annual certified consolidated fiscal reports (“CFRs”) and financial statements submitted to the New York State Education Department (“NYSED”) and the New York City Department of Education (“NYCDOE”).
PARK owned and operated Bilingual SEIT from at least 2005 to 2012. During that time, Bilingual SEIT had a contract with the NYCDOE to provide publicly funded special education services and preschool programs to New York City schoolchildren aged three to five with physical, emotional, and/or developmental disabilities. Specifically, Bilingual SEIT received funding to provide: (1) special education itinerant teacher, commonly referred to as SEIT, services; (2) special education classes in a center-based setting for preschool students with special needs; (3) individual evaluations for preschool students with disabilities; and (4) physical, occupational, and/or speech therapy for preschool students who qualified for such services. As of September 2012, Bilingual SEIT operated out of five locations in Manhattan, Queens, and Brooklyn.
During the seven-year period that Bilingual SEIT was under contract with the NYCDOE, it claimed reimbursement for and received approximately $94.5 million in federal, New York State, and New York City funding to provide the services described above. In order to receive such money, on behalf of Bilingual SEIT, PARK was required to file a CFR supported by audited financial statements with the NYSED. The CFR and audited financial statements represented the costs that Bilingual SEIT had incurred the previous year and the justification for those costs, and included compensation Bilingual SEIT purported to pay its employees and contractors. Each year, PARK signed the certification pages for the CFRs filed with the NYSED, which relied on the CFR and audited financial statements in determining the amount of public funds to pay Bilingual SEIT per student for the services Bilingual SEIT provided to New York City preschool students.
Beginning in approximately June 2011, the New York State Comptroller’s office (the “Comptroller”) conducted an audit of Bilingual SEIT to determine whether the costs reported by Bilingual SEIT on the CFRs for the years July 2007 through 2009 were properly calculated, justified, and allowable under guidance issued by the NYSED. In July 2012, the Comptroller issued a report that concluded that nearly $1.5 million of the costs that PARK certified for the two-year audit period should have been disallowed, including money paid to 26 employees whose time and attendance could not be substantiated. As a result of the Comptroller’s report, the NYCDOE cancelled Bilingual SEIT’s classes and declined to renew its contract with Bilingual SEIT.
In fact, PARK engaged in several schemes designed to inflate the costs Bilingual SEIT represented it incurred, resulting in more public money for Bilingual SEIT, much of which, as set forth below, was kicked back to PARK.
Specifically, PARK engaged in three different fraudulent schemes. First, PARK fraudulently received funds from New York State and New York City to pay multiple individuals who performed little or no work for Bilingual SEIT. At PARK’s request and direction, these individuals then kicked back as much as 50% of the salary they fraudulently received from Bilingual SEIT to PARK. For example, PARK asked an individual who sporadically evaluated children for Bilingual SEIT (“Individual-3”) to accept payment from Bilingual SEIT in exchange for kicking back 50% of the payments to PARK. Individual-3 agreed, and kicked back approximately $3,500 a month in cash to PARK each month during the period between 2005 and 2008. During the Comptroller’s audit, PARK asked Individual-3 to sign various documents that falsely indicated that Individual-3 actually worked for Bilingual SEIT during the years 2007 through 2009.
Second, PARK fraudulently received funds from New York State and New York City to deliberately overpay other individuals who worked for Bilingual SEIT. At PARK’s request and direction, these individuals also kicked back a portion of the overpayment to PARK on a regular basis. For example, in 2006, PARK hired an individual as an office worker for Bilingual SEIT (“Individual-4”). Shortly after Individual-4 began working for Bilingual SEIT, PARK asked Individual-4 to kick back to PARK approximately $2,200 a month from Individual-4’s monthly salary. Individual-4 agreed to do so, and kicked-back approximately $2,200 a month to Park until Individual-4 stopped working for Bilingual SEIT in 2011.
Third, in addition to receiving kickbacks, PARK used Bilingual SEIT funds for his personal benefit in other ways. PARK arranged for Bilingual SEIT to pay his ex-wife and ex-sister-in-law for work they did not perform. According to various CFRs filed with the NYSED, PARK’s ex-wife served as Bilingual SEIT’s “Assistant Executive Director,” the second most senior executive at Bilingual SEIT. For the years 2006 through 2012, PARK’s ex-wife was one of the most highly compensated employees at Bilingual SEIT. According to witness interviews, as well as the audit performed by the Comptroller, PARK’s ex-wife did not function as the “Assistant Executive Director,” and, to the extent she performed any functions at all at Bilingual SEIT, she was an office worker. PARK also arranged to have Bilingual SEIT pay his ex-sister-in-law, who, according to witnesses, never worked at Bilingual SEIT. Finally, PARK also arranged for Bilingual SEIT to pay for tutoring for PARK’s children and for a Bilingual SEIT employee to clean PARK’s home twice a week.
PARK, 46, of Manhasset, New York, is charged with conspiracy to commit mail fraud, which carries a maximum term of 20 years in prison, and one count of mail fraud, which also carries a maximum term of 20 years in prison.
Mr. Bharara praised the investigative work of the Office of the State Comptroller, the Special Commissioner of Investigation for New York City’s Department of Education, the Office of Inspector General for the United States Department of Education. He also thanked the Queens County District Attorney’s Office for its assistance.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Paul Krieger, Rebecca Ricigliano, and Martin Bell are in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Cheon Park Complaint 13Mag2624
Manhattan U.S. Attorney Announces $5 Million Settlment of Civil Forfeiture Claim Against Dutchess County Medical PracticeRead 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 simultaneously settled, a civil forfeiture lawsuit against the assets of Mid Hudson Medical Group, P.C. (“MHMG”). The Government’s action alleges that MHMG received millions of dollars in proceeds from two schemes to defraud Medicare, the New York State Insurance Fund, and private health insurance providers (collectively, the “Health Insurance Providers”). The stipulation and order of settlement (the “Settlement”) requires MHMG to forfeit $5 million to the United States. The Government submitted the Settlement for approval this afternoon to U.S. District Judge Vincent L. Briccetti, who is presiding over the matter, captioned United States v. $5,000,000.00 in U.S. Currency, 13 Civ. 7898 (VB).
Manhattan U.S. Attorney Preet Bharara said: “The laws are clear and formidable when it comes to the bilking of health insurance providers: you cannot be permitted to keep and enjoy illicit proceeds of fraud. This Office and its partners will make every effort to intercept such activity wherever we find it.”
According to the Verified Complaint and other publicly filed documents:
Between at least 2006 and July 2011, Spyros Panos, an orthopedic surgeon and MHMG shareholder, engaged in an unlawful scheme to defraud Health Insurance Providers, in which Panos submitted, and caused MHMG to submit, fraudulent information to the Health Insurance Providers regarding the nature and details of surgical procedures he performed. As a result, the Health Insurance Providers paid MHMG millions of dollars more than MHMG was entitled to receive for the actual work that Panos did perform. On October 31, 2013, Panos pled guilty to one count of engaging in a scheme to commit health care fraud, in a criminal case captioned United States v. Spyros Panos, 13 Cr. 800 (NSR).
Additionally, from approximately 2009 through June 2012, certain employees of MHMG, who were responsible for submitting requests for pre-authorization/certification from certain Health Insurance Providers for Magnetic Resonance Imaging tests (“MRIs”), submitted requests to Health Insurance Providers in which the employees included details regarding patients’ history that the employees knew were necessary in order to obtain the approvals, but which the employees had no reason to know was or was not truthful, and which in at least some cases was not truthful. As a result, Health Insurance Providers paid MHMG more for MRI tests than MHMG was entitled to receive.
Under the terms of the Settlement, MHMG is awarded credits for reimbursements it has already made to certain Health Insurance Providers, and MHMG is required to transfer an additional $3.67 million to the United States pursuant to an agreed-upon schedule. The Settlement amount represents an estimate of the amount of proceeds MHMG obtained from Health Insurance Providers as a result of the alleged unlawful activity and is not a final determination by the Government as to the loss amounts incurred by all Health Insurance Providers, collectively or individually, as a result of the unlawful activity.
Mr. Bharara praised the work of the United States Postal Inspection Service, the United States Department of Health and Human Services – Office of Inspector General, and the Federal Bureau of Investigation, and thanked the United States Department of Health and Human Services, Office of Counsel to the Inspector General and Office of General Counsel, the New York State Insurance Fund, and the New York Workers’ Compensation Board Office of the Fraud Inspector General for their assistance.
This case is being handled by the White Plains Division. Assistant United States Attorneys Lee Renzin and Daniel Filor are in charge of the case.
MHMG Forfeiture Stip Settlement.Filed
MHMG Forfeiture Complaint.FiledEleven Members of Yonkers Gang Charged in White Plains Federal Court with Narcotics Trafficking and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Charles Gardner, the Commissioner of the Yonkers Police Department, and George N. Longworth, the Commissioner of the Westchester County Department of Public Safety, announced today the unsealing of an Indictment charging 11 defendants with a series of crimes, including the distribution of narcotics and the use of firearms in Yonkers, New York.
U.S. Attorney Preet Bharara stated: “Our drive to remove armed drug gangs from Yonkers remains unrelenting, as evidenced by today’s arrests and charges. With motivated and cooperative law enforcement partners involved, we are a step closer to our goals.”
FBI Assistant Director-in-Charge George Venizelos stated: “Combating the scourge of drugs in our cities remains a focus for this office. Like we’ve seen so many times before, these drugs also brought guns and violence. We will continue to work with any law enforcement agency to clean up our cities’ streets.”
Yonkers Police Commissioner Charles Gardner stated: “This operation is yet another example of our successful partnership with federal authorities in targeting a violent street gang on a local level. It should be a warning to any other groups in Yonkers who choose to engage in this activity. I want to thank U.S. Attorney Preet Bharara, the F.B.I. and the Westchester County Department of Public Safety for their efforts in this investigation.”
Westchester Public Safety Commissioner George N. Longworth stated: “This is another example of the tremendous results that occur when federal and local law enforcement work together to maximize our resources to combat drug trafficking and the violence that goes along with it. We remain committed to working with all our law enforcement partners to keep the people of Westchester safe.”
A two-count Indictment, United States v. Joaquin Thatcher, et al., charges 11 members and associates of a violent street gang hailing from Riverdale Avenue, known both as “Two Gunz Up” and simply “Riverdale,” with narcotics and firearms offenses. Specifically, the following 11 members of Two Gunz Up – JOAQUIN THATCHER, a/k/a “Wu,” PAUL FOSTER, a/k/a “Pauly Pistols,” CHARLIE JIMINEZ, a/k/a “350,” a/k/a “Gucci,” TORREL SMITH, a/k/a “Assassin,” CRAIG MAJOR, a/k/a “Millz,” REESE MOORE, a/k/a “Loc,” ANTHONY OLIVER, a/k/a “Ant Pooh,” DAQUON POWELL, a/k/a “DP,” DWAYNE CARR, a/k/a “Weezy,” JIMMIE HUGHES, a/k/a “Jim Jim,” and ALEXANDER MCCRAY, a/k/a “AWOL” – are charged with conspiring to distribute, and possess with intent to distribute, crack cocaine and marijuana from about 2006 up to about October 2013. Eight of these defendants are also charged with using, carrying, possessing, and discharging firearms during the narcotics conspiracy.
The Indictment is the result of a long-term investigation conducted by federal, state, and local law enforcement officers working with the United States Attorney’s Office for the Southern District of New York and supported by the Department of Justice’s Organized Crime and Drug Enforcement Task Force. As part of that investigation, in March 2009, this Office obtained Indictments charging three members of Two Gunz Up and the Elm Street Wolves, an allied Yonkers street gang -- Gregory Fuller, Davon Young, and Thomas Chambliss -- with the January 2008 murder of a narcotics dealer in northern Yonkers. Fuller, Young, and Chambliss were each convicted after trial of murder, conspiracy to distribute crack cocaine, robbery, and firearms offenses and were sentenced to 100, 65 and 45 years of imprisonment, respectively.
In August 2011, 66 Yonkers gang members – 47 members and associates of the Elm Street Wolves, 12 members and associates of the Cliff Street Gangsters and 7 other individuals -- were charged with narcotics trafficking and firearm offenses. Five of the Elm Street Wolves defendants were also charged with the murder of Christopher Cokley, a/k/a “Bracks,” a leading member of the Strip Boyz, a rival Yonkers gang. Each of those defendants has since been convicted, many of them facing mandatory minimum sentences of between 10 and 18 years of imprisonment. Only one of those defendants, Steven Knowles, the leader of the Elm Street Wolves, proceeded to trial. After trial, Knowles was convicted of murder, racketeering, narcotics and firearms offenses and now faces a mandatory term of life imprisonment.
Two Gunz Up, from Riverdale Avenue, has historically been aligned with other street gangs, including the Elm Street Wolves and the Cliff Street Gangsters, in a violent dispute with a number of rival gangs, including the Strip Boyz from the nearby Schlobohm Housing Project on Schroeder Street in Yonkers. In June 2012, 23 members and associates of the Strip Boyz were arrested and charged with narcotics trafficking and firearm offenses. Fifteen of these defendants have pled guilty, with all but one facing mandatory minimum sentences of between 5 and 12 years of imprisonment. The remaining cases are not yet resolved.
All 11 defendants charged in the Indictment unsealed today were arrested today or have previously been taken into custody. They were presented in White Plains federal court this afternoon. The case is assigned to United States District Judge Vincent L. Briccetti.
Mr. BHARARA praised the outstanding investigative work of the FBI and the Yonkers Police Department. He added that the investigation is continuing.
The prosecution is being handled by the Office’s White Plains Division and Violent Crimes Unit. Assistant U.S. Attorneys Scott Hartman and Andrew Bauer 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.
Riverdale Takedown.Indictment
Riverdale Takedown.IndictmentManhattan U.S. Attorney Announces Arrest of SuspendedPort Chester Police Chief for Witness Tampering and RetaliationRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation, (“FBI”), announced today the unsealing of a two-count Complaint charging JOSEPH KRZEMINSKI, the Village of Port Chester Police Chief, with tampering with, and retaliating against, a witness in a federal investigation being conducted by the FBI. The Complaint alleges that the FBI is conducting an investigation into allegations surrounding the disappearance of over $26,000 in cash and narcotics from the evidence room at the Port Chester Police Department, and other allegations of theft and misconduct. The Complaint further alleges that KRZEMINSKI, age 62, physically threatened and retaliated against the Port Chester Police Department’s Acting Chief, who has been cooperating with the FBI in its investigation. KRZEMINSKI was arrested yesterday afternoon and was presented before United States Magistrate Judge Lisa Margaret Smith in White Plains federal court. KRZEMINSKI was released pursuant to a $100,000 personal recognizance bond to the custody of his son.
According to the Complaint unsealed in White Plains federal court:
Since early September 2013, the FBI has been investigating the theft of more than $26,000 in cash from one of the evidence rooms at the Port Chester (Westchester County, New York) Police Department headquarters and additional matters. Shortly after the investigation began, KRZEMINSKI was directed by the Village of Port Chester "not to exercise any of the authority, responsibilities and duties associated with being the Chief of Police" until he was authorized to return to duty. The Village also appointed a Captain of the Port Chester Police Department to the position of Acting Chief. After assuming his duties, the Acting Chief provided information to the FBI relating to possible violations of federal law.
On October 28, 2013, KRZEMINSKI forced his way inside the Acting Chief's home in Port Chester and shouted that the Acting Chief was a "rat" and a "rat bastard." KRZEMINSKI also stated to the Acting Chief, “Who do you think you are telling those people what's going on?" and further said that the Acting Chief did not have the authority to make such reports. KRZEMINSKI also stated, in substance and in part, that he would fire the Acting Chief when KRZEMINSKI returned to duty. During the encounter, KRZEMINSKI put his hands on the Acting Chief's shoulders near his neck. At another point during the encounter, KRZEMINSKI made a fist and cocked his arm, as if he intended to strike the Acting Chief.
On the same day, KRZEMINSKI placed a call to the Port Chester Police Department and told a supervisory police officer that “if [the Acting Chief] doesn’t think I’m coming back he’s dreaming” and that “the first thing I’m gonna do is retaliate against him.” KRZEMINSKI further explained that when he returned to work he would immediately place the Acting Chief on unpaid leave. KRZEMINSKI repeatedly told the supervisory police officer to tell the Acting Chief what he had said.
The Port Chester Village Board met in the late afternoon of October 31, 2013. As the Board was about to go into executive session, KRZEMINSKI forced his way into the room and refused to leave. After the Acting Chief warned KRZEMINKSI that he would be arrested if he did not leave, KRZEMINSKI stated "Go fuck yourself. Don't you tell me you gonna arrest me." KRZEMINSKI then stated, "Let me tell you what this scumbag did to me." The Acting Chief then directed police officers who were present to arrest KRZEMINSKI. KRZEMINSKI resisted arrest, but was handcuffed and removed.
KRZEMINSKI faces, upon conviction, a maximum sentence of 20 years' imprisonment on each of the two counts charged in the Complaint, which charge KRZEMINSKI with witness tampering and retaliating against a witness.
This prosecution is being handled by the Office's White Plains Division. Assistant U.S. Attorney James McMahon 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.
KrzeminskiJoseph.Complaint
Supporting Documents: U.S. V. S.A.C. Capital Advisors, LP, S.A.C. Capital Advisors LLC, CR Intrinsic Investors, LLC, and Sigma Capital Management, LLCRead the Press Release
U.S. v. SAC Capital Advisors, LP, et al. Indictment
U.S. v. SAC Capital Advisors, LP, et al. Complaint - 13 Civ 5182
U.S. v. SAC Capital Advisors, LP, et al. Change of Plea Order
U.S. v. SAC Capital Advisors LP, et al. Cover Ltr, Plea Agt, and StipManhattan U.S. Attorney Announces Guilty Plea Agreement with SAC Capital Management CompaniesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today an agreement (the “Agreement”) to resolve insider trading charges against four companies – S.A.C. CAPITAL ADVISORS, L.P. (“SAC Capital LP”), S.A.C. CAPITAL ADVISORS, LLC (“SAC Capital LLC”), CR INTRINSIC INVESTORS, LLC (“CR Intrinsic”), and SIGMA CAPITAL MANAGEMENT, LLC (“Sigma Capital”), collectively (the “SAC Companies”) – that are responsible for the management of a group of affiliated hedge funds, collectively (the “SAC Hedge Fund” or “SAC”).
Under the Agreement, which is subject to Court approval, the SAC Companies will plead guilty to each count in which they are charged of an indictment (the “Indictment”) unsealed in July of this year charging the SAC Companies with securities fraud and wire fraud in connection with a large-scale insider trading scheme. The Agreement imposes a $1.8 billion financial penalty on the SAC Companies – the largest insider trading penalty in history – split between a $900 million fine in the criminal case (the “Criminal Case”), and a $900 million forfeiture judgment in a civil money laundering and forfeiture action (the “Forfeiture Action”) filed by the Government simultaneously with the criminal charges. It also provides that the SAC Companies and their affiliates will no longer accept outside investor funds and will shut down operations as an investment adviser.
The Agreement between the Government and the SAC Companies to plead guilty to all of the charges in the Indictment in which they are charged and resolve the Forfeiture Action is subject to judicial review and approval. The Government submitted the Agreement this morning to U.S. District Judge Laura T. Swain, who is presiding over the Criminal Case, captioned United States v. S.A.C. Capital Advisors, L.P., et al., 13 Cr 541 (LTS), and U.S. District Judge Richard J. Sullivan, who is presiding over the Forfeiture Action, captioned United States v. S.A.C. Capital Advisors, L.P., et al., 13 Civ. 5182 (RJS). The Agreement has no force unless and until it is approved by the district judges.
Manhattan U.S. Attorney Preet Bharara said: “As I said four years ago, at the time of our first major insider trading arrests, greed sometimes is not good. And there are at least 75 convicted insider trading defendants who, today, would likely agree. But individual guilt is not the whole of our mission. Sometimes, blameworthy institutions need to be held accountable too. No institution should rest easy in the belief that it is too big to jail. That is a moral hazard that a just society can ill afford. Today, SAC Capital, one of the world’s largest and most powerful hedge funds, agreed to plead guilty, shut down its outside investment business, and pay the largest fine in history for insider trading offenses. That is the just and appropriate price for the pervasive and unprecedented institutional misconduct that occurred here.”
FBI Assistant Director-in-Charge George Venizelos said: “What SAC Capital’s plea demonstrates is that cheating and breaking the law were not only permitted but allowed to persist. The result is $1.8 billion in fines and forfeiture, the largest penalty in an insider trading case ever, and termination of their investment advisory business. The problem of insider trading is real. For companies that willfully turn a blind eye, be on notice: how your employees make money is just as important as how much they make. The FBI’s investigation into insider trading on Wall Street, on Main Street, in hedge funds, at expert networking firms, and anywhere else, continues.”
As alleged in the Indictment, from 1999 through at least 2010, numerous employees of the SAC Companies obtained and traded on material, non-public information that they were not permitted to have (“Inside Information”), or recommended trades based on such information to SAC Portfolio Managers (“SAC PMs”) or the SAC Owner. Specifically, the Indictment charges the SAC Companies with insider trading offenses committed by numerous employees, occurring over the span of more than a decade, and involving the securities of more than 20 publicly-traded companies across multiple sectors of the economy. As charged in the Indictment, the systematic insider trading engaged in by SAC PMs and Research Analysts was the predictable and foreseeable result of multiple institutional failures. The failures alleged included hiring practices heavily focused on recruiting employees with networks of public company insiders, the failure of SAC management to question employees about trades that appeared to be based on Inside Information, and ineffective compliance measures that failed to prevent or detect such trading, particularly prior to late 2009.
The Complaint in the Forfeiture Action alleges that the SAC Companies engaged in money laundering by commingling the illegal profits from insider trading with other assets, using the profits to promote additional insider trading, and transferring the profits with the assistance of financial institutions.
The Agreement announced today has two component parts: first, a plea agreement to resolve the Criminal Case, and second, a stipulation and proposed order to resolve the civil money laundering and forfeiture claims in the Forfeiture Action. Both documents have been submitted to the district judges for review. If approved, the Agreement would provide for the following:
- The SAC Companies will plead guilty to all counts of the Indictment in which they are charged, which include a securities fraud and wire fraud count for each of the SAC companies.
- The SAC Companies will pay a $1.8 billion financial penalty, consisting of a $900 million fine in the Criminal Case and a $900 million judgment in the Forfeiture Action. Because the SAC Companies have already agreed to pay $616 million to the U.S. Securities & Exchange Commission to resolve related civil insider trading charges, that amount will be credited against today’s penalty, and therefore, the additional payment required under this Agreement will be approximately $1.2 billion. The SAC Companies have further agreed that neither they nor any other person or entity paying any portion of the $1.8 billion financial penalty shall claim any tax deduction or credit for any money paid in resolving the Criminal Case and the Forfeiture Action.
- The SAC Companies will no longer accept third party investor funds and will terminate operations as an investment adviser.
- The SAC Companies will each be sentenced to five-year terms of probation – the maximum allowed by law – with a provision to end probation earlier if the SAC Companies cease operating entirely. The terms of probation will require, among other conditions, that the SAC Companies employ appropriate compliance measures to identify and prevent insider trading. Additionally, the insider trading compliance measures of the SAC Companies and any related entities trading securities will be reviewed by an independent compliance expert who will direct the SAC Companies to correct identified deficiencies.
The Agreement would resolve the criminal charges against the SAC Companies but does not provide any individual with immunity from prosecution. Under the terms of the Agreement, the Government is not prevented from charging any individual with insider trading offenses and seeking the maximum prison term authorized by law for such offenses.
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 Arlo Devlin-Brown, Antonia M. Apps and John T. Zach are in charge of the prosecution, and Assistant U.S. Attorneys Sharon Cohen Levin, Chief of the Asset Forfeiture Unit, Micah Smith and Christine Magdo are responsible for the forfeiture aspects of the case.
The Agreement relates only to the guilt of the SAC Companies and resolves pending charges against only the SAC Companies – it does not include any admissions pertaining to individual defendants. All criminal defendants are presumed innocent unless and until proven guilty.
U.S. v. SAC Capital Advisors LLP, et al. Cover Ltr, Plea Agt, and Stip
Former Holocaust Claims Conference Director Sentenced to Eight Years in Prison for $57.3 Million Fraud on Organization That Makes Reparations to Victims of Nazi PersecutionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that SEMEN DOMNITSER was sentenced today in Manhattan federal court to eight years in prison for his participation in a $57 million fraud scheme that targeted programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), and that were established to aid the survivors of Nazi persecution. DOMNITSER, a former employee of the Claims Conference who served as the Director of the relevant programs from 1999 to 2010, was convicted on May 8, 2013 of one count of conspiracy to commit mail fraud and one count of mail fraud, following a four-week trial. He was sentenced today by U.S. District Judge Thomas P. Griesa.
Manhattan U.S. Attorney Preet Bharara said: “As the highest ranking insider to participate in this despicable fraud against the Holocaust Claims Conference, Mr. Domnitser played an integral role in the scheme by processing fraudulent applications to the Conference and turning a profit of thousands of dollars for himself. With today’s sentence, he will be held to account for victimizing Holocaust survivors by diverting funds meant to help them to his own pocket and contributing to this $57 million scheme.”
According to the Superseding Indictment, other documents filed in Manhattan federal court, the evidence presented at trial, and statements made during court proceedings:
The Claims Conference, a not-for-profit organization that provides assistance to victims of Nazi persecution, supervises and administers several funds that make reparation payments to victims of the Nazis, including “the Hardship Fund” and “the Article 2 Fund,” both of which are funded by the German government. Applications for disbursements through these funds are processed by employees of the Claims Conference’s office in Manhattan, New York, and the employees are supposed to confirm that the applicants meet the specific criteria for payments under the funds.
As part of the charged scheme, a network of individuals systematically defrauded the Article 2 Fund and Hardship Fund programs for over a decade. The Claims Conference first suspected the fraud in November 2009, and immediately reported their suspicions to law enforcement, which conducted a wide-reaching investigation.
The Hardship Fund pays a one-time payment of approximately $3,500 to victims of Nazi persecution who evacuated the cities in which they lived and were forced to become refugees. Members of the conspiracy submitted fraudulent applications for people who were not eligible. Many of the recipients of fraudulent funds were born after World War II, and at least one person was not even Jewish. Some members of the conspiracy recruited other individuals to provide identification documents, such as passports and birth certificates, which were then fraudulently altered and submitted to corrupt insiders at the Claims Conference, who then processed those applications. When the applicants received their compensation checks, they kept a portion of the money and passed the rest back up the chain, to their recruiters and others involved in the scheme.
From the investigation to date, the Claims Conference has determined that at least 3,839 Hardship Fund applications appear to be fraudulent. These applications resulted in a loss to the Hardship Fund of approximately $12.3 million.
The Article 2 Fund makes monthly payments of approximately $400 to survivors of Nazi persecution who make less than $16,000 per year, and either lived in hiding or under a false identity for at least 18 months; lived in a Jewish ghetto for 18 months; or were incarcerated for six months in a concentration camp or a forced labor camp. The fraud involved doctored identification documents in which the applicant’s date and place of birth had been changed. The fraud also involved more sophisticated deception, including altering documents that the Claims Conference obtained from outside sources to verify a person’s persecution by the Nazis. Some of the detailed descriptions of persecution in the fraudulent Article 2 Fund applications were completely fabricated.
From the investigation to date, the Claims Conference has determined that at least 1,112 Article 2 Fund cases it processed have been determined to be fraudulent. Those cases have resulted in a loss to the Claims Conference of approximately $45 million.
DOMNITSER was an Article 2 Fund caseworker from 1994 until 1999, and as a caseworker, helped process fraudulent applications. In 1999, DOMNITSER became the Director of both the Article 2 Fund and the Hardship Fund, and continued to serve in that role until his termination in February 2010. As Director, DOMNITSER approved fraudulent applications and received thousands of dollars in payments – typically in the form of money orders – from applicants who had received money from the funds to which they were not entitled.
In addition to his prison term, DOMNITSER, 55, of Brooklyn, New York, was sentenced to three years of supervised release. He was also ordered to forfeit $59,230 and pay restitution in the amount of $57.3 million.
Since 2010, a total of 31 individuals have been charged with participating in the scheme to defraud the Article 2 Fund and Hardship Fund programs. Twenty-eight defendants pled guilty and three—DOMNITSER, Luba Kramrish, and Oksana Romalis—were convicted after trial. Kramrish was sentenced by Judge Griesa on September 20, 2013, to 37 months in prison, and Romalis is scheduled to be sentenced before Judge Griesa on November 26, 2013, at 11:00 a.m.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its continued cooperation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Christopher D. Frey and Special Assistant U.S. Attorney Rebecca Rohr are in charge of the prosecution.
Manhattan Man Pleads Guilty in Manhattan Federal Court to Engaging in A Fraudulent Investment SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that S. GEORGE MILTER pled guilty today in Manhattan federal court to participating in an investment scheme that defrauded foreign investors out of nearly $1 million. As part of the scheme, MILTER lured investors with false promises that their funds would be safely invested in the U.S. financial markets through a legitimate broker-dealer. Instead, MILTER and his co-defendant Cliffe R. Bodden misappropriated the money by transferring it to related individuals and entities and using it to pay certain personal expenses. MILTER pled guilty today before U.S. District Judge Katherine B. Forrest.
Manhattan U.S. Attorney Preet Bharara said: “George Milter lied to foreign investors about the safety and performance of their funds while he diverted their money for his own purposes. With his guilty plea today, he joins the disgraced ranks of those convicted for perpetrating investment fraud.”
According to the Indictment against MILTER and Bodden, and statements made during MILTER’s plea allocution today, and prior court proceedings:
MILTER held himself out as the Chief Executive Officer of Lempert Brothers International U.S.A., a registered broker-dealer in Manhattan, and President and Chief Executive Officer of Lempert Capital Management, Ltd., which purportedly was incorporated in the Cayman Islands and managed by Lempert Brothers. Bodden held himself out as a Managing Director of Lempert Capital.
Starting in approximately 2005, MILTER lured foreign investors into sending at least $946,509 to Lempert Brothers under the pretense that those funds would be invested in the U.S. financial markets. To induce investors into wiring funds, MILTER falsely told them that the funds would be safeguarded, and that if the value of the funds dropped more than 20%, the money would be frozen and all remaining funds available for return to investors. In fact, MILTER and Bodden misappropriated the nearly $1 million of investors’ funds by using the money to pay their personal expenses and diverting the funds to a member of MILTER’s family and entities affiliated with Bodden.
To keep the scheme going, MILTER and Bodden sent fraudulent monthly account statements to the investors. These statements falsely reflected that the investors’ funds were invested and earning substantial income. When the investors attempted to withdraw money from their accounts at Lempert Brothers, MILTER and Bodden made additional false and fraudulent representations as to why the funds could not be returned when requested. For example, they falsely told investors that their money was illiquid because it had been invested in various companies that had not yet gone public.
MILTER, 35, of New York, New York, pled guilty to one count of wire fraud and faces a maximum sentence of 20 years in prison. In addition, he has agreed to a money judgment of $946,509 representing the amount of the crime proceeds. Milter is scheduled to be sentenced by Judge Forrest on March 7, 2014 at 2:00 p.m.
Bodden pled guilty in September 2012 to one count of conspiracy to commit wire fraud and one count of wire fraud for his participation in the investment scheme. He was sentenced by Judge Forrest in February 2013 to 74 months in prison and ordered to pay a money judgment and restitution of $946,509 representing the amount of the crime proceeds, as well as a fine of $25,000.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecution.
Milter, Bodden Indictment
Jenkens & Gilchrist Attorney Found Guilty in Manhattan Federal Court of Multibillion-Dollar Criminal Tax Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Ronald A. Cimino, Deputy Assistant Attorney General for the Tax Division of the Department of Justice, and Richard Weber, the Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that PAUL M. DAUGERDAS was convicted in Manhattan federal court for his role in a tax shelter scheme in which he and his co-conspirators designed, marketed, and implemented fraudulent tax shelters used by wealthy individuals to avoid paying taxes to the IRS. The 10-year scheme generated over $7 billion of fraudulent tax losses and netted DAUGERDAS approximately $95 million in profits. DAUGERDAS was convicted following a seven-week jury trial, presided over by U.S. District Judge William H. Pauley III.
Manhattan U.S. Attorney Preet Bharara said: “Paul Daugerdas concocted an elaborate web of lies in orchestrating a fraudulent tax shelter scheme that spanned a decade, generated more than $7 billon in phony tax losses, and made the defendant $95 million in profits. With yesterday’s guilty verdict, the defendant will now be punished for his actions.”
DAAG Ronald Cimino said: “The jury's guilty verdict of Paul Daugerdas reaffirms the principle that an individual who utilizes his expertise, training and skills to create and market fraudulent tax schemes will be prosecuted to the full extent of the law and ultimately held accountable for the crimes that he committed.”
IRS-CI Chief Richard Weber said: “Mr. Daugerdas’s use of convoluted mechanisms to conceal income from the IRS is criminal activity. He designed and marketed tax shelters making him $95 million in illegal profits from the ten-year scheme. Taxpayers deserve our vigilance in making sure everyone pays their fair share of tax.”
According to the evidence admitted at trial and other documents filed in the case:
From 1994 through 2004, DAUGERDAS, a lawyer, certified public accountant, and the former head of the Chicago office of the Jenkens & Gilchrist law firm (“J&G”) and its tax practice, participated in a scheme to defraud the IRS by designing, marketing, implementing, and defending fraudulent tax shelters.
As part of the scheme, DAUGERDAS and others undertook to prevent the IRS from: (i) detecting their clients’ use of these shelters; (ii) understanding how the transactions operated to produce the tax results reported by the clients; (iii) learning that the shelters were marketed as cookie-cutter products designed to eliminate or reduce large tax liabilities; (iv) learning that the clients were not seeking profit-making investment opportunities, but were instead seeking huge tax benefits; and (v) learning that, from the outset, all the clients intended to complete a pre-planned series of steps that had been designed to lead to the specific tax benefits sought by the clients. DAUGERDAS and others created, and assisted in creating, transactional documents and other materials that falsely and fraudulently described their clients’ motivations for entering into the tax shelters and for taking various steps in order to yield the tax benefits.
As a result of the scheme, the defendant and his co-conspirators made millions of dollars in fees and bonuses. Specifically, DAUGERDAS made $95 million in profits but used tax shelters to reduce the taxes he paid to less than $8,000; without the shelters, he would have owed over $32 million in taxes.
DAUGERDAS, 63, of Wilmette, Illinois, was convicted of conspiring to defraud the IRS, to evade taxes, and to commit mail and wire fraud, and of corruptly endeavoring to obstruct and impede the internal revenue laws. He was also convicted of four counts of tax evasion relating to the use of various tax shelters for specified clients, and of mail fraud.
DAUGERDAS faces a maximum sentence of 58 years in prison. He is scheduled to be sentenced by Judge Pauley on March 21, 2014, at 2:15 pm.
DAUGERDAS’s co-defendant at trial, Denis M. Field, was acquitted of all charges.
In connection with this same scheme, David Parse, a former broker at Deutsche Bank was convicted of various tax fraud charges in May 2011 after an 11-week jury trial, and was sentenced in March 2013 to 46 months in prison. Donna Guerin, a former lawyer at J&G’s Chicago tax practice pled guilty for her role in the scheme to various tax fraud charges in September 2012. She was sentenced in March 2013 to eight years in prison.
Former J&G partner Erwin Mayer, former BDO Seidman Vice Chairman and board member Charles W. Bee, Jr., former BDO principal and former member of BDO Seidman’s TSG and Tax Opinion Committee Michael Kerekes, former BDO Seidman Vice Chairman and TSG member Adrian Dicker, BDO Seidman partner Robert Greisman, and BDO Seidman partner Mark Bloom have all previously been convicted in connection with the scheme.
Mr. Bharara thanked the IRS and the Tax Division of the Department of Justice for their work on this case.
This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Stanley J. Okula, Jr. and Niketh Velamoor, and DOJ Tax Division Assistant Chief Nanette L. Davis, are in charge of the prosecution.
Dutchess County Orthopedic Surgeon Pleads GuiltyTo Multimillion Dollar Health Care Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DR. SPYROS PANOS, an orthopedic surgeon, pled guilty today in White Plains federal court before U.S. District Judge Nelson S. Roman to operating a long-running health care fraud scheme in which PANOS defrauded Medicare, the New York State Insurance Fund, and numerous private health insurance providers (the “Health Insurance Providers”) out of over $2.5 million by systematically lying about the nature and scope of the surgical procedures that he performed.
Manhattan U.S. Attorney Preet Bharara said: “Dr. Panos was brazen in his fraud on federal, state, and private health insurance providers. He filed claims for thousands of surgical procedures, often more than 20 a day, billing a total of over $35 million, when he actually performed lesser procedures, or none at all. We and our law enforcement partners finally put a halt to his abuses.”
According to the Information and other documents filed in this case:
PANOS was a board certified orthopedic surgeon licensed to practice medicine in the State of New York who was part a medical group with offices in Dutchess County, New York, (the “Medical Group”) and performed orthopedic surgical procedures (“Surgical Procedures”) at hospitals in Poughkeepsie, New York. From at least 2006 through July 2011, PANOS maintained a high-volume orthopedic practice, which enabled him to carry out his fraud scheme on a large scale. Panos performed thousands of Surgical Procedures, and often as many as 20 or more in a single day, for which he and the Medical Group submitted claims in excess of $35 million to Health Care Providers. Health Care Providers paid the Medical Group in excess of $13 million on these claims.
To receive payments for Surgical Procedures from the Health Insurance Providers, PANOS was required to submit, and caused the Medical Group to submit, information to the Health Insurance Providers regarding the nature and details of the Surgical Procedures. With respect to many of the Surgical Procedures he performed, PANOS furnished, and caused the Medical Group to furnish, false information to Health Insurance Providers that resulted in the Health Insurance Providers paying the Medical Group at least $2.5 million more than PANOS and the Medical Group were entitled to receive based on the true nature and details of the Surgical Procedures PANOS performed. Among PANOS’s false representations were the following:
a. PANOS claimed he performed open surgeries, when in fact PANOS performed the surgeries arthroscopically;
b. PANOS claimed he used certain techniques and procedures during the course of the Surgical Procedures, when in fact PANOS did not, either because they were not medically necessary or because PANOS used other techniques and procedures that would have resulted in lower payments, if any, from the Health Insurance Providers; and
c. PANOS removed body tissue, known in the medical field as loose bodies, in excess of certain size criteria, when in fact PANOS either removed no loose bodies or removed loose bodies that were smaller than the thresholds set by the Health Insurance Providers for payment.
PANOS, was compensated handsomely -- during the years 2007 through 2011, he was paid over $7.5 million by the Medical Group, a number that was inflated as a result of his fraud scheme.
Beginning in or about December 2010, PANOS attempted to conceal his scheme by, among other things, falsely representing to the Medical Group that the Fraudulent Claims were the result of clerical errors.
PANOS, 45, of Hopewell Junction, New York, faces a maximum sentence of 10 years in prison. PANOS agreed to the entry of a $5 million order of forfeiture against him, representing the approximate proceeds of his charged crime. As a result of his conviction, PANOS is subject to mandatory exclusion from participation in any Federal health care program, including Medicare and Medicaid, and he has agreed not to oppose a request by the Government that, as part of his sentence, the Court prohibit him from practicing medicine as a condition of probation or supervised release. Following the uncovering of the scheme, Panos surrendered his New York State medical license. As part of his plea agreement, PANOS must take any reasonable steps necessary to ensure that his Connecticut, Pennsylvania, and Virginia medical licenses are revoked, surrendered, or suspended by the time of sentencing. PANOS is scheduled to be sentenced by U.S. District Court Judge Roman on March 7, 2014.
Mr. Bharara praised the work of the United States Postal Inspection Service, the United States Department of Health and Human Services – Office of Inspector General, and the Federal Bureau of Investigation, and thanked the United States Department of Health and Human Services, Office of Counsel to the Inspector General, the New York State Insurance Fund, and the New York Workers’ Compensation Board Office of the Fraud Inspector General for their extraordinary assistance in the investigation.
This case is being handled by the White Plains Division. Assistant United States Attorneys Lee Renzin and Daniel Filor are in charge of the prosecution.
Panos, Spyros Information
Co-Founder of Liberty Reserve Pleads Guilty to Money Laundering in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Mythili Raman, Acting Assistant Attorney General for the Justice Department’s Criminal Division, announced that VLADIMIR KATS pled guilty today in Manhattan federal court to money laundering and operating an unlicensed money transmitting business for his role in running LIBERTY RESERVE, a company that operated one of the world’s most widely used digital currency services and allegedly laundered more than $6 billion in suspected proceeds of crimes. KATS was arrested in Brooklyn, New York, in May 2013. KATS pled guilty today before U.S. District Judge Denise L. Cote.
Manhattan U.S. Attorney Preet Bharara said: “As a co-founder and operator of Liberty Reserve, Vladimir Kats served as a global banker for criminals, giving them an anonymous, online forum to hide the proceeds of their illegal and dangerous activities. With his guilty plea today, we take a significant step toward punishing those responsible for creating and running this international den of cybercrime.”
Acting Assistant Attorney General Mythili Raman said: “Vladimir Kats, by his own admission, helped to create and operate an anonymous digital currency system that provided cybercriminals and others with the means to launder criminal proceeds on an unprecedented scale. His conviction reinforces what we said when Liberty Reserve was first brought down: banking systems that allow criminals to conduct illegal transactions anonymously will not be allowed to stand, and professional money launderers will be brought to justice.”
According to allegations contained in the Indictment filed against LIBERTY RESERVE, KATS, and six other individual defendants, the Superseding Information against KATS, and statements made in related court proceedings:
LIBERTY RESERVE was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.” LIBERTY RESERVE was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes, and it emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. LIBERTY RESERVE was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.
Before being shut down by the Government in May 2013, LIBERTY RESERVE had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system and laundered more than $6 billion in suspected proceeds of crimes, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking. KATS co-founded LIBERTY RESERVE and helped operate the company until in or about 2009.
KATS, 41, of Brooklyn, New York, pled guilty to one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison; one count of conspiring to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison; one count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison; one count of receiving child pornography, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of fifteen years in prison; and one count of marriage fraud, which carries a maximum sentence of five years in prison. A sentencing date has not yet been scheduled.
Mr. Bharara praised the outstanding work of the Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the Secret Service’s New York Electronic Crimes Task Force for their extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Acting Assistant Attorney General Mythili Raman. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner and Andrew Goldstein of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
The charges contained in the Indictment against KATS’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
Kats, Vladimir S6 Information
Philadelphia Businessman Sentenced in Manhattan Federal Court in Connection with Multiple Investment Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that TYRONE L. GILLIAMS, JR., a Philadelphia businessman, was sentenced today in Manhattan federal court to 10 years in prison after having been found guilty at trial in February 2013 of engaging in securities and wire fraud in connection with two separate schemes. In the larger of the two schemes, GILLIAMS and co-defendant Everette L. Scott, Jr., solicited and misappropriated $5 million in investments in a bogus United States Treasury Strips investment program. In the other scheme, the defendants solicited and misappropriated a $450,000 investment in a Utah coal mine. In addition to buying luxury cars, jewelry, and other items, GILLIAMS spent hundreds of thousands of dollars of investor money organizing and promoting a multi-day festival in Philadelphia that headlined Sean “Diddy” Combs. GILLIAMS was sentenced today by U.S. District Judge Deborah A. Batts.
Manhattan U.S. Attorney Preet Bharara stated, “With the lengthy sentence imposed today, Tyrone Gilliams has been dealt a penalty appropriate to his unlawful scheme, which took advantage of well-meaning investors and used their money to satisfy his own appetite. Our office is committed to pursuing and prosecuting those who commit similar offenses that victimize innocent investors.”
According to the Indictment and the evidence presented at trial:
In 2009 and 2010, GILLIAMS was the owner of TL Gilliams, LLC, which purported to engage in transactions in commodities like oil and gold. Scott was an attorney at a small law firm in New Jersey and acted as TL Gilliams, LLC’s general counsel.
In the summer of 2010, GILLIAMS solicited $5 million from two investors for purposes of trading in U.S. Treasury Strips, which are a derivative of U.S. Treasury Bonds. GILLIAMS and Scott arranged for the investors to make their investments by wiring them into an attorney trust account maintained by Scott’s law firm. Upon receiving the money, Scott – at GILLIAMS’s direction – misappropriated more than $700,000 to satisfy expenses stemming from an unrelated and failed venture to buy a coal mine in Utah. Scott also claimed $50,000 of the investment money for himself as purported fees. At GILLIAMS’ direction, Scott transferred most of the remainder to bank and brokerage accounts that GILLIAMS controlled.
At most, GILLIAMS purchased $250,000 worth of Treasury Strips with the more than $4 million in investment money transferred by Scott. Over a span of less than six months, GILLIAMS spent more than $1.6 million on an unrelated gold investment; more than $200,000 to purchase a commercial warehouse in Denver; at least $100,000 to buy or lease luxury cars; at least $50,000 for construction work on his home; at least $100,000 on luxury hotel and travel expenses; and more than $500,000 promoting two events. The first event was a festival called “Joy to the World,” which involved an album release party with Jamie Foxx at the Vault nightclub in Philadelphia, and a red carpet, black tie gala at the Philadelphia Ritz-Carlton, headlined for a $120,000 fee by Sean “Diddy” Combs. The second event was a December 2010 comedy performance in Nassau, Bahamas, called the “Gatta Be Jokin’ Comedy Jam.”
GILLIAMS did not engage in any trading of Treasury Strips and, as a result, did not derive any profits. Nonetheless, during the period when he was spending investor money, GILLIAMS provided them with false reports of trades and profits, and made occasional, nominal payments that he falsely claimed represented profits from Treasury Strips trading. Other than these purported profit payments, which totaled approximately $100,000, neither investor received any of their combined $5 million investment back.
In a separate scheme, GILLIAMS and Scott arranged in late 2009 for an investor to transfer $450,000 to Scott’s attorney trust account, to be held in escrow until used in connection with a venture to purchase the assets of a bankrupt Utah coal mine. Once the money was in Scott’s account, he secretly misappropriated approximately $112,000 by claiming it as purported fees, and transferred the rest to GILLIAMS or other individuals and entities at GILLIAMS’ direction. Until August 2010, GILLIAMS and Scott falsely assured the victim that his $450,000 remained safely in escrow, long after Scott’s escrow account had been emptied. Although the victim repeatedly demanded the return of his funds, GILLIAMS and Scott pacified him by producing forged bank documents and a false attorney attestation letter written by Scott purporting to show that GILLIAMS was in possession of the millions of dollars necessary to purchase and operate the Utah coal mine. In August 2010, after an attorney for the victim threatened Scott with professional discipline for his failure to return the escrowed funds, GILLIAMS and Scott paid the victim $450,000 using funds they raised for investment in Treasury Strips.
In addition to the prison term, Judge Batts sentenced GILLIAMS, 46, of Philadelphia, Pennsylvania, to three years of supervised release. GILLIAMS was also ordered to make restitution in the amount of $5 million, to forfeit $5 million, and to pay a $300 special assessment fee.
In September 2013, Scott, 51, of Sewell, New Jersey, was sentenced to a 30 months in prison, to be followed by three years of supervised release.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Federal Bureau of Investigation, which jointly investigated this case. He also thanked the U.S. Securities and Exchange 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.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Michael A. Levy and David B. Massey are in charge of the prosecution.
Two Defendants Found Guilty in Manhattan Federal Court in Connection with Murder-For-Hire ConspiracyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Joseph Anarumo, Jr., Special-Agent-in-Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced that HECTOR RAYMOND PEÑA and JOSE PEÑA were found guilty yesterday of conspiracy to commit murder-for-hire, murder-for-hire, and the use of a firearm in connection with murder-for-hire. HECTOR RAYMOND PEÑA and JOSE PEÑA were convicted after a 10-day jury trial before U.S. District Judge Victor Marrero.
Manhattan U.S. Attorney Preet Bharara said: “Hector Raymond Peña and Jose Peña were cold-blooded contract killers who went to great lengths – even impersonating law enforcement – to commit their brutal murders. Yesterday’s swift convictions by the jury ensure that they will spend the rest of their lives behind bars paying for the lives they took.”
ATF Special Agent-in-Charge Joseph Anarumo, Jr. said: “The Solid Gold investigation exemplifies the power of inter-agency cooperation like no other. The case has endured the test of time and has closed homicides that have – up until this point – been open, cold cases. Now, after approximately 16 years, the resolve and determination of the investigators and prosecution team have finally given closure to the victims’ families. Justice has been done.”
NYPD Commissioner Raymond W. Kelly said: “Although New York City has vastly improved from the murderous days of the 1990s when these defendants committed their vicious acts, the NYPD never let up its investigation and secured the arrests that followed. Yesterday’s verdict represents unrelenting work by detectives with the support of U.S. Attorney Preet Bharara’s office, whose prosecutors also are to be commended for delivering justice.”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
HECTOR RAYMOND PEÑA and others were hired by a drug organization to murder Pedro Medina in the spring of 1997. On May 9, 1997, HECTOR RAYMOND PEÑA and others carried out that murder contract by impersonating police officers, abducting Mr. Medina in front of his home, executing him by shooting him in the head twice, and dumping his body on the side of the Harlem River Drive in Manhattan, New York.
HECTOR RAYMOND PEÑA, JOSE PEÑA, and others were hired by a different drug organization to murder members of a robbery crew in the summer of 1997. On June 25, 1997, HECTOR RAYMOND PEÑA, JOSE PEÑA, and others carried out that murder contract by impersonating police officers, abducting Jose Suarez and Juan Carmona, executing them by shooting them in the head, and burning their bodies beyond recognition inside a vehicle they left on the side of the Henry Hudson Parkway in Manhattan, New York.
HECTOR RAYMOND PEÑA and JOSE PEÑA face mandatory minimum sentences of life in prison. They are scheduled to be sentenced by Judge Marrero on February 28, 2014, at 2:00 p.m.
Mr. Bharara praised the investigative work of the Bureau of Alcohol, Tobacco, Firearms & Explosives and the New York City Police Department.
This case is being prosecuted by the Office’s Violent Crimes Unit. Assistant United States Attorneys Laurie A. Korenbaum, Timothy D. Sini, and Micah W. J. Smith are in charge of the prosecution.
Thirteen Members of Pharmacy Burglary Ring Charged with Stealing and Distributing Millions of Dollars’ Worth of Prescription-Controlled Substances and Hundreds of Thousands of Dollars in CashRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Commissioner of the New York City Police Department (“NYPD”) announced today the unsealing of charges against 13 members of a burglary ring (the “Burglary Ring”) alleged to be responsible for more than 125 burglaries and attempted burglaries of pharmacies in Manhattan, the Bronx, Queens, and Brooklyn since 2010. BRYAN ALTAGARCIA, EDWIN ARAUJO, MARTIN AVALO, ALVARADO DOMINGUEZ, ALAN FELIZ, DAVID SANTIAGO, and CARLOS VALLEJO were arrested today in Manhattan and the Bronx, and are expected to be presented and arraigned in Manhattan federal court before U.S. Magistrate Judge Michael H. Dolinger later this afternoon. MIGUEL ARAUJO was arrested today in Boston, and is expected to be presented and arraigned later this afternoon in federal district court in the District of Massachusetts. GUILLLERMO ARAUJO, JOSE GONZALEZ, and ESFRAIN SILVA are already in custody in connection with pending cases. Two other defendants, CHRISTIAN LORA and ANDY MACCOW, remain at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, this group of defendants went to extreme lengths to break into pharmacies across New York City in order to feed their voracious appetite for cash and prescription drugs to peddle. This Office has zero tolerance for those who contribute to the growing prescription drug abuse epidemic, and thanks to our partners at the NYPD and FBI, this ring of alleged offenders has been apprehended and will be prosecuted.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged in the indictment, the defendants participated in a complex burglary scheme to steal controlled prescription drugs and money from numerous victim pharmacies. Allegedly using technology and physical surveillance to perpetuate their illegal activity, this band of thieves thought they could outsmart law enforcement. The defendants’ downfall was that they underestimated the dedication and commitment of the FBI’s Health Care Fraud Task Force and the NYPD. Using traditional investigative techniques and the defendants’ own technology against them, the FBI and its law enforcement partners put an end to their alleged criminal enterprise.”
NYPD Commissioner Raymond W. Kelly said: “Criminals who exploit drug addiction for profit will be pursued and prosecuted as any perpetrator of more immediately devastating offenses. That these individuals are alleged to have used luxury vehicles – from multiple Mercedes-Benzes to a Bentley – purchased from the proceeds of their narcotics sales illustrates the scope of their activity. I commend the detectives in the NYPD’s Major Case Squad and Financial Crimes Task Force, and their partners in U.S. Attorney Bharara’s office on their work in stopping this operation.”
According to the Indictment filed in Manhattan federal court and other information in the public record:
ALTAGARCIA, EDWIN ARAUJO, GUILLERMO ARAUJO, MIGUEL ARAUJO, AVALO, DOMINGUEZ, FELIZ, GONZALEZ, LORA, MACCOW, SANTIAGO, SILVA, and VALLEJO were members of a sophisticated Burglary Ring that stole controlled prescription drugs with a street value in the millions of dollars, and hundreds of thousands of dollars in cash.
The burglaries involved the entry and attempted entry into pharmacies through ceilings, walls, window bars, and doors. In some instances, the victimized pharmacies were in locations that provided cover for the defendants while they penetrated the exteriors of the pharmacies with crowbars, axes, and other tools. In others, the pharmacies were adjacent to commercial establishments that the defendants broke into and then used tools to enter the pharmacies through common walls.
The members of the Burglary Ring wore dark clothing, including hooded sweatshirts, masks, and gloves, and employed sophisticated planning and counter-surveillance techniques to avoid apprehension. They frequently circumvented or disabled burglar alarms and surveillance cameras. By communicating by cellphone with each other and with lookouts who were monitoring police scanners during the burglaries, they were able to escape the pharmacies with the stolen goods and cash before law enforcement was able to apprehend them.
The Indictment unsealed today is a result of a joint investigation by the FBI and NYPD that began in 2011 and continues. In addition to information provided by a cooperating witness who committed burglaries with various defendants, DNA evidence links AVALO, VALLEJO, and SILVA to three of the pharmacy burglaries, and cellphone data links various combinations of the defendants to more than 50 of the pharmacy burglaries. Through sophisticated analysis of cellphone information, law enforcement identified dozens of cellular telephones the burglars used during the burglaries. Extensive evidence demonstrates that the various defendants were the users of those cellphones during more than 50 of those burglaries. In addition, numerous photographs recovered from cellphones belonging to various defendants and searched pursuant to warrants depict the defendants holding large amounts of U.S. currency, wearing expensive jewelry, associating with one another, and possessing high-end luxury automobiles.
The Indictment seeks the forfeiture of several luxury cars used by the defendants to commit the burglaries and purchased with proceeds of narcotics trafficking, including a Bentley, which was captured on surveillance video being used by some of the defendants as a getaway vehicle during several recent pharmacy burglaries, and several Mercedes-Benz vehicles and a BMW.
In connection with the arrests today, the FBI and NYPD also executed search warrants on the residences of EDWIN ARAUJO on Wadsworth Avenue, AVALO on Saint Nicholas Avenue, DOMINGUEZ on West 188th Street, and VALLEJO on Audubon Avenue in New York, New York.
BRYAN ALTAGARCIA, 22, of the Bronx, New York; EDWIN ARAUJO, 30, of New York, New York; GUILLERMO ARAUJO, 24, of New York, New York; MIGUEL ARAUJO, 22, of the Bronx, New York; AVALO, 34, of New York, New York; DOMINGUEZ, 27, of New York, New York; FELIZ, 35, of New York, New York; JOSE GONZALEZ, 30, of New York, New York; CHRSTIAN LORA, 25, of New York, New York; ANDY MACCOW, 29, of New York, New York; DAVID SANTIAGO, 30 of New York, New York; SILVA, 20, of the Bronx, New York; and VALLEJO, 26, of New York, New York are each charged with one count of conspiracy to burglarize pharmacies of controlled substances, which carries a maximum sentence of 10 years in prison. SILVA faces an additional penalty of up to 10 years in prison for committing this offense while on bail in another federal case. All of the defendants except SILVA are also charged with conspiracy to distribute and possess with the intent to distribute controlled substances, which carries a maximum sentence of 20 years in prison. In addition, EDWIN ARAUJO, GONZALEZ, and MACCOW are charged with witness tampering in connection with the beating of a cooperating witness in a federal case against SILVA, which carries a maximum sentence of 30 years in prison.
The charges against each defendant and the corresponding maximum potential penalties are outlined in the chart attached to this press release.
Mr. Bharara praised the efforts of the FBI's Health Care Fraud Task Force and the Bronx Major Case Squad of the NYPD. The New York FBI Health Care Fraud Task Force was formed in 2007 in an effort to combat health care fraud in the greater New York City area. The task force is composed of agents, officers, and investigators from the FBI, NYPD, the New York State Insurance Fraud Bureau, U.S. Department of Labor, U.S. Office of Personnel Management Inspector General, U.S. Food and Drug Administration, New York State Attorney General’s Office, New York State Office of Medicaid Inspector General, New York State Health and Hospitals Inspector General, and the National Insurance Crime Bureau. Mr. Bharara also thanked the Boston Field Office of the FBI for its assistance in locating and arresting MIGUEL ARAUJO.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Jason A. Masimore and Russell Capone are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture of assets.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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U.S. v. Edwin Araujo et al. Indictment
New York Political Consultant Is Charged in White Plains Federal Court with Defrauding the New York Democratic Senate Campaign Committee and Other FraudsRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of a nine-count Complaint charging New York political consultant MELVIN LOWE with fraud and tax violations. The Complaint alleges that LOWE defrauded the New York Democratic Senate Campaign Committee ("DSCC") and its contributors of $100,000 by causing a vendor to submit a false invoice for printing services to the DSCC. According to the Complaint, LOWE instructed the vendor to send $75,000 of the proceeds to LOWE and $20,000 to a political consultant and to keep $5,000 for himself. The Complaint further alleges that the $20,000 payment came days after a State Senator promised to pay a benefit to the consultant for assistance the consultant had previously provided to the Senator. In addition to this fraud charge, the Complaint charges LOWE with income tax violations for his failure to report more than $2 million in consulting income. He is also charged with causing his bank to make a false statement to his mortgage lender, and also for defrauding a Yonkers resident of $66,000. LOWE was arrested this morning and will be presented later today before United States Magistrate Judge Paul E. Davison in White Plains federal court.
Manhattan U.S. Attorney Preet Bharara stated: “Today’s Complaint alleges that New York's culture of political corruption extends beyond elected officials to the relatively unknown professional political insiders who work behind the scenes to carry out corrupt schemes. Our investigation will continue and we will continue bringing to justice every corrupt official we find, as well as those who allegedly execute their unlawful plots."
IRS-CI Special Agent-in-Charge Toni Weirauch stated: “Elected politicians and others involved in the political process, such as political consultants and insiders, must comply with the same laws as the rest of the American public. IRS-Criminal Investigation investigates tax crimes and other financial crimes to ensure that those who are involved in making the rules, directly or indirectly, are held accountable when they do not follow them.”
According to the allegations in the Complaint unsealed today in White Plains federal court:
Fraud on the Democratic Senate Campaign Committee
In June 2010, MELVIN LOWE, a political consultant who had been retained by the DSCC, caused a New Jersey based political consulting firm (the "Vendor") to submit to the DSCC a false invoice for printing services in the total amount of $100,000. LOWE told a representative of the Vendor to send a total of $75,000 to a bank account held by one of LOWE's companies, $20,000 to another New York political consultant (the "Consultant") and to keep $5,000 for himself. The Complaint alleges further that LOWE used the $75,000 he received to pay for the installation of a pool and other renovations at his second home in Georgia and to give $5,000 to a Manhattan community board member.
The Complaint charges that the Consultant received the $20,000 wire transfer from the Vendor several days after a State Senator, identified as "Senator #1," promised the Consultant a benefit for assistance that the Consultant previously had provided to the Senator. The Consultant, who is further described as a former staff member to elected officials in New York City, did not know the Vendor, had done no work for the Vendor and was not owed any money by the DSCC. The Complaint alleges that days after the Senator promised the Consultant a benefit, the Consultant learned of the $20,000 deposit into his bank account in a telephone call from LOWE.
Tax Violations
The Complaint also charges LOWE with three counts of subscribing to false tax returns for each of the years 2007 through 2009 and three counts of failing to file tax returns for each of the years 2010 through 2012. In total, LOWE is charged with failing to report more than $2 million in income from consulting services over a period of six years.
False Statement in Connection with Mortgage Loan Application
The Complaint charges further that LOWE caused an employee of Commerce Bank to make a false statement to LOWE's mortgage lender regarding the balance of LOWE's checking account at Commerce Bank. In 2007, LOWE obtained a mortgage loan from Premium Capital in the principal amount of approximately $225,000 that was secured by his second home in Georgia. As part of the loan application process, LOWE signed a form in which he represented that he had more than $80,000 in his checking account at Commerce Bank and authorized Commerce Bank to confirm that balance, as well as the average balance in the account over the previous two months, to Premium Capital. LOWE then asked an Assistant Manager at his local Commerce Bank branch to confirm that he had more than $80,000 in his checking account. The Assistant Manager did so, despite the fact that LOWE had less than $2,200 in that account at that time. The Complaint alleges that LOWE's fraudulently inflated checking account balance was a material misstatement in that it allowed LOWE to appear to have a positive net worth when, in fact, LOWE had a negative net worth at the time he closed on his mortgage loan. LOWE's mortgage loan balance remains above $225,000 today and the loan is now in foreclosure.
Fraud on Yonkers Resident
The Complaint alleges that LOWE also defrauded a Yonkers resident who is identified as "John Doe," of $66,000. LOWE told John Doe that he needed $66,000 in connection with his purchase of his second home in Georgia and that he would repay the loan within a few days. When John Doe asked LOWE to repay the loan, LOWE gave John Doe a check that was returned due to insufficient funds. Thereafter, LOWE promised to repay the loan at various times but failed to do so. He told John Doe on multiple occasions that he did not have the money to repay the loan when he, in fact, did have the money, the Complaint alleges.
LOWE, 52, of New York City, faces upon conviction a maximum sentence of 20 years' imprisonment on the count charging wire fraud in connection with the scheme to defraud the DSCC; a maximum sentence of 30 years' imprisonment on the count charging him with causing an employee of a federally insured bank to make a false report; a maximum of three years' imprisonment on each of the three counts charging him with subscribing to false tax returns; a maximum of one year's imprisonment on each of the three counts charging him with failure to file tax returns; and a maximum of 20 years' imprisonment on the count charging wire fraud in connection with the scheme to defraud the Yonkers resident.
Mr. Bharara praised the investigative work of IRS-CI and the investigators from the United States Attorney's Office for the Southern District of New York.
This prosecution is being handled by the Office's White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and James McMahon are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
LoweMelvin.Complaint
Six Individuals Charged in Manhattan Federal Court in Connection with Armed Robberies of Cell Phone StoresRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the unsealing of an Indictment charging six members of an armed robbery crew operating in the Bronx, Brooklyn and Queens, with robbery conspiracy and firearms offenses. Five of the defendants charged in the Indictment – HENRY JAMES, EDWARD MATTHEWS, KELVIN GREEN, UNTRA JONES JR., and TYRELL JONES – were previously charged by complaint in September 2013. Of the five defendants charged in September 2013, all but HENRY JAMES were previously arrested, remanded, and remain in custody. JAMES and previously uncharged defendant JEROME ORTIZ were arrested on Wednesday and presented before U.S. Magistrate Judge Frank Maas yesterday. JAMES and ORTIZ were detained.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants unleashed a rash of robberies at gunpoint across three boroughs, in which they stole money and cell phones while dressed in disguise. The perpetrators of violence cannot hide from the law, as the arrests of these defendants show.”
NYPD Commissioner Raymond W. Kelly said: “New York City is a safer place for residents and businesses because of our continued efforts to stop the source of violent crime. In this case, our investigators tracked down and apprehended a gang that allegedly robbed numerous stores across three boroughs at gunpoint. I commend our detectives for their diligent efforts as well as our federal partners and the prosecutors with the U.S. Attorney’s Office for their fine work throughout this investigation.”
According to the allegations contained in the Superseding Indictment and other court documents previously filed in Manhattan federal court:
Between approximately July 2013 and October 2013, members of the robbery crew engaged in a series of over 30 armed robberies and attempted armed robberies of cellular phone stores located throughout the Bronx, Queens, and Brooklyn.
The robberies followed a simple but violent pattern: On each occasion, two or three members of the crew would enter a cellular phone store, often wearing masks, wigs and other disguises; each member of the crew would have a gun; and the robbers would brandish their guns and demand money and cellular phones from employees of the stores.
JAMES, 45, of Brooklyn, New York; ORTIZ, 40, of Brooklyn, New York; MATTHEWS, 61, of Brooklyn, New York; GREEN, 44, of Brooklyn, New York; TYRELL JONES, 26, of Bronx, New York; and UNTA JONES, 27, of Brooklyn, New York, are each charged with one count of Hobbs Act robbery conspiracy, which carries a maximum sentence of life in prison, and one count of brandishing a firearm in furtherance of the Hobbs Act robbery conspiracy, which carries a maximum sentence of life in prison.
Mr. Bharara praised the investigative work of the NYPD, especially detectives from the Bronx Robbery Squad and Brooklyn Robbery Squad. Mr. Bharara also thanked the U.S. Marshals Service Fugitive Squad for their outstanding assistance in the pursuit and arrest of JAMES.
The case is being prosecuted by the Office’s Violent Crimes Unit. Assistant United States Attorneys Andrew Bauer and Andrea Griswold are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Henry James et al. Indictment
Manhattan U.S. Attorney Announces Seizure of Additional $28 Million Worth of Bitcoins Belonging to Ross William Ulbricht, Alleged Owner and Operator of “Silk Road” WebsiteRead 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”), Brian R. Crowell, the Special-Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), today announced the unsealing of a protective order authorizing the seizure of approximately 144,336 Bitcoins found on computer hardware belonging to ROSS WILLIAM ULBRICHT, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” the alleged owner and operator of “Silk Road,” a hidden website designed to enable its users to buy and sell illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement. Along with a prior seizure of approximately 29,655 Bitcoins, federal law enforcement agents have now seized a total of approximately 173,991 Bitcoins in connection with the Silk Road case, which, at today’s Bitcoin exchange rate, are worth over $33.6 million.
The Bitcoins have been seized in connection with a civil action previously filed in Manhattan federal court on September 30, 2013, seeking the forfeiture of all assets of Silk Road, including its website and all of its Bitcoins because those assets allegedly were used to facilitate money laundering and constitute property involved in money laundering. Also in connection with that civil action, federal law enforcement agents previously seized the Silk Road website itself. In addition to the civil action, a criminal Complaint against ULBRICHT was filed in Manhattan federal court charging him with one count of narcotics conspiracy, one of count of conspiracy to commit computer hacking, and one count of money laundering conspiracy. ULBRICHT was arrested in San Francisco, California, on October 1, 2013, he was subsequently ordered detained, and he is expected to appear in Manhattan federal court within the next few weeks. ULBRICHT has also been charged in a separate indictment pending in federal court in Baltimore, Maryland.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ross William Ulbricht operated Silk Road – a global illegal cyber business designed to broker criminal transactions – protected by a presumed anonymity and motivated by profit. With his arrest and our subsequent seizures of millions of dollars worth of Silk Road’s Bitcoins, we have sent a clear message to him and everyone else running criminal enterprises on the dark web: we are determined and equipped to hold you to account.”
FBI Assistant Director-in-Charge Venizelos said: “As alleged in court documents, the creator of Silk Road, Ross William Ulbricht, created a black market bazaar for drugs and illegal services where customer service and anonymity were added value to shoppers and sellers. This market generated millions in illegal profits for Ulbricht in the form of Bitcoins. However, what Ulbricht didn’t count on was that Silk Road’s coffers would not be out of reach of the FBI and our partners to seize. We want to thank our law enforcement partners here and abroad for their support and work on this case.”
DEA Special-Agent-in-Charge Brian R. Crowell said: “The Silk Road underground website was the global venue for drug trafficking and money laundering, producing millions in dirty profits. DEA and others followed the money throughout this investigation, leading to this seizure. The website was used by drug dealers to put illicit drugs into our communities and literally at our doorsteps nationwide. 200,000 people die annually from drug abuse throughout the world, and our investigators worked tirelessly to bring to justice a facilitator who made every effort to hide behind highly encrypted technology while providing 24/7 anonymous services to global drug traffickers and money launderers. Ulbricht’s goals were to make millions from drug use and money laundering while protecting the world’s criminals from law enforcement. Our goal is to shut these people down and protect our children and DEA will continue to be relentless in this effort.”
IRS Special-Agent-in-Charge Toni Weirauch said: “This seizure sends a clear notice to those who think they can commit crimes and conceal the fruits of their criminal activities in digital anonymity. The resolve of the government to uncover criminality and identify criminal proceeds is strong and its investigative capabilities are magnified when different federal agencies, each with its own areas of expertise, unite to achieve a common objective.”
According to the allegations in the Complaint, the civil forfeiture action, and the application and protective order unsealed today in Manhattan federal court:
Background on Silk Road and ROSS WILLIAM ULBRICHT
Since approximately January 2011, ROSS WILLIAM ULBRICHT owned and operated the underground website known as Silk Road, which emerged as the most sophisticated and extensive criminal marketplace on the Internet. Throughout the time that ULBRICHT controlled Silk Road, it served as a sprawling black-market bazaar where unlawful goods and services, including illegal drugs of virtually every variety, were bought and sold regularly by the site’s users.
During its approximately two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a hundred thousand buyers, and to launder hundreds of millions of dollars derived from these unlawful transactions. All told, the site generated sales revenue of more than 9.5 million Bitcoins and collected commissions from these sales totaling more than 600,000 Bitcoins. Although the value of Bitcoins has varied over time, these figures are roughly equivalent to approximately $1.2 billion in sales and approximately $80 million in commissions, using the Bitcoin exchange rate in effect when the Silk Road website was seized.
ULBRICHT deliberately operated Silk Road as an online criminal marketplace designed to enable its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement. He sought to anonymize transactions on Silk Road in two principal ways. First, ULBRICHT operated Silk Road on what is known as “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses and therefore the identities of the networks' users. The Tor network is designed to make it practically impossible to physically locate the computers hosting or accessing websites on the network. Second, ULBRICHT required that all transactions on Silk Road be paid with Bitcoins, an electronic currency that is as anonymous as cash. Although Tor and Bitcoins have known legitimate uses, they were intentionally used by Silk Road to further the site’s unlawful goals.
The Silk Road website provided a sales platform that allowed vendors and buyers using the site to conduct transactions online. Silk Road is believed to have been visited by hundreds of thousands of unique users from countries across the globe, nearly 30 percent of whom indicated upon registering on the site that they were from the United States. The illegal nature of the items sold on the website was readily apparent to any user browsing through its offerings. Indeed, the vast majority of the items for sale on Silk Road were illegal drugs, which were openly advertised as such on the site. As of September 23, 2013, Silk Road had nearly 13,000 listings for controlled substances, listed under such categories as “Cannabis,” “Dissociatives,” “Ecstasy,” “Intoxicants,” “Opioids,” “Precursors,” “Prescription,” “Psychedelics,” and “Stimulants.” From November 2011 to September 2013, law enforcement agents made more than 100 individual undercover purchases of controlled substances from Silk Road vendors. These purchases included heroin, cocaine, ecstasy, and LSD, among other illegal drugs, and were filled by vendors believed to be located in more than ten different countries, including the United States, Germany, the Netherlands, Canada, the United Kingdom, Spain, Ireland, Italy, Austria and France.
In addition to illegal narcotics, other illicit goods and services were also openly bought and sold on Silk Road. For example, as of September 23, 2013, there were: 159 listings under the category “Services,” most of which offered computer-hacking services, such as a listing by a vendor offering to hack into social networking accounts of the customer’s choosing; 801 listings under the category “Digital goods,” including malicious software, hacked accounts at various online services, and pirated media content; and 169 listings under the category “Forgeries,” including offers to produce fake driver’s licenses, passports, Social Security cards, utility bills, credit card statements, car insurance records, and other forms of false identification documents.
The only form of payment accepted on Silk Road was Bitcoins, an anonymous, decentralized form of electronic currency, existing entirely on the Internet and not in any physical form. Silk Road’s payment system essentially consisted of an internal Bitcoin “bank,” where every Silk Road user had to hold an account in order to conduct transactions on the site. Every Silk Road user had at least one Silk Road Bitcoin address associated with the user’s Silk Road account. These addresses were stored on wallets maintained on servers controlled by Silk Road. In order to make a purchase on Silk Road, a user had to obtain Bitcoins (typically through a Bitcoin exchanger) and then send those Bitcoins to a Bitcoin address associated with his or her Silk Road account. Once a user’s account was funded in this way, the user was free to make purchases on Silk Road. When a purchase was made, the user’s Bitcoins were first transferred to an escrow account maintained by Silk Road, pending completion of the transaction. When the transaction was completed, the buyer’s Bitcoins were transferred from the escrow account to the Silk Road Bitcoin address of the vendor involved in the sale. Silk Road also used a so-called “tumbler” which, as the site explained, “sen[t] all payments through a complex, semi-random series of dummy transactions…making it nearly impossible to link your payment with any coins leaving the site.” Silk Road charged a commission for every transaction conducted by its users. The commission rate varied depending on the size of the transaction, but generally ranged from 8 to 15 percent of the total sales price.
Using the online moniker “Dread Pirate Roberts,” or “DPR,” ULBRICHT controlled and oversaw every aspect of Silk Road. ULBRICHT, for example, maintained the computer infrastructure and programming code underlying the Silk Road website; determined vendor and customer policies, including deciding what can be sold on the site; managed a small staff of online administrators who assisted with the day-to-day operation of the site; and controlled the enormous profits generated from the operation of the site. ULBRICHT did so while fully aware of the illegal nature of the enterprise; indeed, he deliberately sought to ensure the anonymity of the drug dealers and other illegal vendors operating on the site, as well as to conceal his own identity as the site’s owner and operator.
ULBRICHT was also willing to use violent means to protect the Silk Road enterprise and the anonymity of its users. For example, in March and April 2013, ULBRICHT solicited a murder-for-hire of a Silk Road vendor, known as “FriendlyChemist,” who was threatening to reveal the real names and addresses of a long list of Silk Road users unless ULBRICHT paid him $500,000. Upon receiving the threat from “FriendlyChemist” to expose the names of Silk Road users, ULBRICHT wrote to another Silk Road user, telling that user that “FriendlyChemist” is “causing me problems,” and adding: “I would like to put a bounty on his head if it’s not too much trouble for you. What would be an adequate amount to motivate you to find him? Necessities like this do happen from time to time for a person in my position.” ULBRICHT later explained that the threat by “FriendlyChemist” to expose the names of Silk Road users “is unforgivable to me. Especially here on Silk Road, anonymity is sacrosanct.” However, there is no record of a homicide at or about that time in the area where “FriendlyChemist” supposedly lived.
The Seizure of Computer Hardware Belonging to ROSS WILLIAM ULBRICHT
ROSS WILLIAM ULBRICHT was arrested in San Francisco, California, on October 1, 2013. At the time of his arrest, ULBRICHT was using a laptop computer, which was seized in connection with his arrest and subsequently searched pursuant to a search warrant. ULBRICHT’s residence was also searched on October 1, 2013, pursuant to a search warrant, and federal law enforcement agents conducting that search found several pieces of computer hardware belonging to ULBRICHT (collectively, along with ULBRICHT’s laptop, the “computer hardware”). Through forensic analysis of the computer hardware, federal law enforcement agents recovered a Bitcoin wallet containing approximately 144,336 Bitcoins.
ULBRICHT, 29, of San Francisco, California, is charged with one count of narcotics conspiracy, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison; one of count of conspiracy to commit computer hacking, which carries a maximum sentence of five years in prison; and one count of money laundering conspiracy, which carries a maximum sentence of 20 years in prison.
Mr. Bharara praised the outstanding investigative work of the FBI and its New York Special Operations and Cyber Division, as well as the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of agents and officers of the DEA, the IRS, the New York City Police Department, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the New York State Police, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, Office of Foreign Assets Control, and NY Department of Taxation. Mr. Bharara also thanked the Chicago field office of ICE-HSI for its assistance and support, as well as the Department of Justice’s Computer Crime and Intellectual Property Section. Additionally, Mr. Bharara praised the foreign law enforcement partners whose contributions to the success of the investigation and prosecution have been invaluable, namely, the Reykjavik Metropolitan Police of the Republic of Iceland and the French Republic’s Central Office for the Fight Against Crime Linked to Information Technology and Communication.
Mr. Bharara also noted that the investigation remains ongoing.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Serrin Turner is in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Ross William Ulbricht Application for Second Post-Complaint Protective Order - Silk Road
U.S. v. Ross William Ulbricht Second Post-Complaint Protective Order - Silk RoadManhattan U.S. Attorney Announces Charges Against Dual U.S.-Iran Citizen for Conspiring to Acquire Surface-To-Air Missiles for the Government of IranRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Derek Maltz, the Special Operations Division Agent in-Charge of the United States Drug Enforcement Administration (“DEA”), today announced the unsealing of charges against REZA OLANGIAN, a dual citizen of the United States and Iran, in connection with his efforts to acquire surface-to-air missiles (“SAMs”) for the government of Iran. OLANGIAN was arrested in Estonia on October 10, 2012, pursuant to a U.S. request for his provisional arrest, and he was extradited to the United States on March 26, 2013. The case is assigned to U.S. District Judge Loretta A. Preska.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, after having been thwarted in his first attempt, Reza Olangian seized on a second opportunity to help arm the Iranian military with surface-to-air missiles and airline parts in violation of international trade sanctions and other laws. Thanks to the outstanding work of our law enforcement partners, Olangian struck out on his second attempt and he will now answer for his alleged willingness to jeopardize this country’s national security.”
DEA Special Operations Division Agent in-Charge Derek Maltz said: “Mr. Olangian’s conspiracy could have put American lives at risk, as well as those of our friends across the globe, if put into action. DEA possesses the unique ability to direct complex undercover operations thanks to our intelligence capabilities, close partnerships, and vast informant network around the world. These tools have allowed us to infiltrate global criminal networks that threaten America's security.”
According to the allegations in the Indictment, the Amended Complaint, and other documents filed in Manhattan federal court:
In 2007, OLANGIAN worked with Iranian officials to obtain approximately 100 SAMs for use by the Iranian government. Ultimately, that missile deal was unsuccessful.
Beginning in early 2012, OLANGIAN worked to negotiate a separate missile deal, this time with a confidential source working with the DEA (the “CS”), who purported to be a weapons and aircraft broker. From his base of operations in Tehran from approximately May 2012 through October 2012, OLANGIAN arranged for the purchase of “IGLA-S” SAMs and various aircraft components. During a covertly recorded meeting in May 2012, and in subsequent recorded conversations and e-mails with the CS, he described in detail his plans for procuring the SAMs and aircraft parts and then smuggling them over land into Iran, from Afghanistan or from another neighboring country.
OLANGIAN’s 2012 negotiations included his participation in a videoconference with the CS, during which OLANGIAN remotely inspected a bona fide SAM, which the CS presented as a sample of the larger quantity of SAMs that OLANGIAN sought to purchase. After inspecting the SAM and inquiring about its specifications, OLANGIAN stated that he would want “at least 200 . . . minimum 200” of such SAMs. In his communications with the CS, OLANGIAN also indicated that he was arranging for a missile expert to inspect and test the SAMs.
During October of 2012, OLANGIAN traveled to Estonia, where he was arrested. Following his arrest, OLANGIAN stated, among other things, that he had been working with Iranian government officials; that the SAMs he had arranged to purchase were being obtained for the Iranian government; and that the aircraft parts he attempted to acquire were to be used in Iranian military aircraft.
The Indictment charges OLANGIAN in four Counts. Counts One and Two charge him with conspiring to acquire and transfer surface-to-air missile systems and attempting to acquire and transfer surface-to-air missile systems. Counts Three and Four charge him with conspiring to violate the International Emergency Economic Powers Act (“IEEPA”) and attempting to violate IEEPA.
If convicted, OLANGIAN faces a maximum sentence of life in prison on each of Counts One and Two, including a mandatory minimum sentence of 25 years in prison on each count. He faces a maximum sentence of 20 years in prison on each of Counts Three and Four.
Mr. Bharara praised the outstanding efforts of the Special Operations Division of the DEA and the DEA Copenhagen Country Office. Mr. Bharara also thanked the U.S. Department of Justice’s Office of International Affairs and its National Security Division.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Sean Buckley and Shane Stansbury are in charge of the prosecution.
The charges contained in the Indictment and the Amended Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Reza Olangian Indictment (12 Cr 798)
U.S. v. Reza Olangian Amended Complaint (12 Mag 2553)Statement of Manhattan U.S. Attorney Preet Bharara on the Countrywide, Bank of America, and Rebecca Mairone VerdictRead the Press Release
“Almost a year to the day after we brought suit, a unanimous jury has found Countrywide, Bank of America, and senior executive Rebecca Mairone liable for making disastrously bad loans and systematically removing quality checks in favor of its own balance. As demonstrated at trial, they adopted a program that they called “the Hustle,” which treated quality control and underwriting as a joke.
In a rush to feed at the trough of easy mortgage money on the eve of the financial crisis, Bank of America purchased Countrywide, thinking it had gobbled up a cash cow. That profit, however, was built on fraud, as the jury unanimously found.
In this case, Bank of America chose to defend Countrywide’s conduct with all its might and money, claiming there was no case here. The jury disagreed. This Office will never hesitate to go to trial to expose fraudulent corporate conduct and to hold companies accountable, particularly when it has caused such harm to the public.
I want to thank the members of the jury for their service in this important trial. And I commend the Assistant U.S. Attorneys in the Office's Civil Division for their dedication, skill, and tireless efforts.”
Seven Individuals Charged in Connection with Multi-Million Dollar Mortgage Modification SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Christy Romero, the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment in Manhattan federal court charging GUY SAMUEL, the co-owner of a company that purported to provide mortgage modification services, and four former employees of the company, ANTHONY BLACKWELL, ANGEL GONZALEZ, JONATHAN LYONS, and AREN GOLDFADEN, for their alleged participation in a multimillion-dollar scheme that victimized more than 500 financially struggling homeowners across the country. The defendants were arrested earlier this morning and will be presented in Manhattan federal court this afternoon before U.S. Magistrate Judge Frank Maas. The case is assigned to U.S. District Judge George B. Daniels.
Also unsealed today were the guilty pleas of SCOTT SCHREIBER and DARRELL KEYS in connection with their participation in the scheme. SCHREIBER pled guilty pursuant to an Information before U.S. District Judge Robert P. Patterson on October 16, 2013, and KEYS pled guilty pursuant to an Information before U.S. District Judge Robert W. Sweet on September 19, 2013.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants told one lie after another, purporting to help struggling homeowners looking for an end to their financial troubles but instead defrauding them out of millions. This Office has zero tolerance for those who would target already distressed borrowers in hopes of turning a profit at their expense, and we will continue to work to hold these and like-minded defendants accountable.”
Special Inspector General of SIGTARP Christy Romero said: “Samuel and his coconspirators stand charged today with ripping off struggling homeowners desperately trying to keep a roof over their heads in the midst of the nation’s housing crisis. They allegedly claimed their ‘business’ was affiliated with TARP’s housing program, HAMP, and instructed victims to stop paying their mortgages immediately, transfer thousands of dollars in upfront frees to their company in exchange for false promises of a guaranteed mortgage modification, and cease all communication with their mortgage lenders. After allegedly swindling more than 500 struggling homeowners nationwide out of $2.3 million in ill-gotten proceeds, Samuel refused to provide refunds to victims for whom he and others did little if any work. Instead, Samuel purportedly spent hundreds of thousands of dollars on vacations, entertainment, and personal expenses. I commend U.S. Attorney Bharara and his team for their efforts in prosecuting this case, and let this be a warning to anyone allegedly engaged in fraud related to TARP; if guilty, you will be held accountable and brought to justice by SIGTARP and our law enforcement partners.”
FBI Assistant-Director-in-Charge George Venizelos said: “Struggling homeowners became easy prey for these defendants, who allegedly lured their victims into a false sense of security by promising to save them from financial burden in exchange for a fee. Those charged allegedly conspired to divert these funds into their own pockets and hid behind the façade of a legitimate federal assistance program with which they were not affiliated. This type of criminal activity is not only devastating to victims, but poses a serious threat to the integrity of our marketplace. Today we remind everyone of our commitment to identify sophisticated schemes that take advantage of vulnerable homeowners; those responsible will not go unpunished.”
According to the allegations contained in the Indictment, the Informations unsealed today, and statements made in related proceedings:
From approximately January 2009 to June 2011, the defendants perpetrated a scheme to defraud homeowners who were in danger of losing their homes because they could not afford to pay their residential mortgages. Through a company located in Long Island, New York (“Company-1”), and its successor companies (the “Mortgage Modification Companies”), the defendants and other employees falsely promised to help financially struggling residential mortgage holders refinance their mortgages for lower interest rates and monthly payments. Despite the defendants’ claims, however, the Mortgage Modification Companies delivered little or no service to their customers, diverting most, if not all, of the customers’ payments to the Mortgage Modification Companies’ owners and employees rather than using those funds to assist customers in procuring mortgage modifications. Through their scheme, the Mortgage Modification Companies obtained at least $2.3 million from more than 500 homeowners throughout the United States.
The Mortgage Modification Companies charged customers thousands of dollars in up-front fees—in violation of New York State law—and made fraudulent claims about the companies’ services, including that the Mortgage Modification Companies guaranteed that they would either: (i) secure a mortgage modification that would result in a significant reduction in the customer’s interest rate and/or monthly payments; or (ii) provide the customer’s money back. Through the Mortgage Modification Companies, the defendants and other employees also falsely claimed to be affiliated with the federal government’s Home Affordable Modification Program (“HAMP”), a federally-funded mortgage assistance program that is part of the Troubled Asset Relief Program and is available to homeowners free of charge.
SAMUEL, the co-owner and operator of the Mortgage Modification Companies, purchased on behalf of those companies tens of thousands of “leads” containing names and contact information for homeowners who had fallen behind or were in danger of falling behind in making mortgage payments on their homes. SAMUEL, BLACKWELL, who held himself out as an attorney for the Mortgage Modification Companies despite not having a valid law license for most of the relevant period, and GONZALEZ, a sales manager, instructed the companies’ sales representatives—who were responsible for calling, and answering calls from, struggling homeowners—to make materially false or misleading representations to convince prospective clients to pay upfront fees to the companies. Those false or misleading representations included that the Mortgage Modification Companies were associated with HAMP; that a mortgage modification was guaranteed and would take only approximately thirty to sixty days; and that the Mortgage Modification Companies would issue a full refund of the upfront fee to any client whose mortgage was not successfully modified in the stated time period. At the direction of SAMUEL, BLACKWELL, and GONZALEZ, the Mortgage Modification Companies routinely refused to provide refunds to customers despite the fact that those customers did not obtain mortgage modifications as promised.
SAMUEL, BLACKWELL, and GONZALEZ also personally met with and spoke directly to customers and told similar lies. They sought to cover up their fraudulent scheme by, among other things, directing sales representatives to assuage customers by falsely claiming that work was being done on the customer’s behalf and that the company just needed more time to obtain a mortgage modification, when, in fact, little or no work was being done to provide a mortgage modification to the customers. SAMUEL also made materially false and misleading statements in a deposition conducted by the New York State Attorney General’s Office in connection with an investigation of complaints by the Mortgage Modification Companies’ customers.
LYONS, GOLDFADEN, and KEYS worked as sales representatives for the Mortgage Modification Companies. SCHREIBER was the co-owner of Company-1.
SAMUEL, 32, of Richmond Hill, New York; BLACKWELL, 47, of Manhattan, New York; GONZALEZ, 31, of Rosedale, New York; LYONS, 51, of Rockville Center, New York; and GOLDFADEN, 36, of East Rockaway, New York, are each charged with one count of conspiracy to commit wire fraud, and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.
SCHREIBER, 30, of Brooklyn, New York, pled guilty to one count of conspiracy to commit wire fraud and one count of wire fraud, and he faces a maximum sentence of 40 years in prison. KEYS, 51, of Uniondale, New York, pled guilty to one count of conspiracy to commit wire fraud, and he faces a maximum sentence of 20 years in prison.
Mr. Bharara praised SIGTARP and the FBI for their outstanding work in the investigation. Mr. Bharara also thanked the New York State Attorney General’s Office 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 matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Janis Echenberg is charge of the case.
The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.
Manhattan U.S. Attorney Announces Charges Against Owners of Three Pharmacies, Pharmacists, and Others for Illegal Distribution of Millions of Dollars Worth of Oxycodone and Other PainkillersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Carl J. Kotowski, the Special Agent-in-Charge of the New Jersey Division of the U.S. Drug Enforcement Administration (“DEA”), today announced charges against nine individuals – PAUL WISEBERG, ROBERT KALABA, GERALD WISEBERG, STEPHANIE TOMASINI, LANA WISEBERG, EMMANUEL ANTONIO, and three pharmacists, DANIEL PODELL, HOWARD HIRSH, and LAWRENCE ZASLOW – for their alleged participation in a multi million-dollar oxycodone distribution ring. The alleged conspiracy involved the distribution of oxycodone and other controlled substances from three pharmacies in New York and New Jersey to customers in Florida who had no legitimate medical need for the drugs.
All the defendants were arrested this morning. KALABA, PODELL, HIRSH, and ZASLOW will be presented in Manhattan federal court later today. PAUL WISEBERG, GERALD WISEBERG, LANA WISEBERG, TOMASINI, and ANTONIO will appear in the Southern District of Florida later today. In addition to the arrests, multiple search warrants were executed and bank accounts restrained in connection with today’s charges.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these nine defendants, including three licensed pharmacists, created and operated a ring for the illegitimate distribution of prescription painkillers on the East Coast. Prescription drug abuse is our nation’s fastest-growing drug epidemic, and it is especially egregious when, as alleged in this Indictment, health care professionals perpetuate this danger to society.”
DEA Special Agent-in-Charge Carl J. Kotowski said: “Today, DEA and its law enforcement partners delivered another blow to alleged rogue pharmacists who choose to sacrifice their ethics for the almighty dollar. They will now have to deal with the consequences of their alleged decisions.”
According to the Indictment unsealed today in Manhattan federal court:
From at least November 2011 up to and including October 2013, PAUL WISEBERG, LANA WISEBERG, and KALABA, none of whom is a medical professional, purchased and operated pharmacies in New York and New Jersey (the “Pharmacies”), through which they ordered bulk quantities of highly addictive painkillers such as oxycodone, hydromorphone, and morphine sulfate. PAUL WISEBERG and KALABA then sold and distributed those pain killers via a mail order program at significantly marked-up prices to individuals, mostly in Florida, who had no legitimate medical need for the painkillers.
On average, the Pharmacies would charge from approximately $6 to $9 per pill of oxycodone. A 28-day prescription for oxycodone, which could contain approximately 158 pills, could cost a patient between $948 and $1,400. The same prescription at a retail pharmacy would typically cost less than $200.
PAUL WISEBERG, LANA WISEBERG, and KALABA are not registered with the DEA, and as such, could not themselves obtain oxycodone and other controlled substances from distributors. They relied on ANTONIO and PODELL to obtain hundreds of thousands of oxycodone pills and other controlled substances from distributors. PODELL, a licensed pharmacist, signed the necessary forms, and ANTONIO interacted with the distributors to arrange for the shipments of bulk quantities of painkillers to the Pharmacies.
GERALD WISEBERG and TOMASINI recruited pain clinics in Florida that had patients who were willing to pay substantially marked-up prices for the painkillers, and that would thereafter have the prescriptions sent directly to the Pharmacies. At one of the Florida pain clinics, patients were told to mail the prescriptions enclosing money orders and that no insurance or checks would be accepted. They were further instructed not to call or visit the Pharmacies.
PODELL, HIRSH, and ZASLOW, all licensed pharmacists, filled prescriptions for hundreds of thousands of highly addictive painkillers, knowing that the prescriptions were not issued for a legitimate medical purpose. The drugs were then mailed to the customers in Florida. In several instances, prescription drugs were mailed to addresses different from those set forth in the prescriptions. In addition, prescriptions for multiple people were also sometimes sent to the same address.
The Indictment also alleges that PAUL WISEBERG, KALABA, GERALD WISEBERG, TOMASINI, and ANTONIO conspired to launder the proceeds of the narcotics conspiracy by both concealing the nature and source of the proceeds, and promoting the distribution of the narcotics.
Mr. Bharara praised the investigative work of the DEA New Jersey Division’s Tactical Diversion Squad, which consists of DEA Agents, Diversion Investigators, and Task Force Officers from the Elizabeth Police Department, Essex County Sheriff’s Office, Toms River Police Department, Clinton Township Police Department, Marlboro Township Police Department, and West Orange Police Department, and the DEA New Jersey Division Diversion Group I. Mr. Bharara also thanked the Internal Revenue Service-Criminal Investigation, participating in the investigation as a member of the El Dorado Task Force, the DEA West Palm Beach Tactical Diversion Squad, the DEA Baltimore Tactical Diversion Squad, and the New Jersey Division of Consumer Affairs, which is part of the New Jersey Office of the Attorney General.
The prosecution is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Carolina A. Fornos and Daniel Tehrani are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Paul Wiseberg et al. Indictment
Defendant Pleads Guilty in Manhattan Federal Court to Participating in Racketeering Conspiracy with Russian-American Organized Crime Enterprise Operating International SportsbookRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that STAN GREENBERG 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. GREENBERG was charged in April 2013 along with 33 other alleged members and associates of two Russian-American organized crime enterprises – the Taiwanchik-Trincher Organization and the Nahmad-Trincher Organization – in an indictment which included racketeering, money laundering, extortion, and various gambling offenses. He pled guilty before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Preet Bharara said: “With his guilty plea today, Stan Greenberg is now the latest member of this Russian-American organized crime ring to be convicted, but we expect he will not be the last. We remain committed to pursuing and prosecuting those involved in this international enterprise.”
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. GREENBERG was a U.S.-based participant in the enterprise. In this capacity, he assisted the Taiwanchik-Trincher Organization in laundering the proceeds of their international sportsbook into various investment vehicles, including real estate purchases and hedge funds, in the United States.
GREENBERG, 48, of New York, NY, faces a maximum of 20 years in prison and three years of supervised release. As part of his plea agreement, GREENBERG agreed to forfeit the proceeds from his racketeering activity. He is scheduled to be sentenced by Judge Furman on February 27, 2014 at 3:00 p.m.
GREENBERG is the 12th 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; and
- Yugeshwar Rajkumar pled guilty to gambling charges on October 18, 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
Manhattan U.S. Attorney Announces Extradition of A Leader of A Colombian Drug Trafficking Organization and Three Other International Narcotics TraffickersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Brian R. Crowell, Special Agent in Charge of the New York Division of the United States Drug Enforcement Administration (“DEA”), today announced the extraditions of four defendants charged with international narcotics trafficking offenses: ERICSON VARGAS CARDONA, extradited from Colombia on charges of conspiring to traffic in cocaine and using weapons, including machine guns, assault rifles, and rocket-propelled grenades, in furtherance of the cocaine trafficking conspiracy; DIEGO VALLEJO-REYES, extradited from Colombia on charges of conspiring to traffic in cocaine; and RICARDO QUINTERO and JESUS DOMINGUEZ GALLARDO, extradited from Mexico on charges of conspiring to traffic in methamphetamine and cocaine.
VARGAS CARDONA and VALLEJO-REYES both arrived in the Southern District of New York on October 16, 2013 and were separately presented and arraigned before Magistrate Judge Sarah Netburn yesterday. QUINTERO and DOMINGUEZ GALLARDO arrived in the Southern District of New York on October 11, 2013 and were presented and arraigned before Magistrate Judge Gabriel W. Gorenstein on October 12, 2013 and ordered detained.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, what these four defendants had in common was the criminal intent and wherewithal to import large quantities of cocaine into the United States. Now, having been successfully extradited, they themselves are in the United States. These cases demonstrate the resolve of the DEA and this Office to bring before the bar of American justice those who pour cocaine and other illegal drugs into the flow of American commerce.”
DEA Special Agent in Charge Brian R. Crowell said: “Ricardo Quintero-Muett and Jesus Dominguez-Gallardo are now on American soil to face justice for their roles in sending hundreds of pounds of narcotics into the United States. This three year multi-national drug investigation has brought to justice two key distributors for the Mexican La Familia Michoacan Drug Cartel for their alleged conspiracy in trafficking over one ton of methamphetamine and hundreds of pounds of cocaine, heroin and marijuana into the United States and into our communities, while making millions of dollars poisoning Americans. The United States Attorney’s Office Southern District of New York, the NY Organized Crime Drug Enforcement Strike Force, and our global DEA offices have worked tirelessly to bring both defendants to justice in the country they poisoned. I commend the DEA’s Special Operations Division, San Diego Field Division, Carlsbad Resident Office, Mexico Country Office, Tijuana Resident Office, Los Angeles Field Division, Bogota Colombia Country Office, Interpol, the U.S. Department of Justice Office of International Affairs and the San Diego District Attorney’s Office.”
VARGAS CARDONA
As alleged in the Indictment previously unsealed in Manhattan federal court and documents publicly filed in Colombia in extradition proceedings:
From approximately 2000 to August 2012, VARGAS CARDONA was a member of La Oficina de Envigado (“Oficina”) a Colombia-based narcotics trafficking organization that served as a debt-collection agency for narcotics traffickers, by means including violence, invested in shipments of narcotics, and manufactured cocaine. Oficina distributed thousands of kilograms of cocaine from Colombia to locations worldwide, including the United States. As a member of Oficina, VARGAS CARDONA, among other things, engaged in debt collection activities, established a cocaine laboratory, and participated in acts of violence on behalf of Oficina. In approximately 2008, VARGAS CARDONA assumed control of Oficina. While a member and as a leader of Oficina, he conspired with others to export and to distribute cocaine, and possessed firearms in furtherance of that crime, including semiautomatic assault weapons, machineguns and destructive devices – including rocket-propelled grenades and grenade launchers – and carried explosive devices, including electric and manual detonators.
VALLEJO-REYES
As alleged in the Indictment previously unsealed in Manhattan federal court and documents publicly filed in Colombia in extradition proceedings:
Beginning in at least 2011, VALLEJO-REYES and his co-defendant Elver Hernan Roa-Avila conspired to transport thousands of kilograms of cocaine using numerous airplanes, including airplanes registered in the United States, from Colombia and Venezuela to points in Central America, particularly Honduras, and the Caribbean and, on occasion, to Africa. The airplanes typically were loaded at and departed from clandestine airstrips located in the Apure region of Venezuela. In addition, in September and October 2012, VALLEJO and Roa-Avila conspired to sell approximately 339 kilograms of cocaine in Bogota, Colombia, which the defendants understood would be imported to the United States and distributed. In connection with this conspiracy, 339-kilograms of cocaine supplied by VALLEJO-REYES and Roa-Avila were seized by law enforcement authorities in Colombia.
QUINTERO and DOMINGUEZ GALLARDO
As alleged in the Indictment previously unsealed in Manhattan federal court and documents publicly filed in connection with Mexican extradition proceedings:
QUINTERO and DOMINGUEZ GALLARDO were members of a drug trafficking organization affiliated with the La Familia Michoacana cartel, a violent drug trafficking organization based in the state of Michoacan in southwestern Mexico. The cartel has imported vast quantities of methamphetamine and cocaine into the United States from Mexico, and utilizes violence, including assault, murder and kidnaping, to support its narcotics trafficking activities. In that capacity, QUINTERO and DOMINGUEZ GALLARDO were responsible for the transport of large quantities of methamphetamine and cocaine from Michoacan, Mexico, into Tijuana, Mexico, and ultimately across the United States border into California, primarily by secreting those narcotics in concealed compartments contained within vehicles. In the course of the investigation, law enforcement agents seized hundreds of kilograms of methamphetamine and cocaine belonging to the organization.
QUINTERO, 39, and DOMINGUEZ GALLARDO, 44, have each been charged with conspiring to import methamphetamine and cocaine into the United States and conspiring to distribute methamphetamine and cocaine, knowing that those substances would be imported into the United States (Count One). The charge carries a maximum penalty of life in prison and a mandatory minimum term of 10 years in prison. The case is assigned to U.S. District Judge Paul A. Crotty.
VARGAS CARDONA, 40, has been charged with conspiracy to import cocaine into the United States (Count One); conspiracy to distribute cocaine (Count Two); possessing and discharging M50 machineguns, AUG assault rifles, rocket-propelled grenades and grenade launchers, submachine guns, shotguns, and other firearms, some of which were equipped with silencers, in furtherance of the conspiracy to import cocaine (Count Three); and carrying explosive compounds, grenades, rocket-propelled grenades, and electric and manual detonators during the commission of the conspiracy to import cocaine (Count Four). Counts One and Two carry a maximum penalty of life in prison and a mandatory minimum penalty of 10 years in prison. Count Three carries a maximum penalty of life in prison and a mandatory minimum penalty of 30 years in prison, to run consecutively to any other penalty imposed. Count Four carries a maximum penalty of life in prison and a mandatory minimum penalty of 10 years in prison, to run consecutively to any other penalty imposed. The total mandatory minimum sentence VARGAS CARDONA faces if convicted of all four counts is 50 years in prison. The case is assigned to U.S. District Judge Harold Baer.
VALLEJO-REYES, 56, has been charged with conspiring to import cocaine and to possess cocaine on board a U.S.-registered aircraft with the intent to distribute it (Count One) and with distributing cocaine knowing and intending that it would be imported into the United States (Counts Two and Three). Each count carries a maximum penalty of life in prison and a mandatory minimum term of 10 years in prison. The case is assigned to U.S. District Judge Andrew L. Carter, Jr.
Roa-Avila remains in the custody of Colombian authorities.
The arrests and transfers of the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s New York Field Office; DEA’s New York Organized Crime and Drug Enforcement Strike Force; DEA’s Special Operations Division; DEA’s San Diego Field Division, Carlsbad Resident Office; DEA’s Tijuana, Mexico Country Office; DEA’s Bogota, Colombia Country Office; DEA’s Los Angeles Field Division; Interpol; the U.S. Department of Justice Office of International Affairs; and the San Diego District Attorney’s Office. The DEA’s New York Organized Crime Drug Enforcement Strike Force is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, the U.S. Marshal Service, New York National Guard, Office of Foreign Assets Control and the New York Department of Taxation and Finance. The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area, which is a federally funded crime fighting initiative. Mr. Bharara thanked Colombia’s Cuerpo Técnico de Investigación, a division of La Fiscalía General de la Nación, and the Mexican Military Forces from the 28th Battalion and the Policia Estatal Preventiva for their assistance in this investigation.
These prosecutions are being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Edward Y. Kim and Michael Ferrara are in charge of the prosecution of VARGAS CARDONA. Assistant United States Attorneys Edward Y. Kim, Michael D. Lockard, and Adam Fee are in charge of the prosecution of VALLEJO-REYES. Assistants Jenna Dabbs and Aimee Hector are in charge of the prosecution of QUINTERO and DOMINGUEZ GALLARDO.
The charges contained in the Indictments are merely accusations and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Ericson Vargas Cardona Indictment
U.S. v. Rafael Antonio Garavito-Garcia and Gustavo Perez-Garcia S5 Indictment
U.S. v. Diego Vellejo-Reyes and Elver Hernan Roa-Avila S5 IndictmentTwo Individuals Charged in Manhattan Federal Court with Alleged Sex Trafficking of MinorsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the arrests of ELFEGO BOYD and NORMAN DARBY in connection with sex trafficking of minor girls. BOYD was arrested yesterday in the Bronx, New York, and DARBY was arrested yesterday in Manhattan. Both defendants were presented yesterday before U.S. Magistrate Judge Sarah Netburn and ordered detained pending trial.
According to the allegations in the Complaint unsealed yesterday in Manhattan federal court:
From September 2010 through June 2012, the BOYD and DARBY have been engaged in a criminal sex trafficking enterprise that recruited and exploited minor girls, and then prostituted them using an online classifieds website for the defendants’ profit. The defendants lured minor girls into prostitution by, among other things, targeting runaways, offering the victims shelter, and romancing them. They then took provocative pictures of the minor victims, which the defendants then posted online in an effort to sell the victims for sex.
Minor Victim-1
In September 2010, Minor Victim-1, who was 15 years old at the time, met BOYD in Times Square, after running away from her home in Pennsylvania to New York City. BOYD, who introduced himself as “Kush da Dawn,” asked Minor Victim-1 if she wanted to prostitute for him and she agreed. He then provided food and shelter to Minor Victim-1. While staying with BOYD, Minor Victim-1 also met DARBY, who introduced himself as “Black.” Both BOYD and DARBY placed advertisements offering Minor Victim-1 for sex using an online classifieds website. The ads did not receive any responses and Minor Victim-1 left New York City and returned to Pennsylvania a short while later.
In the spring of 2011, Minor Victim-1 traveled from Pennsylvania to New York City where she again encountered BOYD and stayed at his apartment in the Bronx. BOYD told Minor Victim-1 that he loved her and that they were boyfriend-girlfriend. He then posted online advertisements offering Minor Victim-1 for sex in exchange for money. At BOYD’s direction, Minor Victim-1 had sex in exchange for money with multiple men who responded to those ads, after which BOYD took all the money.
Later, BOYD took Minor Victim-1 to a house in Long Island where she stayed along with BOYD, DARBY and others, for several months. During that period, DARBY and Minor Victim-1 posted advertisements offering her for sex online in exchange for money. At BOYD and DARBY’s direction, Minor Victim-1 had sex in exchange for money with several men who responded to those ads at hotels.
Eventually, BOYD returned to New York City with Minor Victim-1. At BOYD’s direction, Minor Victim-1 continued to have sex in exchange for money with multiple men who responded to online advertisements, after which BOYD took all the money. Minor Victim-1, who turned 16 years old during the period she was being offered for sex by BOYD and DARBY, told BOYD her age on one or more occasions.
In November 2011, after getting into an argument with BOYD, Minor Victim-1 ran away from him.
Minor Victim-2 and Minor Victim-3
Minor Victim-2, who was 15 years old, along with Minor Victim-3, who was 17 years old, met BOYD, who identified himself as “Kush da Dawn,” in Manhattan in the spring of 2012 after running away from Oklahoma (the “Oklahoma Victims”). BOYD told the Oklahoma Victims he had “connections” and could help them rent a room at a hotel. Instead, BOYD took the Oklahoma Victims to his apartment in the Bronx.
BOYD took provocative pictures of the Oklahoma Victims in lingerie he provided and posted the pictures in advertisements online prostituting them. At BOYD’s direction, the Oklahoma Victims had sex in exchange for money with multiple men who responded to online advertisements, after which BOYD took half of the money.
Minor Victim-3 informed BOYD that she was 17 years old at the time he was prostituting her. In response, BOYD told Minor Victim-3 that he was the only one who needed to know her age.
BOYD, 27, of the Bronx, NY, is charged with one count of conspiracy to commit sex trafficking, three counts of sex trafficking of minors, and two counts of use of interstate facilities to promote a sex trafficking and prostitution enterprise. DARBY, 32, of the Bronx, NY, is charged with one count of conspiracy to commit sex trafficking, one count of sex trafficking of minors, and one count of use of interstate facilities to promote a sex trafficking and prostitution enterprise. Both defendants face a maximum sentence of life in prison.
Mr. Bharara praised the outstanding investigative work of the FBI and the NYPD, and noted that the investigation is continuing.
The prosecution of this case is being overseen by the Office’s General Crimes Unit. Assistant United States Attorneys Andrea Griswold and Amy Garzon are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
US v. Elfego Boyd and Norman Darby Complaint
Statement of U.S. Attorney Preet Bharara on the Transfer of Anas Al Liby to the Southern District of New YorkRead the Press Release
“Anas al Liby was transferred to law enforcement custody this weekend and was brought directly to the Southern District of New York where he has been under indictment for more than a decade. The Government expects that he will be presented before a judicial officer tomorrow.”
International Narcotics Trafficker Pleads Guilty in Manhattan Federal Court to Conspiring to Distribute One Ton of Cocaine Using A U.S.-Registered AircraftRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAWSON EDWARD WATSON, a citizen of the United Kingdom, pled guilty today in Manhattan federal court to conspiring to distribute cocaine using aircraft registered in the United States. WATSON arrived in the Southern District of New York on November 9, 2012, from the Dominican Republic, where he was apprehended on December 15, 2011. WATSON pled guilty before U.S. District Judge Richard J. Sullivan.
Manhattan U.S. Attorney Preet Bharara stated: “Today’s guilty plea ensures that Rawson Edward Watson will be punished for his role in attempting to further the international drug trade using U.S. aircraft.”
According to the Indictment to which WATSON pled guilty and other documents filed in Manhattan federal court:
In late 2011, WATSON and others made arrangements for an aircraft registered in the United States to be flown from the Dominican Republic to Belgium. WATSON was arrested on December 15, 2011 in the Dominican Republic after he boarded a U.S.-registered aircraft that was loaded with 1,000 kilograms of cocaine. The DEA has estimated that the quantity of cocaine on board the aircraft where WATSON was arrested has a wholesale market value of at least $30,000,000.
WATSON, 48, pled guilty to one count of conspiring to possess with intent to distribute five kilograms or more of cocaine on board an aircraft registered in the United States. WATSON faces a maximum sentence of life in prison, and a mandatory minimum sentence of 10 years in prison. Sentencing before Judge Sullivan is scheduled for January 31, 2014, at 10:00 a.m.
Mr. Bharara praised the investigative work of the New Jersey Division of the DEA, the Caribbean Division of the DEA, and the DEA Dominican Republic Country Office. Mr. Bharara also thanked the Government of the Dominican Republic for its assistance, and the U.S. Department of Justice, Office of International Affairs.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Anna M. Skotko, Shane T. Stansbury, Michael D. Lockard, and Randall W. Jackson are in charge of the prosecution.
U.S. v. Watson, Epskamp, and Fawaz S1 Indictment
Brooklyn Man Sentenced in Manhattan Federal Court to 18 Years in Prison for Providing Material Support to Al QaedaRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that SABIRHAN HASANOFF was sentenced today in Manhattan federal court to 18 years in prison for providing and attempting to provide material support to al Qaeda associates in Yemen and elsewhere, and for conspiring to provide material support to al Qaeda over the course of nearly three years. HASANOFF, who was arrested in the United Arab Emirates in 2010 and transferred to United States custody, pled guilty in June 2012 to one count of providing and attempting to provide material support and resources to al Qaeda, and one count of conspiracy to provide material support and resources to al Qaeda. He pled guilty before U.S. District Judge Kimba M. Wood, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara stated: “Today’s sentence reflects the egregiousness of Sabirhan Hasanoff’s conduct. The defendant not only funneled equipment capable of being used for nefarious purposes and thousands of dollars to al Qaeda operatives abroad, he also travelled to U.S. soil to surveil a major New York landmark for a potential terrorist attack. We will not hesitate to continue, with our law enforcement partners, to pursue individuals engaged in similar behavior, and do what we can to ensure they are brought to justice.”
According to various public filings and sworn statements made by the defendant during proceedings in Manhattan federal court:
From 2007 through late 2009, HASANOFF, supported al Qaeda in a variety of ways. HASANOFF and his co-defendant, Wesam El-Hanafi, sent equipment, including remote-controlled devices capable of use in an explosives attack, to terrorist operatives abroad. In addition, HASANOFF and El-Hanafi together funneled approximately $67,000 to al Qaeda operatives overseas. HASANOFF and El-Hanafi collected some of this money from a third individual who resided in the United States. During this time, both defendants used aliases to disguise the source of their money when making cash donations to their terrorist contacts, and made extensive plans for travel to engage in jihad in Somalia, Afghanistan, and Iraq.
In August 2008, HASANOFF entered the United States from abroad, travelled to New York City, and performed surveillance on the New York Stock Exchange – all on instructions from overseas terrorists who were considering the location for a possible attack. The information that HASANOFF gathered on the Stock Exchange was then sent to the terror operatives.
In addition to his prison term, HASANOFF, 37, a dual citizen of the United States and Australia, who resided in Brooklyn, New York, was sentenced to three years of supervised release. He was also ordered to pay a $200 special assessment fee and forfeiture in the amount of $70,000.
El-Hanafi pled guilty in June 2012 to one count of providing and attempting to provide material support and resources to al Qaeda, and one count of conspiracy to provide material support and resources to al Qaeda. He faces a maximum sentence of 20 years in prison.
Mr. Bharara praised the outstanding investigative work of the New York-based Joint Terrorism Task Force – which principally consists of special agents of the Federal Bureau of Investigation and detectives of the New York City Police Department. Mr. Bharara thanked the Department of Justice’s National Security Division and Office of International Affairs, the Kansas City-based JTTF, and the United States Attorney’s Office for the Western District of Missouri for their extraordinary assistance in this matter.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys John P. Cronan, Aimee Hector, Glen Kopp, Michael Lockard, and Brendan R. McGuire are in charge of the prosecution.
Statement of Manhattan U.S. Attorney Preet Bharara on the Charges in U.S. V. Joseph Hunter, Et Al.Read the Press Release
“The bone-chilling allegations in today's Indictment read like they were ripped from the pages of a Tom Clancy novel. The charges tell a tale of an international band of mercenary marksmen who enlisted their elite military training to serve as hired guns for evil ends. Three of the defendants were ready, willing and eager to take cold hard cash to commit the cold-blooded murders of a DEA agent and an informant. Thanks to the determined, skillful and intrepid efforts of the DEA's Special Operations Division, an international hit team has been neutralized by agents working on four continents.”
Manhattan U.S. Attorney Announces Arrests of Two Former U.S. Soldiers and One Former German Soldier for Conspiracy to Murder A DEA AgentRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the United States Drug Enforcement Administration (“DEA”), today announced the arrests of three defendants – JOSEPH MANUEL HUNTER and TIMOTHY VAMVAKIAS, both citizens of the United States, and DENNIS GOGEL, a citizen of Germany. HUNTER is expected to arrive in the Southern District of New York this evening and will be presented before a U.S. Magistrate Judge in Manhattan federal court tomorrow. VAMVAKIAS and GOGEL arrived in the Southern District of New York yesterday and were presented in U.S. Magistrate Court yesterday afternoon. As part of the same case, SLAWOMIR SOBORSKI and MICHAEL FILTER, citizens of Poland and Germany, respectively, were arrested in Estonia at the request of the United States on September 25, 2013.
HUNTER, VAMVAKIAS, and GOGEL are charged in five separate counts with conspiracy to import cocaine into the United States; conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent; conspiracy to kill a person to prevent communications to law enforcement agents; conspiracy to possess a firearm in furtherance of a crime of violence; and conspiracy to distribute cocaine on board an aircraft. SOBORSKI and FILTER are charged with conspiracy to import cocaine into the United States and conspiracy to distribute cocaine on board an aircraft.
On September 25, 2013, the DEA’s Special Operations Division (SOD), Bilateral Investigative Unit (BIU) Narco-Terrorism Group (NTG), concluded a long-standing undercover operation conducted in Asia, Africa, the Caribbean, Europe and elsewhere. HUNTER was arrested in Thailand; VAMVAKIAS and GOGEL were arrested in Liberia and all three subsequently were expelled to the United States. SOBORSKI and FILTER were arrested in Estonia, where they remain, pending extradition to the United States.
Manhattan U.S. Attorney Preet Bharara said: “The bone-chilling allegations in today's Indictment read like they were ripped from the pages of a Tom Clancy novel. The charges tell a tale of an international band of mercenary marksmen who enlisted their elite military training to serve as hired guns for evil ends. Three of the defendants were ready, willing and eager to take cold hard cash to commit the cold-blooded murders of a DEA agent and an informant. Thanks to the determined, skillful and intrepid efforts of the DEA's Special Operations Division, an international hit team has been neutralized by agents working on four continents.”
DEA Administrator Michele M. Leonhart said: “The targets of this investigation were hardened global criminals involved in everything from drug and arms trafficking to contract assassinations. Besides being international cocaine traffickers, members of this criminal organization conspired in an elaborate scheme to murder a DEA Special Agent and an informant for a six figure payday. Their intent was to commit the most serious and ruthless crime that can be directed against any law enforcement officer, and one which has our highest investigative priority. I wish to thank our foreign law enforcement partners for their outstanding efforts and partnership in completely dismantling this sophisticated and dangerous international criminal enterprise.”
According to the Indictment against HUNTER, VAMVAKIAS, GOGEL, SOBORSKI, and FILTER unsealed today:
All five defendants have previously served in the armed forces of their respective nations. HUNTER and VAMVAKIAS served in the U.S. Army until 2004; GOGEL and FILTER served in the German armed forces until 2010 and 2009, respectively, and SOBORSKI served in the Polish armed forces until 2011. HUNTER served as a sniper instructor and a senior drill sergeant, training other soldiers in marksmanship and tactics; VAMVAKIAS attained the rank of sergeant and served both as an infantryman and a military police officer; GOGEL, SOBORSKI and FILTER were trained as snipers.
Since leaving the U.S. Army in 2004, HUNTER has acted as a “contract killer” and successfully arranged for the murder of a number of people.
During meetings in Asia, Africa, and the Caribbean, beginning in January 2013 and continuing through late September 2013, HUNTER communicated with two confidential sources (the “CSs”) working with the DEA, who purported to be Colombian narcotics traffickers. HUNTER agreed to serve as the head of security for the CSs’ purported narcotics trafficking organization, and assembled a “security team” consisting of VAMVAKIAS, GOGEL, FILTER, and SOBORSKI. HUNTER also told the CSs that he had previously been involved in contract killings – referred to as “bonus jobs” – and that some team members wanted to do as much “bonus work” as possible.
HUNTER and his co-defendants thereafter agreed, in meetings and communications with the CSs, to provide security and surveillance services to the narcotics trafficking organization. Furthermore, HUNTER, VAMVAKIAS, and GOGEL agreed to commit murder-for-hire in Liberia by assassinating both a Special Agent of the DEA and a person who purportedly was providing information to the DEA about the CSs’ narcotics trafficking organization. In exchange for the murders, HUNTER, VAMVAKIAS, and GOGEL were together to be paid approximately $700,000, and HUNTER was to receive an additional $100,000 for his leadership role. Communications between the defendants and the CSs occurred by telephone, over e-mail, and in a series of surreptitiously audio-recorded and videotaped meetings over an approximately nine-month period.
HUNTER and his four co-defendants provided a variety of services to the CSs’ purported narcotics organization. In late March 2013, in Thailand, at HUNTER’s direction, GOGEL, FILTER, and SOBORSKI surveilled a vessel on behalf of the CSs’ purported narcotics trafficking organization. In April 2013, in Mauritius, at the direction of the CSs, GOGEL, FILTER, and SOBORSKI provided security for a meeting at which the participants discussed the distribution of illegal narcotics to the United States. In late June 2013, in the Bahamas, VAMVAKIAS, GOGEL, FILTER, and SOBORSKI conducted surveillance of a purported U.S.-registered aircraft at the direction of a third CS (“CS-3”) working with the DEA, who posed as a member of the CSs’ narcotics trafficking organization. CS-3 informed the defendants that the aircraft was to be loaded with 300 kilograms of cocaine to be shipped to New York.
With respect to the murder-for-hire scheme, in mid-May 2013, at a meeting with the three CSs in Thailand, HUNTER,
VAMVAKIAS, GOGEL, and SOBORSKI were told that a “bonus job” – that is, a contract killing – was in the offing, due to a leak within the CSs’ narcotics trafficking organization. In late May 2013, in e-mail communications, HUNTER confirmed that his team would be willing to murder both a U.S. law enforcement agent and a source (a boat captain) who was providing information to U.S. law enforcement authorities. HUNTER confirmed by e-mail that his team would kill both the DEA agent and the informant who was providing information to law enforcement about the CSs’ narcotics trafficking organization. At a meeting in late June 2013, in the Bahamas, CS-3 explained to VAMVAKIAS and GOGEL that “the job is to kill a U.S. DEA agent and a source with the DEA,” who would be located in Liberia. VAMVAKIAS and GOGEL discussed the weapons that could be used and masks to be worn for the murders, and VAMVAKIAS stated that it would be better to “hit the agent first” and then “the snitch.” In early July 2013, HUNTER sent via e-mail a list of the items needed for the murders, including “[t]wo Submachine Guns with silencers . . .[t]wo .22 pistols with Silencers.”
In mid-August 2013, at a meeting in Thailand, HUNTER told CS-3 that VAMVAKIAS and GOGEL would commit the murders. HUNTER, VAMVAKIAS, and GOGEL discussed in detail the weapons that would be used and the possibility of entering Liberia without having their passports stamped. They suggested that CS-3 fly them out of the country via private plane following the murders. VAMVAKIAS stated that among other weapons, a sub-machine gun and two .22 caliber pistols would be needed for the murders, and CS-3 agreed to deliver the weapons to Liberia. The next day, at a meeting with GOGEL, CS-3 confirmed that an order for the requested weapons had been made. Later that same day, GOGEL met again with CS-3 and provided CS-3 with two highly sophisticated latex facemasks, which can make the wearer appear to be of another race, for CS-3 to transport to Liberia.
In late September 2013, GOGEL and VAMVAKIAS arrived in Liberia to commit the planned murders-for-hire.
HUNTER, 48, VAMVAKIAS, 42, GOGEL, 27, FILTER, 29, and SOBORSKI, 40, have each been charged with conspiracy to import cocaine into the United States (Count One). HUNTER, VAMVAKIAS, and GOGEL are also charged with conspiracy to murder a law enforcement agent and a person assisting a law enforcement agent (Count Two); conspiracy to kill a person to prevent communications to law enforcement agents (Count Three); and conspiracy to possess a firearm in furtherance of a crime of violence (Count Four). VAMVAKIAS, GOGEL, FILTER, and SOBORSKI are also charged with conspiracy to distribute cocaine on board an aircraft (Count Five). Each count carries a maximum penalty of life imprisonment. The case is assigned to U.S. District Judge Laura Taylor Swain.
The arrests and transfers of the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s SOD; DEA’s Bangkok, Ghana, Pretoria, Bucharest, Manila, Nassau and Copenhagen Offices; the Royal Thai Police Narcotics Suppression Bureau and Crime Suppression Division; Royal Thai Immigration; the Royal Thai Attorney General's Office; Republic of Liberia’s National Security Agency; the Republic of Liberia’s Attorney General's Office; the Estonian Police and Border Guard; the Estonian National Criminal Police, Investigative Bureau; the Estonian State Prosecutor’s Office; the Royal Bahamas Police Force and Drug Enforcement Unit; 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 Lockard, Aimee Hector and Anna 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.
U.S. v. Joseph Hunter, et al S7 Indictment
Charging Document: U.S. V. Joseph Hunter Et Al.Read the Press Release
U.S. v. Joseph Hunter et al. S7 Indictment
Manhattan U.S. Attorney and FBI Announce Charges Against New York Accountant in Connection with the Fraud at Bernard L. Madoff Investment SecuritiesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Cheryl Garcia, the Acting Special Agent-in-Charge for the New York Regional Office of the U.S. Department of Labor’s Office of the Inspector General, Office of Labor Racketeering and Fraud Investigations (“DOL-OIG”), and Jonathan Kay, the Regional Director for the New York Regional Office of the United States Department of Labor, Employee Benefits Security Administration (“DOL-EBSA”) announced that PAUL J. KONIGSBERG was arrested today for his role in the scheme to falsify books and records at Bernard L. Madoff Investment Securities (“Madoff Securities”), through which Bernard L. Madoff ran his multibillion-dollar Ponzi scheme. KONIGSBERG was also charged in connection with his role in creating a fictitious, no-show job through which a co-conspirator received hundreds of thousands of dollars in compensation from Madoff. KONIGSBERG was presented in Manhattan federal court this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Paul Konigsberg threw aside his ethical duties as an accountant in favor of his role as a false bookkeeper, which included allegedly participating in a scheme of back-dating client account statements to show fictitious trades and conjuring profits and losses of millions of dollars. With today’s indictment, he will be made to answer for his alleged conduct as yet another player on Madoff’s team.”
FBI Assistant Director-in-Charge George Venizelos said: “Sadly, as is often the case in a financial fraud, there was someone to help ‘cook the books’ in the Madoff scheme. Paul Konigsberg was arrested by FBI agents for his alleged role in the multibillion-dollar Ponzi scheme run by Bernard Madoff. Konigsberg allegedly falsified books and records and created a no-show job so a co-conspirator could receive thousands of dollars in compensation. The FBI will continue to investigate and arrest those involved with the Madoff scheme in an attempt to bring some justice to the victims of this devastating fraud.”
DOL-OIG Acting Special Agent-in-Charge Cheryl Garcia said: “Today’s arrest highlights our commitment to work with our law enforcement partners to investigate those who allegedly defraud employee benefit plans and seek to conceal their crimes by falsifying documents required by the Employee Retirement Income Security Act.”
DOL-EBSA New York Regional Director Jonathan Kay said: “Accurate reporting is an essential part of maintaining employee benefit plan integrity. EBSA’s efforts in this case exemplify our commitment to protecting employee benefits and working in coordination with fellow federal agencies.”
In a separate action, the United States Securities and Exchange Commission (“SEC”) announced civil charges against KONIGSBERG.
According to a superseding indictment unsealed today in Manhattan federal court:
KONIGSBERG, a lawyer and Certified Public Accountant, was the senior tax partner of Konigsberg Wolf & Co., P.C. (“Konigsberg Wolf”) and a minority shareholder of Madoff Securities International Limited (“Madoff International”), Madoff’s London-based affiliate. KONIGSBERG was the only person outside of the Madoff family to hold an ownership interest in either Madoff Securities or Madoff International.
Beginning in at least the early 1990s, Madoff began to steer many of his investors towards KONIGSBERG’s accounting practice, particularly certain long-time investors in whose accounts Madoff executed the most glaringly fraudulent transactions. By December 2008, when Madoff’s scheme collapsed, Konigsberg Wolf provided accounting services in connection with more than approximately 300 Madoff Securities accounts. As their accountant, KONIGSBERG typically received duplicate copies of his client’s Madoff Securities account statements, and sometimes the only copy.
After the death of one long-time Madoff client – who had recruited investors and had been promised by Madoff corresponding annual commission payments in the form of guaranteed returns – Madoff encouraged the client’s widow to use KONIGSBERG as her accountant. KONIGSBERG, Madoff, and Frank DiPascali, Jr. – who pled guilty for his role in the fraud and is cooperating with the Government – agreed on an investment “strategy” for the widow’s account. Under the “strategy,” the widow’s money would be “invested” in United States Treasury bonds and cash equivalents for the first 11 months of each year, and then in December, DiPascali would fabricate back-dated options trades in order to generate the promised returns. For instance, one of the widow’s accounts was invested in Treasuries and money market funds in January through November of 2003, resulting in net equity at the end of November 2003 of approximately $860,000. In January 2004, however, DiPascali back-dated fake options trades purportedly executed in December 2003 to generate an additional approximately $825,000, nearly doubling the value of the account. Each December, over the course of several years, KONIGSBERG spoke with DiPascali to ensure that DiPascali arranged for the back-dated trades necessary to ensure the widow’s promised returns.
Similarly, in May 2003, KONIGSBERG requested that another co-conspirator who worked at Madoff Securities (“CC-1”) create back-dated trades in a second client’s account, retroactive to December 2002, in order to generate losses for tax purposes. A Madoff Securities worksheet reflecting the specific composition of the back-dated trades bears the notation “Paul OK’d this,” and an associated note reads, “Jan losses were for 2002 Tax & were put on in May 2003.” The Madoff Securities computer system confirms that in May 2003, CC-1 back-dated the precise trades that “Paul OK’d” to December 2002.
From time to time, moreover, Madoff “amended” the holdings of certain of his oldest clients, replacing statements reflecting one set of securities with revised statements, for the exact same time period, reflecting entirely different holdings and values. Because the existence of multiple, vastly different account statements for the same time risked exposing the fraud, Madoff could only ask certain trusted clients to return their statements in favor of the “amended” ones. Because KONIGSBERG serviced many of Madoff’s most important accounts, he frequently returned statements in favor of the “amended” ones. For example, in late 2002 or early 2003, KONIGSBERG sent back an entire year’s worth of statements for one client in favor of new ones. The new statements reflected millions of dollars in additional profitable trading activity for the client. Likewise, in 2008, KONIGSBERG sent back several months’ worth of statements for a different client, in favor of new ones reflecting millions of dollars in losses.
In addition to being paid for his accounting services by the dozens of clients referred to him by Madoff, for over a decade, KONIGSBERG also received payments directly from Madoff Securities of approximately $15,000 to $25,000 per month for KONIGSBERG’S work in connection with one client in particular. That client, one of Madoff’s oldest and largest, deposited and withdrew tens of billions of dollars into Madoff Securities over the years, and Madoff executed glaringly fraudulent trades in his accounts, such as back-dating an entire year’s worth of statements into accounts that did not previously exist.
Beginning in approximately 1992, Madoff offered KONISBERG, the defendant, an additional cash payment of approximately $20,000 per year. Rather than receiving this money in the form of trading profits, KONIGSBERG instructed Madoff to pay a relative of KONIGSBERG’s (“CC-2”), who had previously worked at Madoff Securities. CC-2 received salary, health, and retirement benefits from Madoff Securities, despite the fact that in recent years CC-2 earned hundreds of thousands of dollars at an overseas hedge fund. Between approximately 1992 until December 2008, CC-2 received more than approximately $320,000 in cash compensation on account of CC-2’s “no show” job at Madoff Securities, plus health and retirement benefits to which CC-2 was not entitled.
KONIGSBERG, 77, was arrested in New York, New York. He is charged in two counts of conspiracy, one count of falsifying the books and records of a broker-dealer, one count of falsifying the books and records of an investment advisor, and one count of making false statements in a document required to be kept by ERISA. He faces a maximum sentence of 40 years in prison. He is also subject to mandatory restitution and criminal forfeiture, and faces criminal fines up to twice the gross gain or loss derived from the offense.
Mr. Bharara praised the work of the FBI, the DOL, and the Internal Revenue Service – Criminal Investigation. He also thanked the SEC.
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 .
This case is 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, and Christopher D. Frey are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Paul Konigsberg S11 Indictment
Former Fund Manager Sentenced in Manhattan Federal Court to 30 Months in Prison in Connection with Multimillion-Dollar Commodities Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that THOMAS HAMPTON, formerly the Managing Director of Hampton Capital Markets, LLC (“Hampton Capital” or the “Fund”), was sentenced today in Manhattan federal court to 30 months in prison in connection with an investment scheme in which HAMPTON concealed millions of dollars in losses he incurred trading various securities, including S&P 500 futures contracts tied to the S&P 500 stock index. HAMPTON pled guilty in April 2013 to one count of commodities fraud before U.S. Magistrate Judge James C. Francis. He was sentenced today by U.S. District Judge Robert W. Sweet.
Manhattan U.S. Attorney Preet Bharara said: “Lying to investors is never acceptable and, as Thomas Hampton now knows after being convicted and sentenced for doing so, it is a federal crime that carries stiff penalties.”
According to the charging instruments in this case and statements made in open court and at the plea proceeding:
From September 2010 through September 2011, HAMPTON was the Managing Director of Hampton Capital, an Arizona limited liability company that had more than $4 million in assets under management. Hampton Capital engaged in the business of buying and selling exchange traded funds (“ETFs”). An ETF is an investment fund that holds assets such as stocks, commodities or bonds, and typically tracks – or attempts to replicate the performance of – an underlying benchmark or index, such as the S&P 500 equities market index. Hampton Capital purported to utilize specially designed computer software to trade ETFs based on pricing inefficiencies. In his role as Managing Director, HAMPTON bought and sold various securities, including S&P 500 E-mini futures contracts, on behalf of the Fund.
When the Fund began to suffer substantial losses as a result of HAMPTON’s trading, he concealed those losses from investors by, among other things, falsely representing that the investments continued to earn profits. For example, HAMPTON provided monthly statements to investors as early as April 2011 that falsely reflected a positive return for the Fund instead of disclosing the actual losses suffered. Based on his misrepresentations and omissions, Hampton Capital investors did not seek to redeem or withdraw their investments. In fact, some investors provided additional investment capital. As a result of the scheme, more than 50 investors lost in total almost $5 million.
In addition to his prison term, HAMPTON, 45, of St. Louis, Missouri, was sentenced to three years of supervised release. He was also ordered to pay restitution in the amount of $4,879,627.98, and to forfeit this amount.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Commodity Futures Trading Commission for their 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 Jillian B. Berman and Emil J. Bove, III, are in charge of the prosecution.
U.S. Citizen Sentenced in Manhattan Federal Court to 25 Years in Prison for Conspiring to Aid the TalibanRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALWAR POURYAN, 38, a U.S. citizen, was sentenced today in Manhattan federal court to 25 years in prison for conspiring to provide material support to the Taliban and conspiring to acquire anti-aircraft missiles. The case arose out of a U.S. Drug Enforcement Administration (“DEA”) undercover operation in which POURYAN and a co-defendant, Oded Orbach, also a U.S. citizen, agreed to provide various military-grade weapons, including heat-seeking surface-to-air missiles, to an individual they believed to represent the Taliban. POURYAN and Orbach were convicted in August 2013 after a two-week bench trial. U.S. District Judge Naomi Reice Buchwald presided over the trial and imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara stated: “Alwar Pouryan was an American who was all too willing to do business with the Taliban – agreeing to provide that narco-terrorist organization with lethal, military-grade weapons that would have put countless innocent lives at risk. The sentence handed down today is a just and appropriate penalty for an individual who so callously sold out his country.”
According to evidence at trial and documents previously filed in Manhattan federal court:
Beginning in the fall of 2010, and continuing through their arrest on February 10, 2011, POURYAN and Orbach communicated with a confidential source (the “CS”) working with the DEA who purported to represent the Taliban. The communications occurred by telephone, via email, and in a series of audio-recorded and videotaped meetings over several months.
During meetings in Ghana, Ukraine, and Romania beginning in November 2010, POURYAN and Orbach, at different times, agreed to arrange the sale of weapons to the CS for the Taliban’s use against U.S. military forces in Afghanistan. At the meetings, POURYAN and Orbach discussed weapons specifications, pricing, and the provision of training for the various weapons, including, among others, “Stinger” surface-to-air missiles, anti-tank missiles, grenade launchers, and M-16 assault rifles. POURYAN and Orbach were informed that the surface-to-air missiles, in particular, were needed to protect Taliban heroin laboratories against attacks by U.S. helicopters. The defendants also offered to provide regular shipments of ammunition. In total, POURYAN and Orbach agreed to provide over $25 million in weapons, ammunition, and training, and expected to make over $800,000 in commissions in connection with the transaction.
The evidence also included internal e-mail and Skype communications between the defendants, which showed them discussing the various weapons requested by the purported Taliban representative, drafting price lists and payment schedules for the weapons, and creating internal budget documents that reflected the expenses and anticipated income from the weapons deal. The evidence also included emails from Orbach to third-party weapons suppliers seeking to obtain certain of the requested weapons.
Following the final meeting in Bucharest, Romania, on February 10, 2011, POURYAN and Orbach were arrested by Romanian authorities in coordination with the DEA. On April 29, 2011, the defendants were transferred by the Government of Romania to the custody of the United States to face charges in the Southern District of New York.
In addition to the prison term, POURYAN was sentenced to 10 years of supervised release and ordered to pay a $200 special assessment.
Orbach is scheduled to be sentenced by Judge Buchwald on November 1, 2013.
The charges, arrest, transfer, and prosecution of POURYAN were the result of close cooperation among the U.S. Attorney’s Office for the Southern District of New York, the Special Operations Division of the DEA, the DEA Warsaw Country Office, the DEA Ghana Country Office, the DEA Athens Country Office, the DEA SECI (South East European Cooperative Initiative Regional Center for Combating Transborder Crime), the Criminal Division’s Office of International Affairs and the National Security Division of the U.S. Department of Justice, the U.S. Attorney’s Office for the Northern District of Illinois, the U.S. Department of State, U.S. Immigration and Customs Enforcement, and the governments of Romania and Ukraine.
Mr. Bharara expressed his sincere gratitude for the work of the Romanian National Prosecutor’s Directorate for Investigating Organized Crime and Terrorism, the Romanian Prosecutor’s Office of the Court of Appeals, and the Romanian National Police Directorate for Investigating Organized Crime.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Christian R. Everdell, Aimee Hector, and Glen A. Kopp are in charge of the prosecution.
Three More Defendants Plead Guilty to Conspiring to Bribe New York State Assemblymember Eric StevensonRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, announced that IGOR TSIMERMAN, ROSTISLAV BELYANSKY (“SLAVA”), and DAVID BINMAN pled guilty in proceedings yesterday and today in Manhattan federal court to conspiring to bribe New York State Assemblymember Eric Stevenson in connection with a scheme to obtain Stevenson’s assistance in drafting, proposing, and agreeing to enact legislation favorable to their business. TSIMERMAN also pled guilty to conspiring to bribe former New York State Assemblymember Nelson Castro. TSIMERMAN, SLAVA, and BINMAN were arrested in April 2013. TSIMERMAN and SLAVA pled guilty yesterday before U.S. District Judge William H. Pauley III, and BINMAN pled guilty today before Judge Pauley.
Manhattan U.S. Attorney Preet Bharara said: “With these additional guilty pleas, we are holding accountable individuals who wanted the law to be for sale and the legislature to be a bazaar. This Office will continue in its work to prosecute and punish those who attempt to corrupt the legislative process in New York.”
According to the allegations contained in the Complaint, the Superseding Indictment, and statements made in court:
Stevenson has served as a member of the New York State Assembly since 2011 representing District 79, which includes various neighborhoods in the Bronx. Castro is a former member of the New York State Assembly who has been cooperating in this investigation. In August 2013, pursuant to a cooperation agreement, Castro pled guilty in federal court to making false statements to law enforcement agents and also pled guilty in state court to committing perjury in connection with registering New York City residents to vote.
TSIMERMAN, SLAVA, and BINMAN, and co-defendant Igor Belyansky, are business partners who, during 2012 and 2013, were trying to open and manage adult day care centers in the Bronx, New York, including a center on Westchester Avenue (the “Westchester Avenue Center”), within Stevenson’s Assembly District, and another center on Jerome Avenue (the “Jerome Avenue Center”), within Castro’s Assembly District. In connection with their efforts to open and operate both centers, TSIMERMAN, SLAVA, and BINMAN, together with Belyansky, made cash bribe payments to Stevenson. TSIMERMAN and Belyansky also made a cash bribe payment to Castro, who was cooperating with the Government at the time.
At a January 27, 2012 meeting at a restaurant in the Bronx, TSIMERMAN and Belyansky paid Castro $12,000 in cash in exchange for Castro’s assistance in helping TSIMERMAN and Belyansky open an adult day care center in Castro’s district. Immediately following this meeting, Castro met with an individual who was working with TSIMERMAN, SLAVA, Belyansky, and BINMAN on their adult day care centers and who later began cooperating with the Government (the “CW”). Castro told the CW, in sum and substance, “Whatever [TSIMERMAN and Belyansky] need, legislatively, whatever. . . . .” The CW interrupted Castro and stated, in sum and substance, “they call me. I call you. That’s it and it’s how we work.”
At a September 7, 2012 meeting at a steakhouse in the Bronx, SLAVA and Belyansky offered to pay Stevenson $10,000 in exchange for calling Con Edison to expedite the installation of a gas line and assisting with obtaining a Certificate of Occupancy from the New York City Buildings Department at the Jerome Avenue Center, and for assistance recruiting senior citizens to attend the Westchester Avenue Center. Stevenson agreed, but when Belyansky attempted to hand him the $10,000 in cash in an envelope, Stevenson indicated that he was concerned that there might be surveillance cameras in the restaurant, so the transaction was conducted outside. After the group walked outside the restaurant, Belyansky handed Stevenson the envelope of cash, after which Stevenson stuffed the envelope into his front pants pocket and covered his front pocket with the bottom of his shirt.
On January 9, 2013, the CW told Belyansky that Stevenson wanted $10,000 for introducing legislation that would establish a temporary moratorium on the construction and/or opening of new adult day care centers (the “Moratorium Legislation”), which would have the effect of eliminating competition with the Jerome Avenue Center and the Westchester Avenue Center, thereby substantially increasing the profits earned by those two centers. Two days later, on January 11, 2013, at the Westchester Avenue Center, TSIMERMAN, SLAVA, BINMAN, and Belyansky, gave the CW $5,000 cash to be delivered to Stevenson.
At a January 31, 2013 meeting, Stevenson showed the CW a draft of the Moratorium Legislation. On February 11, 2013, Stevenson told the CW: “We got the bill [the Moratorium Legislation] back today . . . [t]he bill is done now, it’s going out to the members . . . to the committee and . . . we’re gonna . . . try to push it to get it to the floor.” On February 16, 2013, in a hotel room in Albany, SLAVA gave $5,000 in cash to the CW, which the CW gave to Stevenson after taking a $500 cut.
Stevenson introduced and sponsored Assembly Bill Number A05139, which places a temporary moratorium on the construction and/or opening of new adult day care centers within New York City, on February 20, 2013.
TSIMERMAN, 47, of Staten Island, New York, SLAVA, 43, of the Bronx, New York, and BINMAN, 52, of Glendale, New York, each pled guilty to conspiring to commit honest services wire fraud, which carries a maximum sentence of 20 years in prison and three years of supervised release. TSIMERMAN also pled guilty to travel act conspiracy, which carries a maximum sentence of five years in prison and three years of supervised release. TSIMERMAN, SLAVA, and BINMAN further agreed to forfeit any proceeds of their crimes and pay restitution in an amount ordered by the Court. TSIMERMAN, SLAVA, and BINMAN will be sentenced by Judge Pauley on January 24, 2014, at 2:00 p.m.
On Monday, September 23, 2013, Belyansky pled guilty before Judge Pauley to conspiring to commit honest services wire fraud and conspiring to violate the travel act. Belyansky is scheduled to be sentenced by Judge Pauley on January 24, 2014, at 2:00 p.m. The charges against Stevenson remain pending and are merely accusations. Stevenson is presumed innocent unless and until proven guilty.
Mr. Bharara expressed his appreciation for the outstanding efforts of the Bronx County District Attorney's Office, the partner in this case.
This prosecution is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Paul M. Krieger and Brian A. Jacobs and Assistant District Attorney Pishoy Yacoub of the Bronx County District Attorney’s Office are in charge of the prosecution.
U.S. v. Eric Stevenson et al. S2 Indictment
Manhattan U.S. Attorney Announces Charges Against Hudson County Corrections Officer and Other Alleged Members of an Armed Robbery Crew That Impersonated Police OfficersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Brian R. Crowell, the Special-Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), Aaron Ford, the Special-Agent-in-Charge of the Newark Office of the Federal Bureau of Investigation (“FBI”), Raymond W. Kelly, the Commissioner of the New York City Police Department (“NYPD”), Joseph A. D’Amico, the Superintendent of the New York State Police (“NYSP”), and Gaetano T. Gregory, the Acting Prosecutor of Hudson County, today announced the filing of a Superseding Indictment (the “S2 Indictment”)in Manhattan federal court charging BENNY LISOJO and WILFREDO SUAREZ, two additional alleged members of an armed robbery crew who impersonated police officers, with robbery conspiracy and firearms offenses. LISOJO is a Hudson County Corrections Officer. A third defendant named in the S2 Indictment, ANTHONY SERRANO, was arrested on August 1, 2013. LISOJO and SUAREZ were taken into custody today and will be presented this afternoon before Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants committed armed robberies while pretending to be police officers. In doing so, as charged, the defendants – one of whom sadly was a law enforcement officer -- both endangered the public and added to the workload of the real police. This Office and our partners will continue our efforts to pursue and prosecute those who perpetrate alleged violent crime.”
DEA Special-Agent-in-Charge Brian R. Crowell said: “This nine month investigation has culminated in the announcement of three additional arrests of a home invasion crew that posed as police officers, carrying loaded weapons and committing robberies in New York and New Jersey. One crew member did not have to pretend he was a police officer – because Benny Lisojo was a Hudson County Corrections Officer while committing these alleged crimes. Law enforcement efforts on all levels, have successfully identified, investigated and arrested twenty members of this brutal crew to rid the streets of this public menace.”
FBI Special-Agent-in-Charge Aaron Ford said: “These alleged actions are an erosion of the public's ability to trust the law enforcement personnel who have taken oath to protect against such egregious, criminal activity. The FBI will continue to support this ongoing investigation, so the members of the public can continue to trust in the vast majority of law enforcement officials who respect their oath and are committed to public service.”
NYPD Commissioner Raymond W. Kelly said: “These brazen criminals were allegedly responsible for multiple violent crimes including car jackings and robberies at gunpoint. I commend the members of the New York Drug Enforcement Task Force, including NYPD detectives, and the prosecutors in the U.S. Attorney's office for their work in bringing to justice these violent robbers who even posed as law enforcement in the commission of their crimes.”
NYSP Superintendent Joseph A. D’Amico said: “Once again the hard work of law enforcement partners working together has resulted in getting allegedly dangerous individuals off of our streets. Not only did these suspects allegedly commit these violent acts, but they posed as law enforcement, making traffic stops to pull off their robberies. The alleged actions of these crews will never be tolerated, especially those impersonating officers. I commend and thank the U.S. Attorney's Office, the Drug Enforcement Administration, the Federal Bureau of Investigation, the New York City Police Department and Hudson County Prosecutor's Office for their continued partnerships.”
According to the allegations contained in the Superseding Indictment unsealed today:
On October 14, 2012, SERRANO and other co-conspirators, while pretending to be police officers, stopped two victims who were traveling in a vehicle in New York, New York, and robbed the victims at gunpoint.
On November 22, 2012, LISOJO and SUAREZ and other co-conspirators, while pretending to be police officers, stopped five victims who were traveling in a vehicle in New Jersey after departing from New York, New York, restrained four of the victims, and robbed them at gunpoint.
SERRANO, 39, of Jersey City, New Jersey, LISOJO, 31, of Newark, New Jersey, and SUAREZ, 31, of Jersey City, New Jersey, are each charged with one count of robbery conspiracy, and one count of brandishing a firearm in connection with a robbery conspiracy. They each face up to 20 years in prison on the robbery charge and life in prison on the firearms charge.
The arrests and charges are part of an ongoing investigation of an armed robbery crew that impersonated police officers and targeted individuals believed to be engaged in narcotics trafficking and/or engaged in businesses that affected interstate and international commerce. Seventeen other members of the same robbery crew were arrested in January 2013, in possession of, among other things: six loaded guns, shirts bearing the word “Police,” a hydraulic ram similar to those used by law enforcement to break down doors, handcuffs, walkie talkies, a purported law enforcement shield, a baseball bat, ski masks, and GPS units similar to those used by law enforcement to track suspects. Sixteen of these 17 defendants have pleaded guilty.
Mr. Bharara praised the DEA, the FBI, the NYPD, the NYSP, and the Hudson County Prosecutor’s Office for their work in the investigation.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant United States Attorneys Rachel Maimin and Rahul Mukhi are in charge of the prosecution.
The charges contained in the S2 Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Telemarketer Sentenced in Manhattan Federal Court to 75 Months in Prison for Sweepstakes Fraud That Targeted Elderly VictimsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that WARREN STELMAN, a/k/a “Dave Ford,” was sentenced today to 75 months in prison for his participation in a Dominican-based telemarketing fraud scheme that targeted elderly victims throughout the United States and defrauded those victims of nearly $1 million. STELMAN was arrested in the Dominican Republic in August 2012 and was subsequently extradited to the United States. He pled guilty in January 2013 to one count of wire fraud. Today’s sentence was imposed by U.S. District Judge Lewis A. Kaplan.
Manhattan U.S. Attorney Preet Bharara said: “Warren Stelman admitted scheming in the Dominican Republic to fleece elderly people in the U.S. His pitch, dangling fictitious sweepstakes winnings, was persuasive enough to victimize many of these people repeatedly. Today he has been ordered to pay for his crime against these vulnerable victims in money and time.”
FBI Assistant Director-in-Charge George Venizelos said: “The defendant hid behind his telephone to prey upon his victims, many of whom were elderly, with promises of money and prizes. Although the victims never met the defendant, they relied upon his representations of wealth and in exchange, turned over their hard earned money. This case should be a reminder to the public to be cautious of get-rich-quick opportunities, many of which are merely schemes to defraud and take advantage of our unsuspecting community.”
According to the Indictment and other documents filed in Manhattan federal court, as well as statements made in court proceedings:
STELMAN and his co-conspirators, including his wife Lana Stelman, operated boiler rooms in the Dominican Republic, from which they telephoned victims in the United States, most of whom were elderly. They informed the victims falsely that they had won substantial amounts of cash through a sweepstakes or some other type of promotion, but that in order to claim their prize, they first needed to wire thousands of dollars in “fees” to the Dominican Republic. In reality, however, there were no cash prizes, neither STELMAN nor his co-conspirators worked in connection with a sweepstakes or other promotion, and none of the victims ever received any money in exchange for their fees.
The victims were typically told to send the money for the purported fees by, among other means, Western Union or Money Gram. After victims sent money to cover the supposed fees, STELMAN and his co-conspirators typically contacted them again and, using further fraudulent representations, persuaded them to send more money to pay for other costs. In some instances, when victims said that they had run out of money to pay additional fees, STELMAN and his associates urged the victims to come up with more money by borrowing from friends and relatives, taking cash advances on credit cards, and obtaining loans against their homes and vehicles.
The fraudulent scheme targeted U.S. residents who had previously subscribed to sweepstakes. STELMAN and his co-conspirators identified these victims by purchasing from U.S.-based brokers copies of sweepstakes entry forms the victims had previously filled out. These entry forms, which the conspirators referred to as “leads,” were typically written on narrow slips of paper that included the names, addresses, and telephone numbers for sweepstakes entrants. The conspirators used various Internet-based phone methods to mask their locations and identities, and communicated with the victims through numbers assigned to voicemail boxes located in Manhattan. In total, 78 victims – 54 of whom were over the age of 70 – were defrauded out of nearly $1 million.
In addition to the prison term, Judge Kaplan sentenced STELMAN, 54, of the Dominican Republic, to three years of supervised release. STELMAN was also ordered to forfeit $996,659.30 and to pay a total of $996,659.30 in restitution to 78 victims.
Four other defendants – Lana Stelman, Romeo Rawlins, Juana Santana and Lickenson Brooks – were also charged for their participation in the scheme. Lana Stelman and Brooks pled guilty and are awaiting sentencing. Charges remain pending against Rawlins and Santana, and they are presumed innocent until and unless they are proven guilty.
In related cases, Janice Pemberton, Peter Gruman, Randy Ortzman, and Avraham Fried were charged with participating in similar telemarketing fraud schemes from the Dominican Republic. All of these defendants have pled guilty. Fried was sentenced on September 10, 2013 by U.S. District Judge William H. Pauley to 44 months in prison. Pemberton, Gruman, and Ortzman are awaiting sentencing.
Mr. Bharara praised the outstanding investigative work of the FBI.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Thomas G. A. Brown and Rosemary Nidiry are in charge of the prosecution.
Newburgh Latin Kings Leader Jose Lagos Sentenced to 40 Years in Prison for Three MurdersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOSE LAGOS, a 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 40 years in prison. LAGOS’s criminal conduct, for which he was sentenced, included three murders, shootings, brandishing firearms, assaults, drug distribution, and other acts of racketeering. LAGOS, 23, is one of 35 members and associates of the gang who were charged in the case, all of whom have been convicted, 26 of whom have been sentenced. The remaining top two leaders of the gang, Wilson Pagan and Christian Sanchez, were convicted at trial of murder, racketeering, firearms, and narcotics offenses, and each faces a mandatory life sentence.
U.S. Attorney Preet Bharara stated: “With this sentencing, and the pending sentencing of Lagos’s two key accomplices, the leadership of the gang that deprived the citizens of Newburgh of their well-being has been decapitated. This result was only accomplished by the unflagging efforts of the federal, state and local law enforcement personnel and the prosecution team. Today, Newburgh is a safer place but we are not relenting in our efforts to lift the shadow that gangs cast over its streets.”
According to the Indictment to which LAGOS pled guilty, statements made during the plea and sentencing proceedings, other court documents, and evidence presented during related trials:
On May 6, 2008, LAGOS, then a leader of the Newburgh Latin Kings, ordered two others to shoot a member of a rival gang, the Bloods. The subordinates followed LAGOS’s orders, but mistakenly shot and killed Jeffrey Zachary, a 15-year-old boy, who had nothing to do with the gang dispute.
On March 11, 2010, LAGOS, then still a leader of the Newburgh Latin Kings, ordered, along with others, two others to shoot a member of the Bloods. The subordinates followed LAGOS’s and the other leaders’ orders, but one of the subordinates, Jerome Scarlett, was instead mistakenly shot and killed.
On March 12, 2010, LAGOS, along with other leaders of the Newburgh Latin Kings, ordered the killing of John Maldonado, whom they suspected had killed Scarlett. LAGOS helped to obtain a gun while other members of the gang plotted the murder. Another member of the gang shot Maldonado, unsuspecting, in the back, killing him.
LAGOS carried out the murders as part of his participation in the criminal affairs of the Newburgh Latin Kings. Among the gang’s criminal objectives was selling drugs, including by controlling corners in the City of Newburgh where they regularly met with drug customers to sell crack, cocaine, heroin, and marijuana. Gang members, and leaders such as LAGOS, conspired together to protect their drug turf, and to attempt to expand the gang’s drug turf, including by using violence to kill, hurt, or intimidate the gang’s rivals or other enemies of the gang.
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 S. Kurland and Nicholas McQuaid are in charge of the prosecution.
New Jersey Lawyer Sentenced in Manhattan Federal Court in Connection with Multiple Investment Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that EVERETTE L. SCOTT, JR., a New Jersey attorney, was sentenced today in Manhattan federal court to 30 months in prison for engaging in securities and wire fraud in connection with two separate schemes. In the larger of the two schemes, SCOTT and co-defendant Tyrone L. Gilliams, Jr., solicited and misappropriated $5 million in investments in a bogus U.S. Treasury Strips investment program. In the other scheme, the defendants solicited and misappropriated a $450,000 investment in a Utah coal mine. In addition to buying luxury cars, jewelry, and other items, Gilliams spent hundreds of thousands of dollars of investor money organizing and promoting a multi-day festival in Philadelphia that headlined Sean “Diddy” Combs. SCOTT and Gilliams were found guilty following a jury trial in February 2013, and Scott was sentenced today by U.S. District Judge Deborah A. Batts.
Manhattan U.S. Attorney Preet Bharara said: “With his sentence today, Everette Scott meets the just punishment that befalls an attorney who uses a law license as a vehicle for fraud – time in federal prison. This Office will continue to make sure the perpetrators of fraud are brought to justice and pay the price for their crimes.”
According to the Indictment and the evidence presented at trial:
In 2009 and 2010, Gilliams was the owner of TL Gilliams, LLC, which purported to engage in transactions in commodities like oil and gold. SCOTT was an attorney at a small law firm in New Jersey and acted as TL Gilliams’s general counsel.
In the summer of 2010, Gilliams solicited $5 million dollars from two investors for purposes of trading in U.S. Treasury Strips, which are a derivative of U.S. Treasury Bonds. Gilliams and SCOTT arranged for the investors to make their investments by wiring them into an attorney trust account maintained by SCOTT’s law firm. Upon receiving the money, SCOTT – at Gilliams’s direction – misappropriated more than $700,000 to satisfy expenses stemming from an unrelated and failed venture to buy a coal mine in Utah. SCOTT also claimed $50,000 of the investment money for himself as purported fees. At Gilliams’s direction, SCOTT transferred most of the remainder to bank and brokerage accounts that Gilliams controlled.
At most, Gilliams purchased $250,000 worth of Treasury Strips with the more than $4 million in investment money transferred by SCOTT. Over a span of less than six months, Gilliams spent more than $1.6 million on an unrelated gold investment; more than $200,000 to purchase a commercial warehouse in Denver; at least $100,000 to buy or lease luxury cars; at least $50,000 for construction work on his home; at least $100,000 on luxury hotel and travel expenses; and more than $500,000 promoting two events – “Joy to the World,” involving an album release party with Jamie Foxx at the Vault nightclub in Philadelphia, and culminating in a red carpet, black tie gala at the Philadelphia Ritz-Carlton, headlined for a $120,000 fee by Sean “Diddy” Combs, and the “Gatta Be Jokin’ Comedy Jam,” a December 2010 comedy performance in Nassau, Bahamas.
Gilliams did not engage in any trading of Treasury Strips and, as a result, did not derive any profits. Nonetheless, during the period when he was spending investor money, Gilliams provided investors with false reports of trades and profits, and made occasional, nominal payments that he falsely claimed represented profits from Treasury Strips trading. Other than these purported profit payments, which totaled approximately $100,000, neither investor received any of his combined $5 million investment back.
In a separate scheme, Gilliams and SCOTT arranged in late 2009 for an investor to transfer $450,000 to SCOTT’s attorney trust account, to be held in escrow until used in connection with a venture to purchase the assets of a bankrupt Utah coal mine. Once the money was in SCOTT’s account, he secretly misappropriated approximately $112,000 by claiming it as purported fees, and transferred the rest to Gilliams or other individuals and entities at Gilliams’s direction. Until August 2010, Gilliams and SCOTT falsely assured the victim that his $450,000 remained safely in escrow, long after SCOTT’s escrow account had been emptied. Although the victim repeatedly demanded the return of his funds, Gilliams and SCOTT pacified him by producing forged bank documents and a false attorney attestation letter written by SCOTT purporting to show that Gilliams was in possession of the millions of dollars necessary to purchase and operate the Utah coal mine. In August 2010, after an attorney for the victim threatened SCOTT with professional discipline for his failure to return the escrowed funds, Gilliams and SCOTT paid the victim $450,000 using funds they raised for investment in Treasury Strips.
In addition to the prison term, Judge Batts sentenced SCOTT, 52, of Sewell, New Jersey, to three years of probation. He was also ordered to make restitution in the amount of $1,005,000, and pay a $300 special assessment fee.
Gilliams is scheduled to be sentenced by Judge Batts on October 31, 2013, at 10:30 a.m.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Federal Bureau of Investigation, which jointly investigated this case. He also thanked the U.S. Securities and Exchange Commission.
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.
This case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Michael A. Levy and David B. Massey are in charge of the prosecution.
Former Bronx Not-For-Profit Program Director Found Guilty in Manhattan Federal Court of BriberyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that SATNARINE SEEBACHAN, formerly a program director at Bronx Shepherds Restoration Corporation (“Bronx Shepherds”), a not-for-profit corporation in the Bronx, New York, was found guilty yesterday of soliciting and accepting a bribe in the form of labor and materials for the renovation of his residence from a contractor who received federally funded contracts from Bronx Shepherds. SEEBACHAN was convicted after a five-day jury trial before U.S. District Judge George B. Daniels.
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
SEEBACHAN was employed as a program director by Bronx Shepherds, a not-for-profit corporation that provides housing restoration for low-income individuals in the Bronx, New York. As program director, SEEBACHAN was responsible for administering two federally funded home improvement programs, namely, the Weatherization Assistance Program (“Weatherization Program”) and the Home Program (“Home Program”) (collectively, the “Programs”).
The Weatherization Program is a federal program funded by the U.S. Department of Energy and the U.S. Department of Health and Human Services. The Weatherization Program provides weatherization assistance, such as improved lighting and heating systems, window caulking, and wall and ceiling insulation, to buildings with low-income residents in order to make the buildings more energy efficient. The Home Program is a federal program funded by the U.S. Department of Housing and Urban Development. The Home Program provides renovation assistance to low-income individuals who reside in small family homes, such as repairs to ceilings, bathrooms, kitchens, windows, and sidewalks. As a program director for Bronx Shepherds, SEEBACHAN was in charge of the bidding process to select the construction companies hired to perform the necessary work on the buildings, apartments, and houses that Bronx Shepherds had selected to participate in the Programs.
Towards the end of 2005, SEEBACHAN purchased a residence in Glen Cove, New York. In 2006, 2007, and again in 2010, at the direction of SEEBACHAN, a construction company that bid for and received contracts from Bronx Shepherds to perform renovation work under the Programs (the “Contractor”) supplied materials and labor for construction and renovation work performed at SEEBACHAN’s residence. Specifically, the Contractor paid for marble that was installed in SEEBACHAN’s residence and did extensive concrete beautification renovations to the driveway, front walkway, and back patio and pool area.
At the time the Contractor paid for the marble and performed the concrete work at SEEBACHAN’s residence, SEEBACHAN promised the Contractor that he would ensure the Contractor received lucrative contracts to perform repairs on apartment buildings Bronx Shepherds owned and managed. The total dollar value of the labor and materials that SEEBACHAN obtained from the Contractor was more than $100,000. SEEBACHAN was found guilty of one count of bribery concerning an organization that receives federal program funds.
SEEBACHAN, 51, of Glen Cove, New York, faces a maximum sentence of 10 years in prison. A sentencing hearing has been scheduled for January 30, 2014, at 10:00 a.m. before Judge Daniels.
Mr. Bharara praised the investigative work of the New York State Inspector General’s
Office.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Carrie H. Cohen and Rebecca M. Ricigliano are in charge of the prosecution.
U.S. v. Satnarine Seebachan Indictment
Co-Owner of Adult Day Care Centers in New York City Pleads Guilty to Conspiring to Bribe New York State Assemblymember Eric Stevenson and Former Assemblymember Nelson CastroRead the Press Release
Preet Bharara, United States Attorney for the Southern District of New York, announced that IGOR BELYANSKY pled guilty today in Manhattan federal court to conspiring to bribe New York State Assemblymember Eric Stevenson in connection with a scheme to obtain Stevenson’s assistance in drafting, proposing, and agreeing to enact legislation favorable to BELYANSKY’s business. BELYANSKY also pled guilty to conspiring to bribe former New York State Assemblymember Nelson Castro. BELYANSKY was arrested in April 2013, and pled guilty before U.S. District Judge William H. Pauley III.
Manhattan U.S. Attorney Preet Bharara said: “Igor Belyansky tried to corrupt the legislative process by bribing two New York state lawmakers, and attempted to buy from one of them a self-serving law designed to advance his own business interests. As the prosecution of this case shows, our Office will do everything in its power to ensure that democracy is not for sale in New York. With his guilty plea today, Belyansky becomes the first defendant to admit his role in this egregious scheme.”
According to the allegations contained in the Complaint, the Superseding Indictment, and statements made in court:
Stevenson has served as a member of the New York State Assembly since 2011 representing District 79, which includes various neighborhoods in the Bronx. Castro is a former member of the New York Assembly who has been cooperating in this investigation. In August 2013, pursuant to a cooperation agreement, Castro pled guilty in federal court to making false statements to law enforcement agents and also pled guilty in state court to committing perjury in connection with registering New York City residents to vote.
BELYANSKY and co-defendants Rostislav Belyansky (a/k/a “Slava”), Igor Tsimerman, and David Binman are business partners who, during 2012 and 2013, were trying to open and manage adult day care centers in the Bronx, New York, including a center on Westchester Avenue (the “Westchester Avenue Center”), within Stevenson’s Assembly District, and another center on Jerome Avenue (the “Jerome Avenue Center”), within Castro’s Assembly District. In connection with their efforts to open and operate both centers, BELYANSKY, together with Slava, Tsimerman, and Binman, made cash bribe payments to Stevenson. BELYANSKY and Tsimerman also made a cash bribe payment to Castro, who was cooperating with the Government at the time.
At a January 27, 2012 meeting at a restaurant in the Bronx, BELYANSKY and Tsimerman paid Castro $12,000 in cash in exchange for Castro’s assistance in helping BELYANSKY and Tsimerman open an adult day care center in Castro’s district. Immediately following this meeting, Castro met with an individual who was working with BELYANSKY, Tsimerman, Slava, and Binman on their adult day care centers and who later began cooperating with the Government (the “CW”). Castro told the CW, in sum and substance, “Whatever [Tsimerman and BELYANSKY] need, legislatively, whatever. . . . .” The CW interrupted Castro and stated in sum and substance, “they call me. I call you. That’s it and it’s how we work.”
At a September 7, 2012 meeting at a steakhouse in the Bronx, BELYANSKY and Slava offered to pay Stevenson $10,000 in exchange for calling Con Edison to expedite the installation of a gas line and assisting with obtaining a Certificate of Occupancy from the New York City Buildings Department at the Jerome Avenue Center, and for assistance recruiting senior citizens to attend the Westchester Avenue Center. Stevenson agreed, but when BELYANSKY attempted to hand him the $10,000 in cash in an envelope, Stevenson indicated that he was concerned that there might be surveillance cameras in the restaurant, so the transaction was conducted outside. Outside the restaurant, BELYANSKY handed Stevenson the envelope of cash, after which Stevenson stuffed the envelope into his front pants pocket and covered his front pocket with the bottom of his shirt.
On January 9, 2013, the CW told BELYANSKY that Stevenson wanted $10,000 for introducing legislation that would establish a temporary moratorium on the construction and/or opening of new adult day care centers (the “Moratorium Legislation”), which would have the effect of eliminating competition with the Jerome Avenue Center and the Westchester Avenue Center, thereby substantially increasing the profits earned by those two centers. Two days later, on January 11, 2013, at the Westchester Avenue Center, BELYANSKY, Slava, Tsimerman, and Binman gave the CW $5,000 cash to be delivered to Stevenson.
Stevenson had a draft of the Moratorium Legislation prepared by January 31, 2013, which he showed the CW at a meeting in his office. On February 11, 2013, Stevenson told the CW: “We got the bill [the Moratorium Legislation] back today . . . [t]he bill is done now, it’s going out to the members . . . to the committee and . . . we’re gonna . . . try to push it to get it to the floor.” On February 16, 2013, in a hotel room in Albany, Slava gave $5,000 in cash to the CW, which the CW gave to Stevenson after taking a $500 cut.
Stevenson introduced and sponsored Assembly Bill Number A05139, which places a temporary moratorium on the construction and/or opening of new adult day care centers within New York City, on February 20, 2013.
BELYANSKY, 42, of the Bronx, New York, pled guilty to conspiring to commit honest services wire fraud, which carries a maximum sentence of 20 years in prison and three years of supervised release. He also pled guilty to travel act conspiracy, which carries a maximum sentence of five years in prison and three years of supervised release. BELYANSKY further agreed to forfeit any proceeds of his crimes and to pay restitution in an amount ordered by the Court. BELYANSKY will be sentenced by Judge Pauley on January 24, 2014, at 2:00 p.m.
The charges against Stevenson, Slava, Tsimerman, and Binman remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.
Mr. Bharara expressed his appreciation for the outstanding efforts of the Bronx County District Attorney's Office, the partner in this case.
This prosecution is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Paul M. Krieger and Brian A. Jacobs and Assistant District Attorney Pishoy Yacoub of the Bronx County District Attorney’s Office are in charge of the prosecution.
Manhattan U.S. Attorney Charges Seven Additional Members and Associates of Genovese and Bonanno Organized Crime Families with Narcotics Trafficking Conspiracy and Loan SharkingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the unsealing of charges in Manhattan federal court against seven additional alleged members and associates of the Genovese and Bonanno organized crime families, including a Genovese “Capo,” for offenses including narcotics trafficking conspiracy and loan sharking. Five other defendants, including a solider in the Genovese organized crime family, were charged in a prior Indictment with narcotics trafficking.
In connection with the Superseding Indictment unsealed today, six defendants have been arrested in New York. The six defendants taken into custody today in New York were presented and arraigned in Manhattan federal court before U.S. Magistrate Judge Henry B. Pitman this afternoon. An additional defendant, ELON VALENTINE, was previously arrested on state charges and remains detained.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants, all of whom were members and associates of the Genovese and Bonanno families, operated a narcotics trafficking scheme that ran across the country and onto our streets, on one hand, and a conspiracy to make extortionate loans, on the other. This Office is committed to rooting out any and all organized crime activity wherever we find it.”
FBI Assistant Director-in-Charge George Venizelos said: “Today’s charges show that the wise guys in New York tried to take a ‘higher,’ albeit illegal, approach to make money along with their usual loan sharking ways. Allegedly, members and associates of the Genovese and Bonanno organized crime families along with their cohorts ran a large scale marijuana operation that included the transport of marijuana from California to New York. However wise they thought their alleged antics would be, today, the FBI stands with our law enforcement partners announcing charges to end this cross country drug trade.”
NYPD Police Commissioner Raymond Kelly said: “I commend the NYPD Organized Crime Investigations Division and their FBI partners in the Joint Organized Crime Task Force for seeing this case through, as well as the prosecutors in U.S. Attorney Bharara’s office for their work on this case.”
According to the allegations in the Indictments unsealed today in Manhattan federal court and other court documents and proceedings:
Narcotics Trafficking
VINCENT BASCIANO, JR., STEPHEN BASCIANO, GEORGE KOKENYEI, JOEY BASCIANO, and VALENTINE conspired to distribute hundreds, and in some cases, thousands, of pounds of marijuana. For example, KOKENYEI arranged for large shipments of marijuana to be sent from California to New York, while BASCIANO, JR., ran a marijuana route in the Bronx, New York, that distributed hundreds of pounds of marijuana.
Loan Sharking
PASQUALE FALCETTI, a “capo” in the Genovese crime family, and THOMAS JOY conspired to make extortionate loans to victims in the Bronx, New York, and elsewhere.
A chart containing the ages and charges against the defendants, as well as the maximum penalties they face is attached.
Mr. Bharara thanked the FBI and the NYPD, specifically the FBI-NYPD Joint Organized Crime Task Force, for their work in the investigation.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Rebecca Mermelstein and Peter Skinner of the Organized Crime Unit 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. Vincent Basciano et al S3 Indictment
Former Bank Executive Pleads Guilty in Connection with Accounting Fraud at Olympus CorporationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHAN MING FON (“CHAN”), a former bank vice president based in Singapore, pled guilty today in connection with his participation in a scheme to defraud investors and auditors regarding the financial condition of Olympus Corporation (“Olympus”). CHAN, who was arrested in December 2012, pled guilty before U.S. District Judge Laura Taylor Swain, pursuant to a cooperation agreement.
According to the Information to which CHAN pled guilty and other court documents:
Olympus is a major manufacturer of medical devices and cameras. Olympus common stock is listed on the Tokyo Stock Exchange. In addition, Olympus American Depository Receipts are traded in the United States. Olympus owns, both fully and in part, numerous subsidiaries and related companies, located in many countries, including the United States.
From 1995 through 2004, CHAN was employed as an executive at two different international financial institutions (“Bank-1” and “Bank-2”). While employed at Bank-1, CHAN served as the relationship manager for Olympus. While employed at Bank-2, he facilitated a loan for hundreds of millions of dollars to a special purpose entity established by Olympus known as Easterside. Olympus did not disclose to its auditor, investors or shareholders the existence of this loan or that it was collateralized by Olympus’s deposits.
Subsequently, from 2005 through 2010, CHAN participated in a scheme to disguise hundreds of millions of dollars that Olympus purportedly invested in government bonds and other secure investments (the “Investment Portfolio”). He served as the manager of a fund – known as SG Bond – that held the Investment Portfolio and, at the direction of Olympus’s executives, transferred the Investment Portfolio to Easterside, which then liquidated the bonds and used the proceeds, in part, to repay the loan from Bank-2.
As the manager of Olympus’s purported investment, CHAN submitted, and caused to be submitted, false and misleading documents to Olympus’s outside auditor (“Auditor”) regarding the Investment Portfolio. Specifically, CHAN prepared and provided several false and misleading confirmations of the Investment Portfolio’s value. He did not disclose in these confirmations that the Investment Portfolio had been transferred to Easterside, nor did he disclose that the Investment Portfolio had been liquidated. In June 2009, he provided the Auditor with a confirmation of the Investment Portfolio’s net asset value and a list of assets that purportedly constituted the Investment Portfolio. At the direction of a co-conspirator, CHAN forged a signature on the confirmation to make it appear that it had been signed by a bank representative. CHAN submitted these false and misleading documents, including the confirmation with the forged signature, to deceive the Auditor into believing that Olympus’s purported investment in bonds and fixed income securities was safe and secure at SG Bond.
In 2010, Olympus-controlled entities transferred hundreds of millions of dollars to an entity controlled by CHAN. In turn, he used these funds to purchase bonds and other securities that were similar to the assets that originally had constituted the Investment Portfolio. Upon acquiring these bonds and securities, he caused the assets to be transferred to Easterside, which in turn transferred the assets to SG Bond in order to replace the Investment Portfolio that SG Bond had purportedly held for Olympus since 2005.
In consideration for his assistance to Olympus including in this accounting fraud scheme, CHAN received in excess of $10,000,000 from Olympus or entities controlled by Olympus.
CHAN, 50, resides in Singapore and is a citizen of Taiwan. He pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum potential penalty of five years in prison. CHAN is scheduled to be sentenced by Judge Swain on January 10, 2014.
Mr. Bharara praised the Federal Bureau of Investigation for its outstanding work in the investigation. He also thanked the U.S. Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Zachary Feingold is in charge of the prosecution.
U.S. v. Chan Ming Fon Information
Manhattan U.S. Attorney Announces Court Judgment Finding Midtown Office Building Secretly Owned and Controlled by Government of Iran Subject to Forfeiture for Violations of the Iranian Transactions Regulations and Money Laundering OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that United States District Judge Katherine B. Forrest has issued a decision granting summary judgment in favor of the United States’ claims for forfeiture of the 36-story Midtown Manhattan office building located at 650 Fifth Avenue, New York, New York (“the Building”), as the result of violations of the Iranian Transactions Regulations promulgated under the International Emergency Economic Powers Act (“IEEPA”), and the federal money laundering statutes. The Court found that the partners of the Building’s owner, the Alavi Foundation and Assa Corp., committed the IEEPA violations and money laundering offenses.
Claims against the building in this consolidated action by private parties holding judgments against the Government of Iran remain pending.
Manhattan U.S. Attorney Preet Bharara said: “The Judge’s opinion upholds what was the contention of this Office from outset: ‘Assa was (and is) a front for Bank Melli, and thus a front for the Government of Iran.’ The Judge’s ruling that Alavi and Assa committed IEEPA and money laundering violations paves the way for the largest-ever terrorism-related forfeiture, and provides a means of compensating victims of Iranian-sponsored terrorism.”
According to the amended civil forfeiture Complaint and the oral and written opinions issued by Judge Forrest in this case:
Overview
The Alavi Foundation has been providing numerous services to the Iranian Government, including managing the Building for the Iranian Government, running a charitable organization for the Iranian Government, and transferring funds from 650 Fifth Avenue Company to Bank Melli Iran (“Bank Melli”), a bank wholly owned and controlled by the Government of Iran. Likewise, Assa Corporation and Assa Company Limited (“Assa Co. Ltd.”) have been providing numerous services to Bank Melli in contravention of IEEPA and the Iranian Transactions Regulations promulgated thereunder, including transferring rental income generated from 650 Fifth Avenue Company to Bank Melli, following Bank Melli’s instructions with regard to Assa Corporation’s affairs, reporting back to Bank Melli on Assa Corporations’s financial situation and business dealings, and managing the affairs of Assa Corporation for the benefit of Bank Melli.
IEEPA confers upon the President the authority to take certain actions, defined in 50 U.S.C. § 1702, in response to declared national emergencies. The President has declared national emergencies with respect to the actions and policies of the Government of Iran: Executive Orders 12957, 12959, and 13059, and with respect to the proliferation of weapons of mass destruction (“WMD”), Executive Orders 12938 and 13382. The Treasury Department’s Iranian Transactions Regulations (“ITR”), 31 C.F.R. Part 560, and Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. Part 544, implement these Executive Orders.
The Building was constructed in the 1970s by the Pahlavi Foundation, a non-profit organization operated by the Shah of Iran to pursue Iran’s charitable interests in the United States. The Building’s construction was financed by a substantial loan from Bank Melli.
Following the Iranian revolution of 1979, the Islamic Republic of Iran established the Bonyad Mostazafan, also known as the Bonyad Mostazafan va Janbazan (“Bonyad Mostazafan”), to centralize, take possession of, and manage property expropriated by the revolutionary government. The Bonyad Mostazafan was created in March 1979 by order of the Ayatollah Khomeini and approved by the Revolutionary Council of the Islamic Republic of Iran, and is controlled by the Government of Iran. The Bonyad Mostazafan sought to take control of the Shah’s property, including the assets of the Pahlavi Foundation. The Bonyad Mostazafan reports directly to the Ayatollah.
Between approximately October 1978 and approximately October 1979, all five previous directors of the Pahlavi Foundation resigned, and four new directors took their places. On February 25, 1980, an amended Certificate of Incorporation for the Pahlavi Foundation was filed renaming the Foundation “The Mostazafan Foundation of New York.” The Mostazafan Foundation of New York later renamed itself the Alavi Foundation.
The Government of Iran’s Involvement in the Management of the Building
In 1989, the Alavi Foundation and Bank Melli formed a partnership, 650 Fifth Avenue Company, in order to avoid paying federal taxes on rental income from the Building. Bank Melli’s ownership interest in 650 Fifth Avenue Company, however, was disguised through the creation of two shell companies. The Alavi Foundation transferred 35 percent of 650 Fifth Avenue Company to Assa Corporation, an entity wholly owned by Assa Co. Ltd. Assa Co. Ltd. is a Jersey, Channel Islands, United Kingdom, entity owned by Iranian citizens who represent the interests of Bank Melli. In conjunction with the transfer of the 35 percent interest in 650 Fifth Avenue Company to Assa Corp., Bank Melli cancelled its loan on the Building. Today, the Alavi Foundation owns 60 percent of 650 Fifth Avenue Company, and Bank Melli owns 40 percent of 650 Fifth Avenue Company, through Assa Corp. and Assa Co. Ltd.
The decision to convert Bank Melli’s mortgage on the Building into a partnership interest in 650 Fifth Avenue Company was discussed and approved by high-level Iranian Government officials. Among others, the head of the Bonyad Mostazafan (also the Deputy Prime Minister of Iran), the Office of the Prime Minister of Iran, the director of the Central Bank of Iran, and the general director of Bank Melli, as well as other Bonyad Mostazafan and Bank Melli officials, discussed and approved the partnership between the Alavi Foundation and Bank Melli. After the Alavi Foundation and Assa Corporation entered into the 650 Fifth Avenue Company partnership agreement, a Bonyad Mostazafan official forwarded the agreement to a Bank Melli official, noting that “the partnership is based on prior agreements between the Ministry of Finance, Bank Melli, and the Bonyad Mostazafan, with the only change being the building will be valued at two million dollars less than as previously agreed . . . .”
The Iranian Government’s control of the Alavi Foundation has continued. In 1989, Kamal Kharrazi was named as the new Iranian Ambassador to the United Nations. As a result of tension between the new Ambassador and the Alavi Foundation president, the Ambassador eventually demanded the president’s resignation. According to the minutes of a May 16, 1991, board meeting held in Zurich, Switzerland, the head of the Bonyad Mostazafan explained that, as directed by the Supreme Leader, several board members were to resign. In a letter, the Alavi Foundation’s president described how, a few days later, the Ambassador called the president and another board member to his office. The Ambassador said that “the Foundation from here on out is under the oversight of Haj Agha, not Mr. Rafighdoost [then the head of the Bonyad Mostazafan]. . . . [F]rom now on, the role of the Managing Director and the role of the Board of Directors will be just a formality and he [the Ambassador] will be conducting all of its [the Foundation’s] affairs.” The president of the Alavi Foundation then wrote a letter to the Ayatollah cautioning that although the Ambassador’s “appointment to a position of responsibility connected to the Foundation’s affairs presents enormous political, security, and economic dangers, we feel assured that the Supreme Leader has made this decision with discernment, unique insight, and a thorough knowledge of all pertaining aspects.” In July 1991, the president resigned his position and he was replaced that August by an individual who served as president until the summer of 2007.
In 1992, the Alavi Foundation’s new president met in New York and in Tehran with Bank Melli officials concerning $1.7 million in real estate taxes owed by 650 Fifth Avenue Company and $2.2 million in unpaid distributions owed by the partnership to Assa Corp. The Tehran meeting was attended by a Bank Melli board member, the head of Bank Melli’s Overseas Network Supervisory Department, the head of Bank Melli’s New York branch, and the head of Bank Melli’s Foreign Affairs. The head of the board of directors and managing director of Bank Melli forwarded the minutes of the Tehran meeting to the head of the Bonyad Mostazafan along with a cover letter stating, among other things, that “It is hoped that your firm instructions and the extra attention of the brothers from that esteemed Foundation, who are responsible for the Alavi Foundation of New York, will resolve the partnership’s mutual problems quickly . . . .”
Iranian Ambassadors to the U.N. continued to direct the affairs of the Alavi Foundation and to attend meetings of the Alavi Foundation board. In the late 1990s, two Bank Melli employees sought Ambassador Kharrazi’s permission for Assa Corp. to sell its interest in 650 Fifth Avenue Company. The Ambassador informed Bank Melli that the Building would be sold when the real estate market improved. Ambassador Seyed Mohammad Hadi Nejad Hosseinian, Kharrazi’s successor, originated the Alavi Foundation’s project funding formula. In 2004, Hosseinian’s successor told the Alavi Foundation to settle a lawsuit with a company controlled by a former Alavi Foundation president for $4 million.
In October 2007, Alavi Foundation board members met with the Ambassador and another former Iranian Government official to address issues relating to the Building’s management and Alavi’s charitable services. According to notes taken by a board member, the Ambassador stated, among other things, that it was necessary to increase the profit from the Building; the Ambassador was worried about Assa Corporation’s 40 percent share; the Foundation should only allocate to Shiites; and that the Ambassador would determine the composition of the board. The Ambassador ordered a study about the possibility of increasing the Foundation’s revenue and profit, stating that a business plan and comparative analysis had to be done. The Ambassador instructed: “I have to definitely see the proposed allocations before a final decision is reached. I have to be kept informed and I have to be able to state my opinion in order for you to make a decision.” The Ambassador told the board members that “[i]f there is an issue that needs to be conveyed to Tehran, let me know, I will convey it.”
The Original Complaint
On December 17, 2008, this Office filed a civil Complaint seeking forfeiture of the 40 percent interest held by Assa Corporation in 650 Fifth Avenue Company. In the Amended Complaint, the United States seeks to forfeit all right, title and interest in 650 Fifth Avenue Company, including the Alavi Foundation’s 60 percent interest in the company. The United States also seeks to forfeit the contents of bank accounts held by 650 Fifth Avenue Company, the Alavi Foundation, and Assa Corporation, as well as other real properties owned by the Alavi Foundation.
The Obstruction of Justice Allegations Against the Former President of the Alavi Foundation
On December 19, 2008, Farshid Jahedi, who at the time was the president of the Alavi Foundation, was arrested for obstruction of justice for allegedly destroying documents required to be produced under a grand jury subpoena concerning the Alavi Foundation’s relationship with Bank Melli and the ownership of the Building. Jahedi pled guilty in December 2009. On April 30, 2010, he was sentenced by U.S. District Judge Shira A. Scheindlin to three months in prison and ordered to pay a $3,000 fine.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, the Internal Revenue Service, Criminal Investigation Division, the Joint Terrorism Task Force, and the Police Department of the City of New York. He also thanked the Counterterrorism Section of the Department of Justice National Security Division and the Manhattan District Attorney’s Office for their initiation and assistance in this case.
Assistant United States Attorneys Sharon Cohen Levin, Michael D. Lockard, Martin S. Bell, Carolina A. Fornos, and Special Assistant United States Attorney Anand Sithian are in charge of the civil forfeiture action.
In re 650 Fifth Avenue and Related Properties - Opinion and Order