Southern District of New York
Press releases recorded for this federal judicial district.
Sullivan County Hedge Fund PresidentPleads Guilty to Securities FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that LLOYD BARRIGER, former president and principal shareholder of the Gaffken & Barriger Fund LLC (the “Fund”), which was a hedge fund based in Monticello, New York, pled guilty today in White Plains federal court to a four-count Superseding Indictment charging him with securities fraud, conspiracy to commit securities fraud, mail fraud, and conspiracy to commit mail fraud in connection with a $12.6 million investment fraud scheme.
Manhattan U.S. Attorney Preet Bharara said: “Once again, belief in hedge funds by hopeful investors proved to be sadly misplaced. In this case, the perpetrator was not in a sleek Manhattan building but rather in Sullivan County. Mr. Barriger's guilty plea brings to an end his fraud. We hope that all our cases big and small exposing frauds in hedge funds will convince other fund operators to adhere to the duties of trust and honesty that they owe their investors.”
According to the Superseding Indictment filed in White Plains federal court:
From July 2006 through March 2008, when he froze the Fund, BARRIGER solicited approximately $12.6 million dollars from over 70 investors by deceiving them about the Fund’s performance. During this time period, the Fund invested primarily in real estate collateralized commercial mortgage loans. BARRIGER described the Fund to prospective investors as a safe and liquid investment that paid a minimum return of eight percent per year, which BARRIGER referred to as the “Preferred Return.” He then reported this Preferred Return to investors as income on periodic account statements produced by the Fund. The Preferred Return was supposed to be funded by the Fund’s net income and thus subject to the Fund’s actual performance. However, BARRIGER knew that the Fund’s actual performance did not justify these performance claims.
BARRIGER tricked investors into investing their money by concealing material information from them, including that (1) the Fund had incurred a loss of $600,000 in 2005; (2) the Fund lacked sufficient income to support the promised eight percent Preferred Return; (3) the Fund only continued to pay the Preferred Return – when it actually paid the return rather than simply credit it to investors’ accounts – by funding payments with investor capital, rather than income; (4) the Fund disguised the lack of income by creating a large and growing deficit in BARRIGER’s capital account with the Fund; (5) as a result of the failure of its borrowers to repay their loans, the Fund experienced a severe liquidity crunch and could not meet any substantial amount of withdrawal requests; (6) the Fund had defaulted on its $20 million line of credit with a third party lender in March 2007 and remained in default for much of the period thereafter, which entitled the lender to prohibit distributions to investors and to seize the Fund’s assets; and (7) delinquencies in the Fund’s loan portfolio spiked to over approximately 25% in July 2007 and increased to approximately 34% in November 2007.
In a letter dated May 30, 2008, BARRIGER told the investors that the Fund wrote down the value of the portfolio by approximately 40% and that there was a total reduction in investors’ capital accounts from $25,538,530 to $15,003,208.
BARRIGER, 57, of Damascus, Pennsylvania, faces a maximum sentence of 65 years in prison. The Government notified BARRIGER in the Superseding Indictment that it would seek to forfeit at least $12.6 million from him, representing the proceeds of his charged crimes. BARRIGER is scheduled to be sentenced by U.S. District Court Judge Cathy Seibel on November 15, 2013.
Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the U.S. Securities and Exchange Commission for its extraordinary assistance in the investigation.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the White Plains Division. Assistant United States Attorneys Jeffrey Alberts and John P. Collins, Jr. are in charge of the prosecution.
U.S. v. Barriger, Lloyd S1 Indictment
Former Vice President of High-End Jewelry Company Pleads Guilty in Manhattan Federal Court to Stealing over $2 Million of JewelryRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that INGRID LEDERHAAS-OKUN, a former Vice President of Product Development at a high-end jewelry company, pled guilty today in Manhattan federal court to stealing over $2.1 million worth of jewelry from her former employer. LEDERHAAS-OKUN was arrested earlier this month and pled guilty today before U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Preet Bharara said: “Diamonds are forever but stolen diamonds are not. Over a period of years, Ingrid Lederhaas-Okun, an executive at a high-end jewelry company, looted her employer’s jewelry inventory and then resold millions of dollars’ worth of the merchandise in order to enrich herself. Today, she stands convicted for her thievery and faces the prospect of prison.”
According to the Information, statements made during today’s guilty plea proceeding, and a Complaint previously unsealed in Manhattan federal court:
From at least January 2011 until February 2013, LEDERHAAS-OKUN worked as a Vice President of Product Development at the midtown Manhattan headquarters of one of the world’s premier high-end jewelers (the “Jewelry Company”). Her duties and responsibilities included ensuring that product designs could be manufactured and, to that end, she had authority to check out jewelry belonging to the Jewelry Company for work-related reasons, such as to provide the jewelry to potential manufacturers to determine the cost of production.
Between November 2012 and February 2013, LEDERHAAS-OKUN abused her position and authority at the Jewelry Company to check out over 165 pieces of jewelry with a retail value of over $1.2 million, including numerous diamond bracelets, platinum or gold diamond drop and hoop earrings, platinum diamond rings, and platinum and diamond pendants. She then sold some if not all of this jewelry for $1.3 million to another company, a leading international buyer and reseller of jewelry with an office in midtown Manhattan (the “Jewelry Reseller”). The Jewelry Reseller paid for the merchandise that LEDERHAAS-OKUN had stolen either by paying her or her husband, in transactions arranged either by LEDERHAAS-OKUN or a friend working on her behalf.
In addition to this jewelry, in November 2012, following an announcement by the Jewelry Company that it was going to undertake a full physical inventory review, LEDERHAAS-OKUN also reported that approximately $1.5 million worth of jewelry which she had checked out would have to be written off. However, none of that jewelry was ever returned to the Jewelry Company, contrary to the usual practice of accounting for inventory, such as damaged jewelry, that would have to be written off because it had been rendered unusable in some way.
To conceal her theft, LEDERHAAS-OKUN made repeated false statements to the Jewelry Company. For example, after her termination in February 2013, she told the Jewelry Company that she had only recently checked out the missing jewelry in anticipation of creating a PowerPoint presentation for her supervisor, and that a draft of the presentation could be found on her office computer. However, the missing pieces of jewelry had been checked out months earlier, her supervisor was unaware of any such presentation being worked on by LEDERHAAS-OKUN, and there was no draft presentation on her computer. In addition, LEDERHAAS-OKUN claimed the jewelry in question could be found in a white envelope in her office, but a search of her office shortly after her departure did not yield any white envelope.
LEDERHAAS-OKUN, 46, of Darien, Connecticut, pled guilty to one count of interstate transportation of stolen property, which carries a maximum penalty of 10 years in prison. As part of her plea agreement, LEDERHAAS-OKUN also agreed to forfeit $2,114,873 and further agreed to make restitution in the amount of $2,239,873. She is scheduled to be sentenced by Judge Gardephe on December 10, 2013 at 2:30 p.m.
Mr. Bharara praised the investigative work of the FBI. 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. Ingrid Lederhaas-Okun Information
First Defendant Pleads Guilty for Role in Operation of International Sportsbook Operated by Organized Crime EnterpriseRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that BRYAN ZURIFF, a Hollywood producer, pled guilty in Manhattan federal court in connection with his role in the operation of a high-stakes illegal sports gambling business run by an organized crime enterprise. ZURIFF pled guilty yesterday before U.S. District Court Judge Jesse M. Furman to accepting a financial instrument in connection with unlawful Internet gambling.
Manhattan U.S. Attorney Preet Bharara said: “Bryan Zuriff spanned the coasts with his crimes, by operating his own illegal gambling enterprise in Los Angeles, and helping to operate a vast illegal gambling enterprise in New York. With his plea, he becomes the first defendant, but not the last, to be convicted in this sprawling script of criminal conduct.”
ZURIFF was charged in April 2013 in a 34-defendant indictment charging members and associates of two Russian-American organized crime enterprises with various crimes, including racketeering, money laundering, extortion, and various gambling offenses. ZURIFF is the first defendant in the case to plead guilty.
According to the Indictment, other documents filed in this case, statements made at various conferences and at the guilty plea, and other information in the public record:
ZURIFF operated his own illegal gambling business that catered to gamblers seeking to bet on the outcome of various sporting events (commonly referred to as a “sportsbook”) in Los Angeles, California. He also assisted Hillel Nahmad, Illya Trincher, and others in operating their own high-stakes sportsbook in New York that catered to millionaires and billionaires. Those clients typically placed bets online through various accounts maintained on gambling websites that were operating illegally in the United States. Tens of millions of dollars in bets were placed through those online accounts each year.
ZURIFF, 44, of Brentwood, California, faces a maximum sentence of five years in prison and three years of supervised release. As part of his guilty plea, he agreed to forfeit $500,000 to the United States. ZURIFF is scheduled to be sentenced by Judge Furman on November 25, 2013 at 3 p.m.
The charges against Hillel Nahmad, Illya Trincher, and the other 31 defendants in this case are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation, Internal Revenue Service, and the New York City Police Department.
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. Attorney Alexander Wilson of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
Tokhtakhounov, Alimzhan et al. Indictment
Two Alleged Members of Yonkers Narcotics Ring Are Charged in White Plains Federal CourtRead 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”), Charles Gardner, the Commissioner of the Yonkers Police Department, and Joseph A. D’Amico, the Superintendent of the New York State Police, announced the arrest of two alleged members of a narcotics trafficking ring centered in and around Hoover Road in Yonkers, New York. Defendants THOMAS J. SUPPA and JOSEPH KOPPE were arrested yesterday and presented in White Plains federal court today before United States Magistrate Judge Paul E. Davison, who ordered that SUPPA be detained and KOPPE be released on bail upon meeting bail conditions.
Manhattan U.S. Attorney Preet Bharara stated: “These arrests underscore the commitment of this Office to eliminating the scourge of drug trafficking and its attendant harms from Yonkers and communities throughout the Southern District of New York. Together with our partners in state and local law enforcement, we will continue to work to improve the safety of our streets and the quality of life for our citizens.”
FBI Assistant Director-in-Charge George Venizelos stated: “As alleged, Suppa and Koppe were members of a narcotics ring that distributed large amounts of cocaine to Yonkers, damaging the fabric of a city. The FBI remains committed to working with our partners in law enforcement to eradicate this epidemic.”
Yonkers Police Commissioner Charles Gardner stated: "Individuals who choose to deal in the narcotics trade in our city will be targeted and vigorously prosecuted. These arrests are another example of our continued success working together with our federal partners to address criminal activity in our neighborhoods. I would like to thank U.S. Attorney Preet Bharara and his office along with the Federal Bureau of Investigation for their support and assistance in this investigation."
New York State Police Superintendent Joseph A. D'Amico stated: "With the arrests of these two drug traffickers, the streets of Yonkers are a safer place. Drugs and the crime and violence they cause will never be tolerated. I thank the U.S. Attorney's Office, Yonkers Police Department and the Federal Bureau of Investigation for their continued partnerships."
According to the allegations in two criminal Complaints unsealed today in White Plains federal court:
From at least January 2012 and up to and including July 17, 2013, SUPPA and KOPPE conspired together and with others to distribute crack and powder cocaine in and around Hoover Road in Yonkers. In furtherance of the conspiracy, SUPPA is alleged to have personally sold crack cocaine to an undercover law enforcement officer on or about May 6, 2013 and July 17, 2013. KOPPE is alleged to have sold crack cocaine and powder cocaine to the same undercover officer on or about June 27, 2013.
SUPPA, 30, has been charged with one count of distributing more than 280 grams of a mixture or substance containing crack cocaine, in violation of 21 U.S.C. §§ 812, 841(a), and 841(b)(1)(A), and one count of conspiracy to commit the same, in violation of 21 U.S.C. § 846. Both offenses, upon conviction, carry a maximum prison sentence of life and a mandatory minimum sentence of 10 years.
KOPPE, 32, has been charged with one count of distributing more than 28 grams of a mixture or substance containing crack cocaine, in violation of 21 U.S.C. §§ 812, 841(a), and 841(b)(1)(B), and one count of conspiracy to do the same, in violation of 21 U.S.C. § 846. Both offenses carry, upon conviction, a maximum prison sentence of 40 years and a mandatory minimum sentence of 5 years.
Mr. Bharara praised the FBI, the Yonkers Police Department, the New York State Police and the Westchester County District Attorney’s Office for their work in this investigation.
The prosecution is being overseen by the Office’s White Plains Unit. Assistant United States Attorneys Daniel Filor and Scott A. Hartman are in charge of the prosecution.
The charges contained in the Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
KOPPE COMPLAINT
SuppaThomas.ComplaintManhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Insider Trading Charges Against Four SAC Capital Management Companies and SAC Portfolio ManagerRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of 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”). The SAC Companies are responsible for the management of a group of affiliated hedge funds, collectively (the “SAC Hedge Fund” or “SAC”). Charges were also unsealed today against RICHARD LEE, a portfolio manager employed by SAC Capital LP, who focused on “special situations” like mergers and acquisitions, private equity buy-outs, and corporate restructurings in publicly-traded companies across various industry sectors. LEE pled guilty on July 23, 2013, before U.S. District Judge Paul G. Gardephe, to conspiracy and securities fraud charges in connection with his work at SAC Capital LP.
The SAC Companies are charged with criminal responsibility for insider trading offenses. These alleged offenses were committed by numerous employees, occurred over the span of more than a decade, and involved the securities of more than 20 publicly-traded companies across multiple sectors of the economy. It is charged that the acts of these employees were made possible by institutional practices that encouraged the widespread solicitation and use of material, non-public information (“Inside Information”). This activity allegedly resulted in hundreds of millions of dollars in illegal profits and avoided losses at the expense of members of the investing public. The SAC Companies are expected to be arraigned on the charges on tomorrow at 10:00 a.m. before U.S. District Judge Laura Taylor Swain.
Manhattan U.S. Attorney Preet Bharara said: “A company reaps what it sows, and as alleged, S.A.C. seeded itself with corrupt traders, empowered to engage in criminal acts by a culture that looked the other way despite red flags all around. S.A.C. deliberately encouraged the no-holds-barred pursuit of an ‘edge’ that literally carried it over the edge into corporate criminality. Companies, like individuals, need to be held to account and need to be deterred from becoming dens of corruption. To all those who run companies and value their enterprises, but pay attention only to the money their employees make and not how they make it, today’s indictment hopefully gets your attention.”
FBI Assistant Director-in-Charge George Venizelos said: “Our aim all along has been to root out the wrongdoers, and send a message to anyone else inclined to break the law. If your information ‘edge’ is inside information, you can’t trade on it.”
According to the allegations in the five-count Indictment and the criminal Information to which LEE pled guilty, both of which were unsealed today in Manhattan federal court:
The SAC Hedge Fund operated as a collection of dozens of individual trading portfolios that covered nearly every trading sector of the economy. Each portfolio was headed up by a portfolio manager (“PM”), and supported by one or more research analysts (“RA”). SAC PMs had substantial discretion in managing the investments in their own portfolios, and were required by the SAC Companies to share the investment recommendations in which they had the greatest confidence with the owner of the SAC Companies (the “SAC Owner”). The SAC Owner managed the largest trading portfolio at SAC.
From 1999 through at least 2010, numerous employees of the SAC Companies obtained and traded on Inside Information, or recommended trades based on such information to SAC PMs or the SAC Owner. To date, eight SAC Company PMs and RAs have been charged and/or convicted in insider trading cases involving the SAC Hedge Fund, including LEE, who was charged and pled guilty earlier this week.
The systematic insider trading engaged in by SAC PMs and RAs was the predictable and foreseeable result of an institutional failure. The SAC business culture encouraged and tolerated the relentless pursuit of an information “edge,” with no meaningful commitment to ensuring that such an “edge” came from legitimate research and not Inside Information.
As charged in the Indictment, these institutional failings fell into three main categories:
First, the SAC Companies focused on recruiting SAC PMs and SAC RAs who had proven networks of public company contacts. The SAC Companies, however, did not make any corresponding effort to ensure that prospective SAC PMs and SAC RAs did not use these contacts to obtain illegal Inside Information. For example, in a November 16, 2008, e-mail forwarded to the SAC Owner, an SAC PM candidate in the industrial sector was recommended in part because he had “a house in the Hamptons with the CFO” of a Fortune 100 industrial sector company. In another instance, the SAC Companies hired LEE despite a warning to the SAC Owner from LEE’s prior employer, that LEE had been a member of an insider trading group at that hedge fund. LEE ultimately traded on Inside Information in the $1.25 billion “special situations” SAC portfolio he jointly managed with a second SAC PM.
Second, employees of the SAC Companies were financially rewarded for recommending to the SAC Owner “high conviction” trading ideas, in which the SAC PM had an “edge” over other investors. In many cases, the employees were not questioned when making trading recommendations that appeared to be based on Inside Information. On numerous occasions, the SAC Owner failed to follow up with SAC employees who were promoting trading sourced to an “edge” from a contact at a public company or with similar language suggesting potential insider trading. On one occasion, the SAC Owner participated in a discussion with his employees on the topic of confidential information the SAC employees had said that they learned during a paid consultation session from a clinical investigator for a drug trial. During the discussion with his employees, the SAC Owner, a sophisticated trader with over three decades of experience, never questioned whether the drug trial data constituted Inside Information. In addition, the SAC Owner and SAC Companies cultivated an environment that emphasized not discussing Inside Information openly rather than not seeking or trading on it in the first place.
Third, the SAC Companies employed limited compliance measures designed to detect or prevent insider trading by SAC PMs or SAC RAs. They failed to routinely monitor employee e-mails for indications of insider trading until late 2009, even though SAC’s head of compliance had recommended such monitoring to SAC management four years earlier. Indeed, despite numerous documented cases of insider trading at SAC – established by, among other things, guilty pleas of six former SAC PMs and RAs, each predicated upon repeated insider trading over substantial periods of time – SAC’s compliance department contemporaneously identified only a single instance of suspected insider trading by its employees. In that one case, the SAC Companies permitted those involved to continue working at SAC and failed to report the conduct to regulators or law enforcement.
In addition to the Indictment, today the Government filed a civil forfeiture action (the “Forfeiture Complaint”) in Manhattan federal court, seeking the forfeiture of assets held by investment funds to which the SAC Companies served as investment advisors, assets held by affiliated investment funds, and assets held by the SAC Companies themselves. The Forfeiture Complaint 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 SAC Companies are charged together in Count One of the Indictment with wire fraud, and each of the four SAC Companies is charged separately in Counts Two through Five with securities fraud. Each of the SAC Companies faces a maximum fine, for the securities fraud charges, of the greater of $25 million, or twice the gross gain or loss derived from the offense on each charge.
The criminal Information unsealed today, to which RICHARD LEE pled guilty earlier this week, charges LEE with one count of conspiracy and one count of securities fraud in connection with insider trading between April 2009 through 2010, while he was employed by SAC Capital LP. LEE faces a maximum penalty of 20 years in prison for the securities fraud charge and five years in prison for the conspiracy charge. He also faces a maximum fine of $5 million for the securities fraud charge and $250,000 or twice the gross gain or loss derived from the offense on the conspiracy charge.
Of the seven other SAC Company portfolio managers and research analysts previously charged in insider trading cases involving the SAC Hedge Fund, five have pled guilty and await sentencing. They include:
- Jon Horvath, who pled guilty on September 28, 2012;
- Wes Wang, who pled guilty on July 13, 2012;
- Donald Longueuil, who pled guilty on April 28, 2011;
- Noah Freeman, who pled guilty on February 7, 2011; and
- Richard Choo-Beng Lee, who pled guilty on October 13, 2009
Charges are still pending against the remaining two defendants previously charged in connection with SAC, Michael Steinberg and Mathew Martoma, who are presumed innocent unless and until proven guilty.
Mr. Bharara praised the efforts of the FBI and also thanked the U.S. Securities and Exchange Commission for its assistance in the investigation. He added that the investigation is continuing.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it 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. Attorney Micah Smith is responsible for the forfeiture aspects of the case.
The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.
SAC Indictment (Stamped)
SAC Capital Complaint - 13 Civ 5182
Lee, Richard InformationManhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Charges Against Russian National for Hacking Nasdaq ServersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment against a Russian hacker, ALEKSANDR KALININ, a/k/a “Grig,” a/k/a “g,” a/k/a “tempo,” for hacking certain computer servers used by the NASDAQ Stock Market (“NASDAQ”). In a separate indictment also unsealed today, KALININ and another Russian hacker, NIKOLAY NASENKOV, were charged with an international scheme to steal bank account information by hacking U.S.-based financial institutions and then using the stolen account information to withdraw millions of dollars from the victims’ bank accounts. KALININ has also been charged in a separate indictment unsealed in federal court in Newark, New Jersey. KALININ and NASENKOV remain at large.
Manhattan U.S. Attorney Preet Bharara said: “As today’s allegations make clear, cyber criminals are determined to prey not only on individual bank accounts, but on the financial system itself. But would-be cyber thieves should take note: Because of the close and growing collaboration between the U.S. government and the private sector on issues of cyber security, our ability to unmask and prosecute the anonymous perpetrators of cyber crimes – wherever they may be located – has never been stronger.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Kalinin infiltrated NASDAQ’s servers, allowing for the manipulation and theft of sensitive data. In a series of separate schemes, Kalinin and Nasenkov stole hundreds of thousands of bank account numbers, PIN numbers, and other code to withdraw millions of dollars from victim accounts. Today, their password has expired.”
According to the allegations in the Indictments unsealed today in Manhattan federal court:
The NASDAQ Hack
From November 2008 through October 2010, KALININ hacked various computer servers used by the NASDAQ to conduct its business operations. During the course of the hack, KALININ installed on certain NASDAQ servers malicious software, or malware, which enabled him and others to surreptitiously access the infected NASDAQ servers and execute commands on those servers, including commands to delete, change or steal data. The infected servers did not include the trading platform that allows NASDAQ customers to buy and sell securities.
The Citibank and PNC Bank Hacks
From December 2005 through November 2008, KALININ and NASENKOV allegedly stole bank account information from financial institutions through computer hacking. KALININ, NASENKOV, and their co-conspirators then used that account data to access the bank accounts of thousands of individual victims without authorization and without those victims’ knowledge, resulting in the theft of millions of dollars from those accounts.
The defendants fraudulently obtained bank account numbers, customer identification numbers (a unique number embossed or printed on the front of an ATM card), card verification values (a security feature which helps authenticate an ATM card), and personal identification numbers (PINs) for victims’ accounts at financial institutions, including Citibank and PNC Bank, through computer hacking and other techniques. As part of the scheme, the defendants and their co-conspirators then encoded the stolen account data onto the magnetic strips of blank plastic ATM cards so that those ATM cards could be used to access individual victims’ bank accounts through ATMs. The ATM cards were then used, along with the stolen account PINs, to access individual victims’ accounts through ATMs located around the world, including in the United States, Estonia, Canada, Great Britain, Russia, and Turkey, and to withdraw from those accounts millions of dollars.
In January 2006, the PINs for hundreds of customer accounts were compromised as a result of a cyber attack launched against PNC Bank’s online banking website. NASENKOV allegedly supplied stolen account information, including PINs, from the compromised bank accounts to co-conspirators who, in turn, used the stolen account information to encode blank ATM cards and withdraw approximately $1.3 million from victims’ accounts.
In 2007, KALININ allegedly placed malware on a computer network that processed ATM transactions for Citibank and other financial institutions. The malware recorded data passing over the network and exported it to an outside computer. Using this malicious computer code, KALININ stole bank account information for approximately 500,000 bank accounts, including approximately 100,000 Citibank accounts. The stolen account information was used to create ATM cards that in turn were used to withdraw approximately $2.9 million from Citibank customers’ accounts.
In 2008, NASENKOV allegedly used a computer program to mount an attack against Citibank’s online banking website that resulted in the theft of account information for more than 300,000 accounts. The stolen account information was used to create ATM cards that in turn were used to withdraw approximately $3.6 million from the compromised accounts.
KALININ, 26, of St. Petersburg, Russia, is charged with one count of computer hacking in connection with the NASDAQ hack, which carries a maximum sentence of 10 years in prison. In connection with the scheme to steal bank account information, KALININ is charged with one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison; four counts of bank fraud, each of which carries a maximum sentence of 30 years in prison; one count of conspiracy to commit access device fraud, which carries a maximum sentence of 7 ½ years in prison; one count of aggravated identity theft, which carries a mandatory sentence of 2 years in prison; and one count of conspiracy to commit computer intrusion, which carries a maximum sentence of 5 years in prison.
NASENKOV, 31, of St. Petersburg, Russia, is charged with one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison; four counts of bank fraud, each of which carries a maximum sentence of 30 years in prison; one count of conspiracy to commit access device fraud, which carries a maximum sentence of 7 ½ years in prison; one count of computer intrusion to obtain information, which carries a maximum sentence of 5 years in prison; one count of computer intrusion to further fraud, which carries a maximum sentence of 5 years in prison; one count of aggravated identity theft, which carries a mandatory sentence of 2 years in prison; one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison; and one count of conspiracy to commit computer intrusion, which carries a maximum sentence of 5 years in prison.
Mr. Bharara praised the outstanding investigative work of the FBI. In addition, Mr. Bharara thanked NASDAQ, Citibank, and PNC Bank for their cooperation and assistance in the investigations. Mr. Bharara also thanked the Department of Justice’s Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Thomas G.A. Brown, Sarah Lai, Joseph Facciponti, and James J. Pastore, Jr., are in charge of the prosecution.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Aleksandr Kalinin Indictment
U.S. v. Nikolay Nasenkov and Aleksandr Kalinin S1 IndictmentCHARGING & SUPPORTING DOCUMENTS: U.S. V. S.A.C. Capital Advisors, L.P., Et Al.Read the Press Release
U.S. v. Richard Lee Information
U.S. v. SAC Capital Civil Forfeiture Complaint
U.S. v. SAC IndictmentUnited States Returns Stolen Antique Books to the National Library of SwedenRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the return to the National Library of Sweden of two antique books that were stolen from the Library in the 1990s. The books, which were once part of the collections of Swedish royalty, contain early depictions of interior areas of the United States, including the Mississippi River, by explorers.
Manhattan U.S. Attorney Preet Bharara said: “These two books, which offered the world some of the first glimpses of the extraordinary American landscape and people, were wrongfully taken from the National Library of Sweden, only to end up in the land depicted in their pages more than 300 years ago. With their odyssey now complete, we are proud to be part of returning these priceless artifacts to their rightful owners, and we hope this recovery will prompt others to return antique books in their possession that were stolen from the Library.”
FBI Assistant Director-in-Charge George Venizelos said: “Treasured pieces of a country’s heritage have value far beyond their price on the open market. Some things are not for sale – or shouldn’t be. Anders Burius stole dozens of rare books from the National Library of Sweden, sold them, confessed to the thefts, and committed suicide. He cannot be prosecuted. But the FBI has a role in serving the interests of justice beyond arresting criminals. We are happy to have assisted in returning a part of Sweden’s cultural wealth.”
According to the Stipulation filed in Manhattan federal court and other documents in the public record:
The two books being returned are part of a group of at least 56 rare or one-of-a-kind books that were stolen from the National Library of Sweden’s collection by Anders Burius (“Burius”), a former employee of the Library, between 1995 and 2004. After stealing the books, Burius consigned or sold the books to Ketterer Kunst (“Ketterer”), an auction house in Germany. In 2004, Burius confessed to the book thefts and admitted to Swedish law enforcement officials that he had sold and/or consigned the books to Ketterer under the alias “Carl/Karl Fields.” Shortly after confessing to the thefts, Burius committed suicide. Swedish authorities subsequently received information that 13 of the stolen books had been sold by Ketterer to individuals and/or entities in the United States.
On November 16, 1998, Stephan Loewentheil, the owner of 19th Century Shop Rare Books in Baltimore, Maryland, purchased, without knowledge of the theft, two of the books that Burius had stolen from the National Library of Sweden. Those two books were a Louis Hennepin book entitled “Description de la Louisiane, nouvellement decouverte au sud-ouest de la Nouvelle-France, par ordre du roi; avec la carte du pays, les moeurs et la maniere de vivre des sauvages,” printed in Paris in 1683 by Sebastien Hure (the “Louis Hennepin book”), and a Henry Lewis book entitled “Das illustrirte Mississippithal, dargestellt in 80 nach der Natur aufgenommenen Ansichten vom Wasserfalle zu S:t Anthony an bis zum Golf von Mexico…,” printed in Dusseldorf between 1854-58 by Arntz & Comp (the “Henry Lewis book”).
The Louis Hennepin book, which documents the author’s exploration of the upper Mississippi River in 1680, is known for its map, which has the first-ever printed record of Louisiana, and for the first descriptions of Niagara Falls and the Falls of Saint Anthony. The book once belonged to King Gustav IV and was incorporated into the Library in 1796. The Henry Lewis book contains hand-colored lithographs and texts from the author’s exploration of the Mississippi River between the years 1846-1849. The book belongs to the collection of King Charles XV that was incorporated into the Library in 1873.
Loewentheil, after being contacted by the FBI about the theft of the Louis Hennepin book and the Henry Lewis book from the National Library of Sweden, voluntarily re-obtained both books and agreed to return them to the Library. On July 12, 2013, Loewentheil and the United States Attorney’s Office for the Southern District of New York entered into a stipulation, pursuant to which Loewentheil consented to tender the Louis Hennepin book and the Henry Lewis book to the FBI, to allow for the return of these books to the National Library of Sweden. The stipulation was so ordered by the United States District Court on July 17, 2013. The Louis Hennepin book and the Henry Lewis book were returned to representatives of the National Library of Sweden earlier today at a repatriation ceremony held at the United States Attorney’s Office in New York.
Mr. Bharara praised the investigative work of the FBI in this matter, and its ongoing efforts to find and repatriate stolen property.
Gunilla Herdenberg, the CEO of the National Library of Sweden, said: “On behalf of the Kingdom of Sweden as well as the international library community, I am very grateful to the U.S. Government and to Stephan Loewentheil for all their efforts. I am very happy to bring these books back to Sweden and to make them available for the public and for research again.”
This matter is being handled by the Office’s Asset Forfeiture Unit. Assistant U.S. Attorneys Christine Magdo and Sarah E. Paul are in charge of the case.
National Library of Sweden Stipulation and Order
Former Indian Point Supervisor Charged in White Plains Federal Court with Falsifying Records to Conceal Information from the Nuclear Regulatory CommissionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DANIEL WILSON, a former supervisor at Indian Point Energy Center (“Indian Point”), a nuclear power plant in Westchester County, was charged in a criminal Complaint (the “Complaint”) with engaging in deliberate misconduct in violation of rules of the Nuclear Regulatory Commission (“NRC”), making false statements in connection with a matter within the jurisdiction of the NRC, and fabricating records to conceal a violation of NRC requirements at the facility. This Complaint was based on the results of an investigation by the NRC’s Office of Investigations, led by Director Cheryl McCrary. WILSON was arrested today on the charges in the Complaint and was presented before United States Magistrate Judge Paul E. Davison in the White Plains federal courthouse, who ordered him released on bail conditions.
U.S. Attorney Preet Bharara stated: "Any alleged deliberate misconduct at a facility like Indian Point is a matter of grave concern to this Office. One need look no further than recent natural disasters to know that at important facilities, backup generators and other systems must be maintained in working order because in an emergency they may be critical."
NRC Region I Administrator Bill Dean stated: “The NRC relies on nuclear power plant employees to behave in a responsible and trustworthy manner. When it comes to ensuring the operability of a plant's emergency diesel generators, or any other vital nuclear safety equipment, there can be no room for anything other than employees adhering to the highest standards of integrity. In coordination with the Department of Justice, the NRC will move forward with any civil enforcement action in this matter."
As charged in the Complaint, Indian Point must comply with technical specifications; otherwise Indian Point may be required to shut down until it complies. Indian Point maintains a backup system of emergency generators for use in part to provide power in the event of a power outage and shutdown. WILSON, the Chemistry Manager at Indian Point from 2007 through 2012, was responsible for, among other things, ensuring that certain aspects of the operation at Indian Point were in compliance with the required technical specifications. One such requirement regards the amount of particulate matter in the diesel fuel used to power emergency generators at Indian Point, which must not exceed a set limit. In 2011, tests of the diesel fuel maintained for use in powering the emergency generators at Indian Point showed that the ratio of particulate matter in the diesel fuel exceeded the limit set by the NRC.
In February 2012, WILSON concealed material facts from his employer and the NRC by fabricating test data for non-existent resamples of the diesel fuel, falsely showing that the resamples of diesel fuel tested below the applicable NRC limit. In fact, no such resamples were taken, and the purported test data were fabrications. Later in February 2012, WILSON, in response to questioning by other employees of Indian Point in advance of an inspection by the NRC, wrote a report – the kind on which the NRC ordinarily relies in inspecting nuclear facilities for safety – in which he gave a false explanation for the lack of supporting documentation for his fabricated test results. In a subsequent interview with NRC personnel, WILSON admitted that he had fabricated the test results so that Indian Point would not have to shut down.
WILSON, 57, of Walden, New York, is charged in a two-count Complaint with willfully violating rules of the NRC by engaging in deliberate misconduct, in violation of Title 42, United States Code, Section 2273, and with making false statements in a matter within the jurisdiction of the NRC, in violation of Title 18, United States Code, Section 1001. If convicted, WILSON faces a maximum sentence of seven years in prison.
Mr. Bharara praised the efforts of the NRC Office of Investigations in connection with this investigation.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Benjamin Allee is in charge of the prosecution.
The charges in the Complaint are merely accusations, and the defendant is presumed innocent until and unless proven guilty.
WilsonDaniel.Complaint
WilsonDaniel.ComplaintFederal Agent Arrested for Participating in A Cocaine and Marijuana ConspiracyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Gregory K. Null, the Special Agent-in-Charge of the Department of Homeland Security, Office of the Inspector General, Northeast Region (“DHS-OIG”), and Terence S. Opiola, the Special Agent-in-Charge Northeast, Immigration and Customs Enforcement, Office of Professional Responsibility (“ICE-OPR”), announced today the arrest of Immigration Enforcement Agent KORDELL NESBITT for his participation in a conspiracy to distribute cocaine and marijuana. NESBITT was arrested last night and presented in Manhattan federal court before U.S. Magistrate Judge James L. Cott today. An alleged co-conspirator, SHERISSE THOMPSON, was arrested this morning in the Bronx, and was presented in Manhattan federal court before U.S. Magistrate Judge Gabriel W. Gorenstein. A second alleged co-conspirator, CHRISTOPHER SINCENO, was arrested today at his residence in Las Vegas, Nevada.
Manhattan U.S. Attorney Preet Bharara said: “Kordell Nesbitt had a duty to uphold the nation’s immigration laws. But as alleged, he also had a side job: coordinating the transport and sale of cocaine and marijuana with co-conspirators Christopher Sinceno and Sherisse Thompson. We will not tolerate abuses of trust by individuals who, tasked with preserving law and order, choose instead to engage in illicit activity.”
DHS-OIG Special Agent-in-Charge Gregory K. Null said: “The Office of Inspector General is committed to working with our law enforcement partners to identify and aggressively investigate all allegations of corruption to protect our borders and the integrity of DHS personnel, programs, and operations. Acts of corruption within DHS represent a threat to our nation and undermine the honest and hardworking employees who strive to maintain the integrity of the Department. Corruption will not be tolerated and those who choose to break the law will be pursued aggressively.”
ICE-OPR Special Agent-in-Charge Terence S. Opiola said: “The ICE Office of Professional Responsibility takes all allegations of employee misconduct seriously; and takes great pride in protecting the integrity of the ICE workforce and the agency mission through impartial and thorough investigations. The outcome of this investigation is the direct result of the successful, ongoing relationship between the ICE Office of Professional Responsibility and its law-enforcement partners.”
According to the two criminal Complaints unsealed today in Manhattan federal court:
NESBITT, an Immigration Enforcement Officer with Immigrations and Customs Enforcement (“ICE”), was responsible for, among other duties, escorting detained aliens both within the United States and internationally to foreign countries. In this capacity, he was authorized to carry a firearm at all times, and was able to avoid screening measures at airports to which civilian travelers are typically subjected.
Beginning in at least May 2013, NESBITT agreed to receive and distribute multiple packages containing cocaine, marijuana and other narcotics in the New York City area. He purchased the packages of narcotics from SINCENO and arranged for their delivery to THOMPSON’s residence in the Bronx. Once the packages reached THOMPSON’s residence, NESBITT sold the narcotics to his drug customers with her assistance.
Following his arrest last night, NESBITT, after being advised of, and waiving, his Miranda rights, stated: (1) he had purchased pound quantities of marijuana from SINCENO over the past two months; (2) THOMPSON had assisted him in distributing marijuana from her apartment; and (3) he had attempted to purchase $10,000 worth of cocaine from SINCENO, which he intended to sell. Following her arrest earlier today, THOMPSON, after being advised of, and waiving, her Miranda rights, admitted that she had assisted NESBITT in distributing marijuana from her apartment. Also earlier today, during a court-authorized search of THOMPSON’s residence, agents recovered a quantity of marijuana, a drug scale, and a set of ziplock bags.
NESBITT, 25, and THOMPSON, 33, both of the Bronx, New York, and SINCENO, 40, are each charged with one count of engaging in a conspiracy to violate the narcotics laws of the United States, namely, to distribute controlled substances containing marijuana and cocaine. They each face a maximum sentence of 20 years in prison.
Mr. Bharara praised the investigative work of the DHS-OIG and ICE-OPR. He also thanked ICE’s Homeland Security Investigations for its assistance in the investigation.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
The charges contained in the Complaints are merely accusations and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Nesbitt, Sinceno Complaint
U.S. v. Sherisse Thompson ComplaintCharges Filed in Manhattan Federal Court Against Mokhtar Belmokhtar for His Role in Terror Attack in Algeria and Other CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, John Carlin, the Acting Assistant Attorney General for National Security, 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 Police Commissioner of the City of New York (“NYPD”), today announced the filing of charges against MOKHTAR BELMOKHTAR for, among other things, his alleged participation in the January 2013 terrorist attack on a Western-owned gas processing facility near In Amenas, Algeria, that killed three Americans and scores of Algerian and foreign nationals. BELMOKHTAR is charged in an eight-count criminal Amended Complaint with various offenses including conspiracy to provide material support to al Qaeda and al Qaeda in the Islamic Maghreb (“AQIM”), hostage-taking conspiracy, kidnapping of internationally protected persons, and conspiring to use a weapon of mass destruction. BELMOKHTAR remains at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Mokhtar Belmokhtar unleashed a reign of terror years ago, in furtherance of his self-proclaimed goal of waging bloody jihad against the West. His efforts culminated in a four-day siege that left dozens dead, including three Americans, and hundreds of others fearing for their lives, as the Amended Complaint describes. For the victims, their families, and their friends, who hail from all over the world, five days must have seemed like an eternity. Belmokhtar brought terror and blood to these innocent people and now we intend to bring Belmokhtar to justice, as charged.”
Acting Assistant Attorney General for National Security John Carlin said: “The charges announced today underscore the Department’s commitment to bring to justice those responsible for attacks on Americans and American interests, no matter where they occur. I want to thank all of the agents, analysts, and prosecutors who helped bring about today’s result.”
FBI Assistant Director-in-Charge George Venizelos said: “The charges against Mokhtar Belmokhtar describe a fanatical jihadist leading an extremist vanguard of an extremist ideology. As alleged, he kidnapped diplomats, formed his own terrorist organization that pledged fealty to al Qaeda, and masterminded the murderous siege of a civilian plant in Algeria that resulted in the deaths of dozens of hostages, including three Americans. Belmokhtar, in furtherance of his ‘cause,’ has shown a commitment to kidnapping and murdering Western diplomats and other civilians. The cause of justice will be served by his apprehension and prosecution.”
NYPD Commissioner Raymond W. Kelly said: “The attack in Algeria underscores the fact that American lives remain at risk from al Qaeda and its affiliates. The NYPD remains committed to the interdiction of terrorists here and abroad and to the prevention of another terrorist attack in New York City.”
A Complaint against BELMOKHTAR initially was filed under seal in Manhattan federal court, on February 26, 2013, and is attached as an Exhibit to the Amended Complaint. As alleged in the Amended Complaint:
BELMOKHTAR was designated as a foreign terrorist by the U.S. Department of Treasury in 2003. As a key leader of al Qaeda’s efforts in North Africa, from 2008 through early 2013, BELMOKHTAR has orchestrated terror attacks involving the kidnapping and murder of numerous individuals. In support of al Qaeda, BELMOKHTAR has operated under the auspices of two groups: AQIM and the Al-Mulathamin Brigade and its recently formed battalion, “The Signers in Blood” (the “Battalion”).
In December 2008, BELMOKHTAR, and others acting at his direction, kidnapped two Western diplomats working in Niger as part of a United Nations mission. The victims were held for approximately four months and then released in Mali.
In early December 2012, BELMOKHTAR issued a video-taped statement in which he announced the formation of “The Signers in Blood” Battalion, identified the “emir” of the group as Ayman al- Zawahiri, the leader of al Qaeda, and called for fighting in Algeria and elsewhere to oppose Western influence. Several weeks later, BELMOKHTAR issued another video-taped statement in which he confirmed that the Battalion was “in [the] al Qaeda organization.”
On January 16, 2013, terrorists who were part of BELMOKHTAR’s Battalion attacked a Western-owned gas processing facility in Algeria, armed with AK-47s and rocket-propelled grenade launchers. The terrorists took numerous workers inside the facility hostage by force, including Algerian nationals and citizens of the United States, the United Kingdom, Japan, Norway, the Philippines, Colombia, Romania, and other nations, while other workers fled or hid inside the facility. The terrorists attached explosives to some of the hostages, wound detonation cord around their necks, and threatened to kill them. During the siege of the facility, numerous hostages, including three U.S. citizens, were killed.
On January 21, 2013, approximately one day after the siege ended, BELMOKHTAR appeared in an online video in which he claimed responsibility for the Battalion’s attack on the facility, on behalf of al Qaeda.
Three of the hostage-takers involved in the siege were arrested and detained by foreign authorities and later separately interviewed by U.S. law enforcement officers. The hostage-takers each acknowledged their membership in an al Qaeda group, of which BELMOKTAR was the “emir,” and further stated that they had received military training in another country prior to traveling to Algeria to conduct the attack in the name of al Qaeda.
The Amended Complaint charges BELMOKHTAR in eight Counts:
- Count One charges BELMOKHTAR with conspiring to provide material support to al Qaeda and AQIM, and carries a maximum penalty of life in prison;
- Count Two charges BELMOKHTAR with conspiring to take hostages, and carries a maximum penalty of life in prison or death;
- Count Three charges BELMOKHTAR with conspiring to discharge a firearm in furtherance of a crime of violence, and carries a maximum penalty of life in prison;
- Count Four charges BELMOKHTAR with discharging a firearm in furtherance of a crime of violence, and carries a maximum penalty of life in prison or death;
- Count Five charges BELMOKHTAR with conspiring to use and carry an explosive during the commission of a felony, and carries a maximum penalty of 20 years in prison;
- Count Six charges BELMOKHTAR with conspiring to kidnap internationally protected persons, and carries a maximum penalty of life in prison;
- Count Seven charges BELMOKHTAR with kidnapping of internationally protected persons, and carries a maximum penalty of life in prison; and
- Count Eight charges BELMOKHTAR with conspiring to use a weapon of mass destruction, and carries a maximum penalty of life in prison.
The investigation of BELMOHKTAR was the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York and the New York-based Joint Terrorism Task Force of the FBI, which is comprised of FBI agents and members of the NYPD. Mr. Bharara thanked the Justice Department’s National Security Division, the U.S. Department of Justice Office of International Affairs, the FBI’s International Operations Division, and the U.S. Department of State for their assistance, as well as the international law enforcement partners involved in this investigation.
The United States Department of State, through the Rewards for Justice Program, is offering a $5 million reward for information leading to the location of BELMOKHTAR. Please see the Rewards for Justice website for further details: http://www.rewardsforjustice.net.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Glen Kopp, Anna Skotko, and Shane Stansbury are in charge of the prosecutions, with assistance from Trial Attorney Stephen Ponticiello of the Counterterrorism Section of the Justice Department’s National Security Division.
The charges contained in the Amended Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Mokhtar Belmokhtar Amended Complaint
United States Settles Medicare Billing Fraud Lawsuit with Multi-Specialty Health Care Provider for $1 MillionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Thomas O’Donnell, Special Agent-in-Charge of the Department of Health and Human Services, Office of Inspector General (HHS-OIG), New York region, announced today that the United States has settled for $1 million a civil health care False Claims Act lawsuit it filed on March 5, 2013 in Manhattan federal court against PARK AVENUE MEDICAL ASSOCIATES, P.C., PARK AVENUE HEALTH CARE MANAGEMENT, LLC, and PARK AVENUE HEALTH CARE MANAGEMENT, INC. (collectively “PAMA”), affiliated companies in the business of providing multi-specialty medical services in New York. This settlement resolves a lawsuit alleging that PAMA billed Medicare for services purportedly provided to elderly, mentally ill patients that were not medically necessary, were not documented in the medical record, or failed otherwise to comply with Medicare rules and regulations. The settlement was approved today by U.S. District Court Judge Colleen McMahon.
Manhattan U.S. Attorney Preet Bharara said: “In these lean budget times, it’s especially important that federal dollars be reserved for Medicare’s prescribed purposes, and not lost to fraud or abuse by companies like Park Avenue Medical Associates. This Office will continue to work hard to protect the Medicare program and prevent taxpayers from paying for unnecessary services.”
HHS-OIG Special Agent-in-Charge Thomas O’Donnell said: “For over a dozen years, Park Avenue Medical Associates submitted fraudulent claims to pad their pockets at Medicare’s expense, a practice that will simply not be tolerated. Through this settlement, PAMA is owning up and paying the price for their misconduct.”
According to the allegations contained in the Complaint filed in March 2013 in Manhattan federal court:
PAMA directly employs physicians, nurses and other medical professionals who provide services to elderly patients at hospitals, including inpatient psychiatric facilities, nursing homes, and assisted living facilities, among other types of long-term care facilities. The patients and residents at these facilities suffer from various chronic health conditions, including Alzheimer’s disease, dementia, schizophrenia, psychosis, depression and anxiety. The doctors and nurses employed by PAMA receive a salary from PAMA, which contracts with the facilities. In addition to their regular salaries, psychiatrists and psychologists employed by PAMA receive bonuses based on how many services they provide and the level of reimbursement they generate for PAMA from government and other insurance providers, including Medicare.
Medicare prohibits payment for services that are not “reasonable and necessary” for the diagnosis or treatment of an illness or injury. Medicare also prohibits payment for any claim without adequate documentation substantiating the reasonableness and necessity of the services provided. In particular, Medicare does not cover psychotherapy services rendered to patients with Alzheimer’s disease or dementia unless the patient’s dementia is mild, the patient has the capacity to recall what occurred at the therapy from one session to the next, and that capacity is documented in the patient’s record. Psychotherapy services are not covered when dementia has produced a severe enough cognitive defect to prevent psychotherapy from being effective. In addition, Medicare provides that psychiatric diagnostic examinations are covered only once for each episode of illness or suspected illness in a patient.
In violation of Medicare policies, as well as its own policies, PAMA provided psychotherapy to patients who lacked the capacity to benefit from it due to severe dementia. In addition, PAMA billed for psychiatric evaluations that were duplicative, failed to comply with Medicare rules, and reflected a lack of coordination of care both among PAMA’s own psychiatrists, psychologists and nurses, and between PAMA’s employees and staff at the facilities at which PAMA performed services. In fact, PAMA billed Medicare for a far larger number of all of these services per psychiatrist and psychologist during the period 2001 through 2012 than any other provider with a similar patient population in the New York area.
In the settlement, PAMA admitted the following:
- In many instances, PAMA billed Medicare for psychiatric diagnostic examinations without demonstrating that they had adequately documented the patient’s medical and/or psychiatric history and/or mental status;
- In many instances, PAMA billed Medicare for multiple psychiatric diagnostic examinations after receiving multiple orders for such, but without demonstrating that the examinations complied with certain applicable Medicare rules, including those that allow for multiple examinations only when there is a demonstrated hiatus in the condition of the patient or the beginning of a new spell of illness; and
- In many instances, PAMA billed Medicare for psychotherapy services to patients who suffered from dementia or other cognitive disorders without demonstrating that the patients had the capacity to benefit from the psychotherapy.
As part of the settlement, PAMA also entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General.
Mr. Bharara thanked the Department of Health and Human Services, Office of the Inspector General, for its assistance in this case.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Heidi A. Wendel and Mara E. Trager are in charge of the case.
U.S. v. Park Ave Medical Associates, et al. Stipulation and Settlement
U.S. v. Park Ave Medical Associates, et al. ComplaintManhattan U.S. Attorney Announces Charges Against Eight Individuals in Connection with $2.3 Million Bribery and Kickback Scheme to Secure Business from A Medical Cost-Management CompanyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Thomas O’Donnell, the Special Agent-in-Charge of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), and Steven G. Hughes, the Special Agent-in-Charge of the New York Office of the U.S. Secret Service today announced charges against eight individuals for their alleged involvement in a lucrative scheme in which information technology vendors paid over $2.3 million in bribes and kickbacks to secure business from executives of a Manhattan-based medical cost management company (the “New York Company”). The defendants charged with paying the bribes and kickbacks are SARVESH DHARAYAN, SANJAY GUPTA, VENKATA ATLURI, RANGARAJAN KUMAR, VADAN KUMAR KOPALLE, and DARREN SIRIANI. The defendants charged with receiving the bribes and kickbacks are ANIL SINGH and KEITH BUSH. DHARAYAN, GUPTA, KOPPALLE, and SIRIANI were arrested this morning at their homes in New Jersey, and were presented in Manhattan federal court this afternoon before U.S. Magistrate Judge James L. Cott. SINGH, who was previously arrested in April 2013, pled guilty to honest services fraud and other charges before U.S. District Judge Denise L. Cote on July 11, 2013. BUSH, who was also arrested previously on July 12, 2013, is next scheduled to appear in court for a pretrial conference on August 15, 2013. ATLURI and KUMAR are not yet in custody.
Manhattan U.S. Attorney Preet Bharara said: “For the eight defendants charged in this multi-million dollar scheme, bribes and kickbacks were allegedly the cost they imposed for doing business with this medical-cost management company. As today’s charges detail, the defendants achieved their years-long fraud through fake companies, sham invoices and made-up consulting services. Today’s actions underscore our commitment to work with our law enforcement partners to bring to justice individuals who break the law out of greed.”
HHS-OIG Special Agent-in-Charge Thomas O’Donnell said: “This scheme was motivated by greed and it deprived its victim, a company in the health care field, of the honest labor of its employees. We will continue to aggressively investigate those who pay kickbacks and bribes to gain an advantage in the public and private health care sectors.”
USSS Special Agent-in-Charge Steven G. Hughes said: “The Secret Service continues to enjoy its partnership with the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General. We find partnerships such as this to be an effective way to share resources and stop criminals from continuing to engage in fraudulent schemes.”
According to the allegations contained in the Complaint, the Informations filed against BUSH and SINGH, and other statements made in Manhattan federal court:
SINGH was employed as a Senior Vice President and the Chief Information Officer at the New York Company, which provided nation-wide medical cost management solutions including, among other things, medical reimbursement services, and BUSH was employed as the company’s Director of Database Administration. SINGH and BUSH had considerable influence over the selection of vendors, specifically vendors of database administrators (“DBAs”), hired by the New York Company.
From 2008 to September 2012, various individuals collectively paid over $2.3 million in money and other benefits to SINGH and BUSH in exchange for SINGH’s and BUSH’s agreement to steer millions of dollars of the New York Company’s DBA business to them. Specifically, as alleged:
- DHARAYAN, the owner of a New Jersey information technology company (“Vendor 1”) and GUPTA, an employee of Vendor 1, paid approximately $1,722,620 in kickbacks and bribes to BUSH and SINGH in exchange for receiving DBA business from the New York Company. From 2010 to 2012, the New York Company paid Vendor 1 approximately $6,625,479.20 for placing DBAs with the New York Company.
- ATLURI, the owner of another New Jersey information technology company (“Vendor 2”), paid approximately $190,436.75 in kickbacks and bribes to BUSH and SINGH in exchange for receiving DBA business from the New York Company. From 2008 to 2012, the New York Company paid Vendor 2 approximately $11,495,804.88 for placing DBAs with the New York Company.
- KUMAR paid approximately $247,634 in kickbacks and bribes to BUSH and SINGH in exchange for their agreement to steer DBA business to another New Jersey information technology company (“Vendor 3”). From 2009 to 2012, the New York Company paid Vendor 3 approximately $2,593,210.38 for placing DBAs with the New York Company.
- KOPALLE, who was in charge of delivery and operations at a Texas information technology company (“Vendor 4”), paid approximately $142,967.50 in kickbacks and bribes to BUSH and SINGH in exchange for receiving DBA business from the New York Company. From 2009 to 2010, the New York Company paid Vendor 4 approximately $1,035,660 for placing DBAs with the New York Company.
- SIRIANI, the owner and operator of another New Jersey information technology company (“Vendor 5”) paid approximately $23,000 to $29,000 in cash kickbacks and bribes to BUSH and SINGH in exchange for receiving business from the New York Company. SIRIANI also paid for hotel rooms in Las Vegas and Costa Rica, deep sea fishing, massages, sports tickets, and other things, all in exchange for receiving business from the New York Company. From 2008 to 2012, the New York Company paid Vendor 5 approximately $1,177,600.91 for various services and products.
According to the Complaint, DHARAYAN, GUPTA, ATLURI, KUMAR, and KOPALLE paid the kickbacks and bribes through conduit companies established by BUSH and SINGH for the very purpose of disguising the true nature and origin of the illegal payments. To further conceal the bribery and kickback scheme, BUSH and SINGH sent false invoices to the conduit companies for consulting services that never occurred. Many of the kickbacks and bribes were paid pursuant to these false invoices.
DHARAYAN, 42, of Edison, New Jersey, GUPTA, 38 of East Windsor, New Jersey, ATLURI, 41, of Monmouth Junction, New Jersey, KUMAR, 47, of Monroe, New Jersey, KOPALLE, 43, of Edison, New Jersey, and SIRIANI, 45, of Matawan, New Jersey, were each charged with one count of conspiracy to commit honest services fraud, which carries a maximum term of 20 years in prison, one count of conspiracy to violate the Travel Act, which carries a maximum term of five years in prison, one count of honest services fraud, which carries a maximum term of 20 years in prison, and one count of violating the Travel Act, which carries a maximum term of five years in prison. DHARAYAN, GUPTA, ATLURI, KUMAR, and KOPALLE were also charged with one count of conspiracy to commit money laundering, which carries a maximum term of 20 years in prison.
SINGH, 40, a resident of East Brunswick, New Jersey pled guilty to one count each of conspiracy to commit honest services fraud, conspiracy to violate the Travel Act, honest services fraud, violating the Travel Act, and conspiracy to commit money laundering. He faces a maximum penalty of 70 years in prison on all counts. BUSH, 41, a resident of Rahway, New Jersey, is charged with one count each of conspiracy to commit honest services fraud, conspiracy to violate the Travel Act, honest services fraud, violating the Travel Act, and conspiracy to commit money laundering. He also faces a maximum penalty of 70 years in prison if convicted on all counts.
Mr. Bharara praised the outstanding efforts of HHS-OIG and the U.S. Secret Service in the investigation. He also thanked the New York Company for its assistance and cooperation in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Jason P. Hernandez is in charge of the prosecution. Assistant U.S. Attorney Christine Magdo of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case.
The charges and allegations contained in the Complaint and the Information filed against BUSH are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Sarvesh Dharayan, et al. Complaint
U.S. v. Anil Singh Information
U.S. v. Keith Bush InformationManhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Arrest of California Man for Attempted Sex Trafficking and Possession and Distribution of Child PornographyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced the arrest of CHARLES FAMILETTI, JR. for attempted sex trafficking of a minor as well as for possession and distribution of child pornography. FAMILETTI was arrested by FBI agents in the afternoon of Monday, July 15, 2013, at a corporate apartment that he rents in Manhattan. He was presented Monday evening before U.S. Magistrate Judge James L. Cott in Manhattan federal court.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Charles Familetti not only possessed and distributed child pornography, but even more disturbingly, agreed to pay hundreds of dollars to arrange to have sex with a child. Thanks to the efforts of the FBI, Familetti’s alleged illicit conduct was brought to light, and he will now have to answer to these serious charges.”
FBI Assistant Director-in-Charge George Venizelos said: “There may be no more important mission for the FBI than protecting the most vulnerable of victims. As alleged, this defendant not only possessed and distributed child pornography, he paid someone in an attempt to rape an 11-year-old child. Child pornography is itself predatory, because children are victimized to produce it.”
According to the allegations contained in the Complaint filed in Manhattan federal court:
FAMILETTI was arrested following an FBI sting operation in which he agreed to pay an undercover FBI agent $500 in order to have sex with an 11-year old boy. On July 15, 2013, FAMILETTI met with the undercover agent to confirm the agreement and then took the agent to an ATM and gave him a $100 down payment. Prior to that meeting, FBI agents downloaded what appeared to be several images of child pornography from FAMILETTI via a publically available peer-to-peer file sharing network. During a search of FAMILETTI’s apartment following his arrest, FBI agents also recovered a memory card containing hundreds of images and videos of what appeared to be minor children engaging in sexually explicit conduct.
FAMILETTI, 46, of San Francisco, California, is charged with one count of attempted sex trafficking of a minor, which carries a mandatory minimum sentence of 15 years in prison and a maximum penalty of life in prison. He is also charged with one count of transporting or distributing child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison, and one count of possessing child pornography which carries a maximum sentence of 10 years in prison. All three counts also carry a maximum fine of $250,000 or twice the gross gain or loss from the offense.
Mr. Bharara praised the outstanding investigative work of the FBI. He added that the investigation is continuing.
The FBI encourages the public to report suspected child predators and any suspicious activity through their switchboard at (212) 384-1000. It is staffed around the clock by investigators. Suspected child sexual exploitation or missing children may be reported to the National Center for Missing and Exploited Children, an Operation Predator partner, at 1-800-843-5678 or http://www.cybertipline.com.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Patrick Egan is in charge of the prosecution.
The charges contained in the Complaint are merely an accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Charles Familetti Complaint
Long Island Art Dealer Indicted for Massive Art Fraud, Money Laundering, and Tax SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Toni Weirauch, the Special Agent-in-Charge of the New York Field Division of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of a seven-count Indictment charging GLAFIRA ROSALES, an art dealer, with participating in a $30 million fraud in which she sold over 60 works of fake art to two Manhattan galleries. ROSALES was also charged with money laundering and tax crimes related to the art fraud scheme. Rosales, who was originally charged in a complaint, was arrested on May 21, 2013. The case has been assigned to U.S. District Court Judge Katherine Polk Failla and ROSALES will be arraigned on Friday, July 19, 2013, at 11 a.m.
Manhattan U.S. Attorney Preet Bharara said: “The indictment depicts a complete circle of fraud perpetrated by Glafira Rosales – fake paintings sold on behalf of non-existent clients with money deposited into a hidden bank account. The one thing about this story that is true is that this alleged fraud will be prosecuted.”
IRS Special Agent-in-Charge Toni Weirauch said: “The tax charges alleged in this indictment center on the concealment of taxable income from the sale of counterfeit paintings. This investigation is an excellent example of how the government is dedicated to detecting and investigating all kinds of income tax fraud schemes and seeing that those who commit tax fraud are prosecuted. It is important for the public to feel confident that their government is working to ensure that everyone pays their fair share.”
FBI Assistant Director-in-Charge Venizelos said: “As the indictment alleges, Glafira Rosales knowingly peddled fakes to two Manhattan art galleries. To prolong her scheme for a decade-and-a-half, not only the paintings were fake, but the stories behind them as well. The pictures Rosales painted of the anonymous Swiss client – a pure fiction – and the Spanish collector – a real person but not, as purported, the owner of any of the paintings – were as fake as the dozens of works she attributed to the modern masters.”
According to the allegations contained in the Indictment and the Complaint filed in Manhattan federal court:
Starting in 1994 and continuing through 2009, ROSALES sold more than 60 never-before exhibited and previously unknown works of art that she claimed were painted by some of the most famous artists of the 20th century, including Jackson Pollock, Mark Rothko, and Willem de Kooning. ROSALES sold these works of art to two prominent Manhattan galleries for approximately $33.2 million. In selling some of the paintings to the two galleries, she purported to represent a client with ties to Switzerland who had inherited the paintings and wanted to sell them, but who also wished to remain anonymous (the “Purported Swiss Client”). For the remainder of the paintings, she purported to represent a Spanish collector (the “Purported Spanish Collector”). ROSALES also claimed that a portion of the price paid by the Manhattan galleries would be her commission for selling the paintings and that the remainder would be passed along to her clients.
In contrast to the claims made by ROSALES, as alleged in the Indictment:
- the paintings ROSALES sold were fake, that is, not by the hand of the artists that she represented them to be;
- ROSALES knew that the paintings were counterfeit and that the statements she made about their provenance were false;
- the Purported Swiss Client on whose behalf she purported to sell most of the paintings to the Manhattan galleries never existed;
- the Purported Spanish Collector on whose behalf she claimed to sell the remainder of the paintings to the Manhattan galleries never owned the paintings;
- instead of passing along a substantial portion of the proceeds of the sale of the various paintings, she kept all or substantially all of the proceeds, and transferred substantial portions of the proceeds to an account maintained by her then-boyfriend; and
- ROSALES concealed and disguised the nature, location, source, ownership, and control of the proceeds of sales of the fake works by causing the Manhattan galleries to transfer substantial portions of the proceeds of the sales to foreign bank accounts, and by transferring, and causing to be transferred, proceeds of the sales from foreign bank accounts to accounts maintained in the United States.
ROSALES filed tax returns that falsely claimed she had not kept all, or substantially all of the proceeds from the sale of the purported clients’ paintings, when, in fact, she kept all or nearly all of the proceeds. In total, she failed to report the receipt of at least $12.5 million of income for the years 2006 through 2008.
In addition, ROSALES received most of the proceeds from the sale of the paintings in a foreign bank account that she hid from, and failed to report to, the IRS. U.S. taxpayers are required to report the existence of any foreign bank account that holds more than $10,000 at any time during a given year by the filing of a Report of Foreign Bank and Financial Accounts, Form TD F 90-22.1 (“FBAR”). ROSALES failed to file FBARs for the years 2010 and 2011.
ROSALES, 56, of Sands Point, New York, is charged with one count of wire fraud, which carries a maximum of 20 years in prison; one count of money laundering, which carries a maximum of 20 years in prison; three false tax return charges, each of which carries a maximum of three years in prison; and two willful failure to file FBAR charges, each of which carries a maximum sentence of five years in prison.
Mr. Bharara praised the outstanding efforts of IRS-CI and FBI in the investigation, which he noted is ongoing. He also thanked the Department of Justice’s Tax Division for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Jason P. Hernandez and Daniel W. Levy are in charge of the prosecution.
The charges and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Glafira Rosales Indictment
Victims of Bayou Hedge Funds Receive Another$31 Million in Forfeited Assets, Including Millions Repatriated from Singapore and the United KingdomRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York announced that today the Clerk of the Court distributed $31,788,917.44 in proceeds from forfeited assets to victims of the fraud committed at the Bayou hedge funds. The forfeited assets include approximately $2 million seized from a bank account in Singapore and $1 million seized from a bank account in the United Kingdom. This brings the total value of the forfeited assets distributed to Bayou fraud victims to over $128 million.
U.S. Attorney Bharara stated: “We are dedicated to using forfeiture to compensate victims for their losses whenever possible. This return of money to Bayou fraud victims underscores the power and flexibility of forfeiture as a tool to help victims of major financial crimes. It also demonstrates our commitment to working with foreign governments to pursue and seize criminal proceeds that are transferred into offshore accounts.”
According to documents filed in these cases:
SAMUEL ISRAEL III, DANIEL E. MARINO and JAMES G. MARQUEZ were each convicted of defrauding investors by inducing them to invest in the various Bayou hedge funds and creating fake financial statements. These statements falsely represented that the Bayou hedge funds were profitable, when in fact they were sustaining substantial losses. As a result, the total loss to investors was approximately $300 million. As part of the sentences imposed in 2008 by United States District Judge Colleen McMahon, ISRAEL and MARINO were each directed to pay restitution of $300 million to victims of the Bayou fraud. MARQUEZ was directed to pay restitution of $6,259,650. In addition, ISRAEL and MARINO each were sentenced to 20 years in prison. MARQUEZ was sentenced 51 months in prison.
Following entry of these restitution orders, the U.S. Attorney’s Office in the Southern District of New York, with the assistance of the United States Marshals Service and a court-appointed receiver, pursued and forfeited assets that were traceable to the Bayou fraud. In 2008, the United States restored to victims over $115 million in proceeds of the Bayou fraud, consisting primarily of funds seized from bank accounts in the United States and interest on the seized funds.
The Clerk of the Court distributed these seized funds in accordance with distribution orders that created a reserve fund consisting of 25.18% of the restored funds. Judge McMahon created the reserve fund to permit the payment of restitution to investors in the Bayou hedge funds who redeemed all or part of their investment and may be ordered to return a portion of their investment in connection with the ongoing Bayou bankruptcy action, In re Bayou Group LLC, et al., 06-22306 (ASH). Since the creation of the reserve fund, dozens of redeeming investors have been included in amended restitution orders and have received distributions of reserve funds. Following resolution of claims brought against redeeming investors in the Bayou bankruptcy action, the Government successfully moved for the distribution of these reserve funds to existing fraud victims. Today’s distribution to victims includes the entire reserve fund, consisting of $20,985,100.21.
The remaining funds distributed to Bayou fraud victims are derived from dozens of assets that were liquidated following the sentencing of ISRAEL, MARINO, and MARQUEZ. These assets include a variety of securities for which Judge McMahon entered a final order of forfeiture in April 2013. The assets also include $1 million in funds repatriated from a bank account in the United Kingdom and $1,999,994.19 in funds repatriated from a bank account in Singapore, both of which were forfeited to the United States following a contested ancillary forfeiture proceeding.
Mr. Bharara praised the outstanding efforts of the Federal Bureau of Investigation and the U.S. Marshals Service in this case. He also thanked the U.S. Department of Justice’s Office of International Affairs, the United Kingdom’s Foreign and Commonwealth Office, the City of London Police Economic Crimes Directorate, the Attorney General’s Chambers of the Singapore Government, and the Financial Investigation Division of the Singapore Government’s Commercial Affairs Department for their significant assistance in the forfeiture proceedings.
This case is being handled by the Office’s Asset Forfeiture Unit and the White Plains Division. Assistant U.S. Attorneys Jeffrey Alberts, Perry Carbone, and Sharon Cohen Levin are in charge of the prosecution.
Former IRS Official Sentenced in Manhattan Federal Court for Violating Conflict of Interest and Audit Disclosure LawsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DENNIS LERNER, a former employee of the Internal Revenue Service (“IRS”), was sentenced today in Manhattan federal court to three years of probation for violating a criminal conflict of interest law and to illegally disclosing confidential audit information during the time he was an IRS employee. LERNER pled guilty in March 2013 to one count of violating a criminal conflict of interest law and one count of illegally disclosing confidential audit information while he was an IRS employee before United States District Judge John F. Keenan, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Whether you cheat on complying with the tax laws or cheat on enforcing the tax laws, you corrupt our tax system. Dennis Lerner discredited his office and the integrity of the audit process by disregarding his responsibilities as an IRS Examiner in order to land himself a job. This Office will not hesitate to root out corruption wherever we find it, including among government officials.”
According to the allegations in the Criminal Complaint and the Criminal Information, along with statements made at Lerner’s plea and during today’s sentencing proceeding:
From June 2010 until his resignation in August 2011, LERNER worked as an International Examiner in the New York office of the IRS. For several months leading up to his resignation from the IRS, one of his chief responsibilities involved conducting an audit of an international bank (“Bank-1”) related to approximately $1 billion in allegedly unreported income. Shortly before his resignation, LERNER led negotiations on behalf of the IRS which resulted in a proposed $210 million settlement between Bank-1 and the IRS. The settlement was still pending final approval at the time of his departure. Unbeknownst to his colleagues and supervisors, LERNER applied for, interviewed for, and accepted the position of Tax Director at Bank-1 during the time period in which he was representing the IRS in the Bank-1 settlement discussions. He also sent multiple emails to an individual in which he expressed both his dissatisfaction with his job at the IRS and his hope that he would secure the Bank-1 job. At no time did he notify the IRS of his efforts to obtain employment with Bank-1.
LERNER also engaged in improper disclosure of IRS tax return information during the time period that he worked as an IRS International Examiner. Specifically, he revealed the identity of a bank he was auditing to an individual who was not employed by the IRS.
In addition to his probation, LERNER, 60, of Edgewater, New Jersey, was ordered to pay a $10,000 fine and a $200 special assessment fee.
Mr. Bharara praised the outstanding investigative work of the Treasury Inspector General for Tax Administration, which included the assistance and cooperation of IRS management.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Randall W. Jackson is in charge of the prosecution.
California Economist Sentenced in Manhattan Federal Court to Four Years in Prison for Evading over $1.5 Million in Taxes Due to IRSRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID GILMARTIN, a Ph.D. economist, was sentenced today in Manhattan federal court to four years in prison for failing to file tax returns since 1989, evading payment of his taxes, and obstructing attempts by the Internal Revenue Service (“IRS”) and the State of New York to assess and collect his personal income taxes. GILMARTIN was convicted of tax evasion and mail-fraud charges in January 2013, after a one-week jury trial before U.S. District Judge Miriam Cedarbaum, who imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “For more than 20 years, David Gilmartin thumbed his nose at the government, failing to pay his taxes and ignoring repeated warnings to do so. Everyone must pay their fair share of taxes, and those like Gilmartin who do not, will be punished.”
According to the indictment and evidence introduced at GILMARTIN’s trial:
GILMARTIN, who holds a Ph.D. in economics, willfully failed to file income tax returns and pay income taxes on over $1.7 million in consulting income from 1989 through 2010. He justified his failure to pay taxes by claiming that he could not identify a provision in the tax code that made him liable for the payment of income taxes. Despite numerous IRS notices, meetings, and letters, and despite GILMARTIN’s friends telling him that he would go to jail, GILMARTIN refused to file his tax returns or pay his income taxes.
GILMARTIN evaded his taxes by providing a false social security number to one employer, and by providing false withholding forms to employers that claimed that he was exempt from taxes, to keep his employers from withholding taxes from his paychecks. In order to prevent the IRS from assessing and collecting his taxes, from 1995 through 2002, GILMARTIN paid nearly $500,000 from his paychecks directly to his banks for credit card purchases and payments on a line of credit, rather than deposit them in a bank account that he knew the IRS would try to levy. From 2008 until his arrest, GILMARTIN cashed over $338,000 in paychecks rather than deposit them into a bank account, also to prevent the IRS from collecting his taxes.
As a result of his evasion efforts, GILMARTIN owes more than $1.5 million in income taxes and interest to the IRS, and more than $99,000 to the State of New York.
In addition to the prison term, Judge Cedarbaum also sentenced GILMARTIN, 69, of Phelan, California, to three years of supervised release. GILMARTIN was also ordered to pay $1.67 million in restitution, and $2,500 in the costs of prosecution.
Mr. Bharara thanked the Internal Revenue Service-Criminal Investigation 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. Attorney Stanley J. Okula, Jr. and DOJ Tax Division Assistant Chief Nanette L. Davis are in charge of the prosecution.
Joseph Collins, Principal Attorney for Former Commodities Firm Refco, Sentenced in Manhattan Federal Court to One Year and One Day in Prison for Securities FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOSEPH P. COLLINS, formerly the principal outside attorney for the now defunct financial services company, Refco Group Inc. (“Refco”), was sentenced today in Manhattan federal court to one year and one day in prison for conspiracy, securities fraud, filing false statements with the SEC, and wire fraud, in connection with his role in the fraud underlying the collapse of Refco. The accounting fraud at Refco, once the nation’s largest independent commodities firm, cost investors and lenders more than $2.4 billion in losses. COLLINS was convicted in November 2012, after a four-week jury trial before Chief U.S. District Judge Loretta A. Preska, who imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara stated: “Joseph Collins was a lawyer deeply and corruptly enmeshed in coordinating and concealing the massive accounting fraud that ultimately led to Refco’s collapse. By aiding and abetting the commodities firm’s executives, Collins not only shirked his duties as an officer of the court and violated the ethical obligations of his profession – he broke the law.”
According to the Superseding Indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
In August 2004 Thomas H. Lee Partners, L.P., purchased a majority interest in Refco through a $2.4 billion leveraged buyout (“LBO”) transaction. The buyout was financed with
approximately $500 million in cash from Thomas H. Lee Partners, $600 million in notes that Refco sold to private investors, and approximately $800 million borrowed from a syndicate of banks. In August 2005, Refco conducted an initial public offering (“IPO”) of its stock, which was then listed on the New York Stock Exchange. Both the LBO and the IPO were constructed and orchestrated in the context of a massive fraud scheme engineered by Phillip R. Bennett, former Chief Executive Officer and 50% owner of Refco, and others, with the knowing assistance of COLLINS. Only months after the IPO, Refco went into bankruptcy and its stock was delisted from the New York Stock Exchange.
During the relevant time period, COLLINS, then a partner at the law firm Mayer, Brown, Rowe & Maw LLP, was the primary outside counsel for Refco and Bennett. COLLINS participated in, among other things, Bennett’s scheme to falsify Refco's financial statements by hiding from Refco’s investors and auditors an enormous debt owed to Refco by a holding company partially owned by Bennett. This debt had ballooned to more than $1 billion by January 2004. On at least 17 different occasions from February 2000 through October 2005, COLLINS, and lawyers at his firm working at his direction, drafted documents that arranged for the routing – through various third parties – of more than $5.5 billion in loans from Refco to Bennett’s company. As COLLINS knew, the loans were made shortly before, and reversed shortly after, Refco’s fiscal year-ends and quarter-ends. During those brief periods, Bennett used the loans to pay down the debt his company owed to Refco, only to have the debt return once these “round-trip” loan transactions were reversed. These loans had the effect of concealing the size of Refco’s related-party debt by making it appear that the debt owed by Bennett’s company was significantly smaller than it really was.
COLLINS falsely represented to Thomas H. Lee Partners and others that all material contracts and related-party transactions had been disclosed, knowing that was untrue. In fact, documents relating to the round-trip loan transactions, including documents in which Refco guaranteed to third parties the performance of Bennett’s company – in amounts totaling billions of dollars – were never provided to Thomas H. Lee Partners. COLLINS also made affirmative misrepresentations and drafted contract terms that misled others into believing that Bennett’s holding company owed Refco no more than approximately $108 million, which COLLINS knowingly and falsely misrepresented would be repaid by the time the LBO transaction closed. In fact, COLLINS knew that Bennett’s holding company actually owed Refco at least $1 billion and that, even after the LBO, it would continue to owe Refco at least $300 million.
COLLINS also agreed with Bennett to conceal the terms of a 2002 agreement giving the Austrian bank BAWAG an approximately 47% economic interest in Refco, and further agreed to conceal Bennett’s plan to buy out BAWAG’s interest by using more than $500 million from the proceeds of the LBO. COLLINS directed others not to disclose information relating to Bennett’s buyout of BAWAG’s interest, and lied to Thomas H. Lee Partners by representing that all material contracts and related-party transactions concerning Refco had been disclosed, knowing full well that these agreements and arrangements had not been disclosed. To that end, COLLINS created fraudulent corporate documents for Refco that he provided to Thomas H. Lee Partners in order to conceal from the firm BAWAG’s true economic interest in Refco and Refco’s true financial condition.
In addition to the prison term, Chief Judge Preska sentenced COLLINS, 62, of Winnetka, Illinois, to two years of supervised release. COLLINS was originally found guilty in 2009 on charges of conspiracy to commit securities fraud, wire fraud, bank fraud, and money laundering, but that conviction was reversed by the United States Court of Appeals for the Second Circuit in January 2012.
To date, several former executives of Refco have been convicted for their participation in the $2.4 billion fraud described above:
- Bennett, 64, of Gladstone, New Jersey, pled guilty in February 2008 to all 20 charges filed against him. He was sentenced on July 3, 2008, to 16 years in prison by U.S. District Judge Naomi Reice Buchwald;
- Tone N. Grant, 69, of Chicago, Illinois – one of the former owners of Refco – was convicted at trial in April 2008 on all five counts in the Indictment against him. Grant was sentenced on August 7, 2008, to 10 years in prison by Judge Buchwald;
- Robert C. Trosten, 44, of Sarasota, Florida – the former Chief Financial Officer of Refco – pled guilty in February 2008 before Judge Buchwald to five counts charged against him in the Indictment against him. Trosten has not yet been sentenced; and
- Santo C. Maggio, formerly of Naples, Florida – the former Executive Vice President of Refco and the former President and Chief Executive Officer of Refco Securities LLC, a Refco subsidiary – pled guilty in December 2007 before U.S. Magistrate Judge Ronald L. Ellis to a four-count Information. Maggio died last year before being sentenced.
Mr. Bharara praised the work of the United States Postal Inspection Service and the Criminal Investigators of the United States Attorney’s Office, which jointly investigated this case. He also thanked the Securities and Exchange Commission and the Commodity Futures Trading Commission for their assistance in the case.
Assistant United States Attorneys Harry A. Chernoff, Michael A. Levy, and Edward A. Imperatore are in charge of the prosecution.
Canadian Citizen Sentenced in Manhattan Federal Court to 20 Years in Prison in Connection with $7 Million Advance-Fee Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that DAVID “JIM” NORMAN was sentenced in Manhattan federal court to 20 years in prison for his role in a scheme to defraud victims across the country out of millions of dollars. As part of the scheme, NORMAN promised victims huge guaranteed returns on investments to be paid out of overseas bank accounts that in reality did not exist. Following his extradition from Canada in November 2011, NORMAN was convicted of conspiracy to commit wire fraud in January 2013, after a six-day jury trial. U.S. District Judge Katherine B. Forrest presided over the trial and sentenced NORMAN today.
Manhattan U.S. Attorney Preet Bharara said: “By promising huge returns on their investments, Jim Norman induced scores of victims from around the country to give him millions of dollars. As proven at trial, his promise was nothing more than a shameless scheme to steal hard-earned money from the victims, some of whom lost their entire life savings and even their homes. With today’s sentence, Norman will pay the price for his fraud and the suffering that he has caused his victims.”
FBI Assistant Director-in-Charge George Venizelos said: “As the jury found, Jim Norman used fast talk and the lure of easy profits to separate credulous investors from their money. The promissory notes he issued were as fraudulent as the rest of his scheme. The immediate results were ill-gotten gains for Norman and devastating losses for his victims. The endgame for Norman is a lengthy prison term.”
According to the evidence presented at trial, beginning in 2004 through his arrest in Canada in December 2009, NORMAN told victims that, as part of the “Jim Norman Program,” he was seeking investors to help pay fees to secure the release of hundreds of millions of dollars held in bank accounts in Spain and Switzerland. NORMAN, along with his co-conspirators in the United States who helped lure victims into the scheme, stole at least $7 million from more than 100 victims by promising them huge returns on their investments – that would be paid in a matter of days or weeks at most – and by giving victims official-looking, but worthless, “promissory notes” that purportedly guaranteed their investments and return. In reality, there were no overseas accounts, and NORMAN and his co-conspirators spent the victims’ money on themselves by making large retail purchases and withdrawing hundreds of thousands of dollars in cash. As a result of the fraudulent scheme perpetrated by NORMAN, some victims lost all their assets, others lost their homes, and others lost their businesses.
In addition to the prison term, Judge Forrest sentenced NORMAN, 64, of Toronto, Canada, to three years of supervised release. NORMAN was also ordered to forfeit $2,197,637 and pay $1,731,805 in restitution, in addition to a $100 special assessment fee.
Mr. Bharara praised the FBI for its outstanding work on this case.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Andrew Goldstein and Andrea Surratt are in charge of the prosecution.
Former Chief Executive Officer of Hospital for Special Surgery Pleads Guilty in Manhattan Federal Court to 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”), pled guilty today in Manhattan federal court to participating in a fraudulent scheme in which he was paid nearly $300,000 in undisclosed kickbacks from a subordinate Hospital employee. REYNOLDS, who was arrested in September 2012, also pled guilty to making false statements to a law enforcement agent. U.S. Magistrate Judge Debra Freeman presided over today’s plea proceeding.
Manhattan U.S. Attorney Preet Bharara said: “John Reynolds demonstrated a shocking disregard for his obligations as the leader of a world-renowned New York hospital when he exploited his position to line his own pockets and later lied about it to law enforcement. His guilty plea today shows that when people abuse positions of authority and responsibility for illicit personal gain, this Office will do everything in its power to hold them accountable.”
According to the allegations in the Indictment and Superseding Information filed in Manhattan federal court, as well as statements made in open court today at the plea proceeding:
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 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.
REYNOLDS, 64, of Venice, Florida, pled guilty to one count of wire fraud and one count of making false statements to the federal government. He faces a maximum sentence of 25 years in prison and is scheduled to be sentenced by U.S. District Judge Harold Baer, Jr. on November 7, 2013.
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.
U.S. v. John Reynolds S1 Information
Manhattan Business Owner Pleads Guilty in Manhattan Federal Court to Multi-Million Dollar Ponzi SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JASON KONIOR, the founder and manager of a number of related business entities in New York City, collectively referred to as “Absolute,” pled guilty today in Manhattan federal court in connection with his operation of a multi-million dollar Ponzi scheme in which he stole at least $2.9 million from small hedge fund investors and used the funds to pay off prior investors and to pay himself. KONIOR was originally charged in February 2013, and pled guilty today before U.S. District Judge Alvin K. Hellerstein.
Manhattan U.S. Attorney Preet Bharara said: “In the space of less than a year, Jason Konior managed to take at least $2.9 million that he had solicited from his investors, and then use it to settle up with previous investors and to pay himself. Today’s plea ensures that he will be punished for perpetrating this Ponzi scheme on his victims.”
According to the Information, statements made during today’s guilty plea proceeding, and a Complaint previously unsealed in Manhattan federal court:
From late 2011 through May 2012, KONIOR organized and managed a Ponzi scheme in which he misappropriated at least $2.9 million in funds he had solicited from hedge fund investors. He represented to these investors that Absolute would provide additional trading funds of up to nine times the investment they made in Absolute. As part of Absolute’s “first loss” investment program, KONIOR claimed that he would place the combined funds – the investors’ funds and the additional funds to be provided by Absolute – in a brokerage account designated by Absolute. According to KONIOR, the hedge fund investors would then be able to trade securities utilizing that brokerage account. Under the arrangement, the hedge funds would be responsible for trading losses, and they would share any profits with Absolute.
Instead of establishing brokerage accounts for the victim hedge funds, however, KONIOR misappropriated the funds they provided by paying redemptions to prior investors, making payments to himself, and paying various personal and business expenses. In e-mails, text messages, and telephone conversations, KONIOR pretended that he was establishing brokerage accounts for the three hedge fund investors, when he had already stolen their money. For example, in one case, after KONIOR repeatedly failed to set up a brokerage account for one of the hedge fund investors, the manager of the hedge fund investor sent him a text message stating, “I want my money back. What did you do to it anyway? Are you going to tell me or do you want the SEC to find out?” KONIOR responded with a text message stating, “[w]e have your funds in our acct. Where else would they be?” At the time KONIOR wrote the message, he had already used that hedge fund’s investment to pay off other investors and his own expenses.
KONIOR, 39, of New York, New York, pled guilty to one count of wire fraud, which carries a maximum potential penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. He is scheduled to be sentenced by Judge Hellerstein on November 8, 2013 at 11:00 a.m.
Mr. Bharara praised the work of the Federal Bureau of Investigation and the 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 John T. Zach and Jason H. Cowley are in charge of the prosecution.
U.S. v. Jason Konior Information
Boston Area Pimp Charged with Murdering A Rival Pimp in the Bronx in Dispute Related to Criminal Prostitution BusinessRead 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 Police Commissioner of the City of New York (“NYPD”), announced that SAMUEL L. WHITESIDE was presented today in Manhattan federal court on charges that he traveled interstate to commit murder to further his prostitution business. WHITESIDE was arrested in Rockford, Illinois on June 14, 2013, and initially presented in the Northern District of Illinois. He arrived in the Southern District of New York yesterday and was presented today before U.S. Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Samuel Whiteside traveled to New York with the cold-blooded intent to murder a rival in the unlawful prostitution business. Thanks to the efforts of our law enforcement partners, he will now face justice in the Southern District of New York.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, a business dispute between two men ended with one brutally murdering the other. Given that the business in question was the exploitation of women and trading them like livestock, it is not surprising that a dispute would be resolved by violence. While not surprising, it is intolerable.”
NYPD Commissioner Raymond W. Kelly said: “I commend the detectives of the NYPD’s Bronx Homicide squad and their counterparts in the 47th Precinct for helping return this pimp to face federal prosecution for murder.”
According to the allegations in the Complaint filed in Manhattan federal court:
During the course of the evening of June 4, 2012, and early morning hours of June 5, 2012, WHITESIDE, a Boston area pimp, had an argument over the telephone with Victor Martino (the “Victim”). The Victim, who at the time was staying at the Metro Motel in the Bronx, New York, was also a pimp, and the argument between WHITESIDE and the Victim related to their respective prostitution businesses.
Specifically, WHITESIDE and the Victim had a dispute about a woman who had worked for WHITESIDE as a prostitute. WHITESIDE believed that the Victim owed WHITESIDE money related to that woman, who had been traded and sold between WHITESIDE and the Victim. During a telephone conversation that evening, the Victim told WHITESIDE that WHITESIDE could settle the dispute in person and provided WHITESIDE with the address of the Metro Motel.
During the course of that evening, WHITESIDE traveled from New England to the Metro Motel. When he arrived, WHITESIDE went to the motel room where the Victim was staying and attacked and stabbed the Victim with a knife, killing him.
WHITESIDE, 30, of Dorchester, Massachusetts, is charged with one count of traveling interstate to commit murder to further his prostitution business. He faces a maximum sentence of life in prison.
Mr. Bharara praised the investigative work of the FBI and NYPD, and stated that the investigation is ongoing.
This case is being prosecuted by the Office’s Violent Crimes Unit. Assistant United States Attorney Kan M. Nawaday is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Samuel Whiteside Complaint
Manhattan, Brooklyn, and Miami U.S. Attorneys Announce Extradition of Colombian Narcotics KingpinRead the Press Release
Preet Bharara, Loretta E. Lynch, and Wifredo A. Ferrer – the United States Attorneys for the Southern District of New York (“SDNY”), Eastern District of New York (“EDNY”), and Southern District of Florida (“SDFL”), respectively – Michele M. Leonhart, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), James Dinkins, the Executive Assistant Director of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the extradition of DANIEL BARRERA BARRERA, also known as “Loco,” a citizen of Colombia, to the U.S. on charges that for decades he manufactured hundreds of tons of cocaine annually in Colombia and trafficked it to various parts of the world, including the U.S., and laundered tens of millions of dollars in proceeds from that narcotics trafficking activity. BARRERA arrived in the Southern District of New York this afternoon. He will be presented and arraigned in the Southern District of New York before U.S. District Judge Alvin K. Hellerstein on July 10, 2013, at 11:00 a.m., and in the Eastern District of New York before U.S. District Judge I. Leo Glasser on July 11, 2013, at 3:30 p.m. Following his prosecution in New York, BARRERA will be presented and arraigned in the Southern District of Florida.
In March 2010, the U.S. Department of the Treasury’s Office of Foreign Assets Control designated BARRERA as a “Special Designated Narcotics Trafficker,” pursuant to the Foreign Narcotics Kingpin Designation Act. BARRERA was arrested in Venezuela on September 18, 2012. Thereafter, he was sent to Colombia, from where the U.S. sought BARRERA’s extradition. The extradition of BARRERA is the result of an ongoing Organized Crime Drug Enforcement Task Forces (OCDETF) investigation led by DEA and HSI. The principal mission of the OCDETF program is to identify, disrupt and dismantle the most serious drug trafficking, weapons trafficking and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply.
U.S. Attorney Preet Bharara said: “For more than a decade, as alleged, Daniel Barrera Barrera has operated at the center of a truly evil web spun between his narcotics trafficking organization and two violent and sworn enemy terrorist organizations – the AUC and the FARC. By purchasing raw cocaine paste from the FARC, which he processed in laboratories in areas controlled by the AUC, to whom he paid fees, Barrera’s behemoth cocaine organization reached an annual production rate of upwards of 400 tons, enriching itself and the two terrorist organizations it paid off, as the indictment describes. This was truly cocaine with blood in its background. With his arrival in the U.S., Barrera must now answer for his alleged crimes, and we will continue to work with our law enforcement partners, both here and abroad, to prosecute him and other alleged titans of the transnational drug trade.”
U.S. Attorney Loretta E. Lynch said: “As alleged in the three indictments on which he was extradited, Daniel “Loco” Barrera Barrera was the kingpin of a stunningly prolific Colombian drug cartel, which flooded the globe with its deadly product. Barrera also allegedly wrought destruction closer to home, working with not one but two terrorist organizations responsible for decades of death and destruction in Colombia, all to ensure his deadly business ran smoothly. His extradition to the United States marks the fall of the last don of an organization marked by its worldwide reach, ruthless criminality, and staggering profits. This investigation exemplifies the global cooperation necessary to combat international drug traffickers and our commitment to dismantle these criminal organizations from the highest levels down.”
U.S. Attorney Wifredo A. Ferrer said: “Daniel “Loco” Barrera Barrera’s arrest and extradition is the direct result of strong international cooperation with Colombian authorities. It also reflects the hard work and perseverance of our law enforcement partners – both at home and abroad – whose dedicated efforts led to the capture of one of the world’s most notorious drug traffickers. While Barrera evaded capture for several years, the time has finally come for him to answer for his crimes and face justice. As this case confirms, the United States will never tire in its pursuit of those who profit from the illegal drug trade.”
DEA Administrator Michele M. Leonhart said: “Daniel Barrera allegedly worked with both the FARC and AUC terrorist organizations in operating his drug trafficking syndicate, becoming one of the most prolific drug traffickers of the past twenty years. Charged with manufacturing upwards of 400 tons of cocaine a year, Barrera’s alleged impact on the global trade of cocaine was immense – but so was DEA’s response. Thanks to the cooperative efforts of our Colombian and U.S. law enforcement counterparts, Barrera’s criminal career is over as he now faces charges that may bring him a life behind bars.”
ICE HSI Executive Assistant Director James Dinkins said: “Mr. Barrera and his co-conspirators stand accused of running one of the largest cocaine trafficking operations in history. His extradition to the United States represents a major victory for the rule of law. While Mr. Barrera may have thought he was safe hiding and conducting his illicit activities in South American countries, an international team of law enforcement agencies worked tirelessly and cooperatively towards bringing him to justice.”
NYPD Commissioner Raymond W. Kelly said: “If any one case epitomizes the nexus between terrorism and drug trafficking and the destructive impact on Colombian society, this is it; not to mention the crime and suffering cocaine addiction has fueled on the demand-side of the equation in the streets of New York. Barrera’s extradition is a milestone, and we’re indebted to the detectives, agents, and prosecutors who’ve made it possible.”
As alleged in the Superseding Indictment filed in the Southern District of New York (S1 07 Cr. 862 (AKH)), the Superseding Indictment filed in the Eastern District of New York (S2 10 Cr. 288 (ILG)), the Superseding Indictment filed in the Southern District of Florida (S1 10 Cr. 20587 (DLG)), other documents filed in these cases, and information in the public record:
Since 1998, BARRERA has run a cocaine manufacturing and trafficking syndicate which each month processed approximately 30,000 kilograms of raw cocaine base into about the same amount of cocaine powder – in total, up to approximately 400 tons of cocaine annually.
BARRERA purchased the raw cocaine base or paste from the designated terrorist group Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, or the “FARC”), which has been the world’s largest supplier of cocaine and which has engaged in bombings, massacres, kidnappings, and other acts of violence within Colombia.
BARRERA converted the raw cocaine into powder at laboratories he owned and operated in an area of Colombia controlled by the since demobilized terrorist group, Autodefensas Unidas de Colombia (the “AUC”). For years, the AUC’s main political objective was to defeat the FARC in armed conflict, and it financed its terrorist activities through the proceeds of cocaine trafficking in AUC-controlled regions of Colombia.
Although BARRERA purchased raw materials for cocaine production from the FARC, he was able to maintain his network of cocaine-processing laboratories in AUC-controlled territory, in part by paying monthly “taxes” to the AUC. The fees BARRERA paid to the AUC also allowed him to safely move the processed cocaine through and out of Colombia, into locations on four continents – including into the U.S.
BARRERA reaped tens of millions of dollars of profits from cocaine trafficking, which he laundered through illicit means.
The FARC and the AUC are both designated by the U.S. Department of State as Foreign Terrorist Organizations.
BARRERA, 44, is charged in the Southern District of New York with one count of conspiring to distribute and manufacture cocaine knowing it would be unlawfully imported into the U.S. On that count, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.
BARRERA is charged in the Eastern District of New York with one count of conspiracy to launder money. On that count, BARRERA faces a maximum sentence of 20 years in prison.
BARRERA is charged in the Southern District of Florida with one count of conspiring to import cocaine into the U.S. and one count of conspiring to manufacture and distribute cocaine knowing that it would be unlawfully imported into the U.S. On those counts, BARRERA faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.
Mr. Bharara, Ms. Lynch, and Mr. Ferrer praised the outstanding work of the OCDETF, working in cooperation with HSI New York’s El Dorado Task Force, the DEA’s Bogota Country Office, the DEA’s Caracas Country Office, the DEA’s Miami Field Division, the DEA’s New York Drug Enforcement Task Force – which is comprised of agents and officers of the DEA, the New York City Police Department, and the New York State Police – as well as HSI Bogota. Mr. Bharara, Ms. Lynch, and Mr. Ferrer also thanked the Colombian National Police, the U.S. Marshals Service, and the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance.
The Southern District of New York case is being handled by that office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Jenna Dabbs, Benjamin Naftalis, and Andrea Surratt are in charge of the prosecution. The Eastern District of New York case is being handled by that office’s International Narcotics Strike Force. Assistant United States Attorneys Justin Lerer, Soumya Dayananda, and Amir Toossi are in charge of the prosecution. The Southern District of Florida case is being handled by that office’s Narcotics Unit. Assistant United States Attorney Adam Fels is in charge of the prosecution.
The charges and allegations contained in the Indictments are merely accusations and the defendant is presumed innocent unless and until proven guilty.
US v. Daniel Barrera Barrera SDNY Indictment
US v. Daniel Barrera Barrera, et al EDNY Indictment
US v. Daniel Barrera Barrera, et al SDFL IndictmentOwner of New York City Parking Lots Pleads Guilty to Failing to Pay Payroll Taxes to the IRSRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that TREVOR WHITTINGHAM, an owner of parking lots in Manhattan, pled guilty in Manhattan federal court to failing to pay payroll taxes to the Internal Revenue Service (“IRS”). WHITTINGHAM was arrested in January 2013 and pled guilty today before U.S. District Judge Richard J. Sullivan.
According to the Indictment and statements made in open court today at the plea proceeding:
WHITTINGHAM owned and controlled two companies, EZ Going Park Here and We Have Cars II, through which he operated parking lots in Harlem and other parts of upper Manhattan, New York. He was responsible for collecting, accounting for, and paying payroll taxes on behalf of both of these companies. From December 2006 through June 2009, WHITTINGHAM caused EZ Going Park Here and We Have Cars II to deduct and collect payroll taxes from its employees. The majority of those payroll taxes, however, were not paid over to the IRS as required. Instead, WHITTINGHAM used the corporate funds of EZ Going Park Here and We Have Cars II to pay for various personal items and otherwise finance a lavish lifestyle. As a result, from 2005 through 2009, EZ Going Park Here and We Have Cars II accumulated approximately $251,265 in unpaid payroll tax liabilities.
WHITTINGHAM, 63, of Fort Lee, New Jersey, pled guilty to one count of willfully failing to pay over payroll taxes to the IRS. He faces a maximum sentence of five years in prison. He will be sentenced by Judge Sullivan on November 15, 2013 at 10:30 a.m. WHITTINGHAM also agreed to make restitution to the IRS in the amount of $251,265.
Mr. Bharara praised the IRS, Criminal Investigation for its outstanding work in the investigation. He also thanked the U.S. Department of Justice’s Tax Division for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Special Assistant U.S. Attorney Andrew Young is in charge of the prosecution.
Twenty-Fifth Defendant Pleads Guilty in Manhattan Federal Court in Connection with Lirr Disability Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Martin J. Dickman, Inspector General of the Railroad Retirement Board (“RRB-OIG”), George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Barry L. Kluger, Inspector General of the New York State Metropolitan Transportation Authority (“MTA-OIG”), announced that ROBERT ELLENSOHN, a former bridges and buildings inspector for the Long Island Railroad (“LIRR”), pled guilty today for his role in the allegedly massive fraud scheme in which LIRR workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. ELLENSOHN pled guilty in Manhattan federal court before U.S. District Judge Sidney H. Stein. He is the 33rd defendant to be charged, and the 25th defendant to plead guilty in the case, which alleges a pervasive pattern of fraudulent disability claims being filed with the U.S. Railroad Retirement Board (“RRB”) by retiring LIRR employees.
According to the Information filed today and statements made in other public filings and in court:
The LIRR Disability Fraud Scheme
The RRB is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50 – the age of eligibility has since changed to 55 – if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. In addition, at full retirement age (between age 60 and age 65 depending on years of service), they are eligible to receive an RRB retirement pension. For LIRR workers who retired at 50 with only an LIRR pension, they would receive less than their prior salary and substantially lower pension payments than those to which they would be entitled at full retirement age. However, LIRR employees who retired and claimed disability could receive a disability payment from the RRB on top of their LIRR pension, regardless of age. A retiree’s LIRR pension, in combination with RRB disability payments, can be roughly equivalent to the base salary earned during his or her career.
Hundreds of LIRR employees have allegedly exploited the overlap between the LIRR pension and the RRB disability program by pre-planning the date on which they would falsely declare themselves disabled so that it would coincide with their projected retirement date. These false statements, made under penalty of prosecution in disability applications, allowed LIRR employees to retire as early as age 50 with an LIRR pension, supplemented by the fraudulently obtained RRB disability annuity. From 1995 through 2011, more than 75% of LIRR employees stopped working and began receiving RRB disability benefits, whereas during this same period, only 25% of retiring Metro-North employees stopped working and began receiving RRB disability benefits. During the period 2004 through 2008, only three doctors were responsible for approximately 86% of the disability claims submitted by LIRR retirees. Of these, one has died and one, Dr. Peter J. Ajemian, pled guilty and admitted that he declared “large numbers of Long Island Railroad employees” to be disabled even though they were not disabled and could have continued working in their railroad jobs. Dr. Ajemian was sentenced in May 2013 to eight years in prison.
ELLENSOHN, 59, of North Merrick, New York, pled guilty to one count of conspiracy to commit mail fraud, wire fraud, and health care fraud; one count of conspiracy to defraud the United States and the RRB; and one count of wire fraud. He faces a maximum sentence of 45 years in prison. ELLENSOHN is scheduled to be sentenced by Judge Stein on January 8, 2014.
Thirty-three people have been charged in connection with the LIRR disability fraud scheme, 25 of whom have now pled guilty. Of the 25 defendants that have pled guilty, two have been sentenced. The charges against the remaining defendants are merely allegations, and they are all presumed innocent unless and until proven guilty.
Mr. Bharara praised the work of the RRB-OIG, the FBI, and the MTA-OIG for their outstanding work in the investigation, which he noted is ongoing. He also acknowledged the previous investigation conducted by the New York State Attorney General’s Office into these pension fraud issues.
The case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.
Twenty-Fifth Defendant Pleads Guilty in Manhattan Federal Court in Connection with LIRR Disability Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Martin J. Dickman, Inspector General of the Railroad Retirement Board (“RRB-OIG”), George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Barry L. Kluger, Inspector General of the New York State Metropolitan Transportation Authority (“MTA-OIG”), announced that ROBERT ELLENSOHN, a former bridges and buildings inspector for the Long Island Railroad (“LIRR”), pled guilty today for his role in the allegedly massive fraud scheme in which LIRR workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. ELLENSOHN pled guilty in Manhattan federal court before U.S. District Judge Sidney H. Stein. He is the 33rd defendant to be charged, and the 25th defendant to plead guilty in the case, which alleges a pervasive pattern of fraudulent disability claims being filed with the U.S. Railroad Retirement Board (“RRB”) by retiring LIRR employees.
According to the Information filed today and statements made in other public filings and in court:
The LIRR Disability Fraud Scheme
The RRB is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50 – the age of eligibility has since changed to 55 – if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. In addition, at full retirement age (between age 60 and age 65 depending on years of service), they are eligible to receive an RRB retirement pension. For LIRR workers who retired at 50 with only an LIRR pension, they would receive less than their prior salary and substantially lower pension payments than those to which they would be entitled at full retirement age. However, LIRR employees who retired and claimed disability could receive a disability payment from the RRB on top of their LIRR pension, regardless of age. A retiree’s LIRR pension, in combination with RRB disability payments, can be roughly equivalent to the base salary earned during his or her career.
Hundreds of LIRR employees have allegedly exploited the overlap between the LIRR pension and the RRB disability program by pre-planning the date on which they would falsely declare themselves disabled so that it would coincide with their projected retirement date. These false statements, made under penalty of prosecution in disability applications, allowed LIRR employees to retire as early as age 50 with an LIRR pension, supplemented by the fraudulently obtained RRB disability annuity. From 1995 through 2011, more than 75% of LIRR employees stopped working and began receiving RRB disability benefits, whereas during this same period, only 25% of retiring Metro-North employees stopped working and began receiving RRB disability benefits. During the period 2004 through 2008, only three doctors were responsible for approximately 86% of the disability claims submitted by LIRR retirees. Of these, one has died and one, Dr. Peter J. Ajemian, pled guilty and admitted that he declared “large numbers of Long Island Railroad employees” to be disabled even though they were not disabled and could have continued working in their railroad jobs. Dr. Ajemian was sentenced in May 2013 to eight years in prison.
ELLENSOHN, 59, of North Merrick, New York, pled guilty to one count of conspiracy to commit mail fraud, wire fraud, and health care fraud; one count of conspiracy to defraud the United States and the RRB; and one count of wire fraud. He faces a maximum sentence of 45 years in prison. ELLENSOHN is scheduled to be sentenced by Judge Stein on January 8, 2014.
Thirty-three people have been charged in connection with the LIRR disability fraud scheme, 25 of whom have now pled guilty. Of the 25 defendants that have pled guilty, two have been sentenced. The charges against the remaining defendants are merely allegations, and they are all presumed innocent unless and until proven guilty.
Mr. Bharara praised the work of the RRB-OIG, the FBI, and the MTA-OIG for their outstanding work in the investigation, which he noted is ongoing. He also acknowledged the previous investigation conducted by the New York State Attorney General’s Office into these pension fraud issues.
The case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.
U.S. v. Robert Ellensohn Information
Large-Scale, Miami-Based Marijuana Trafficker Convicted in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that DANIEL FERNANDEZ, 35, was found guilty yesterday in Manhattan federal court of marijuana trafficking. FERNANDEZ was convicted following a two-and-a-half-week jury trial before U.S. District Judge Laura Taylor Swain.
Manhattan U.S. Attorney Preet Bharara said: “As a member of a sophisticated network of drug traffickers, Daniel Fernandez profited handsomely from many years of distributing truckloads of marijuana to the New York City area. He now stands convicted, along with more than 50 other defendants whose massive drug dealing network was stopped as a result of a successful, multi-agency law enforcement effort.”
According to the charging documents in this case and evidence presented at trial:
On August 21, 2012, this Office announced the unsealing of a 40-count Racketeering Influenced Corrupt Organizations Indictment (the “RICO Indictment”) charging nine individuals with participating in a massive racketeering organization led by Manuel Geovanny Rodriguez-Perez (the “Rodriguez Enterprise”) whose members allegedly sold massive quantities of marijuana; engaged in murders and other violent acts; transported and laundered millions of dollars; obstructed justice and committed perjury; and engaged in firearms offenses.
FERNANDEZ, a Miami-based marijuana broker, was one of Rodriguez-Perez’s principal suppliers of marijuana. From at least 2007 through October 2010, he directly supplied Rodriguez-Perez with over a ton of marijuana, which was funneled into Washington Heights, New York for distribution throughout the New York City area.
FERNANDEZ was convicted of one count of conspiracy to distribute 1,000 kilograms and more of marijuana, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life. The charges against him arose out of a multi-year investigation titled “Operation Green Venom,” a coordinated multi-agency investigation that was led by Immigration and Customs Enforcement’s Homeland Security Investigations (“ICE HSI”) and first announced in October 2010. With his conviction, a total of more than 50 defendants have been convicted in United States v. Manuel Geovanny Rodriguez-Perez, et al., 10 Cr. 905 (LTS), and related cases. Those defendants include former Rock-a-fella music founder Kareem Burke, a/k/a “Biggs,” who received a sentence of 60 months in prison, and High Times Magazine editor Matthew Woodstock Stang, a/k/a “Magazine Guy,” who has not yet been sentenced. Trial of the defendants charged in the RICO Indictment is scheduled for March 2014. The charges against these remaining defendants are merely accusations, and they are presumed innocent unless and until proven guilty.
Mr. Bharara praised the outstanding investigative work of ICE HSI and the New York City Police Department. He also thanked U.S. Customs and Border Protection; the U.S. Drug Enforcement Administration; the U.S. Marshals Service; the Bergen County, New Jersey Prosecutor’s Office; the Englewood, New Jersey, Police Department; the U.S. Department of Housing and Urban Development; and the City of New York Department of Investigation for their assistance. Mr. Bharara added that the investigation is continuing.
The prosecution of the cases arising from “Operation Green Venom” is being overseen by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Amie N. Ely, Sarah E. McCallum, Jessica Ortiz, and Sarah Paul are in charge of the prosecution. Assistant U.S. Attorney Michael D. Lockard is responsible for the forfeiture proceedings.
Doctor Sentenced in White Plains Federal Court to over 3 Years in Prison for Distributing OxycodoneRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that FELIX RODRIGUEZ, a licensed physician in Manhattan, was sentenced to a term of 37 months’ imprisonment by U.S. District Judge Kenneth M. Karas in White Plains federal court for distributing Oxycodone, a Schedule II controlled substance.
Manhattan U.S. Attorney Preet Bharara stated: “The abuse of diverted prescription pain medication is the fastest growing drug problem in our country, now killing more people than illegal street drugs like heroin and cocaine combined. We cannot tolerate the fueling of this epidemic by crooked doctors who flout their oath to care for, not harm, their patients. The sentence imposed today sends a strong message to those doctors engaged in the criminal distribution of pain killers that they too, like dealers of illegal street drugs, will feel full force of the law. We will continue to work with federal, state, and local law enforcement organizations to eradicate this nationwide problem harming so many in our communities.”
According to documents filed in White Plains federal court in this case:
From May 2010 through February 2011, RODRIGUEZ, who was a licensed physician, working out of a medical office in Manhattan, provided Oxycodone prescriptions made out in the names of various other individuals, including individuals who RODRIGUEZ never met or examined to an individual who then used these prescriptions to obtain the drugs for illegal distribution. When RODRIGUEZ wrote these prescriptions, he knew that by doing so he was violating generally accepted medical practice. Oxycodone is a powerful painkiller with a high potential for addiction and abuse.
In addition to the term of imprisonment imposed, RODRIGUEZ, 52, of the Bronx, New York, was sentenced to three years of supervised release.
Mr. Bharara praised the investigative efforts of the U.S. Drug Enforcement Administration, the Westchester County District Attorney’s Office, the Westchester County Department of Public Safety, the U.S. Marshals Service, the New York State Police, the Yonkers Police Department, and the Mount Vernon Police Department.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey Alberts and Abigail S. Kurland are in charge of the prosecution.
Doctor Sentenced in White Plains Federal Court to over 3 Years in Prison for Distributing OxycodoneRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that FELIX RODRIGUEZ, a licensed physician in Manhattan, was sentenced to a term of 37 months’ imprisonment by U.S. District Judge Kenneth M. Karas in White Plains federal court for distributing Oxycodone, a Schedule II controlled substance.
Manhattan U.S. Attorney Preet Bharara stated: “The abuse of diverted prescription pain medication is the fastest growing drug problem in our country, now killing more people than illegal street drugs like heroin and cocaine combined. We cannot tolerate the fueling of this epidemic by crooked doctors who flout their oath to care for, not harm, their patients. The sentence imposed today sends a strong message to those doctors engaged in the criminal distribution of pain killers that they too, like dealers of illegal street drugs, will feel full force of the law. We will continue to work with federal, state, and local law enforcement organizations to eradicate this nationwide problem harming so many in our communities.”
According to documents filed in White Plains federal court in this case:
From May 2010 through February 2011, RODRIGUEZ, who was a licensed physician, working out of a medical office in Manhattan, provided Oxycodone prescriptions made out in the names of various other individuals, including individuals who RODRIGUEZ never met or examined to an individual who then used these prescriptions to obtain the drugs for illegal distribution. When RODRIGUEZ wrote these prescriptions, he knew that by doing so he was violating generally accepted medical practice. Oxycodone is a powerful painkiller with a high potential for addiction and abuse.
In addition to the term of imprisonment imposed, RODRIGUEZ, 52, of the Bronx, New York, was sentenced to three years of supervised release.
Mr. Bharara praised the investigative efforts of the U.S. Drug Enforcement Administration, the Westchester County District Attorney’s Office, the Westchester County Department of Public Safety, the U.S. Marshals Service, the New York State Police, the Yonkers Police Department, and the Mount Vernon Police Department.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey Alberts and Abigail S. Kurland are in charge of the prosecution.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Arrest of Former Vice President of High-End Jewelry Company for Stealing over $1 Million of JewelryRead 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”), today announced the arrest of INGRID LEDERHAAS-OKUN, a former Vice President of Product Development at a high-end jewelry company, for stealing over $1.3 million worth of jewelry from her former employer. LEDERHAAS-OKUN was arrested this morning at her residence in Darien, Connecticut, and will be presented in Manhattan federal court later today before U.S. Magistrate Judge James C. Francis.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Ingrid Lederhaas-Okun went from a Vice President at a high-end jewelry company to jewel thief. She abused her access to valuable jewelry in order to steal and then resell over one million dollars’ worth of items that she falsely represented as her own, as the complaint describes. Her arrest shows that no matter how privileged their position in a company, employees who steal will face the full consequences of the law.”
FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Ingrid Lederhaas-Okun took advantage of the access her employment afforded her to expensive jewelry. She allegedly stole numerous items, sold them for over a million dollars, then engaged in a series of lies in an attempt to cover up the theft. A privileged position in a prestigious company does not insulate a thief from arrest and prosecution.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:
From at least January 2011 until February 2013, LEDERHAAS-OKUN worked as a Vice President of Product Development at the midtown Manhattan headquarters of one of the world’s premier high-end jewelers (the “Jewelry Company”). Her duties and responsibilities included ensuring that product designs could be manufactured and, to that end, she had authority to check out jewelry belonging to the Jewelry Company for work-related reasons, such as to provide the jewelry to potential manufacturers to determine the cost of production.
Between November 2012 and February 2013, LEDERHAAS-OKUN abused her position and authority at the Jewelry Company to check out over 165 pieces of jewelry with a retail value of over $1.2 million, including numerous diamond bracelets, platinum or gold diamond drop and hoop earrings, platinum diamond rings, and platinum and diamond pendants. She then sold some if not all of this jewelry for $1.3 million to another company, a leading international buyer and reseller of jewelry with an office in midtown Manhattan (the “Jewelry Reseller”). The Jewelry Reseller paid for the merchandise that LEDERHAAS-OKUN had stolen either by paying her or her husband, in transactions arranged either by LEDERHAAS-OKUN or a friend working on her behalf.
In addition to this jewelry, in November 2012, following an announcement by the Jewelry Company that it was going to undertake a full physical inventory review, LEDERHAAS-OKUN also reported that approximately $1.5 million worth of jewelry which she had checked out would have to be written off. However, none of that jewelry was ever returned to the Jewelry Company, contrary to the usual practice of accounting for inventory, such as damaged jewelry, that would have to be written off because it had been rendered unusable in some way.
To conceal her theft, LEDERHAAS-OKUN made repeated false statements to the Jewelry Company. For example, after her termination in February 2013, she told the Jewelry Company that she had only recently checked out the missing jewelry in anticipation of creating a PowerPoint presentation for her supervisor, and that a draft of the presentation could be found on her office computer. However, the missing pieces of jewelry had been checked out months earlier, her supervisor was unaware of any such presentation being worked on by LEDERHAAS-OKUN, and there was no draft presentation on her computer. In addition, LEDERHAAS-OKUN claimed the jewelry in question could be found in a white envelope in her office, but a search of her office shortly after her departure did not yield any white envelope.
LEDERHAAS-OKUN, 46, of Darien, Connecticut, is charged with one count of wire fraud, which carries a maximum penalty of 20 years in prison, and one count of interstate transportation of stolen property, which carries a maximum penalty of 10 years in prison.
Mr. Bharara praised the investigative work of the FBI. Mr. Bharara also noted the investigation is ongoing.
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.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Lederhaas-Okun, Ingrid Complaint
Chief Executive Officer and President of Investment Fund Plead Guilty in Manhattan Federal Court to Orchestrating Nearly $10 Million Dollar Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ABDUL WALJI and RENIERO FRANCISCO, the Chief Executive Officer and President, respectively, of Arista LLC (“Arista”), a California investment fund, pled guilty today in Manhattan federal court to defrauding and misappropriating nearly $10 million from more than 35 investors by misrepresenting the nature and performance of the fund, and issuing fraudulent account statements to investors to cover up massive losses. WALJI also pled guilty to perpetrating a multi-million dollar fraudulent scheme with pension plan funds that he managed through three California-based trusts: Allied Benefits, Inc., Allied Benefits Trust, and Stone Lamm Trust (collectively, the “Trusts”). Both defendants were charged in December 2012, and pled guilty today before U.S. District Judge Denise Cote.
Manhattan U.S. Attorney Preet Bharara said: “Abdul Walji and Reniero Francisco told one lie after another in order to squeeze millions of dollars out of their investors, even as they misappropriated nearly $10 million, including at least $2.7 million solely for their own personal benefit. Walji even went a step further and orchestrated a second scheme that ultimately cost his victims another approximately $9.5 million. With today’s guilty pleas, they will begin to be held responsible for their actions and repay those wronged by their unlawful conduct.”
According to the three-count Superseding Information to which WALJI pled guilty, the Indictment to which FRANCISCO pled guilty, the defendants’ plea agreements and other documents in the public record:
The Arista Fraudulent Scheme
Arista began operations as an investment firm in February 2010, with its principal place of business in Newport Coast, California. In April 2011, Arista became a registered commodity pool operator (“CPO”) with the United States Commodity Futures Trading Commission (“CFTC”), and a National Futures Association (“NFA”) member.
In early 2010, WALJI and FRANCISCO began to solicit individuals to invest in Arista. From 2010 through 2011, the defendants carried out their fraudulent scheme through three methods. First, WALJI and FRANCISCO misrepresented to several Arista investors the nature of the company’s investments and the returns that investors would receive from investing in Arista. For example, WALJI and FRANCISCO falsely told investors that their money would be invested in safe, risk-free securities, when in fact much of the money was invested in options and futures. Second, WALJI and FRANCISCO sent fraudulent account performance statements to Arista investors that misrepresented the value of their investments. In an effort to secure additional contributions, the defendants also concealed Arista’s trading losses, and told investors that they were profiting from their investments when they were actually losing money. Finally, WALJI and FRANCISCO misappropriated at least $2.7 million from Arista’s investors through fees to which they were not entitled, and which WALJI and FRANCISCO diverted for their own personal benefit. Based on their false representations, WALJI and FRANCISCO collected nearly $10 million from over 35 investors, and they ultimately misappropriated a large portion of the money.
Walji’s Pension Plan Fraudulent Scheme
From early 2008 through June 2013, WALJI also perpetrated a separate fraudulent scheme using pension plan funds that he administered. Similar to the scheme set forth above, WALJI executed his fraudulent scheme through three principal methods. First, WALJI made oral misrepresentations to existing and potential clients of the Trusts concerning: (i) the nature of the Trusts’ pension plan investments; (ii) the investment value and past performance of the pension plans; and (iii) the source of funds distributed to plan participants who had reached retirement and/or who had requested distributions. Second, WALJI distributed fraudulent statements to clients concerning the value of their accounts and the prior performance of their pension plans in order to forestall redemption requests, induce new clients to contribute to the plans, and induce existing clients to make additional contributions. As selected clients reached retirement age or requested disbursements, WALJI sent those clients money that he represented to be proceeds of their individual pensions, when in fact he knew that the purported disbursements were often funds contributed by other clients. Third, WALJI misappropriated approximately $300,000 of client funds for his personal use. In total, this scheme caused losses to approximately 35 additional victims in an aggregate amount of approximately $9.5 million.
WALJI, 60, of San Juan Capistrano, California, pled guilty to one count of conspiracy to commit securities fraud and wire fraud, one count of commodities fraud, and one count of securities fraud. The securities fraud charge carries a maximum sentence of 20 years in prison; the commodities fraud charge carries a maximum sentencing of 10 years in prison; and the conspiracy charge carries a maximum sentence of five years in prison. FRANCISCO, 57, of Newport Coast, California, pled guilty to one count of conspiracy to commit securities fraud and wire fraud and one count of securities fraud.
In connection with their guilty pleas, WALJI consented to forfeit $13.6 million and FRANCISCO consented to forfeit $4.1 million. The defendants also agreed to forfeit the proceeds of several bank and trading accounts.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and also thanked the U.S. Commodities Futures Trading Commission for its assistance.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys David I. Miller and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture related to the prosecution.
U.S. v. Abdul Walji S1 Information
US v. Abdul Walji & Reniero Francisco IndictmentYonkers Gang Leader Convicted in Federal Court of Racketeering Charges, Murder, Conspiracy to Murder, Attempted Murder, Narcotics, and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN KNOWLES, 25, was convicted today in White Plains of various racketeering charges, murder, conspiracy to murder, attempted murder, narcotics conspiracy, and firearms offenses following a four-week jury trial before the U.S. District Judge Kenneth M Karas. The jury convicted KNOWLES of charges arising out of his involvement, from 2000 through 2013, in the criminal activities of the Elm Street Wolves gang (the “Wolves”) – a violent street gang that was involved in drug-trafficking and multiple acts of violence, including murder and attempted murder, in Yonkers, New York.
Manhattan U.S. Attorney Preet Bharara said: “It was four years ago almost to the day, July 4, 2009, that Steven Knowles shot down rival gang member Christopher Cokley, killing him in cold blood. With today’s verdict, Knowles is now held accountable for not only Cokley’s murder, but for the years of violence and drug dealing committed by Knowles on the streets of Yonkers. This conviction is a continuation of the long-standing commitment by federal, state, and local law enforcement authorities to rid Yonkers and other communities in the Southern District of New York of violent drug gangs. Law enforcement has pledged itself to this cause for several years now and has not stood down.”
According to the Superseding Indictment and evidence admitted at trial:
From 2000 through 2013, KNOWLES was a member, and then leader, of a racketeering enterprise – the Elm Street Wolves. As part of his participation in that enterprise, KNOWLES conspired to murder a member of a rival gang, the Strip Boyz, which culminated in the violent murder by KNOWLES and others of Christopher Cokley on July 4, 2009. On October 14, 2007, KNOWLES also participated in an attempted murder of Tremaine Garrison, a/k/a “Triggermain,” also a member of the Strip Boyz. Further, KNOWLES participated in a more than decade-long conspiracy to distribute kilograms of crack cocaine within a several block radius of Elm Street and Oak Street in Southwest Yonkers, New York. The evidence at trial also showed that KNOWLES and other members of the Wolves possessed, brandished, and discharged a number of firearms in connection with their drug trafficking and racketeering activities with the Elm Street Wolves gang.
KNOWLES was convicted of one count of racketeering, one count of racketeering conspiracy, one count of conspiracy to murder in aid of racketeering, one count of murder in aid of racketeering, one count of conspiracy to distribute or possess with intent to distribute 280 grams and more of crack cocaine, two counts of discharging a firearm in furtherance of a crime of violence or a drug-trafficking crime, and one count of discharging a firearm in connection with the murder of Christopher Cokley on July 4, 2009. He was acquitted of one count of conspiracy to commit murder, one count of attempted murder, and one count of possession, use, and carrying a firearm in furtherance of a crime of violence, all stemming from shooting another member of the Strip Boyz. KNOWLES faces a mandatory sentence of life in prison, plus 35 years. KNOWLES is scheduled to be sentenced on May 29, 2014, at 10:00 a.m. before Judge Karas.
Mr. BHARARA praised the outstanding investigative work of the FBI and the Yonkers Police Department. He also thanked the Westchester County Department of Public Safety and the Westchester County District Attorney’s Office for their assistance in the case. He added that the investigation is continuing.
This case is being handled by the Office’s White Plains Division and Violent Crimes Unit. Assistant United States Attorneys Andrew Bauer and Jessica Ortiz are in charge of the prosecution.
Former Technology Company Insiders Sentenced in Manhattan Federal Court for Insider TradingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARK ANTHONY LONGORIA, a former employee of Advanced Micro Devices (“AMD”) and a consultant for the expert networking firm Primary Global Research (“PGR”), and WALTER SHIMOON, a former employee of Flextronics International, Ltd. (“Flextronics”) and also a consultant for PGR, were each sentenced today to time served plus two years of supervised release for their participation in insider trading schemes during which they provided material, nonpublic information (“Inside Information”) obtained from their employers to certain PGR clients who were money managers. In addition, SHIMOON also provided Inside Information to John Kinnucan, who operated a research firm and then provided the information to certain money managers.
LONGORIA pled guilty pursuant to a cooperation agreement in June 2011 to one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, one count of securities fraud, and one count of false statements. SHIMOON pled guilty pursuant to a cooperation agreement in July 2011 to two counts of conspiracy to commit securities and wire fraud and one count of securities fraud. LONGORIA and SHIMOON were sentenced today in Manhattan federal court by U.S. District Judge Jed S. Rakoff.
According to the Informations and statements made during the defendants’ plea proceedings and sentencings:
From 2007 and 2010, LONGORIA worked as a supply chain manager at AMD, a company that produced microprocessor chips. While employed at AMD, LONGORIA engaged in consultation calls with PGR employees and clients. For two quarters in 2009, he provided top line revenue and gross margin information for AMD during some of these calls. Throughout the period, he also routinely provided average sales prices and product sales figures for all of the company’s product lines. For example, between July 2008 and November 2009, LONGORIA provided AMD Inside Information to a hedge fund located in New York, New York (the “New York Hedge Fund”), that executed securities transactions, based in whole or in part, on LONGORIA’s information. The New York Hedge Fund earned approximately $2 million in profits using LONGORIA’s information. In 2006, in connection with a separate but related scheme, LONGORIA also provided confidential business information concerning the business of Western Digital to PGR employees and its clients in his capacity as a PGR consultant.
From 2008 to 2010, SHIMOON worked as a Director of Business Development at Flextronics, a technology company that designed, engineered and manufactured electronics products. During that time, SHIMOON obtained confidential information, including Inside Information, concerning Flextronics; customers of Flextronics, including Apple, Inc. (“Apple”); and suppliers of Flextronics, including OmniVision Technologies, Inc. (“OVTI”). SHIMOON then provided this information to employees and clients of PGR and to Kinnucan. For example, SHIMOON provided Inside Information concerning OVTI’s revenues to an employee of a hedge fund located in White Plains, New York. The hedge fund subsequently executed securities transactions in OVTI and earned profits of over $750,000. On another occasion, SHIMOON disclosed to Kinnucan, and, separately, to a cooperating witness who claimed to represent a PGR client, that Apple would be launching a new iPhone in 2010 that would contain two cameras. The cameras would give iPhone users the ability to videoconference, which was a significant enhancement over prior generations of the iPhone. SHIMOON knew that disclosure of this and other information violated fiduciary duties he owed to Flextronics, and/or violated non-disclosure agreements executed between Flextronics and Apple. PGR paid SHIMOON approximately $18,000 for the consultation services he provided to PGR clients from mid-2008 to 2010, and Kinnucan paid SHIMOON approximately $27,500 for providing confidential information, including Inside Information.
In addition to the terms of supervised release imposed, LONGORIA, 46, of Round Rock, Texas, was sentenced to forfeiture of $170,000, and a $400 special assessment. SHIMOON, 41, of San Diego, California, was also sentenced to forfeiture of $45,500, and a $300 special assessment.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. 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.
The cases are being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps and Katherine Goldstein are in charge of the prosecutions.
Former Governor of Mexican State Sentenced in Manhattan Federal Court to 131 Months in Prison for Money Laundering in Connection with Narcotics BribesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARIO VILLANUEVA MADRID, the former governor of the Mexican state of Quintana Roo, was sentenced today in Manhattan federal court. VILLANUEVA MADRID received a sentence of 131 months in prison for conspiring to launder millions of dollars in narcotics bribe payments that he received from the Juarez Cartel – one of Mexico’s most notorious and violent cocaine cartels – through accounts at banks in the United States and other countries. VILLANUEVA MADRID, 65, was extradited from Mexico in May 2010. He pled guilty on August 2, 2012, before U.S. District Judge Victor Marrero, who also imposed today’s sentence. Judge Marrero stated that he viewed the appropriate sentence to be 204 months’ imprisonment, less 73 months for the time VILLANUEVA MADRID spent in Mexican custody on related Mexican charges, and he therefore imposed a final sentence of 131 months’ imprisonment in the United States.
Manhattan U.S. Attorney Preet Bharara stated: “Mario Villanueva Madrid was entrusted to serve the public in Mexico, but instead, in return for millions of dollars in bribes, he provided safe passage to a brutal drug cartel allowing it to move massive amounts of cocaine through the state he governed. With his sentence today, Villanueva Madrid completes his descent from elected government official to corrupted official to incarcerated felon. This Office and our law enforcement partners will not relent in our efforts to prosecute and punish corrupt public officials who violate U.S. law, wherever they operate.”
According to Indictments previously returned in this case, and statements made during court proceedings:
In the mid- to late-1990s, the Juarez Cartel transported over 200 tons of cocaine into the United States across the Southwest U.S. border. In 1994, the Cartel established operations in the eastern Mexican state of Quintana Roo, where the resort city of Cancun is located.
VILLANUEVA MADRID, who had previously served as mayor of Cancun, was elected governor of Quintana Roo in April 1993. In 1994, he entered into an agreement with the Juarez Cartel that would ensure its cocaine shipments traveled safely through Quintana Roo without interference from law enforcement. Under the agreement, VILLANUEVA MADRID was paid between $400,000 and $500,000 for each shipment of cocaine that the Cartel transported through Quintana Roo.
From 1994 through 1999, the Juarez Cartel paid VILLANUEVA MADRID millions of dollars in narcotics proceeds. By late 1995, in an effort to hide the illicit funds, he began transferring them to bank and brokerage accounts in the United States, Switzerland, the Bahamas, Panama, and Mexico, many of which were held in the names of British Virgin Islands shell corporations. In April 1999, shortly before his term as Governor was to expire and while under investigation by Mexican authorities, VILLANUEVA MADRID fled. He remained a fugitive for over two years.
In connection with his flight, VILLANUEVA MADRID liquidated the millions of dollars in narcotics proceeds he had deposited at Lehman Brothers Inc. (“Lehman”), through a series of wire transfers totaling over $11 million. These transfers were made through an account at the Mexican bank Banamex that had been secretly opened for him in the name of “Lehman Brothers Private Client Services.” A large portion of the illicit proceeds – over $7 million – were then deposited into an account at Lehman that a banker had opened in the names of a non-existent Mexican family.
In May 2001, VILLANUEVA MADRID was arrested and subsequently convicted in Mexico on organized crime and corruption offenses. All of his illicit funds at Lehman and in other U.S. accounts, totaling over $17 million, were seized and later forfeited by U.S. authorities.
In addition to the prison term, Judge Marrero ordered VILLANUEVA MADRID to pay a $100 special assessment fee.
Mr. Bharara praised the extraordinary investigative efforts of the U.S. Drug Enforcement Administration’s (“DEA”) New York Organized Crime Drug Enforcement Strike Force (“the Strike Force”) – which is comprised of agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, and the U.S. Marshals Service – as well as the DEA’s Mexico City Country Office and Merida, Mexico, Resident Office, which together led the investigation. 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 also recognized the DEA’s Offices in Houston and Pittsburgh, as well as the United States Attorney’s Office in Houston, for their invaluable assistance in the investigation. Mr. Bharara also thanked the U.S. Marshals Service and the Department of Justice's Office of International Affairs for their assistance in this matter.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Glen Kopp and Anna Skotko are in charge of the prosecution.
Manhattan U.S. Attorney Announces Extradition of Felix Trujillo-Manrique from Colombia on Heroin Trafficking ChargesRead 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 Field Office of the U.S. Drug Enforcement Administration (“DEA”), today announced that FELIX TRUJILLO-MANRIQUE was extradited yesterday from Colombia for allegedly conspiring to import heroin from Colombia into the U.S. TRUJILLO-MANRIQUE, a citizen of Colombia, was arrested by Colombian National Police in October 2010, at the request of the U.S. He will be presented and arraigned today in federal court before U.S. Magistrate Judge Andrew J. Peck. U.S. District Court Judge J. Paul Oetken is assigned to the case.
As alleged in the Indictment unsealed yesterday in Manhattan federal court and other court documents:
TRUJILLO-MANRIQUE was a leader of an international conspiracy to traffic kilogram quantities of heroin from Colombia through Ecuador and ultimately into the U.S. TRUJILLO-MANRIQUE, who was based in Colombia, supplied couriers in Ecuador with heroin which they then smuggled into the U.S. via international flights, including flights into John F. Kennedy International Airport in New York City. In connection with the investigation into TRUJILLO-MANRIQUE, more than ten kilograms of heroin were seized in South America and New York City.
The Indictment charges TRUJILLO-MANRIQUE, 42, with one count of conspiracy to distribute heroin and one count of conspiracy to import heroin into the United States. If convicted, TRUJILLO-MANRIQUE faces a maximum sentence of life in prison.
Mr. Bharara praised the outstanding efforts of the DEA’s New York Drug Enforcement Task Force Group T-23, which conducted the investigation along with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations New York Narcotics Group II. The DEA’s New York Drug Enforcement Task Force is comprised of members of the DEA, the New York City Police Department, and the New York State Police. Mr. Bharara also thanked U.S. Customs and Border Protection, the New Jersey Field Division of the Federal Bureau of Investigation, the DEA Bogota Country Office, the DEA Guayaquil Resident Office, the DEA Baltimore District Office, the U.S. Attorney’s Office for the Eastern District of New York, the Colombian National Police, the U.S. Department of Justice Office of International Affairs, the U.S. Department of State, and Interpol for their assistance in this matter.
The case is being handled by the Narcotics Unit. Assistant United States Attorney Robert L. Boone is 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. Felix Trujillo-Manrique Indictment
Manhattan U.S. Attorney Announces $102 Million Settlement of Civil Forfeiture and Money Laundering Claims Against Lebanese Canadian BankRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the U.S. Drug Enforcement Administration (“DEA”), announced today a settlement of a civil forfeiture and money laundering lawsuit brought by the United States against the Lebanese Canadian Bank (“LCB”) and its assets. The Government’s action, filed on December 15, 2011, alleges a widespread, international scheme in which Lebanese financial institutions with links to Hizballah, including the now defunct LCB, used the U.S. financial system to launder narcotics trafficking and other criminal proceeds through West Africa and back into Lebanon. The settlement order requires LCB to forfeit $102 million to the United States. The settlement order was entered in Manhattan federal court today by U.S. District Judge Paul A. Engelmayer.
Manhattan U.S. Attorney Preet Bharara said: “Today’s settlement shows that banks laundering money for terrorists and narco-traffickers will face consequences for their actions, wherever they may be located. This type of money laundering network fuels the operations of both terrorists and drug traffickers, and we will continue to use every resource at our disposal to sever the connection between terrorists, narco-traffickers, and those who fund their lethal agenda.”
DEA Administrator Michele M. Leonhart said: “Regardless of how or where, DEA will relentlessly pursue global drug criminals and their huge profits, in particular those associated with terror networks such as Hizballah. This settlement is significant and addresses the role the Lebanese Canadian Bank played in facilitating illicit money movement from the United States to West Africa to Hizballah-controlled money laundering channels. Drug trafficking profits and terror financing often grow and flow together. One of DEA’s highest priorities will always be to promote U.S. and global security by disrupting these narco-terror schemes and protecting the systems they abuse.”
According to an Amended Complaint filed in Manhattan federal court in October 2012, and other documents filed in the case:
From approximately January 2007 to early 2011, at least $329 million was transferred by wire from LCB and other financial institutions, primarily two Lebanese money exchange houses, to the United States for the purchase of used cars that were then shipped to West Africa. Cash from the sale of the cars, along with the proceeds of narcotics trafficking, were funneled to Lebanon through Hizballah-controlled money laundering channels. LCB played a key role in these money laundering channels and conducted business with a number of Hizballah-related entities. Hizballah is a U.S. Department of State designated Foreign Terrorist Organization, a Specially Designated Terrorist, and a Specially Designated Global Terrorist.
On February 10, 2011, the U.S. Department of the Treasury, Financial Crimes Enforcement Network (“FinCEN”) issued a finding and proposed rule, pursuant to the USA Patriot Act, that LCB is a financial institution of primary money laundering concern, based on, among other things, FinCEN’s determination that there was reason to believe that LCB had been routinely used by drug traffickers and money launderers operating in various countries in Central and South America, Europe, Africa, and the Middle East. FinCEN also determined that there was reason to believe that LCB managers were complicit in the network’s money laundering activities.
Following the FinCEN action, another Lebanese financial institution, Société Générale de Banque au Liban (“SGBL”), acquired most of the assets of LCB. In connection with the purchase, $150 million was placed in an escrow account at Banque Libano Française SAL (“BLF”) in Lebanon. In August 2012, the Government seized $150 million from a BLF correspondent account in the United States based on a provision of U.S. law allowing seizure of such funds as a substitute for the funds held in escrow in Lebanon (the “Seized Funds”).
The settlement order requires LCB to forfeit $102 million of the Seized Funds to the United States. The settlement order also provides that, to settle claims brought by SGBL for $90 million of the Seized Funds, LCB will be required to pay SGBL an additional $12 million, and make provisions for additional payments based on separate agreements between LCB and SGBL. SGBL will also receive the remaining $48 million of the Seized Funds.
In addition, a second settlement order was entered in this action on June 20, 2013, regarding claims against the Hassan Ayash Exchange Company (“Ayash”), one of the Lebanese money exchange houses allegedly involved in the money laundering scheme. Under this settlement order, Ayash will forfeit more than $720,000 to the United States.
The settlement orders resolve only claims relating to LCB, Ayash, and their assets. The civil forfeiture and money laundering action continues against other alleged participants in the money laundering scheme.
Mr. Bharara thanked the DEA for its leadership and praised the New York Organized Crime Drug Enforcement Strike Force for its outstanding work on this investigation, which he noted is ongoing. The DEA’s New York Organized Crime Drug Enforcement Strike Force (the “Strike Force”) is comprised of agents and officers of the U. S. Drug Enforcement Administration, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), the New York State Police, the U. S. Internal Revenue Service Criminal Investigation Division, the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Secret Service, and the U.S. Marshals Service. The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA), which is a federally funded crime fighting initiative. Mr. Bharara also thanked the U.S. Department of State, the U.S. Department of the Treasury, the Federal Bureau of Investigation, and the New Jersey State Police for their assistance.
This matter is being handled by the Office’s Asset Forfeiture Unit. Assistant U. S. Attorneys Sharon Cohen Levin, Michael Lockard, Jason Cowley, and Alexander Wilson are in charge of the case.
U.S. v. Lebanese Canadian Bank Settlement Order
U.S. v. Lebanese Canadian Bank, et al. Amended ComplaintFlorida Investment Fund Manager Pleads Guilty in Manhattan Federal Court in Connection with $13 Million Securities Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CRAIG L. BERKMAN pled guilty today in Manhattan federal court to securities fraud and wire fraud in connection with a more than $13 million scheme to defraud investors through false ownership claims of stock in Facebook, Inc. (“Facebook”); Groupon, Inc. (“Groupon”); LinkedIn, Inc. (“LinkedIn”); and Zynga, Inc. (“Zynga”) before their respective initial public offerings, and in other private companies. BERKMAN was arrested in March 2013 in connection with the scheme, and pled guilty today before United States Magistrate Judge Kevin Nathaniel Fox.
Manhattan U.S. Attorney Preet Bharara stated: “Through various misrepresentations, Craig Berkman enticed investors with highly coveted investment opportunities, and then swindled them out of millions of dollars, using much of it for his personal benefit. Today’s guilty plea ensures that he will be held to account for his conduct.”
According to the charging instruments in this case and statements made in open court today at the plea proceeding:
From 2010 until his arrest in March 2013, BERKMAN served as the managing member of a series of limited liability companies, which he effectively controlled, including Face-Off Acquisitions, LLC; Assensus Capital, LLC; and several LLCs with variations of the words “Ventures Trust” in their names (the “Ventures Trust LLCs”). Beginning in about October 2010, BERKMAN and others offered investors the opportunity to purchase units of each of these LLCs. In doing so, BERKMAN misrepresented to investors that the LLCs either owned or would soon acquire pre-initial public offering shares in various technology companies, including Facebook, Groupon, LinkedIn, and Zynga. BERKMAN also misappropriated millions of dollars of investor funds for his own use and benefit.
The ways in which BERKMAN carried out his scheme often varied with each of the LLCs. In one instance, BERKMAN represented to investors that various Ventures Trust LLCs held large quantities of pre-IPO shares of Facebook, Groupon, LinkedIn, and Zynga. In fact, the Ventures Trust LLCs held no shares of Groupon, LinkedIn, or Zynga, and held only a small, indirect interest in pre-IPO Facebook shares. In another example, BERKMAN falsely told investors with Face-Off Acquisitions, LLC that their money would be used to purchase an existing special purpose vehicle, which already held a significant stake in Facebook. BERKMAN also misrepresented to Assensus Capital Investors, LLC investors that he would use their money to fund various start-ups, including technology, medical device, and energy companies, and that the investors’ funds would be partially secured by interests in pre-IPO Facebook stock. In fact, BERKMAN misappropriated most, if not all, of the investors’ money for his own use and benefit.
Ultimately, BERKMAN raised at least approximately $13.2 million in funds from more than 120 different investors, which he used for various unauthorized purposes. BERKMAN used approximately $6 million in stolen investor funds to pay off creditors in his personal bankruptcy, and in doing so, he misrepresented the source of those funds to the Bankruptcy Court. BERKMAN also used approximately $4.8 million of new investor money to pay off earlier investors, and spent approximately $1.6 million on legal fees, travel, other personal expenses, and in cash withdrawals, among other things.
BERKMAN, 71, of Odessa, Florida, pled guilty to one count of securities fraud and one count of wire fraud. He faces a maximum sentence of 20 years in prison on each count, a fine of the greater of $5 million or twice the gross gain or gross loss from the offense on the securities fraud charge, and a fine of a lesser amount on the wire fraud charge. In connection with his guilty plea, BERKMAN agreed to pay restitution to the victims of his offenses and consented to forfeit approximately $13.2 million. He will be sentenced before U.S. District Court Judge Shira A. Scheindlin on October 1, 2013.
Mr. Bharara praised the work of the Criminal Investigators of the U.S. Attorney’s Office and the United States Postal Inspection Service, 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 John J. O’Donnell and Matthew L. Schwartz are in charge of the prosecution.
US v. Craig Berkman Information
Twenty-Fourth Defendant Pleads Guilty in Mahattan Federal Court in Connection with LIRR Disability Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN GAGLIANO, a former Long Island Railroad signalman, pled guilty today to charges related to the allegedly massive fraud scheme in which Long Island Rail Road (“LIRR”) workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. GAGLIANO pled guilty in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck. He is the 24th defendant to plead guilty in the case, which alleges a pervasive pattern of fraudulent disability claims being filed with the U.S. Railroad Retirement Board (“RRB”) by retiring LIRR employees.
According to the Complaint, the Superseding Indictments, the Superseding Informations, and statements made in other public filings and court proceedings:
The RRB is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50 – the age of eligibility has since changed to 55 – if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. In addition, at full retirement age (between age 60 and age 65 depending on years of service), they are eligible to receive an RRB retirement pension. For LIRR workers who retired at 50 with only an LIRR pension, they would receive less than their prior salary and substantially lower pension payments than those to which they would be entitled at full retirement age. However, LIRR employees who retired and claimed disability could receive a disability payment from the RRB on top of their LIRR pension, regardless of age. A retiree’s LIRR pension, in combination with RRB disability payments, can be roughly equivalent to the base salary earned during his or her career.
Hundreds of LIRR employees have allegedly exploited the overlap between the LIRR pension and the RRB disability program by pre-planning the date on which they would falsely declare themselves disabled so that it would coincide with their projected retirement date. These false statements, made under penalty of prosecution in disability applications, allowed LIRR employees to retire as early as age 50 with an LIRR pension, supplemented by the fraudulently obtained RRB disability annuity. From 1995 through 2011, more than 75% of LIRR employees stopped working and began receiving RRB disability benefits, whereas during this same period, only 25% of retiring Metro-North employees stopped working and began receiving RRB disability benefits. During the period 2004 through 2008, only three doctors were responsible for approximately 86% of the disability claims submitted by LIRR retirees. Of these, one has died and one, Dr. Peter J. Ajemian, has pled guilty and admitted that he declared “large numbers of Long Island Railroad employees” to be disabled even though they were not disabled and could have continued working in their railroad jobs. Dr. Ajemian was sentenced in May 2013 to eight years in prison.
GAGLIANO, 55, of North Babylon, New York, pled guilty to one count of conspiracy to commit mail fraud, wire fraud, and health care fraud; one count of conspiracy to defraud the United States and the RRB; one count of health care fraud; and one count of wire fraud. He faces a maximum sentence of 55 years in prison, and has agreed to make restitution to the RRB in the amount of $242,466.73.
Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 24 of whom have now pled guilty. Of the 24 defendants that have pled guilty, two have been sentenced. The charges against the remaining defendants are merely allegations and they are all presumed innocent unless and until proven guilty.
Mr. Bharara praised the work of the RRB Office of the Inspector General, the Federal Bureau Investigation, and the Office of the Inspector General of the Metropolitan Transportation Authority for their outstanding work in the investigation, which he noted is ongoing. He also acknowledged the previous investigation conducted by the New York State Attorney General’s Office into these pension fraud issues.
The case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.
US v. Lesniewski, et al S14 Indictment
Florida Businessman Sentenced in Manhattan Federal Court to 11 Years in Prison in Connection with $13 Million Fraud Scheme Involving Phony Facebook and Groupon StockRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JOHN A. MATTERA was sentenced in Manhattan federal court to 11 years in prison for his role in a $13 million scheme to defraud investors through false ownership claims of stock in Facebook, Inc. (“Facebook”) and Groupon, Inc. (“Groupon”) before their initial public offerings, and in other private companies. MATTERA pled guilty to securities fraud and wire fraud charges in October 2012, and he agreed to pay restitution to the victims of his offense and consented to the entry of a $13 million forfeiture order. MATTERA was sentenced today by U.S. District Judge Richard J. Sullivan.
Manhattan U.S. Attorney Preet Bharara stated: “John Mattera enjoyed a lavish lifestyle, funded by approximately $13 million he procured from investors with false promises of profit from high-profile stocks. He then took millions for dollars for himself. Today’s sentence ensures he will pay a substantial price for his fraud.”
According to the charging instruments filed in this case and statements made during court proceedings:
In 2010 and 2011, MATTERA served as Chairman of the Advisory Board of Praetorian Global Fund Ltd. (“Praetorian”), a professional mutual fund, where he was responsible for the day-to-day management decisions. Beginning in the late summer of 2010, MATTERA and others offered investors the opportunity to invest in special purpose entities related to Praetorian (the “G Power Entities”). MATTERA falsely represented that the G Power Entities owned shares in companies such as Facebook and Groupon when they were still private. Ownership of stock in these private companies was particularly attractive to certain investors because, as MATTERA and others communicated, there was an expectation that initial public offerings would soon occur, thereby potentially increasing the value of the shares. In reality, neither MATTERA, Praetorian, nor the G Power Entities held these shares of stock.
Based on the misrepresentations of MATTERA and others, investors sent more than $11 million into “escrow accounts” maintained at a Florida bank. MATTERA reassured investors that their money would be held in the escrow accounts until either the offering was completed or another triggering event took place. Investors were told they would then receive their ownership interest in the particular special purpose entity. However, instead of maintaining the investor money in the escrow accounts as MATTERA promised, MATTERA caused the vast majority of the funds to be transferred to other entities with which he was associated. Ultimately, MATTERA misappropriated approximately $13 million of investor money, spending nearly $4 million on personal items for himself and his family, such as expensive jewelry, interior decorating, and luxury cars.
In addition to the prison term, Judge Sullivan sentenced MATTERA, 51, of Boca Raton, Florida, to three years of supervised release. MATTERA was also ordered to forfeit $11.8 million and pay restitution to be determined, as well as a $400 special assessment fee.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Internal Revenue Service, Criminal 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.
Assistant United States Attorneys Eugene Ingoglia, David Miller, and Paul Monteloni are in charge of the prosecution.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Arrest of Florida Man in Connection with $8 Million Investment Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), announced today that SETH BEOKU BETTS, a principal of Betts and Gambles Global Equities, LLC (“Betts and Gambles”), was arrested today on the charge of wire fraud for operating a scheme to defraud a public university (the “University”) in the Midwest of more than $8 million. BETTS is alleged to have solicited the money from the University for the purposes of trading in collateralized mortgage obligations (“CMOs”). He then misappropriated the funds, including at least $2 million to purchase luxury automobiles and a personal residence in Florida. BETTS was arrested in Durham, North Carolina this morning, and is expected to be presented in federal court in the Eastern District of North Carolina, Western Division, this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, the main investment Seth Betts made was in himself. He induced a public university to make a large investment on which he promised a quick, safe return, but instead he pocketed the university’s money to buy luxury cars, property and to fund other expenses, delivering a full-fledged fraud as the university’s only return, as described in the complaint. With his arrest, this Office continues its work to hold financial professionals accountable for cheating investors.”
FBI Assistant Director-in-Charge George Venizelos said: “Seth Betts allegedly committed the most brazen form of investment fraud. Worse than misrepresenting how he would invest the University’s money, Betts made few investments at all – other than in luxury goods for himself. You can’t take someone’s money to invest in mortgages and spend it on Maseratis.”
According to a Complaint unsealed today in Manhattan federal court:
Between July 2008 and December 2008, BETTS presented himself to the University as a principal of Betts and Gambles. In that capacity, he solicited the University’s investment in CMOs, which he would then sell to third-party buyers in short order at predicted profits. CMOs are fixed income mortgage-backed securities which permit investment in different tranches based upon the maturity of the underlying mortgages. As a result of his solicitation, the University invested approximately $8.165 million dollars of the University’s money with BETTS.
BETTS misappropriated the money and never delivered any CMOs to the University or returned any funds. For example, on December 10, 2008, BETTS transferred $325,000 of the University’s investment money to a car dealership for the purchase of a Ferrari automobile and a Maserati automobile. Approximately one week later, he transferred $1,545,000 of the University’s investment money to an attorney trust account in connection with his purchase of a personal residence in Florida. BETTS also spent at least $455,000 on additional personal expenses, including more than $150,000 in additional payments to car dealerships.
BETTS, 37, of Boynton Beach, Florida, is charged with one count of wire fraud. The charge carries a maximum sentence of 20 years in prison, or twice the gross gain or loss from the offense.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney's Office and the FBI, which jointly investigated this case.
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 Telemachus P. Kasulis 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.
Betts, Seth Complaint
Three Defendants Plead Guilty in Manhattan Federal Court to Charges Related to Their Roles in the CityTime Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that LARISA MEDZON, ANNA MAKOVETSKAYA, and SVETLANA MAZER pled guilty today to various felony offenses in connection with their roles in facilitating a fraud, kickback, and money laundering scheme that targeted the City of New York’s CityTime information technology project. In connection with their pleas, the defendants agreed to forfeit their interests in over $27 million in cash held in 91 bank accounts and five safe deposit boxes, as well as four real properties worth over $4 million, all of which constitute crime proceeds. MEDZON, MAKOVETSKAYA, and SVETLANA MAZER pled guilty in Manhattan federal court before U.S. District Judge George B. Daniels.
Manhattan U.S. Attorney Preet Bharara said: “Through lies and subversion, each of these three defendants served as highly paid enablers of an epic fraud against the City of New York. And with their pleas today and multi-million dollar forfeitures, they will be stripped of their ill-gotten gains and potentially their liberty. Thanks to the efforts of prosecutors from this Office and our partners at the Department of Investigation, the City recouped more than $500 million that was lost to the CityTime fraud, and we continue to hold the perpetrators of this brazen scheme to account.”
According to the criminal Informations filed earlier today in Manhattan federal court, and as alleged in the Superseding Indictment in United States v. Mark Mazer et al., (the “Mazer Indictment”), and other public filings in the case:
The CityTime project was a City initiative intended to modernize timekeeping and payroll systems across City agencies. In 2000, Science Applications International Corporation (“SAIC”) became the lead contractor on CityTime. Beginning in 2003, SAIC appointed Gerard Denault as Program Manager for CityTime. At Denault’s behest, SAIC hired Technodyne LLC (“Technodyne”) as a “single source” subcontractor on the CityTime project. In exchange for agreeing to steer work to Technodyne, Denault and Carl Bell, SAIC’s Chief Systems Engineer in the New York office of SAIC, began receiving kickbacks from Technodyne via its principals, Reddy Allen and Padma Allen, which were laundered through affiliates of Technodyne located in India.
Beginning in 2005, Mark Mazer, who had been retained by the City to help manage the CityTime project, began demanding and obtaining a separate kickback stream via two subcontractors of Technodyne to which he steered work: D.A. Solutions, run by Mark Mazer’s uncle, Dimitry Aronshtein, and Prime View, run by Victor Natanzon. As a result of the scheme, Denault and Bell obtained approximately $15 million in kickbacks and Mark Mazer obtained approximately $30 million in kickbacks. Technodyne also obtained over $325 million in revenue from the scheme. Denault, Mark Mazer, Padma Allen, Reddy Allen, and the Allens’ company, Technodyne, among others, worked together to defraud the City by causing it to overpay for the CityTime project in order to increase their illicit profits from the scheme. The fraudulent scheme helped cause the cost of the CityTime project to balloon from under $100 million to a final cost of close to $700 million.
Mark Mazer and Aronshtein, among others, helped launder millions of dollars in proceeds of the fraud and kickback scheme by routing the funds through shell companies controlled by Mark Mazer’s relatives MEDZON, MAKOVETSKAYA, and SVETLANA MAZER, and by causing millions of dollars in proceeds to be routed through other companies and offshore accounts located in Latvia, among other means. MEDZON, Mark Mazer’s mother, withdrew over $200,000 in cash derived from the scheme through hundreds of ATM transactions that were designed to evade currency transaction reporting requirements, while MAKOVETSKAYA, Mark Mazer’s cousin, lied to employees of a federally-insured bank so that the bank would agree to open up accounts in the name of a shell company that was used to facilitate the scheme. SVETLANA MAZER, Mark Mazer’s wife, also attempted to obstruct the Government’s investigation of the CityTime scheme by omitting her role in controlling shell companies used to facilitate the scheme from sworn disclosures she submitted to the City.
MEDZON, 68, of Forest Hills, New York, pled guilty to intentionally structuring cash transactions to avoid currency reporting requirements, which carries a maximum potential penalty of five years in prison. MAKOVETSKAYA, 42, of Forest Hills, New York, pled guilty to conspiracy to make false statements to a bank, which carries a maximum potential penalty of five years in prison. SVETLANA MAZER, 47, of Manhasset, New York, pled guilty to obstruction of justice, which carries a maximum potential penalty of 20 years in prison. In connection with their pleas, the defendants agreed to entry of preliminary orders of forfeiture forfeiting their interests in a total of over $27 million in cash held in 91 bank accounts and five safe deposit boxes, and in four real properties worth more than $4 million, derived from the scheme.
Today’s pleas follow several other developments in the case, including: (1) guilty pleas by Carl Bell and Victor Natanzon, who are cooperating with the Government’s investigation; (2) the Office’s entry into a deferred prosecution agreement with SAIC, in which SAIC agreed to forfeit over $500 million, cooperate with the Government’s investigation, and accept responsibility for illegal conduct by its employees on the CityTime project; (3) the Office’s forfeiture of several million dollars in cash and property seized from Padma Allen and Reddy Allen after they fled the country to avoid prosecution; and (4) the return of approximately $500 million in forfeited funds to the City and its agencies.
Mr. Bharara praised the New York City Department of Investigation (“DOI”) for its outstanding work in this investigation, specifically the efforts of Commissioner Rose Gill Hearn and teams led by Chief of Investigations John Kantor, Deputy Commissioner for Legal Affairs Marjorie Landa, and Associate Commissioner Yuval Hibshoosh.
The charges against the remaining defendants in the Mazer Indictment, including Denault, Mark Mazer, Aronshtein, Padma Allen, Reddy Allen, and Technodyne, are merely allegations, and they are presumed innocent unless and until proven guilty.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Howard S. Master and Andrew D. Goldstein are in charge of the investigation.
U.S. v. Svetlana Mazer S4 Information
U.S. v. Larisa Medzon S3 Information
U.S. v. Anna Makovetskaya S5 InformationStatement of Manhattan U.S. Attorney Preet Bharara on the Guilty Pleas of Larisa Medzon, Anna Makovetskaya, and Svetlana Mazer to Charges Related to Their Roles in the Citytime Fraud SchemeRead the Press Release
“Through lies and subversion, each of these three defendants served as highly paid enablers of an epic fraud against the City of New York. And with their pleas today and multi-million dollar forfeitures, they will be stripped of their ill-gotten gains and potentially their liberty. Thanks to the efforts of prosecutors from this Office and our partners at the Department of Investigation, the City recouped more than $500 million that was lost to the CityTime fraud, and we continue to hold the perpetrators of this brazen scheme to account.”
Two Defendants Convicted in Manhattan Federal Court of Various Racketeering, Murders, Attempted Murders, Narcotics, and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, today announced that ANTHONY BOYKIN and JUSTIN SIMMONS were convicted yesterday in Manhattan federal court of various racketeering, murder, attempted murder, narcotics conspiracy, and firearms offenses following a four-week jury trial before the U.S. District Judge Colleen McMahon. The jury convicted BOYKIN and SIMMONS of charges arising out of their involvement, from 2006 through 2013, in the criminal activities of the Bloods gang (the “Newburgh Bloods”) – a violent street gang that was involved in drug-trafficking and multiple acts of violence, including murders and attempted murders, in Newburgh, New York.
Manhattan U.S. Attorney Preet Bharara said: “The Bloods in Newburgh – including Anthony Boykin, the gang’s leader, and Justin Simmons, a soldier – have laid siege to that city, making victims not only out of those who they shot, stabbed, and killed, but also out of every Newburgh resident who has had to live with the terror wrought by the Bloods’ legacy of drugs and violence. These convictions show that it does not matter if you are at the top of a gang or merely work within it – if you choose to engage in drug-dealing and gang violence, you will be held accountable for your actions and deprived of your liberty.”
According to the Superseding Indictment and evidence admitted at trial:
From 2006 through 2013, BOYKIN was a member, and then leader, of a racketeering enterprise – the Newburgh Bloods. As part of his participation in that enterprise, BOYKIN conspired to murder Lamont Young, a local marijuana dealer, which culminated in Young’s murder on March 4, 2009. He participated in two additional conspiracies to commit murder, which culminated in the vicious attacks of Ishmael Gillian and David Freeman on August 24, 2008 and September 20, 2008, respectively. BOYKIN also robbed a suspected narcotics dealer in August 2009.
From 2007 through 2011, BOYKIN and SIMMONS, a soldier of the Newburgh Bloods, participated in a conspiracy to distribute crack cocaine on Landers Street in Newburgh, New York and throughout the city. They also possessed firearms in connection with their drug trafficking and racketeering activities with the Newburgh Bloods gang.
BOYKIN was convicted of one count of racketeering, one count of racketeering conspiracy, three counts of conspiracy to murder in aid of racketeering, one count of murder in aid of racketeering, one count of assault in aid of racketeering, one count of conspiracy to distribute or possess with intent to distribute 280 grams and more of crack cocaine, and two counts of possessing, using, and carrying a firearm in furtherance of a crime of violence or a drug-trafficking crime. He was acquitted of one count of murder, one count of conspiracy to commit murder, two counts of attempted murder, one count of assault, and two counts of possession, use, and carrying a firearm in furtherance of a crime of violence or a drug-trafficking crime. BOYKIN faces a mandatory minimum sentence of life in prison, and is scheduled to be sentenced on November 14, 2013, at 2:00 p.m. before Judge McMahon.
SIMMONS was convicted of one count of racketeering conspiracy, one count of conspiracy to distribute or possess with intent to distribute 280 grams and more of crack cocaine, and two counts of possession, use, and carrying a firearm in furtherance of a crime of violence or a drug-trafficking crime. He was acquitted of one count of murder, one count of conspiracy to commit murder, one count of assault, and one count of possession, use, and carrying a firearm in furtherance of a crime of violence or a drug-trafficking crime. SIMMONS faces a mandatory minimum sentence of 50 years in prison and a maximum sentence of life in prison. He is scheduled to be sentenced on October 17, 2013, at 4:00 p.m. before Judge McMahon.
Mr. Bharara praised the outstanding efforts of the Hudson Valley Safe Streets Task Force, including the FBI, the City of Newburgh Police Department, the Orange County Sheriff’s Office, and the New York State Police, in connection with this investigation.
Assistant United States Attorneys Michael D. Maimin, Amie N. Ely, and Emil J. Bove III are in charge of the prosecution.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Charges Against Psychiatrist for Illegally Distributing OxycodoneRead 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 the arrest today of William S. Belfar, a licensed psychiatrist in New York, on charges that he distributed oxycodone, a prescription painkiller, for cash and without a medical purpose. BELFAR was presented today in Manhattan federal court before U.S. Magistrate Judge Andrew J. Peck.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, William Belfar, a licensed psychiatrist, contributed to the growing epidemic of prescription drug abuse and addiction by writing prescriptions in exchange for cash – conduct which he had described as illegal when discussing other doctors. This Office will not tolerate medical professionals who exploit their licenses to fuel the prescription drug problem.”
FBI Assistant Director-in-Charge George Venizelos said: “William Belfar, a licensed physician and mental health professional, allegedly exploited the addictive nature of oxycodone – the very thing he warned of on television – to make money. He violated the oath of his profession and broke the law in peddling oxycodone prescriptions. The Health Care Fraud Task Force was formed in part to protect the public from unscrupulous doctors who put profiteering ahead of professional responsibility.”
According to the Complaint unsealed today in Manhattan federal court:
BELFAR operated a medical office in Manhattan, New York, from which he sold prescriptions for oxycodone and other medications for cash. On three occasions from May 2011 to April 2013, he sold prescriptions of oxycodone pills and other medications to an FBI confidential informant and two undercover FBI officers. BELFAR sold the prescriptions for up to $1,000 per prescription. On one occasion when BELFAR sold an oxycodone prescription, he stated to the informant: “[I]t is a very easy way to make money, but it’s an easy way for me to go to jail too.” BELFAR prescribed the oxycodone to the confidential informant even though he said he believed the informant was a “dealer.”
In February and March 2013, around the same time that BELFAR was selling oxycodone prescriptions, he appeared on two television shows as an interview guest on the subject of oxycodone addiction. During those interviews, BELFAR discussed cases of celebrities becoming addicted to oxycodone, including one situation where the “doctor essentially became [a] drug dealer.” BELFAR also stated during one interview that “This is a big business. . . . On the street . . . each [oxycodone] pill is $30. . . . Patients will pay a lot of money just to get these pills. . . . The doctors prescribe it. Yes, some do it for money. Some do it because they just don’t know what they are doing. . . . [T]hey just shouldn’t be doing it.”
Oxycodone, a Schedule II controlled substance, is a powerful painkiller with a high potential for addiction and abuse. It is sold on the street as a substitute for heroin and other illegal drugs.
BELFAR, 49, of Huntington, New York, is charged with three counts of distributing oxycodone. Each count carries a maximum sentence of 20 years in prison.
Mr. Bharara praised the investigative work of the FBI, the FBI’s Boston Field Office, the FBI Boston-Lakeville RA, the New York City Police Department, and the FBI’s New York Health Care Fraud Task Force. The FBI’s New York 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 of the FBI, NYPD, 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, NYS Attorney General’s Office, NYS-Office of Medicaid Inspector General, NYC Health and Hospitals Inspector General, and the National Insurance Crime Bureau.
The case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Rahul Mukhi and Ian McGinley 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. William Belfar Complaint
Leader of Massive Tax Refund Fraud Scheme Pleads Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELVIN DUARTE pled guilty today in Manhattan federal court for his role in a scheme to fraudulently generate and then steal more than $50 million in federal tax refund checks. DUARTE was originally arrested in 2008 and subsequently fled the U.S. He was extradited from the Dominican Republic and arrived in the U.S. in January 2013. DUARTE pled guilty before U.S. Circuit Court Judge Denny Chin, sitting by designation.
Manhattan U.S. Attorney Preet Bharara said: “The $50 million tax refund fraud scheme Melvin Duarte orchestrated is among the largest known cases of its kind, and Duarte’s guilty plea today is a significant victory in our fight to hold tax refund fraudsters to account. Our commitment to prosecuting those who engage in this type of scheme – the use of stolen Puerto Rican identities to fraudulently obtain tax refunds – is unwavering. We have aggressively pursued these schemes since at least 2008, and in just the last 12 months have charged at least 55 defendants who allegedly sought to cause approximately $230 million in losses to the IRS.”
According to the Indictment and other documents filed in Manhattan federal court:
DUARTE was charged as part of an investigation into a massive tax and mail theft scheme. As part of the scheme, co-conspirators operating out of the Dominican Republic and other places electronically filed thousands of fraudulent federal tax returns, seeking tens of millions of dollars in tax refunds. The fraudulent returns were filed using Social Security numbers and other identifying information stolen from residents of Puerto Rico. Participants in the scheme targeted Social Security numbers assigned to residents of Puerto Rico because they are generally not required to file federal tax returns with the Internal Revenue Service (“IRS”), as long as their income is derived solely from Puerto Rican sources. In so doing, the co-conspirators minimized the risk that legitimate federal tax returns were already filed by the holders of the Social Security numbers that they were using in the scheme.
Each of the tax returns at issue falsely represented that the taxpayer resided at an address in the Bronx, where the refund check requested in the return was to be sent. The checks were then stolen by letter carriers assigned to the mail routes where the checks were sent and who had been recruited beforehand to participate in the scheme. The letter carriers participating in the scheme were paid a kickback for each check that they stole. The letter carriers passed the checks on to other co-conspirators, who cashed them at various banks and check-cashing businesses located in the U.S. and the Dominican Republic.
Over the course of the scheme, thousands of false and fraudulent federal tax returns were filed seeking more than $50 million of fraudulent tax refunds from the IRS.
DUARTE was previously convicted in 2002 for conspiracy to steal federal funds, based on substantially similar conduct and was sentenced to three years of probation.
DUARTE, 37, resided in Bronx, New York, prior to his 2008 flight to the Dominican Republic. He faces a maximum sentence of 10 years in prison on the charge of conspiracy to defraud the United States with respect to claims, a maximum sentence of five years in prison on the charge of conspiracy to steal mail, and a maximum sentence of five years in prison on the substantive theft of mail charge. DUARTE also faces a maximum of three years of supervised release and a fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense on each of the charges. He is scheduled to be sentenced by Judge Chin on October 24, 2013 at 11:00 a.m.
Mr. Bharara praised the work of the Internal Revenue Service, Criminal Investigation, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the United States Postal Service Office of Inspector General, and thanked them for their work in this case. He also thanked the Dominican National Police for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Daniel W. Levy is in charge of the prosecution.
Leader of Massive Tax Refund Fraud Scheme Pleads Guilty in Manhattan Federal CourtRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MELVIN DUARTE pled guilty today in Manhattan federal court for his role in a scheme to fraudulently generate and then steal more than $50 million in federal tax refund checks. DUARTE was originally arrested in 2008 and subsequently fled the U.S. He was extradited from the Dominican Republic and arrived in the U.S. in January 2013. DUARTE pled guilty before U.S. Circuit Court Judge Denny Chin, sitting by designation.
Manhattan U.S. Attorney Preet Bharara said: “The $50 million tax refund fraud scheme Melvin Duarte orchestrated is among the largest known cases of its kind, and Duarte’s guilty plea today is a significant victory in our fight to hold tax refund fraudsters to account. Our commitment to prosecuting those who engage in this type of scheme – the use of stolen Puerto Rican identities to fraudulently obtain tax refunds – is unwavering. We have aggressively pursued these schemes since at least 2008, and in just the last 12 months have charged at least 55 defendants who allegedly sought to cause approximately $230 million in losses to the IRS.”
According to the Indictment and other documents filed in Manhattan federal court:
DUARTE was charged as part of an investigation into a massive tax and mail theft scheme. As part of the scheme, co-conspirators operating out of the Dominican Republic and other places electronically filed thousands of fraudulent federal tax returns, seeking tens of millions of dollars in tax refunds. The fraudulent returns were filed using Social Security numbers and other identifying information stolen from residents of Puerto Rico. Participants in the scheme targeted Social Security numbers assigned to residents of Puerto Rico because they are generally not required to file federal tax returns with the Internal Revenue Service (“IRS”), as long as their income is derived solely from Puerto Rican sources. In so doing, the co-conspirators minimized the risk that legitimate federal tax returns were already filed by the holders of the Social Security numbers that they were using in the scheme.
Each of the tax returns at issue falsely represented that the taxpayer resided at an address in the Bronx, where the refund check requested in the return was to be sent. The checks were then stolen by letter carriers assigned to the mail routes where the checks were sent and who had been recruited beforehand to participate in the scheme. The letter carriers participating in the scheme were paid a kickback for each check that they stole. The letter carriers passed the checks on to other co-conspirators, who cashed them at various banks and check-cashing businesses located in the U.S. and the Dominican Republic.
Over the course of the scheme, thousands of false and fraudulent federal tax returns were filed seeking more than $50 million of fraudulent tax refunds from the IRS.
DUARTE was previously convicted in 2002 for conspiracy to steal federal funds, based on substantially similar conduct and was sentenced to three years of probation.
DUARTE, 37, resided in Bronx, New York, prior to his 2008 flight to the Dominican Republic. He faces a maximum sentence of 10 years in prison on the charge of conspiracy to defraud the United States with respect to claims, a maximum sentence of five years in prison on the charge of conspiracy to steal mail, and a maximum sentence of five years in prison on the substantive theft of mail charge. DUARTE also faces a maximum of three years of supervised release and a fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense on each of the charges. He is scheduled to be sentenced by Judge Chin on October 24, 2013 at 11:00 a.m.
Mr. Bharara praised the work of the Internal Revenue Service, Criminal Investigation, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the United States Postal Service Office of Inspector General, and thanked them for their work in this case. He also thanked the Dominican National Police for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Daniel W. Levy is in charge of the prosecution.
US v. Melvin Duarte S2 Indictment
Manhattan U.S. Attorney Announces the Arrests of Two Rikers Island Correction Officers for Marijuana DealingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Rose Gill Hearn, the Commissioner of the New York City Department of Investigation (“DOI”), and Brian R. Crowell, Special Agent-in-Charge of the New York Field Office of the U.S. Drug Enforcement Administration (“DEA”), today announced the arrests of Correction Officers AUSTIN ROMAIN and KHALIF PHILLIPS for engaging in marijuana dealing inside Rikers Island prison facilities. It is alleged that, while on duty as Correction Officers, ROMAIN and PHILLIPS smuggled marijuana and scalpels into two different maximum security Rikers Island prison facilities and sold them to inmates. ROMAIN and PHILLIPS were arrested today while at work on Rikers Island and will be presented in Manhattan federal court before U.S. Magistrate Judge Kevin Nathaniel Fox tomorrow.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, correction officers Austin Romain and Khalif Phillips had a duty to ensure the security and safety of the prisons and inmates in their care, but instead they compromised it in the name of personal profit by smuggling and aiding in the selling of drugs, scalpels, and other contraband. We will not tolerate misuse of authority by those entrusted with supervising incarcerated individuals and keeping them safe, but who instead choose to join them in unlawful activity.”
DOI Commissioner Rose Gill Hearn said: “With 30 contraband arrests involving DOC employees in the past 10 years, DOI has worked hard to send the message that those who smuggle drugs and weapons into the City’s jails will face criminal penalties. The Correction Officers arrested today allegedly subverted jail safety and made their fellow-officers' jobs more difficult and dangerous. We will continue to investigate this insidious form of corruption and work with our colleagues in the U.S. Attorney’s Office, the DEA, other law enforcement agencies, and the Department of Corrections to ensure this kind of abuse is rooted out.”
DEA Special Agent-in-Charge Brian Crowell stated: “This two year investigation into an illicit contraband distribution ring operating within the jail cells of Rikers Island uncovered two Correction Officers allegedly responsible for smuggling contraband into the jail. The alleged contraband distribution ring supplied inmates with drugs, scalpels and various illicit products that were requested and paid for through an evasive money wiring system the officers oversaw outside the jails walls. Their alleged actions endangered their fellow officers. I commend the diligent investigation by the NYC Department of Investigation and the New York Drug Enforcement Task Force.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:
ROMAIN has worked as a Correction Officer for the New York City Department of Corrections since August 2007 and during all relevant time periods was assigned to two different maximum security facilities on Rikers Island, the George R. Vierno Center (the “GRVC”) and the Otis Bantum Correctional Center (the “OBCC”). PHILLIPS has worked as a Correction Officer since February 2006 and was assigned to the GRVC.
On multiple occasions during the past year, ROMAIN and PHILLIPS have smuggled marijuana into the GRVC and the OBCC and sold it to numerous inmates housed in those facilities who in turn sold it to other inmates. ROMAIN and PHILLIPS also smuggled scalpels and tobacco into the facilities and sold them to other inmates.
While ROMAIN and PHILLIPS worked independently from each other, both of them essentially supplied the inmates with marijuana in the same manner. In general, the defendants would contact the inmates’ wives and girlfriends via cellphone numbers provided to them by the inmates and arrange to pick up the marijuana, tobacco, and scalpels from them. ROMAIN and PHILLIPS charged the inmates a fee to bring them the marijuana, scalpels, and tobacco. The inmates then sold the marijuana and other contraband that ROMAIN and PHILLIPS supplied to them.
ROMAIN, 31, and PHILLIPS, 31, both of Brooklyn, New York, are each charged with one count of engaging in a conspiracy to distribute and possess with the intent to distribute a controlled substance and one count of distributing and possessing with the intent to distribute a controlled substance. They each face a maximum sentenced of 10 years in prison (five years on each count).
Mr. Bharara praised the investigative work of the DOI and the DEA’s New York Drug Enforcement Task Force, comprised of members of the DEA, the New York City Police Department, and the New York State Police.
This case is being handled by the Office's Public Corruption and Narcotics Units. Assistant United States Attorneys Carrie H. Cohen and Russell Capone are in charge of the prosecutions.
The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Austin Romain and Khalif Phillips Complaint
Manhattan U.S. Attorney Announces Proposed Settlement Agreement in Pension Benefits Class Action Lawsuit Against the City of New YorkRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States Attorney’s Office and the City of New York (the “City”) have entered into a settlement agreement (the “Proposed Settlement Agreement”) that, if approved by the Court, would resolve the issues raised in the class action lawsuit brought under the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”) alleging unlawful calculation of the pensionable earnings of New York City Police Department (“NYPD”) officers who have performed active military service since September 11, 2001.
Manhattan U.S. Attorney Preet Bharara said: “The Proposed Settlement Agreement is an important step forward in the process of ensuring that the brave men and women who unselfishly serve both their city and their country receive the pensions they have earned, will earn, and to which they are entitled. Under the law, these dedicated public servants should not be penalized with a reduction in pension benefits for fulfilling a service to their nation. This Office believes that the Proposed Settlement Agreement achieves the best possible result not only for NYPD officers, but for all employees of the City who have chosen or may in the future choose to devote themselves to military service, and we commend the City for reaching an agreement.”
According to the Amended Complaint filed in Manhattan federal court:
The United States filed the class action lawsuit on August 2, 2012 against the City, the NYPD, and the New York City Police Pension Fund on behalf of all current and retired NYPD officers who have performed active military service since September 11, 2001, or who will do so in the future. The suit alleges that the City unlawfully calculates the pensionable earnings of NYPD officers called to active military duty by relying exclusively on their base pay rate, instead of including the overtime or night shift differential compensation they would have earned had they not been on active military duty, as required by USERRA. As a result, service members are being deprived of pension benefits they would have been reasonably likely to receive, but for their military service.
The lawsuit came in the form of an amended Complaint to three separate lawsuits previously filed by the U.S. Attorney’s Office on behalf of David Goodman, Michael Doherty, and Robert Black, three NYPD officers who were called to active military service during the time they worked for the NYPD, and whose pension benefits were unlawfully calculated. In the course of discovery in these matters, the Government learned that approximately 1,500 officers were called to active military service since September 11, 2001. The United States then moved to amend Goodman’s complaint to raise allegations on behalf of a class of similarly situated individuals. On July 30, 2012, The Honorable Richard J. Sullivan ruled that Goodman could amend his complaint to assert a class action lawsuit against the City.
In addition to the NYPD, the Proposed Settlement Agreement encompasses all municipal workers who have performed active military service since September 11, 2011. The Proposed Settlement Agreement provides the following relief:
- All retired NYPD officers who are members of the proposed class will receive the past pension benefits that they are entitled to under USERRA, as well as have their future pension benefit payments adjusted to reflect any increase that results from the recalculation.
- All active NYPD officers who have been, or will be, called to active military service will have their future pensionable earnings calculated in accordance with USERRA, and can request in writing to have their past pensionable earnings recalculated.
- The City will implement the terms of the Proposed Settlement Agreement in all of the City’s other retirement systems so that every qualified municipal worker will have his or her pensionable earnings appropriately calculated under the law.
The Court must approve the Proposed Settlement Agreement in order for it to take effect.
The Proposed Settlement Agreement has been filed with the Court as part of the plaintiffs’ motion requesting that the Court conditionally certify a class of relevant retired NYPD officers; approve the Proposed Settlement Agreement and the forms of class notice to be sent to the NYPD Class Members notifying them of the settlement and of their other rights with respect to the class action; and set a date for a hearing on the fairness of the Proposed Settlement Agreement.
The Proposed Settlement Agreement can be found on the website of the United States Attorney for the Southern District of New York at http://www.justice.gov/usao/nys/pressreleases/June13/USERRASettlementAgreement.php. More information can also be obtained by calling the civil rights hotline number at (212) 637-0840, or e-mailing [email protected].
This case is being handled by the Office’s Civil Rights Unit. Assistant United States Attorneys Tara M. La Morte and Arastu K. Chaudhury are in charge of the case.
Goodman et al. v. City of New York et al. Settlement Agreement
Goodman Et Al. V. City of New York Et Al. Settlement AgreementRead the Press Release
Goodman et al. v. City of New York et al. Settlement Agreement