Southern District of New York

Preet Bharara, the United States Attorney for the Southern District of New York, announced that WADIH EL HAGE, a United States citizen, was resentenced today in Manhattan federal court to life in prison for his participation in al Qaeda conspiracies to murder U.S. nationals and government employees that culminated in the 1998 bombings of the U.S. Embassies in Kenya and Tanzania, and for lying to the grand jury and to federal agents about his association with al Qaeda before and after the bombings took place. EL HAGE, 52, was convicted of conspiracies to kill U.S. nationals; to murder U.S. government employees and internationally protected persons; and to destroy buildings and property of the United States on May 29, 2001, following a six-month trial before U.S. District Judge Leonard B. Sand. The jury also convicted EL HAGE of multiple counts of perjury for lying to the grand jury about his knowledge of, and association with, al Qaeda and its leaders and members, and three counts of making false statements to FBI agents regarding the same. On October 18, 2001, Judge Sand, sentenced EL HAGE to life imprisonment.

On appeal, the Second Circuit upheld the conviction and remanded for resentencing in light of the Supreme Court’s decision in United States v. Booker, concerning the federal sentencing guidelines. EL HAGE was resentenced today by U.S. District Judge Lewis A. Kaplan.

Manhattan U.S. Attorney Preet Bharara stated: “Today’s resentencing confirms the outcome this Office worked to ensure: that Wadih El Hage will spend the rest of his life in prison for his involvement in an international conspiracy to murder Americans which spawned the 1998 bombings that killed 224 innocent people.”

According to evidence presented at trial and documents previously filed in Manhattan federal court:

EL HAGE was a high-ranking associate of Usama Bin Laden who performed key functions for al Qaeda to advance the organization's terrorist goals, including facilitating the bombing of the U.S. Embassies in Kenya and Tanzania, killing 224 people. Among other things, El HAGE disbursed the al Qaeda payroll, procured equipment for the organization, and operated al Qaeda businesses, which provided cover for operatives and generated cash for the organization. He also provided false identification documents to the group so that operatives could travel undetected and participated in secret meetings with al Qaeda leaders, after which he carried messages from Bin Laden to other members of the organization. In his capacity as one of the leaders of al Qaeda's East Africa cell, EL HAGE conveyed Bin Laden’s order that the cell – which played a key role in the 1998 Embassy Bombings – prepare for military action. Both before and after the bombings took place, EL HAGE obstructed the investigation into al Qaeda by repeatedly lying to a federal grand jury in the Southern District of New York concerning his knowledge of and involvement in al Qaeda.

Mr. Bharara praised the investigative efforts of the Federal Bureau of Investigation, the U.S. Department of Justice’s National Security Division, the Tanzanian National Police, and the Kenyan National Police.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Sean S. Buckley and Aimee Hector are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Ronald T. Hosko, the Assistant Director of the Federal Bureau of Investigation, Criminal Investigative Division (“FBI”), announced today that the United States has filed a civil healthcare fraud lawsuit against NOVARTIS PHARMACEUTICALS CORP. (“NOVARTIS”). The Government’s Complaint seeks treble damages and civil penalties under the False Claims Act against Novartis for giving kickbacks, in the form of rebates and discounts, to 20 or more pharmacies in exchange for their switching transplant patients from competitor drugs to NOVARTIS’s drug, Myfortic. The lawsuit alleges that, as a result of NOVARTIS’s kickback scheme, Medicare and Medicaid have issued tens of millions of dollars in reimbursements based on false, kickback-tainted claims.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, using the lure of kickbacks disguised as rebates, Novartis co-opted the independence of certain pharmacists and turned them into salespeople for one of its drugs. And by allegedly hiding this illegal quid pro quo from physicians, patients, and federal healthcare programs, Novartis caused the public to pay tens of millions of dollars for kickback-tainted drugs that were dispensed by pharmacists who were in cahoots with the company. Novartis, as we allege, is a repeat offender, having settled healthcare fraud charges based on kickbacks less than three years ago.”

FBI Assistant Director Ronald T. Hosko said: “The FBI takes these allegations very seriously because of the potential impact to the nation’s healthcare system and to the public. These cases are one of the highest priorities of the FBI’s health care fraud program. We have established a centralized unit called the Major Provider Response Team to provide nationwide investigative assistance given the complexity of such investigations.”

The following allegations are based on the Complaint filed today in Manhattan federal court:

NOVARTIS markets and manufactures Myfortic, an immunosuppressant drug approved for use by patients who have undergone kidney transplants. NOVARTIS markets Myfortic to hospital centers and pharmacies that serve these transplant patients. Since 2005, NOVARTIS has orchestrated a scheme whereby it offered kickbacks, disguised as “performance” rebates and discounts, to 20 or more pharmacies with influence over prescription decisions. In exchange, those pharmacies committed to use that influence to “convert” (i.e., switch) patients to Myfortic from competitor drugs and/or to oppose the use of a cheaper, generic immunosuppressant drug.

In one case, according to a NOVARTIS manager, NOVARTIS offered a pharmacist in Los Angeles a “bonus” rebate equal to 5% of that pharmacist’s annual Myfortic sales, amounting to several hundred thousand dollars, to induce the pharmacist to “shoulder the burden” of switching 700 to 1,000 transplant patients to Myfortic. NOVARTIS found that it was highly profitable to pay pharmacies even 10% or 20% in kickbacks in exchange for switching transplant patients to Myfortic because, in the words of a Novartis manager, the “short term cost” bought NOVARTIS “a long term annuity.”

In an effort to actively conceal the quid pro quo, NOVARTIS documented its relationships with the pharmacies in rebate and discount contracts that omitted the agreements between NOVARTIS and the pharmacies to switch patients to Myfortic or keep them from switching to competitor drugs. For example, in discussing a potential kickback relationship with a national pharmacy, NOVARTIS and the pharmacy recognized that, although a basic objective of that relationship was the “conversion” of patients to Myfortic, NOVARTIS “cannot put this in writing.” Further, the pharmacies hid the financial benefits they stood to gain from physicians, patients, and the federal healthcare programs, and instead, presented their efforts to switch patients to Myfortic as unbiased professional judgments.

NOVARTIS’s kickback scheme violated the federal anti-kickback statute, which prohibits the offer or payment of rebates and other types of remuneration to induce the purchase or recommendation of any drug or service covered by Medicare, Medicaid, or another federal healthcare program. By orchestrating this scheme, NOVARTIS further caused the pharmacies to submit tens of thousands of claims to Medicare and Medicaid, resulting in those programs paying out tens of millions of dollars in reimbursements based on false claims tainted by kickbacks.

The Complaint seeks treble damages and penalties under the False Claims Act, 31 U.S.C. §§ 3729 et seq., for the tens of millions of dollars in reimbursements that Medicare and Medicaid paid for Myfortic shipments that resulted from NOVARTIS’s kickback scheme. In addition, the United States seeks compensatory damages under the common law theory of unjust enrichment for the tens of millions of dollars in profits that NOVARTIS has obtained as result of Medicare and Medicaid reimbursements for Myfortic.

Mr. Bharara praised the investigative work of the FBI’s Major Provider Response Team. He also thanked the Office of Inspector General at the U.S. Department of Health and Human Services and the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington D.C., for their extraordinary assistance in this case.

The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating healthcare and other types of frauds. Assistant U.S. Attorneys Li Yu, Ellen M. London, and Rebecca C. Martin are in charge of the case.

U.S. v. Novartis Pharmaceuticals Corporation - Complaint in Intervention (11 Civ 8196)

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), today announced the arrest of MELANIE FERREIRA for engaging in a series of frauds, which included cheating the Internal Revenue Service (“IRS”) out of nearly half a million dollars, and perpetrating a bank fraud scheme. FERREIRA was arrested by FBI and IRS agents this morning at her residence in Dutchess County, New York, and was presented this afternoon before U.S. Magistrate Judge Lisa M. Smith in White Plains federal court.

U.S. Attorney Preet Bharara said: “As alleged, Melanie Ferreira thumbed her nose at the IRS, stealing hundreds of thousands of dollars in refunds to which she was not entitled, and forged a check to satisfy a debt. We enjoy many rights and privileges in this country but not among them is the right to enjoy the fruits of law-abiding taxpayers’ money while evading the tax laws and defrauding the government and thereby your fellow citizens.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, the defendant committed tax fraud that was as unsophisticated as it was audacious. She simply lied about the amount of taxes already paid in 2008. The method of Ferreira’s alleged bank fraud may be tied to her questioning the legitimacy of the government. Regardless, she apparently had no qualms stealing from the treasury.”

IRS-CI Special Agent-in-Charge Toni Weirauch said: “The privilege of living in the United States carries certain responsibilities, one of which is that one must pay his or her fair share of taxes. Filing a false claim with the IRS is stealing, not only from the U.S. Treasury, but from all law-abiding taxpayers. Whether through claiming fictitious deductions, exemptions or withholding amounts, the charge is serious, and so are the consequences.”

According to the allegations in the Complaint unsealed today in White Plains federal

court:

On October 15, 2009, FERREIRA filed a U.S. Individual Income Tax Return, Form 1040, for the year 2008 (“2008 Return”). In her 2008 Return, she falsely reported interest income of $661,600 from three different banks. She then falsely claimed that she had paid taxes in the amount of $661,536 to the IRS for Tax Year 2008. On that basis, she claimed a refund of $440,924. In reality, she actually earned only $17 in interest income from those three banks. Furthermore, contrary to her claim on her 2008 Return that she had already paid $661,536 in federal taxes, she actually paid only $236.

On October 23, 2009, the IRS wired $440,924 to FERREIRA’s bank account.

The following spring, on April 15, 2010, FERREIRA tried to carry out the same type of scheme when she filed her Form 1040 for the year 2009, but this time, the IRS rejected her refund request.

In addition, FERREIRA also perpetrated a bank fraud scheme against the Bank of America (“BOA”), which was the bank that held the mortgage for her house in Dutchess County, New York (“House 1”). In May 2010, she caused a forged cashier’s check for $316,966.05, purporting to be drawn on the Federal Reserve Bank of Cleveland, Ohio (“Check 1”), to be sent to BOA in satisfaction of the mortgage on House 1. Believing that Check 1 was legitimate, BOA filed a satisfaction of mortgage with the Dutchess County Clerk’s Office. BOA subsequently determined that Check 1 was fraudulent and filed suit in New York State Supreme Court in order to have the mortgage reinstated.

Similarly, on June 2, 2012, FERREIRA sent a check in the amount of $305,000 (“Check 2”) to BOA, purporting to pay off the balance of her mortgage from BOA on House 1. When BOA tried to negotiate Check 2, it was returned since the originating bank account had been closed. On the memo line of Check 2, FERREIRA wrote, in red ink, “FOR DISCHARGE OF DEBT EFT ONLY.” On the back of the check, she wrote several lines in a different color of ink, including the following: “NOT FOR DEPOSIT; EFT ONLY; FOR DISCHARGE OF DEBT.”

FERREIRA’s scheme – sometimes known as an electronic funds transfer or “EFT” scheme – is a scheme often used by adherents to the Sovereign Citizens Movement, a group comprised of individuals who, although they reside in the United States, assert the position that they do not have to answer to any government authority, including courts, taxing entities, motor vehicle departments or law enforcement.

FERREIRA, 60, of Lagrangeville, New York, is charged with one count of wire fraud, one count of filing false claims with the IRS, and one count of bank fraud. She faces a maximum sentence of 55 years in prison and a maximum fine of $1,000,000, or twice the gross gain or gross loss from the offense.

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

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Jason P.W. Halperin 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. Melanie Ferreira Complaint

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 AYMAN RABADI , 52, of Yonkers, New York, was arrested yesterday by agents of the Federal Bureau of Investigation on charges of impersonating a Special Agent of the FBI. According the Complaint, filed in federal district court in White Plains today, from November 2010 to date, RABADI has, in at least three separate instances, falsely represented to others that he was a Special Agent with the FBI and offered them various forms of assistance including obtaining identification documents and obtaining the release of their relatives from jail.

Manhattan U.S. Attorney Bharara stated: “Rabadi’s ability to prey on vulnerable victims by pretending to be a federal agent came to an end today when he tried to extract money from a real federal agent.”

FBI Assistant Director-in-Charge Venizelos stated: "Rabadi took the easy road to fast money by impersonating an FBI agent. But the easy road was the crooked path that ultimately led to his arrest by the FBI."

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

An undercover FBI agent acting as the niece of one of RABADI’s victims paid RABADI $10,000 cash yesterday at a Yonkers restaurant. The money was, purportedly, a down payment towards the $300,000 RABADI had asked for in exchange for obtaining the release of one of the victim’s relatives from jail. RABADI was arrested immediately after leaving the restaurant and was in possession of the $10,000 cash. Also, RABADI has an extensive criminal history including a 2008 conviction in the state of New Jersey for the felony of Theft by Deception. In that case, RABADI created the false impression that there were criminal charges pending against the victim, that RABADI was connected to law enforcement, and that he could cause the dismissal of the charges against the victim for $75,000.

At his arraignment before U.S. Magistrate Paul E. Davison in White Plains this afternoon, Judge Davison ordered that RABADI be held without bail pending his next court appearance, a bail hearing on Tuesday, April 23, 2013, at 10 a.m.

If convicted on the charge in the Complaint, RABADI faces a maximum sentence of three years imprisonment and a $250,000 fine.

Mr. Bharara praised the work of the FBI in this investigation.

This case is being handled by the Office’s White Plains Division. Assistant United States Attorney Elliott B. Jacobson 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

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that ALWAR POURYAN and ODED ORBACH, two U.S. citizens, were found guilty of conspiring to provide material support to the Taliban and conspiring to acquire anti-aircraft missiles. The case arose from a U.S. Drug Enforcement Agency (“DEA”) undercover operation in which the defendants agreed to provide various military-grade weapons, including heat-seeking surface-to-air missiles, to an individual they believed to represent the Taliban. POURYAN and ORBACH were convicted after a two-week bench trial before U.S. District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara stated: “By agreeing to sell arms to a source they believed represented the Taliban, Alwar Pouryan and Oded Orbach betrayed their country, and all the U.S. citizens they were willing to put in harm’s way. Now they stand convicted and will pay the price for their crimes and their betrayal. I want to thank our international law enforcement partners for their extraordinary efforts and cooperation, in particular, the DEA, and the dedicated prosecutors from this Office for their outstanding work in prosecuting this case.”

According to evidence presented at trial and documents previously filed in Manhattan federal court:

Beginning in the fall of 2010, and continuing through their arrests on February 10, 2011, POURYAN and ORBACH communicated with a confidential source (the "CS") working with the DEA who purported to represent the Taliban. The communications occurred by telephone, via e-mail, and in a series of audio-recorded and videotaped meetings over several months.

During meetings in Ghana, Ukraine, and Romania beginning in November 2010, POURYAN and ORBACH, at different times, agreed to arrange the sale of weapons to the CS for the Taliban’s use against U.S. military forces in Afghanistan. At the meetings, POURYAN and ORBACH discussed weapons specifications, pricing, and the provision of training in the use and deployment of various weapons, including, among others, “Stinger” surface-to-air missiles, anti-tank missiles, grenade launchers, and M-16 assault rifles. POURYAN and ORBACH were informed that the surface-to-air missiles, in particular, were needed to protect Taliban heroin laboratories against attacks by U.S. helicopters. The defendants also offered to provide regular shipments of ammunition. In total, POURYAN and ORBACH agreed to provide over $25 million in weapons, ammunition, and training, and expected to make over $800,000 in commissions in connection with the transaction.

The evidence also included internal e-mail and Skype communications between the defendants, which showed them discussing the various weapons requested by the purported Taliban representative, drafting price lists and payment schedules for the weapons, and creating internal budget documents that reflected the expenses and anticipated income from the weapons deal. The evidence also included emails from ORBACH to third-party weapons suppliers seeking to obtain certain of the requested weapons.

Following the final meeting in Bucharest, Romania on February 10, 2011, POURYAN and ORBACH were arrested by Romanian authorities in coordination with the DEA. On April 29, 2011, the defendants were transferred by the Government of Romania to the custody of the United States to face charges in the Southern District of New York.

POURYAN, 38, of Phoenix, Arizona, and ORBACH, 55, of Highland Park, Illinois, each face a maximum sentence of life in prison and a mandatory minimum sentence of 25 years in prison for the anti-aircraft missile count. They also face a maximum sentence of 15 years for the material support count. The defendants are scheduled to be sentenced by Judge Buchwald on September 4, 2013.

The charges, arrests, transfers, and prosecution of the defendants were the result of close cooperation among the U.S. Attorney’s Office for the Southern District of New York, the Special Operations Division of the DEA, the DEA Warsaw Country Office, the DEA Ghana Country Office, the DEA Athens Country Office, the DEA SECI (South East European Cooperative Initiative Regional Center for Combating Transborder Crime), the Criminal Division’s Office of International Affairs and the National Security Division of the U.S. Department of Justice, the U.S. Attorney’s Office for the Northern District of Illinois, the U.S. Department of State, U.S. Immigration and Customs Enforcement, and the governments of Romania and Ukraine.

Mr. Bharara expressed his sincere gratitude for the work of the Romanian National Prosecutor’s Directorate for Investigating Organized Crime and Terrorism, the Romanian Prosecutor’s Office of the Court of Appeals, and the Romanian National Police Directorate for Investigating Organized Crime.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Christian R. Everdell, Aimee Hector, and Glen A. Kopp are in charge of the prosecution.

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 Thomas H. Mattox, the Commissioner of the New York State Department of Taxation and Finance (“DTF”), announced today the arrest of Jonathan Wally, an NYPD Police Officer, for tax fraud and identity theft offenses. WALLY was arrested yesterday in Bronx, New York, and presented in Manhattan federal court yesterday before U.S. Magistrate Judge James C. Francis IV.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Jonathan Wally was enforcing the law by day, and breaking it at night. Identity theft and tax fraud are urgent and widespread problems, and it is especially troubling when they are crimes committed by those entrusted with enforcing the law, as is alleged here.”

IRS Special Agent-in-Charge Toni Weirauch said: “IRS-Criminal Investigation is involved in this investigation for two reasons. First, IRS Criminal Investigation has made investigating stolen identity refund fraud a top priority. The filing of fraudulent tax returns using stolen identities can cause significant financial harm to the victims of ID theft, as well as a monetary loss for the U.S. Treasury. Secondly, no law enforcement officer is above any law; we have the same duty to pay our fair share of taxes as any other American citizen. IRS-Criminal Investigation is committed to ensuring that everyone pays their fair share.”

DTF Commissioner Thomas H. Mattox said: “I commend U.S. Attorney Bharara for his ongoing diligence in identifying and prosecuting tax fraud. It is particularly egregious when a police officer, whom we trust to enforce the law, is alleged to have used stolen identities to steal tax dollars for himself and his clients. Tax preparers are critical to the financial well-being of their clients, and we remind all taxpayers to be vigilant when selecting a tax professional.”

According to the Complaint unsealed yesterday in Manhattan federal court and statements made yesterday in court:

WALLY has been employed by the NYPD as a Police Officer assigned to the 34th Precinct located in the Washington Heights/Inwood section of New York, New York since 2003. Since at least 2008, WALLY also served as a tax preparer for individuals. Although the NYPD requires its Police Officers to obtain written authorization to engage in off-duty employment, WALLY never sought or obtained such authorization to work as a tax preparer.

From 2010 through April 2012, WALLY defrauded the IRS by causing it to issue tax refunds to other individuals based on fraudulent and false U.S. individual income tax returns (“tax returns”) prepared and filed by WALLY on behalf of those taxpayers.

During that time period and continuing through January 2013, WALLY further defrauded the IRS by preparing and filing fraudulent and false tax returns on his own behalf that failed to declare certain income, causing him to receive tax refunds to which he was not entitled.

In connection with the fraudulent tax return scheme, WALLY obtained personal identifying information of children and Social Security cards in the names of other children that he used to declare them as dependents on false and fraudulent tax returns he prepared and filed on behalf of others and himself.

As a result of the false and fraudulent tax returns prepared and filed by WALLY on behalf of other individuals, the IRS paid them at least $119,793 in fraudulent tax refunds. The false and fraudulent tax returns prepared and filed by WALLY on his own behalf caused the IRS to pay him at least $4,850 in fraudulent tax refunds. In addition, from 2010 up to and including the present, WALLY failed to pay the IRS at least $19,487 in income taxes that he owed based on income he earned as a tax preparer but failed to declare on his tax returns.

WALLY, 33, of Bronx, New York, is charged with five counts. Counts One and Two charge him with aiding and abetting the filing of a false and fraudulent tax return, and subscribing to a false and fraudulent tax return, respectively. Counts One and Two each carry a maximum sentence of three years in prison. Counts Three and Four charge WALLY with identify theft and Count Five charges WALLY with aggravated identity theft. Counts Three and Four each carry a maximum sentence of 15 years in prison, and Count Five carries a mandatory minimum sentence of two years in prison.

Mr. Bharara praised the investigative work of the IRS, DTF, the U.S. Drug Enforcement Agency, and the Internal Affairs Bureau of the New York City Police Department.

This prosecution is being handled by the Office's Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecution.

U.S. v. Jonathan Wally Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that THOMAS HAMPTON, formerly the Managing Director of Hampton Capital Markets, LLC (“Hampton Capital” or the “Fund”), pled guilty today in Manhattan federal court to commodities fraud in connection with an investment scheme in which HAMPTON concealed millions of dollars in losses he incurred trading various securities, including S&P 500 futures contracts tied to the S&P 500 stock index. HAMPTON was charged in December 2012, and pled guilty today before U.S. Magistrate Judge James C. Francis, IV.

Manhattan U.S. Attorney Preet Bharara said: “Thomas Hampton blatantly deceived his investors in a scheme that resulted in millions of dollars in losses for scores of people. His guilty plea today ensures that he will be punished for those deceptions and that, to the extent possible, his investor victims will be made whole.”

According to the charging instruments in this case and statements made in open court today at the plea proceeding:

From September 2010 through September 2011, HAMPTON was the Managing Director of Hampton Capital, an Arizona limited liability company that had more than $4 million in assets under management. Hampton Capital engaged in the business of buying and selling exchange traded funds (“ETFs”). An ETF is an investment fund that holds assets such as stocks, commodities or bonds, and typically tracks – or attempts to replicate the performance of – an underlying benchmark or index, such as the S&P 500 equities market index. Hampton Capital purported to utilize specially designed computer software to trade ETFs based on pricing inefficiencies. In his role as Managing Director, HAMPTON bought and sold various securities, including futures contracts, on behalf of the Fund.

When the Fund began to suffer substantial losses as a result of HAMPTON’s trading, he concealed those losses from investors by, among other things, falsely representing that the investments continued to earn profits. For example, HAMPTON provided monthly statements to investors as early as April 2011 that falsely reflected a positive return for the Fund instead of disclosing the actual losses suffered. Based on his misrepresentations and omissions, Hampton Capital investors did not seek to redeem or withdraw their investments. In fact, some investors provided additional investment capital. As a result of the scheme, more than 50 investors lost millions of dollars in the aggregate.

HAMPTON, 44, of St. Louis, Missouri, pled guilty to one count of commodities fraud. He faces a maximum sentence of 10 years in prison, and a fine of the greater of $1 million or twice the gross gain or gross loss from the offense. In connection with his guilty plea, HAMPTON agreed to forfeit the illegal proceeds of his crimes and will be ordered to pay restitution to the victims of his offense.

Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Commodity Futures Trading Commission for their assistance.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jillian B. Berman and Emil J. Bove, III are in charge of the prosecution.

U.S. v. Thomas Hampton Information

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the United States Drug Enforcement Administration (“DEA”), announced today the unsealing of charges against ANTONIO INDJAI, the head of the Guinea-Bissau Armed Forces, for conspiring to provide aid to the Fuerzas Armadas Revolucionarios de Colombia (the “FARC”), a South American paramilitary group long designated by the United States as a Foreign Terrorist Organization (“FTO”), by storing FARC-owned cocaine in West Africa; conspiring to sell weapons, including surface-to-air missiles to be used to protect FARC cocaine processing operations in Colombia against U.S. military forces; and conspiring to import narcotics into the United States; INDJAI has been the subject of a United Nations travel ban since May 2012 as a result of his alleged participation in the April 2012 coup d'état in Guinea-Bissau.

INDJAI’s co-conspirators Manuel Mamadi Mane and Saliu Sisse were apprehended in a West African Country on April 4, 2013, and thereafter transferred to the custody of the United States and transported to the Southern District of New York for prosecution. Co-conspirators Rafael Antonio Garavito-Garcia and Gustavo Perez-Garcia were apprehended in Colombia on April 5, pursuant to Interpol Red Notices, and remain in Colombia pending extradition to the United States. The case is assigned to U.S. District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, from his position atop the Guinea-Bissau military, Antonio Indjai conspired to use his power and authority to be a middleman and his country to be a way-station for people he believed to be terrorists and narco-traffickers so they could store, and ultimately transport narcotics to the United States, and procure surface-to-air missiles and other military-grade hardware to be used against United States troops. As with so many allegedly corrupt officials, he sold himself and use of his country for a price. The charges against Indjai, together with the recent arrests of his co-conspirators, have dismantled a network of alleged narco-terrorists, and once again showcased the extraordinary work of our DEA partners who, at great personal risk, travel across the globe to investigate and make arrests in these cases in order to protect the American people and American interests here and abroad.”

DEA Administrator Michele M. Leonhart said: “Today’s indictment reflects DEA’s commitment to securing our nation and protecting our citizens. These charges reveal how Indjai's sprawling drug and terror regime threatened the national security not only of his own country, but of countries across the globe. As the head of Guinea-Bissau's Armed Forces, Indjai had insider access to instruments of national power that made him an allegedly significant player in West Africa's dangerous drug trade. Partnering with individuals he believed to be part of a terrorist organization like the FARC served to expand Indjai's criminal activities and the damage he could cause. Due to our worldwide reach and unrelenting efforts, DEA and our partners took decisive action against this narco-terrorist and his network of facilitators."

According to the Indictment against INDJAI that was unsealed today and previously unsealed Indictments against his co-conspirators:

INDJAI became the head of the Guinea-Bissau armed forces in June of 2010. Beginning in the summer of 2012, he and his co-defendants communicated with confidential sources (the “CSs”) working with the DEA who purported to be representatives and/or associates of the FARC. The communications occurred by telephone, over e-mail, and in a series of audio-recorded and videotaped meetings over several months in Guinea-Bissau.

During meetings in Guinea-Bissau beginning in June 2012, and continuing through at least mid-November 2012, INDJAI, Mane, Sisse, Garavito-Garcia, and Perez-Garcia agreed to receive and store multi-ton shipments of FARC-owned cocaine in Guinea-Bissau. The defendants agreed to receive the cocaine off the coast of Guinea-Bissau, and to store the cocaine in storage houses there pending its eventual shipment to the United States, where it would be sold for the financial benefit of the FARC. The defendants further agreed that a portion of the cocaine would be used to pay Guinea-Bissau government officials, including INDJAI, for providing safe passage for the cocaine through Guinea-Bissau.

Also during those meetings, INDJAI, Mane, Sisse, and Garavito-Garcia agreed to arrange to purchase weapons for the FARC, including surface-to-air missiles, by importing them into Guinea-Bissau for the nominal use of the Guinea-Bissau military when in fact they intended to provide the weapons to the FARC.

For example, on June 30, 2012, during a recorded meeting in Guinea-Bissau with the CSs, Mane, Sisse, and Garavito-Garcia agreed to assist in the distribution of FARC cocaine by facilitating its shipment to Guinea-Bissau inside loads of military uniforms, and by establishing a front company in Guinea-Bissau to export the cocaine to the United States. In addition, Mane agreed to assist in obtaining weapons for the FARC by arranging a meeting with INDJAI. On July 2, 2012, at a recorded meeting with the CSs in Guinea-Bissau, INDJAI agreed to facilitate the shipment of cocaine to the United States through Guinea-Bissau and to procure weapons for the FARC, including surface-to-air missiles, knowing that the weapons would be used to combat United States forces operating in Colombia. During a recorded meeting in Guinea-Bissau with Mane, Sisse, Garavito-Garcia, and Perez-Garcia on November 13, 2012, a Guinea-Bissau military official advised one of the CSs that INDJAI would be ready to execute the weapons transaction once the FARC brought money to Guinea-Bissau, and that the anti-aircraft missiles to be sold to the FARC could be used against United States helicopters operating in Colombia.

INDJAI has been charged with one count of conspiracy to engage in narco-terrorism; one count of conspiracy to distribute five kilograms or more of cocaine, knowing or intending that the cocaine would be imported into the United States; one count of conspiracy to provide material support and resources to an FTO; and one count of conspiracy to acquire and transfer anti-aircraft missiles. Count One carries a mandatory minimum sentence of 20 years in prison and a maximum penalty of life in prison. Count Two carries a mandatory minimum sentence of 10 years in prison and a maximum penalty of life in prison. Count Three carries a maximum potential penalty of 15 years in prison. Count Four carries a mandatory minimum of 25 years in prison and a maximum potential penalty of life in prison.

The charges and investigation of these defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York, the Special Operations Division and the Foreign-Deployed Advisory Support Team of the DEA, the DEA Lisbon Country Office, the DEA Bogota Country Office, and the U.S. Department of Justice Office of International Affairs.

This prosecution is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorneys Aimee Hector and Glen Kopp 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. Antonio Indjai S6 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALI OKLU, a former New York City Police Department (“NYPD”) Officer, was sentenced today to 46 months in prison for participating in a scheme to illegally transport firearms, including M-16 rifles and handguns, and stolen goods across state lines. OKLU was sentenced by U.S. District Judge William H. Pauley III.

Manhattan U.S. Attorney Preet Bharara said: “Ali Oklu betrayed the NYPD and the fine men and women who serve there so honorably, even going so far as to conspire to bring firearms into New York where his brother and sister officers – as far as he knew – might have been potentially in the firing line. With his sentence today, he will now be punished for his crimes.”

According to the court filings and statements made in court:

From September 2010 to October 2011, OKLU participated in the transportation of firearms and what he believed were stolen goods across state lines. He was an active duty NYPD Officer at the time he committed the offenses. The firearms OKLU helped transport included three M-16 rifles, one shotgun, and 16 handguns, the majority of which had been defaced to remove or alter the serial numbers, and all of which had been rendered inoperable. The goods he helped transport, and that he thought were stolen, included 12 slot machines and thousands of cartons of cigarettes, as well as various counterfeit merchandise. In total, the goods that OKLU and his co-conspirators illegally transported carried a street value of approximately $1 million.

OKLU was recruited to join the conspiracy in early October 2010 by its leader and organizer, and his fellow NYPD Officer, William Masso. The trips in which OKLU participated included two trips to transport purportedly stolen slot machines from Atlantic City to New York; multiple trips to transport hundreds of cases of purportedly stolen cigarettes from New Jersey to New York; a trip to Virginia to take part in the purported theft of hundreds of cases of cigarettes from trucks parked outside a warehouse; and the final trip during which 20 firearms, many of which were defaced, and all of which were rendered inoperable, were transported interstate. In total, OKLU was paid $35,000 for his role in the transport of the firearms and purportedly stolen goods.

OKLU specifically discussed with his co-conspirators using their law enforcement credentials and applying their law enforcement expertise in preparing for and carrying out these schemes. For example, in a meeting in March 2011, Masso explained that they should carry their law enforcement badges during the operation and, if stopped, say they were police officers working off-duty to deliver items that had been purchased at an auction. The group also discussed using their specialized knowledge as law enforcement officers in determining the ideal vehicles to rent to transport the goods. OKLU specifically recommended that the group not travel together in the rental vehicles they used to transport the purportedly stolen goods in order to avoid raising the suspicion of law enforcement. During his guilty plea, OKLU admitted that he had knowingly transported what he believed were stolen cigarettes, slot machines, and other merchandise across state lines and had willfully transported firearms across state lines.

In addition to the prison term, Judge Pauley sentenced OKLU, 36, of Sunnyside, New York, to three years of supervised release and ordered him to pay a $7,500 fine and a $200 special assessment fee. Judge Pauley also imposed on OKLU an agreed upon forfeiture amount of $35,000 representing his share of the crime proceeds. Pursuant to OKLU's guilty plea, OKLU relinquished his interests in guns seized from him at the time of his arrest.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Internal Affairs Bureau of the NYPD.

This prosecution is being handled by the Office’s Public Corruption and Complex Frauds Units. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecutions.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today the appointments of Neil Corwin as Executive Assistant United States Attorney, Bonnie B. Jonas as Deputy Chief of the Criminal Division, Sarah Normand as Deputy Chief of the Civil Division, and Benjamin H. Torrance as Chief Appellate Attorney of the Civil Division.

Mr. Corwin joined the Office in 1995. Prior to being named Executive Assistant United States Attorney, he served as Deputy Chief of the Office’s Civil Division for the last decade. Mr. Corwin also served as Chief of the Civil Rights Unit from 2000 to 2003, and as an AUSA in the Civil Division from 1995 to 2000. Prior to joining the Office, Mr. Corwin worked for the New York City Law Department’s Affirmative Litigation Division. After law school, he clerked for the Honorable W. Arthur Garrity, Jr. of the U.S. District Court for the District of Massachusetts, and worked as an associate at Hogan & Hartson LLP in Washington, D.C. Mr. Corwin is a 1981 graduate of Amherst College and a 1985 graduate of the New York University School of Law.

Ms. Jonas joined the Office in 1997. Prior to being named Deputy Chief of the Office’s Criminal Division, she served as Senior Litigation Counsel since 2009 and as the Office’s Financial Fraud Coordinator for President Obama’s Financial Fraud Enforcement Task Force since 2010. During her tenure, Ms. Jonas has also served as the Chief of the General Crimes Unit, and as a member of the Securities and Commodities Fraud Task Force. Following law school, Ms. Jonas clerked for the Honorable Reena Raggi of the U.S. District Court in the Eastern District of New York and worked as an associate at Paul, Weiss, Rifkind, Wharton & Garrison in New York. She is a 1991 graduate of the Wharton School at the University of Pennsylvania, and a 1995 graduate of the Columbia University School of Law.

Ms. Normand joined the Office in 1999. Prior to being named Deputy Chief of the Office’s Civil Division, she served as the Division’s Chief Appellate Attorney since 2009, and Deputy Chief Appellate Attorney from 2004 to 2009. Prior to joining the Office, Ms. Normand clerked for the Honorable Sonia Sotomayor on the U.S. Court of Appeals for the Second Circuit, and worked as an associate in the environmental group at Dewey Ballantine. After law school, she also clerked for the Honorable Frank E. Schwelb on the D.C. Court of Appeals. Ms. Normand is a 1991 graduate of Georgetown University and a 1995 graduate of the Georgetown University Law Center.

Mr. Torrance joined the Office in 2002. Prior to being named Chief Appellate Attorney of the Civil Division, he served as the Deputy Chief Appellate Attorney from 2009 to 2013 and the Acting Deputy Chief Appellate Attorney in 2008. Prior to joining the Office, Mr. Torrance clerked for the Honorable Jed S. Rakoff of the U.S. District Court in the Southern District of New York from 2000 to 2001, and for the Honorable Merrick B. Garland of the U.S. Court of Appeals for the D.C. Circuit. He is a 1995 graduate of Harvard College and a 2000 graduate of Columbia Law School.

In making these appointments, Mr. Bharara stated: “These four talented and dedicated public servants have already made valuable contributions to this Office and to the residents of the Southern District, and I have no doubt they will continue to do so in their new positions.”

Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, Assistant Attorney General for the Tax Division, Department of Justice (“DOJ”), and Richard Weber, the Chief of Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced the indictment today of EDGAR PALTZER, a partner at a Swiss law firm (the “Swiss Law Firm”) and a registered attorney in the State of New York, and STEFAN BUCK, the head of private banking and a member of the executive committee at a bank headquartered in Switzerland (“Swiss Bank No. 1”). PALTZER and BUCK are each charged with one count of conspiring with U.S. taxpayer-clients and others to hide millions of dollars in offshore accounts from the IRS and to evade U.S. taxes on the income earned in those accounts.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Edgar Paltzer and Stefan Buck used their professional expertise to guide and encourage their U.S. clients to evade our tax laws. This is simply the latest in an increasingly long list of cases this Office has charged against foreign individuals and entities that allegedly conspired to violate U.S. tax laws, many of which have already been convicted.”

Assistant Attorney General for the DOJ’s Tax Division Kathryn Keneally said: “We learn new information every day about the use of foreign bank accounts to facilitate U.S. tax evasion. Those involved need to balance whether trying to hide money is worth the real risk of discovery and criminal prosecution. Time is running out.”

IRS-CI Chief Richard Weber said: “Today’s indictment is the latest action against foreign bankers and professionals who assist taxpayers with concealing from the IRS their offshore bank accounts and income generated in those accounts. International tax evasion is a high priority for IRS and through our investigative efforts, we are gaining access to more and more information on institutions and individuals involved in offshore tax evasion. IRS Criminal Investigation will use all of our enforcement tools to stop this abuse.”

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

PALTZER is a U.S.- and Swiss-trained lawyer who began to practice at the Swiss Law Firm in 1998, in the fields of international private client work, wealth transfer planning, successions, trusts and foundations, and eventually became a partner. PALTZER is licensed to practice in New York State.

In 2007, BUCK worked as a client adviser, and later, as the head of private banking at Swiss Bank No. 1, which provides private banking, asset management, and other services to clients around the world. In December 2012, BUCK became a member of Swiss Bank No. 1’s three-person executive committee.

In March 2009, UBS AG (“UBS”), a Swiss bank that provided private banking services to U.S. taxpayers, entered into a deferred prosecution agreement with the Department of Justice and admitted engaging in a conspiracy to defraud the IRS. In February 2012, Wegelin & Co. (“Wegelin”), another Swiss bank that provided similar services, was indicted by a grand jury in the Southern District of New York for its conduct in conspiring with U.S. taxpayers to evade taxes, and ultimately pled guilty. Between March 2009 and February 2012, Swiss Bank No. 1 experienced an increase of approximately 300% in clients who were U.S. taxpayers. Further, as of September 30, 2012, Swiss Bank No. 1 had approximately 2 billion Swiss francs in assets under management (“AUM”), equating to approximately $2.12 billion. Approximately 882.5 million Swiss francs of this AUM, equating to approximately $938 million, or approximately 44 percent of Swiss Bank No. 1’s total AUM, was held on behalf of U.S. taxpayers living in the United States.

PALTZER and BUCK conspired with various U.S. taxpayers and others to ensure that their clients could hide their Swiss bank accounts and the income generated in these accounts from the IRS. The defendants opened and managed undeclared accounts on behalf of U.S. taxpayers at Swiss Bank No. 1 and other Swiss banks. PALTZER and BUCK helped U.S. taxpayers open undeclared accounts at Swiss Bank No. 1 after these U.S. taxpayers had been informed by other Swiss banks that they had to close their undeclared accounts.

BUCK and PALTZER also helped to repatriate funds to the U.S. taxpayers from their undeclared accounts in Switzerland in ways that were designed to ensure that U.S. authorities would not discover these undeclared accounts. For example, PALTZER helped a U.S. taxpayer repatriate assets in the form jewelry in order to avoid detection of an account in Switzerland. BUCK attempted to dissuade a U.S. taxpayer with an undeclared account at Swiss Bank No. 1 from entering the IRS’s voluntary disclosure program. In substance, he told the taxpayer that the account did not need to be disclosed to the IRS because Swiss Bank No. 1 operated only in Switzerland, and the U.S. rules did not apply.

PALTZER, 56, a dual U.S.-Swiss citizen, and BUCK, 32, a Swiss citizen, both reside in Switzerland. Neither defendant has been arrested.

PALTZER and BUCK each face a maximum sentence of five years in prison, a maximum term of three years of supervised release, and a fine of the greatest of $250,000, or twice the gross pecuniary gain derived from the offense or twice the gross pecuniary loss to the victims.

Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation, which he noted is ongoing. He also thanked DOJ’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 Daniel W. Levy, Jason H. Cowley, and David B. Massey and are in charge of the prosecution.

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

U.S. v. Edgar Paltzer and Stefan Buck Indictment

One of the Enterprises Allegedly Laundered Tens of Millions of Dollars from Russia and the Ukraine through Cyprus Shell Companies and Bank Accounts into the United States

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced today the unsealing of charges against 34 alleged members and associates of two related Russian-American organized crime enterprises, including a Russian “Vor,” for a range of offenses including the operation of at least two international bookmaking organizations – or “sportsbooks” – that catered to multi-millionaires and billionaires in the U.S., Russia, and the Ukraine. One enterprise, the Taiwanchik-Trincher Organization, run by VADIM TRINCHER, is alleged to have laundered tens of millions of dollars from Russia and the Ukraine through Cyprus and into the U.S. The other enterprise, the Nahmad-Trincher Organization, run by ILLYA TRINCHER, the son of VADIM TRINCHER, is alleged to have been financed by, among other entities, a prestigious art gallery in New York City.

In connection with the Indictment unsealed today in the Southern District of New York, 29 defendants have been arrested in New York, Philadelphia, Detroit, and Los Angeles. The 20 defendants taken into custody today in New York were presented and arraigned in Manhattan federal court before U.S. Magistrate Judge James C. Francis, IV this afternoon. The remaining defendants arrested today will be presented in federal court in Philadelphia, Detroit, and Los Angeles this afternoon. An additional defendant, HILLEL NAHMAD, is expected to surrender in Los Angeles later today. The remaining four defendants – DONALD McCALMONT, BRYAN ZURIFF, WILLIAM EDLER, and ALIMZHAN TOKHTAKHOUNOV – are fugitives and are still being sought.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these criminal enterprises were vast and many-tentacled, with one of them reaching across the Atlantic to launder tens of millions of dollars from Russia to the U.S. via Cyprus and in some cases, back again. International money laundering is a serious offense, and we will do everything within our power to inhibit those who seek to sanitize the proceeds of crime through legitimate investment vehicles in this country from doing so.”

FBI Assistant Director-in-Charge George Venizelos said: “Today’s charges demonstrate the scope and reach of Russian organized crime. One of the principal defendants is a notorious Russian ‘thief-in-law’ allegedly directing an international conspiracy through Cyprus to the U.S. The defendants are alleged to have handled untold millions in illegal wagers placed by millionaires and billionaires, laundered millions, and in some cases are themselves multimillionaires. Crime pays only until you are arrested and prosecuted.”

IRS-CI Special Agent-in-Charge Toni Weirauch said: “International money laundering is not a victimless crime. Rather, it is a national and global threat that can provide criminal enterprises with resources to conduct further illegal activity. The laundering of illegal gambling proceeds, in particular, facilitates the underground, untaxed economy which, in turn, harms our nation’s economic strength.”

NYPD Commissioner Raymond W. Kelly said: “The subjects in this case ran high-stakes illegal poker games and online gambling, proceeds from which are alleged to have been funneled to organized crime overseas. The one thing they didn't bet on was the New York City police and federal investigators’ attention. I commend the NYPD Organized Crime Investigations Division and their partners in the FBI and U.S. Attorney Bharara's office for identifying and bringing the members of this organization to justice.”

According to the allegations in the Indictment unsealed today in Manhattan federal court and other court documents:

The Taiwanchik-Trincher Organization

The Taiwanchik-Trincher Organization is a nationwide criminal enterprise with strong ties to Russia and Ukraine. The leadership of the organization ran an international sportsbook that catered primarily to Russian oligarchs living in Russia and Ukraine and throughout the world. The Taiwanchik-Trincher Organization laundered tens of millions of dollars in proceeds from the gambling operation from Russia and the Ukraine through shell companies and bank accounts in Cyprus, and from Cyprus into the U.S. Once the money arrived in the U.S, it was either laundered through additional shell companies or invested in seemingly legitimate investments, such as hedge funds or real estate.

The Taiwanchik-Trincher Organization operated under the protection of ALIMZHAN TOKHTAKHOUNOV, who is known as a “Vor,” a term translated as “Thief-in-Law,” that refers to a member of a select group of high-level criminals from the former Soviet Union. TOKHTAKHOUNOV used his status as a Vor to resolve disputes with clients of the high-stakes illegal gambling operation with implicit and sometimes explicit threats of violence and economic harm. During a single two-month period, TOKHTAKHOUNOV was paid $10 million for his services by the Taiwanchik-Trincher Organization. TOKHTAKHOUNOV is also under indictment in the Southern District of New York for his alleged involvement in bribing officials at the 2002 Winter Olympics held in Salt Lake City, Utah.

Nahmad-Trincher Organization

The Nahmad-Trincher Organization is a nationwide criminal enterprise with leadership in Los Angeles, California, and New York City. The organization ran a high-stakes illegal gambling business that catered primarily to multi-millionaire and billionaire clients. The organization utilized several online gambling websites that operated illegally in the U.S. Debts owed to the Nahmad-Trincher Organization sometimes reached hundreds of thousands of dollars and even millions. One client, who lost approximately two million dollars to the organization, surrendered his plumbing company to the organization as payment of the debt.

The Nahmad-Trincher Organization was financed by, among others, HILLEL NAHMAD, a/k/a “Helly,” and the art gallery he operates in New York City, the Helly Nahmad Gallery. NAMHAD is also charged with conspiring to commit wire fraud in connection with the sale of a painting worth approximately $250,000.

The organization laundered tens of millions of dollars through various companies and bank accounts. It was assisted in its money laundering by RONALD UY, a branch manager at a bank in New York City. UY advised ILLYA TRINCHER on how to structure financial transactions so as to avoid bank reporting requirements.

Illegal Poker Rooms

The Indictment also charges various defendants with promoting and operating high-stakes illegal poker rooms in and around New York City, including EDWIN TING, MOLLY BLOOM, and EUGENE TRINCHER, who is the son of VADIM and brother of ILLYA. The poker games operated by the defendants resulted in gambling debts as high as hundreds of thousands of dollars.

A chart containing the ages, residency information, and charges against the defendants, as well as the maximum penalties they face is attached.

Mr. Bharara thanked the FBI, specifically the Eurasian Organized Crime Squad of the New York Office, IRS-CI, and the NYPD for their work in the investigation.

The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Harris Fischman, Peter Skinner, and Joshua A. Naftalis 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.

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

Click here to view chart(s)

U.S. v. Alimzhan Tokhtakhounov, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that LUCIANO MENDEZ-ROJAS was sentenced today in Manhattan federal court to 21 years in prison for sexually exploiting a child and distributing images and videos of child pornography over the Internet. MENDEZ-ROJAS pled guilty in June 2012. He was sentenced today by U.S. District Judge Paul A. Engelmayer.

Manhattan U.S. Attorney Preet Bharara stated: “By his conduct, Luciano Mendez-Rojas stole the innocence of one child and exploited countless others. We have zero tolerance for child predators like Mendez-Rojas and his ilk and will prosecute and punish them with the full force of the law.”

According to documents filed in this case and statements made in court:

In July 2011, MENDEZ-ROJAS and his co-defendant, Inocencia Ortega, engaged in

sexually explicit conduct in their home in the Bronx, New York, while their minor child filmed videos of the conduct at the direction of MENDEZ-ROJAS.

On February 9, 2011, MENDEZ-ROJAS distributed child pornography over the Internet

using file-sharing software.

In addition to the prison term, Judge Engelmayer sentenced MENDEZ-ROJAS, 39, a citizen of Mexico, to eight years of supervised release. He must also register as a sex offender. Ortega is scheduled to be sentenced by Judge Engelmayer on April 26, 2013 at 2:15 p.m.

Mr. Bharara praised the investigative work of Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the New York City Police Department.

The case is being handled by the Office’s General Crimes Unit. Assistant United

States Attorneys Kristy J. Greenberg and Daniel C. Richenthal are in charge of the prosecution.

ICE HSI encourages the public to report suspected child predators and any suspicious

activity through its toll-free hotline at 1-866-347-2423. This hotline is staffed around the clock

by investigators.

Suspected child sexual exploitation or missing children may be reported to the National Center for Missing and Exploited Children, an Operation Predator partner, at 1-800-843-5678 or http://www.cybertipline.com.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed and simultaneously settled a civil fraud lawsuit against Electrical & Electronic Controls, Inc. (“E&E”), a small distributor of electrical components, for knowingly supplying the United States Department of Defense (“DoD”) with non-conforming electrical and other parts critical to weapons performance and operation, that later turned out to be defective. The Complaint was filed on March 21, 2013 in Manhattan federal court and the settlement was approved Friday by U.S. District Court Judge William H. Pauley, III.

Manhattan U.S. Attorney Preet Bharara said: “As E&E admitted, they provided less expensive unapproved parts to our Department of Defense, conduct that jeopardized both the flawless functioning of our weapons system and the safety of those who operate it. This Office is committed to ensuring that the U.S. Government gets what it pays for, and pursues those who would mislead it.”

According to the allegations contained in the Complaint:

From 2004 through 2007, E&E bid on and entered into fourteen contracts with the DoD. Under those contracts, E&E was required to supply parts from specific manufacturers that had been vetted and approved by the DoD for the quality of their products. Instead, E&E knowingly supplied less expensive parts from unapproved sources to the DoD. Twelve of the 14 contracts involved Critical Application Items, i.e., items that are essential to weapon system performance or operation, or the safety of operating personnel. In addition, many of the substituted parts turned out to be defective and unusable, costing the DoD hundreds of thousands of dollars.

As part of the settlement, E&E admitted, acknowledged, and accepted responsibility for repeatedly substituting less expensive parts from unapproved sources, and misrepresenting the source of the parts it then supplied to DoD. E&E must also pay $250,000 to the United States under the False Claims Act.

Mr. Bharara praised the investigative work of the DoD in this case.

Assistant U.S. Attorney Jaimie L. Nawaday is in charge of the case.

Preet Bharara, the United States Attorney for the Southern District of New York, Mythili Raman, the Acting Assistant Attorney General for the Criminal Division, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest today of FREDERIC CILINS, a French citizen, for obstructing a grand jury investigation concerning alleged bribes paid for certain mining rights in the Republic of Guinea. CILINS was arrested yesterday in Jacksonville, Florida, and was presented in federal court in Jacksonville this afternoon. He was detained pending a detention hearing scheduled for April 18, 2013.

Manhattan U.S. Attorney Preet Bharara stated: “A grand jury can never learn the truth, and justice cannot prevail, where documents are intentionally destroyed and testimony is tainted by lies. As alleged, Frederic Cilins attempted to obstruct a significant investigation by corrupting evidence and testimony in precisely those ways. With today’s arrest, Mr. Cilins now must answer to the system he allegedly tried to obstruct.”

Acting Assistant Attorney General Mythili Raman said: “The Department of Justice considers efforts to obstruct grand jury and FBI investigations to be a serious threat to the due administration of justice. The Department will actively prosecute those found to be subverting our efforts to fight corruption.”

FBI Assistant Director-in-Charge George Venizelos: “As alleged, Cilins attempted to buy evidence he sought to destroy. The destruction of evidence was in furtherance of Cilins’s effort to obstruct an investigation into a bribery scheme. In effect, he was willing to commit bribery in an effort to cover up a bribery.”

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

Since January 2013, a federal grand jury sitting in the Southern District of New York has been conducting a criminal investigation into potential violations of the Foreign Corrupt Practices Act (“FCPA”) and money laundering related to a scheme in which a particular mining company (“Entity”) allegedly paid bribes to officials of a former governmental regime of the Republic of Guinea to win valuable mining concessions in the Simandou region of Guinea. The investigation is focused on, among other things, at least one individual who is a “domestic concern” within the meaning of the FCPA and also concerns certain proceeds that were wired to or through the Southern District of New York.

CILINS is a French citizen who has identified himself as a representative of the Entity. From at least March 2013 to the present, CILINS has repeatedly attempted to obstruct the grand jury investigation in conversations and meetings he has had with a cooperating witness (“CW”), the former wife of a now deceased high-ranking official in Guinea. Among other things, CILINS offered to pay the CW as much as $5 million if, in exchange, the CW would: provide, certain documents that CILINS knew had been requested from the CW by special agents of the FBI so that he could destroy them; and sign an affidavit containing numerous false statements regarding matters within the scope of the grand jury investigation. The documents that CILINS sought to destroy included original copies of contracts between the Entity and its affiliates and the CW, whose husband then held an office in Guinea that allowed him to influence the award of mining concessions. These contracts reflect an alleged corrupt deal in which the Entity offered to pay the CW’s company millions of dollars, among other benefits, with the understanding that, in exchange for these payments, the CW’s husband would undertake official action to help the Entity with respect to certain valuable mining concessions the Entity sought in the Simandou Region in Guinea.

In at least one meeting with the CW, which was recorded, when CILINS learned that a U.S. grand jury was investigating the Entity’s conduct, CILINS repeatedly said that the documents in the CW’s possession needed to be destroyed “urgently.” CILINS offered to pay the CW $200,000 and another $800,000 at a later date. Further, if the case was completed, and the Entity did not lose its business in Guinea, CILINS offered to pay the CW $5 million.

CILINS, 50, is a resident of France. He is charged with one count of witness tampering, which carries a maximum term of 20 years in prison; one count of destroying, altering, or falsifying records in a federal investigation, which carries a maximum term of 20 years in prison; and one count of obstructing a criminal investigation, which carries a maximum term of five years in prison.

Mr. Bharara praised the outstanding efforts of FBI in the investigation, which he noted is ongoing. He also thanked the Justice Department’s Office of International Affairs and Office of Enforcement Operations for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Elisha J. Kobre and Stephen Spiegelhalter of the Fraud Section of the Criminal Division are in charge of the prosecution.

Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

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

U.S. v. Frederic Cilins Complaint

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 arrests of RICHARD MELTZ, Chief of Police for the U.S. Department of Veterans Affairs, for the Bedford, Massachusetts Veteran Affairs Medical Center, and ROBERT CHRISTOPHER ASCH, a former high school librarian, for conspiracy to kidnap, torture, rape, and kill women and children. MELTZ was arrested yesterday afternoon and ASCH was arrested this morning by special agents of the FBI. MELTZ and ASCH will be presented today before U.S. Magistrate Judge James C. Francis IV in Manhattan federal court.

Manhattan U.S. Attorney Preet Bharara said: “The bone-chilling conduct alleged in this complaint is a chronicle of sadism and depravity that includes the defendants’ very real steps to carry out their plans to kidnap, torture, rape, and kill the women and children they targeted. As alleged, Richard Meltz and Robert Christopher Asch assiduously planned their plot in detailed conversations and alternately served as advisors and facilitators of the plan – Meltz provided ‘strategic advice’ and Asch conducted surveillance, and provided supplies including leather ties, a sleeping agent, instruments of torture, and a taser gun. The only thing that stood between these alleged kidnappers and their horrifying plot was the outstanding investigative teamwork of the FBI and the prosecutors in this Office.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, both of these defendants took affirmative steps to carry out the conspiracy to kidnap and torture women. Their actions were not confined to talking about these ghoulish plans. They acquired the tools to accomplish the deed, including a taser and the chemical means to anesthetize their victims. And they made detailed plans to use these instruments – plans that were foiled by the FBI’s intervention.”

According to the Complaint filed today in Manhattan federal court:

Between 2011 and October 2012, MELTZ, ASCH, and a co-conspirator, Michael Vanhise, who was previously indicted on kidnapping conspiracy charges, engaged in a series of electronic mail (“e-mail”) and instant message communications during which they discussed and planned in great detail the kidnapping, torture, and murder of women. In October 2012, FBI agents became aware of these communications. Specifically, they learned that Vanhise was sending e-mail and instant messages from various computers to solicit individuals, including MELTZ and ASCH, to kidnap, rape, and kill his wife, his sister-in-law, her children and his step-daughter. Vanhise eventually met with FBI agents, and told them that he sent MELTZ and ASCH photographs of his sister-in-law and her minor children. MELTZ and ASCH both expressed interest in kidnapping the proposed victims, and Vanhise provided MELTZ and ASCH with a location that was in close proximity to the kidnapping targets’ actual home address. In an e-mail exchange between MELTZ and Vanhise about this plan, MELTZ wrote: “we go over there she know you let’s [sic.]us in we choke her out tie her up throw her in the back of your car take her someplace and [rape and torture her].”

In October 2012, an FBI agent working in an undercover capacity (“UC-1”) contacted ASCH online and began discussions about kidnapping a woman, who, unbeknownst to the defendants, was also actually an FBI undercover agent (“UC-3”). UC-1 and ASCH met on a number of occasions in Manhattan, and during one such meeting on March 13, 2013, ASCH provided UC-1 with a bag of materials to be used during the kidnapping and torture of UC-3, including a ski mask, hypodermic needles, leather ties, chrome forceps, a three-page gun show itinerary, documents relating to a “leg-spreader” and “dental retractor” that ASCH claimed to have purchased, and the liquid form of doxepin hydrochloride, commonly used as a sleep agent. During the same meeting, ASCH, along with UC-1 and another FBI agent acting in an undercover capacity (“UC-2”), conducted surveillance of UC-3, the intended victim, as she left her purported work place. ASCH, upon viewing UC-3, said, “She has to die.”

ASCH also introduced UC-1 to MELTZ, who participated in multiple conversations with both UC-1 and ASCH about the conspiracy’s objective to kidnap and commit acts of violence against women. For example, after MELTZ and ASCH discussed the widespread availability of stun guns in gun shops in New Hampshire, where MELTZ lived, and at gun shows in Pennsylvania, and MELTZ provided advice about the use of a stun gun in the commission of the kidnapping offense, ASCH traveled from New York to Pennsylvania to attend a gun show and purchased a high-voltage taser gun.

Throughout this investigation, the FBI intercepted numerous phone calls during which MELTZ provided advice, information, and assistance to ASCH on how to avoid detection and minimize the risks associated with abducting and murdering a woman. Examples of the techniques suggested by MELTZ include the avoidance of toll roads, using rental cars, paying for “tools” in cash, looking for victims in desolate areas who are engaged in other activities (such as talking on the phone), abducting victims at night, and using disguises when first approaching a potential victim.

On April 14, 2013, MELTZ met with UC-1 at a location in New Jersey. This meeting was recorded and observed by FBI agents. At the meeting, MELTZ and UC-1 discussed the kidnapping and murder of UC-3. MELTZ advised UC-1 on how best to dispose of UC-3’s body, including how to transport it from the crime scene to a desolate location in the woods in upstate New York. MELTZ told UC-1 that given the weather at the time of year, if UC-3’s body were left in the woods, wild animals would likely find and destroy it before law enforcement could find it.

On April 15, 2013, ASCH met UC-1 in lower Manhattan to conduct surveillance of UC-3. UC-1 and ASCH previously had discussed ASCH giving UC-1 the tools ASCH had gathered to use for the kidnapping, so that UC-1 could take them to the location where UC-3 was to be brought following her abduction. ASCH brought to the April 15 meeting two bags of tools intended to be used in the kidnapping, rape, torture, and murder of UC-3, including but not limited to a taser gun, rope, a meat hammer, duct tape, gloves, cleaning supplies, zip ties, a dental retractor, two speculums, 12-inch skewers, pliers, a wireless modem, and a leg spreader.

ASCH, 60, of Manhattan, and MELTZ, 65, of Stanhope, New Jersey, and Nashua, New Hampshire, are each charged with one count of conspiracy to commit kidnapping, which carries a maximum sentence of life in prison, and a maximum fine of $250,000, or twice the gross gain or gross loss from the offense.

Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked the New Jersey State Police. Mr. Bharara added that the investigation is continuing.

This case is being handled by the Office's Violent Crimes Unit. Assistant United States Attorneys Hadassa Waxman and Brooke E. Cucinella are in charge of the prosecution.

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

U.S. v. Robert Christopher Asch and Richard Meltz Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAYMOND BITAR, the former Chief Executive Officer of Full Tilt Poker, pled guilty today to unlawful internet gambling and to conspiracy to commit bank fraud and wire fraud and was sentenced to time served by U.S. District Judge Loretta A. Preska. In pleading guilty, BITAR admitted to working with others to defraud his poker customers by lying to them about the security of their funds and falsely promising players that their funds would be protected in “segregated” accounts. In connection with his plea and sentencing, BITAR agreed to forfeit $40 million dollars in money and other property derived from his offenses. In sentencing BITAR, Judge Preska made clear that she would have imposed a substantial term of imprisonment had it not been for the fact that BITAR has an extremely serious heart condition and is in urgent need of a heart transplant.

Manhattan U.S. Attorney Preet Bharara said: “With his guilty plea and sentencing today, former Full-Tilt Poker CEO Raymond Bitar now stands convicted and must forfeit tens of millions of dollars in ill-gotten gains in connection with the massive fraud his company orchestrated against the U.S. banking system and the scheme that defrauded Full-Tilt Poker’s U.S. customers.”

The following allegations are based on the Superseding Information filed today in Manhattan federal court, the Superseding Indictment unsealed following the defendant’s arrest in 2012, and the Indictment unsealed on April 15, 2011 in which BITAR was initially charged, other documents previously filed in the case, and statements made in court:

In late 2006, Congress enacted the Unlawful Internet Gambling Enforcement Act ("UIGEA"), making it a crime to "knowingly accept" most forms of payment "in connection with the participation of another person in unlawful Internet gambling." Notwithstanding the enactment of UIGEA, Full Tilt Poker – a company founded by professional poker players in the U.S. in 2004 – contined to offer Internet gambling to U.S. residents, and took in an estimated $1 billion from U.S. residents through April 15, 2011. Because U.S. bankes were laregely unwilling to process payments for illegal Internet gambling, BITAR relied on fraudulent means designed to trick U.S. banks by disguising payments to Full Tilt Pker as payments unrelated to Internet gambling.

In order to encourage players to deposit money with Full Tilt Poker, BITAR directed Full Tilt Poker employees to falsely assure potential customers that player deposits would be held in segregated accounts that would be kept separate and distinct from the company’s operating accounts. In fact, Full Tilt Poker did not protect player funds in segregated accounts, and instead, used them for whatever purposes BITAR directed, including to pay him and other owners millions of dollars. Because player funds were being used to cover operating expenses, Full Tilt Poker experienced an increasing shortfall between the cash it had in its bank accounts and the money it owed to players. For example, by early November 2010, Full Tilt Poker owed its customers approximately $344 million but had only approximately $145 million in all of its bank accounts. To conceal this financial shortfall, BITAR directed Full Tilt Poker employees to misrepresent how much cash the company had on hand. Among other things, Full Tilt Poker

Further, to prevent players from learning about Full Tilt Poker’s shaky finances and to induce them to continue gambling with Full Tilt poker, BITAR concocted a scheme in which Full Tilt Poker players were led to believe they were gambling real money when in actuality they were gambling with “phantom” online credits. As explained in greater detail in the Superseding Indictment, in the fall of 2010, Full Tilt Poker lost its ability to reliably collect deposits from U.S. bank accounts. Rather than terminate its U.S. operations – an option that would likely have exposed the fact that Full Tilt Poker was not holding player cash in segregated accounts, and was holding less than half of the money it owed players – BITAR arranged for Full Tilt Poker to continue approving player deposits, and to award credit to depositors even though Full Tilt Poker had not actually collected the money from players and had no ability to do so. As United States players gambled and won or lost these phantom funds – ultimately totaling over $130 million – Full Tilt Poker would list the phantom funds on players’ online account statements, even though the funds were never collected, or available to pay the winning players.

Only weeks before U.S. law enforcement took action against Full Tilt Poker in April 2011, Full Tilt Poker’s internal financial statements reported $390 million in debts to players but only $60 million in its bank accounts. As players around the world began demanding their funds from Full Tilt Poker following the law enforcement action, rather than suspend operations, BITAR lured players to continue gambling with Full Tilt Poker by continuing to promise them that their funds were safe. In actuality, BITAR was using new customer deposits to pay off some of the backlog of player requests to withdraw funds and to cover the company’s operating expenses, including salary for himself and others. In effect, Full Tilt Poker operated what was, by then, nothing more than a Ponzi scheme. When the scheme finally collapsed, Full Tilt Poker was unable to pay players the approximately $350 million it owed them.

BITAR, 41 of Glendora, California, was also ordered to pay a $200 special assessment fee.

Mr. Bharara thanked the Federal Bureau of Investigation for its outstanding work in the investigation, which he noted is ongoing. He also thanked Immigration and Customs Enforcement’s Homeland Security Investigations New York and New Jersey offices for their continued assistance in the investigation.

BITAR is the eighth of the eleven defendants charged in connection with the original Internet poker indictment to have been arrested, all of whom have pled guilty. In addition to BITAR they are: Bradley Franzen, Ryan Lang, Ira Rubin, Brent Beckley, Chad Elie, John Campos and Nelson Burtnick. Charges are still pending against the remaining three defendants – Isai Scheinberg, Paul Tate and Scott Tom – who are at large, and are presumed innocent unless and until proven guilty.

This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Arlo Devlin-Brown, Niketh Velamoor, and Nicole Friedlander are in charge of the criminal case, and Assistant U. S. Attorneys Sharon Cohen Levin, Jason Cowley, Andrew Goldstein, Michael Lockard and Christine Magdo are in charge of related civil money laundering and forfeiture actions.

U.S. v. Raymond Bitar S1 Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that HERAYER BAGHOUMIAN was sentenced today to 135 months in prison for his role in a $100 million massive Medicare fraud scheme. BAGHOUMIAN pled guilty to racketeering in March 2012, and was sentenced today by U.S. District Judge Paul G. Gardephe.

Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence, Herayer Baghoumian becomes the latest defendant who took part in this widespread fraud to be punished for his conduct. At a time when the Medicare trust fund is under great strain, his conduct is particularly egregious.”

According to the Indictment and other documents filed in this case:

From 2006 through 2010, BAGHOUMIAN and others participated in a nationwide Medicare scam that fraudulently billed Medicare for over $100 million. As part of the conspiracy, the defendant created dozens of “phantom clinic” health care providers that existed only on paper, had no doctors, and treated no patients. The scheme involved at least 118 fraudulent Medicare providers that were located in approximately 25 states, and that submitted fraudulent bills for at least approximately $100 million, and received approximately $35.7 million in reimbursements from Medicare.

In addition to his prison term, Judge Gardephe sentenced BAGHOUMIAN, 57, of Burbank, California, to three years of supervised release, and imposed a $100 special assessment fee. Judge Gardephe also ordered BAGHOUMIAN to forfeit $472,545, and property he acquired with the proceeds of the crime, including two homes in California and a Maserati.

Of the 28 defendants charged in U.S. v. Armen Kazarian, et al., 16 have now been sentenced. Six others have pled guilty and are awaiting sentencing. Charges have been dismissed against one defendant, and remain pending against five defendants. The charges pending against the five outstanding defendants are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

Mr. Bharara thanked the Federal Bureau of Investigation, the New York City Police Department, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and the U.S. Department of Health and Human Services for their work in the investigation.

The prosecution is being handled by the Office’s Organized Crime Unit. Assistant U.S. U.S. Attorneys Jennifer Burns and Harris Fischman are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York 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 additional charges against 12 alleged members of drug trafficking crews based in the vicinity of Allerton Avenue Co-ops and the Parkside Houses in the Bronx, New York. Eleven of the 12 defendants are charged with conspiracy to distribute crack cocaine, and possessing, brandishing and discharging firearms in connection with, and in furtherance of, the charged crack cocaine conspiracy. In connection with the crack cocaine conspiracy, ARMANI CUMMINGS is charged with the January 2010 murder of Lequan Jones, and the June 2010 murder of Carl Copeland, both of whom were shot in the Bronx. BRYAN RHODES is also charged with Copeland’s murder. JOSE MUNOZ is charged with the December 2011 murder of Shameek Young, who was shot in the Bronx. In addition, JESSIE MCCOLLUM is charged with a non-fatal, drug-related shooting in the Bronx on that same day. Finally, MUNOZ is also charged with conspiracy to commit Hobbs Act robbery, participation in a Hobbs Act robbery, and his use of a firearm in connection with, and in furtherance of, it.

Nine of the defendants are already in custody in connection with charges contained in previous Indictments related to this prosecution, which led to the arrests of 63 individuals and was the result of a coordinated operation involving federal, state, and local law enforcement officers. Two of the defendants were released on bail following their arrests in December 2011. One of the defendants remains at-large. The defendants will be arraigned today in Manhattan federal court before U.S. District Judge Victor Marrero on the charges in the Superseding Indictment at 2:00 p.m.

Manhattan U.S. Attorney Preet Bharara said: “The charges in this indictment once again put the nexus between drugs, guns, and fatal violence into stark relief. Through patient and painstaking work, the investigators and prosecutors targeted violent drug operations, charged drug crimes at first and eventually were able to charge drug-related murders, shootings and other violent crimes, which might have gone otherwise unaddressed. The law enforcement drumbeat will continue until we clean up the streets of our communities once and for all.”

FBI Assistant Director-in-Charge George Venizelos said: “The link between drug trafficking and gun violence could not be better illustrated than with this investigation. The defendants, initially charged with narcotics offenses, now stand charged with crimes of violence including three fatal shootings. Policing drug trafficking reduces the threat of gun violence. That is the reason the FBI and the NYPD work these cases.”

NYPD Commissioner Raymond W. Kelly said: “The charges announced today make clear the nexus between illicit drugs and violence, including murder, as well as the risk faced by police officers who work undercover to provide a modicum of safety to law abiding residents of public housing. I commend the NYPD detectives and the prosecutors in U.S. Attorney’s office for their thorough investigation.”

As alleged in the Superseding Indictment returned Wednesday and other documents filed in Manhattan federal court:

From 2006 through February 20, 2013, undercover officers with the NYPD made hundreds of purchases of “crack” cocaine from drug dealers in the Allerton Avenue Co-ops and Parkside Houses. During the buys, officers were able to purchase significant street level quantities of crack. In addition, members of the drug trafficking organization used firearms, threats of violence, and violence to secure and enforce their drug territory. This included the 2010 murder of Lequan Jones, the 2010 murder of Carl Copeland, and the 2011 murder of Shameek Young, all of which occurred in the Bronx. During the incident involving the fatal shooting of Young, an innocent bystander was shot and critically wounded.

A chart containing the ages, residency information, and charges against the defendants, as well as the maximum penalties they face is attached.

Mr. Bharara praised the outstanding investigative work of the FBI and the NYPD. He added that the investigation is continuing.

The prosecution of this case is being overseen by the Office’s Violent Crimes Unit. Assistant United States Attorneys Timothy D. Sini and Hadassa Waxman are in charge of the prosecution.

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

Click here to view chart(s)

U.S. v. Armani Cummings, et al. S7 Indictment

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”), Raymond W. Kelly, the Commissioner of the Police Department for the City of New York (“NYPD”), and Patricia A. Menges, the Director of the New York Asylum Office of the United States Citizenship and Immigration Services (“USCIS”), announced that attorney JOHN LIN pled guilty today in Manhattan federal court to one count of conspiring to commit immigration fraud. LIN is the eighth lawyer charged for his participation in a massive immigration fraud scheme involving thousands of fraudulent asylum applications that were allegedly submitted by at least 10 law firms in the New York City area. He pled guilty before U.S. Magistrate Judge Andrew J. Peck.

Manhattan U.S. Attorney Preet Bharara said: “For those seeking asylum from persecution in their native countries, United States immigration laws provide a vital escape hatch. Not only did John Lin abuse those laws and violate his duties as an officer of the court, but he also made it harder for legitimate asylum-seekers. We will continue to work with our law enforcement partners to identify and prosecute those who violate this country’s immigration laws.”

FBI Assistant Director-in-Charge George Venizelos: “Lin, a lawyer and officer of the court, violated the ethical obligations of his profession while breaking the law. Assisting others with their fraudulent asylum claims enabled them to enter the country under false pretenses. The scheme exploited a program designed to provide safe haven for real victims of persecution.”

NYPD Commissioner Raymond W. Kelly said: “It’s bad enough when new arrivals to this country are victimized by common criminals, but despicable when a member of the bar dishonors his sworn duties to exploit a system designed to protect some of the most vulnerable among us.”

USCIS New York Asylum Office Director Patricia A. Menges stated: “Asylum is a humanitarian protection that represents the best of American values. USCIS is committed to ensuring that criminals like Mr. Lin aren’t allowed to abuse this protection for personal gain. We appreciate the efforts of U.S. Attorney Bharara’s office, the NYPD, the FBI and USCIS’s Fraud Detection and National Security Program in helping us protect the integrity of this important program.”

According to the Information and other documents filed in this case:

LIN was an attorney at a law office located in New York City (the “Law Firm”). As part of the scheme, the defendant and his co-conspirators profited by creating and submitting asylum applications containing false stories of persecution, purportedly suffered by Chinese alien applicants.

The law firm made up stories of persecution that often followed one of three fact patterns: (a) forced abortions performed pursuant to China’s family planning policy; (b) persecution based on the client’s belief in Christianity; or (c) political or ideological persecution, typically for membership in China’s Democratic Party or followers of Falun Gong. Since 2006, the Law Firm has submitted more than 500 asylum applications.

LIN, 53, of Staten Island, New York, faces a maximum sentence of five years in prison and three years of supervised release. He is scheduled to be sentenced by U.S. District Court Judge Sidney H. Stein, on August 12, 2013 at 4:00 pm.

Mr. Bharara praised the investigative work of the FBI, NYPD, and USCIS.

The prosecution is part of Operation Fiction Writer, a joint investigation led by the United States Attorney’s Office for the Southern District, the FBI, the NYPD, and the USCIS. To date, 28 defendants, including eight lawyers, have been charged with participating in nine separate but overlapping immigration fraud schemes in New York City. Of the 28 defendants charged, two defendants – LIN and attorney Meng Fei Yu – have pled guilty. Charges against the remaining 26 defendants are merely accusations, and they are presumed innocent unless and until proven guilty.

This case is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Harris Fischman and Robert Boone are in charge of the prosecution.

U.S. v. John Lin Information

Preet Bharara, the United States Attorney for the Southern District of New York, today announced the guilty plea of KAREEM SERAGELDIN, the former Managing Director/Global Head of Structured Credit in the Investment Banking Division of Credit Suisse Group (“Credit Suisse”). SERAGELDIN was extradited from the United Kingdom on Friday, April 5, 2013, to face charges that he fraudulently inflated the prices of asset-backed bonds in Credit Suisse’s trading book in late 2007 and early 2008. The bonds were comprised of subprime residential mortgage backed securities (“RMBS”) and commercial mortgage backed securities (“CMBS”). Once discovered, SERAGELDIN’s manipulation of these bond prices contributed to Credit Suisse taking a $2.65 billion write-down of its 2007 year-end financial result. He pled guilty to conspiring to falsify the books and records of Credit Suisse before U.S. District Judge Alvin K. Hellerstein.

As a result of his manipulation, SERAGELDIN was able to secure significant year-end bonuses since the trading book’s profitability was one of the factors in determining bonus amounts. His 2007 bonus was over $1.7 million and his Incentive Share Unit Award was more than $5.2 million. The latter was rescinded after Credit Suisse discovered the alleged fraud. SERAGELDIN’s co-conspirators, David Higgs and Salmaan Siddiqui, previously pled guilty and are cooperating with the government’s investigation.

Manhattan U.S. Attorney Preet Bharara said: “While the real estate market was imploding and the financial crisis emerging, Kareem Serageldin and his co-conspirators concealed significant subprime mortgage-related losses in order to secure multi-million dollar paydays. Serageldin’s extradition to face charges for his role in this conspiracy and the guilty plea he entered today demonstrate, once again, that no one is above the law.”

The following allegations are based on the Indictment filed against SERAGELDIN and the Informations to which Higgs and Siddiqui pled guilty:

SERAGELDIN was employed at Credit Suisse as a Managing Director. He held the position of Global Head of the Structured Credit Group in the Securities Department of Credit Suisse’s Investment Banking Division, and divided his time between the company’s New York and London offices. The Structured Credit Group held and traded ABS (“Asset Backed Security”) cash bonds, which included RMBS and CMBS. SERAGELDIN oversaw and

managed a number of trading books, including a trading book known as “ABN1.” The ABN1 book was comprised primarily of several thousand individual long and short subprime-related positions, and also included other securities. The long positions consisted of, among other things, various types of cash securities, including AAA-rated and non-AAA-rated cash bonds. Until March 2008, ABN1 had a net asset value of approximately $5.35 billion, approximately $3.71 billion of which consisted of ABS cash bonds, including RMBS and CMBS positions.

Pricing of Mortgage-Backed Securities

Credit Suisse traders were required at all relevant times to price securities they held at their fair value, that is, on a “mark-to-market” basis, which was determined by reference to either the current market price of the asset or liability, or the current price for a similar asset or liability. In the absence of a liquid market, Credit Suisse traders were required to look to other indicia in order to determine the fair value of the assets on their books. During this time, the ABX Index served as a benchmark for certain securities backed by home loans. It was widely understood within Credit Suisse that traders were to consult the corresponding ABX indices when pricing RMBS bonds and related products.

The Bond Pricing Scheme

The deterioration throughout 2007 of the real estate market in the United States, including the subprime housing market, led to significant reductions in valuations of mortgage-backed securities. As mortgage delinquencies increased across the country, the value of the securities backed by these mortgages decreased and the market for them became increasingly illiquid.

By late November 2007, SERAGELDIN was aware that the market for mortgage-backed securities had declined enormously. On November 28, 2007, SERAGELDIN told Higgs, Siddiqui, and a co-conspirator (“CC-1”) that “the housing market [was] going down the tubes” and that they had to “find a way to sell these bonds,” i.e., mortgage-backed bonds in ABN1. As SERAGELDIN recognized, “[t]hose bonds are going to start trading worse than the [ABX] Index.” SERAGELDIN and his co-conspirators did not sell the bonds because the market prices for the bonds were substantially below the inflated value at which they marked the bonds.

From August 2007 through February 2008, SERAGELDIN, Higgs, Siddiqui, and their co-conspirators artificially increased the price of bonds in order to create the false appearance of profitability in the ABN1 trading book. Specifically, SERAGELDIN directed Higgs on numerous occasions to reach specific Profit & Loss (“P&L”) targets on a daily and month-end basis. Higgs, in turn, instructed Siddiqui and another unnamed co-conspirator to mark the books so as to achieve the particular P&L targets specified by SERAGELDIN, rather than to reflect the fair value of the bonds.

In order to reach specific P&L targets, SERAGELDIN, Higgs, Siddiqui, and their co-conspirators marked up bond prices without regard to fair market value; improperly offset mark-downs with gains realized in other parts of the book to avoid a P&L impact; and engaged in the practice of “reversing out,” which involved freezing marks at a favorable point in time to achieve a desired P&L result. In addition, as part of their scheme, SERAGELDIN, Higgs, Siddiqui, and their co-conspirators concealed their manipulation of bond marks from internal control personnel within Credit Suisse who were charged with independently ensuring the accuracy of bond prices, and they devised other ways to avoid detection of their fraud.

Credit Suisse’s ABN1 Trading Book Was Falsely Inflated as a Result of the Scheme

As a result of the scheme, there was a growing disparity between the values ascribed to the marks in the ABN1 book and the available external benchmarks, such as the ABX Index. From August 2007 through the end of that year, as ABX Index prices fell, bond prices in ABN1 that were supposed to reflect the ABX Index remained effectively stable, thereby giving the false impression to Credit Suisse senior management that the ABN1 book was profitable. On one occasion in January 2008, SERAGELDIN expressed concern to Higgs that the overpriced bonds were at risk of being discovered: “We should mark these down because someone is going to spot this,” he said.

The February 2008 Mark-Down

On March 20, 2008, Credit Suisse issued a press release which announced completion of its internal review and stated that the fair value reduction, or write-down, of the ABS positions – which included but was not limited to the ABNl book – was approximately $2.65 billion. Approximately $540 million of this write-down was attributable to the ABN1 trading book and included ABS cash bonds for the fourth quarter 2007 that SERAGELDIN manipulated and inflated in connection with his scheme.

SERAGELDIN, 39, a citizen of the United Kingdom, faces a maximum sentence of five years in prison and a maximum fine of the greater of $250,000, or twice the gross gain or loss from the offense. He is scheduled to be sentenced before Judge Hellerstein on August, 2, 2013 at 1:30 p.m.

Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance in the investigation of this case.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Eugene Ingoglia is in charge of the prosecution.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.

U.S. v. Kareem Serageldin Indictment
U.S. v. David Higgs and Salmaan Siddiqui Informations

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHRISTOPHER WILSON, a one-time Army private who was dishonorably discharged in 2003 after deserting his post, was sentenced today to four years in prison for filing dozens of false and fraudulent applications for unemployment benefits intended for other military veterans, ultimately obtaining approximately $143,000 to which he was not entitled. WILSON pled guilty in July 2012 to one count of theft of Government funds and one count of mail fraud. He was sentenced today by U.S. District Judge Andrew L. Carter, Jr.

According to the Complaint, the Information, WILSON’s plea agreement, statements made in court proceedings, and other public documents:

Federal law provides for a permanent program of unemployment compensation for unemployed individuals separated from the Armed Forces, called the Unemployment Compensation for Ex-Service Members Program (“UCX”). UCX benefits are funded by the U.S. Department of Defense and administered by the states on behalf of the U.S. Department of Labor (“DOL”). To qualify for UCX benefits, a claimant must provide his or her Certificate of Release or Discharge from Active Duty (known as a “DD Form 214”), and must have been discharged or separated from their respective service honorably.

Between August 2010 until his arrest in September 2011, WILSON conspired with others to file dozens of false and fraudulent applications for UCX benefits to which they were not entitled. They did so by obtaining the names and social security numbers of unknowing individuals; creating fraudulent DD Form 214s and other documents which purported to indicate that these individuals had served in, and been honorably discharged from, the military; and then submitting these fraudulent documents to states, including New York, in support of claims for UCX benefits. In so doing, WILSON received approximately $143,000 in benefits to which he was not entitled.

In addition to the prison term, WILSON, 33, of Spring Lake, North Carolina, was ordered to pay $143,000 in restitution to the New York State Department of Labor (“NYS DOL”).

Mr. Bharara thanked DOL, NYS DOL, and the Department of Defense, Defense Criminal Investigative Service for their assistance in the investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Edward B. Diskant is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States and the State of New York have entered into a $5.5 million settlement agreement with the trust responsible for winding up the affairs of Chapter 11 debtor MOTORS LIQUIDATION COMPANY (“Old GM”), formerly known as General Motors Corporation. The settlement agreement, which remains subject to public notice and comment and bankruptcy court approval, concerns environmental liabilities for damages to natural resources under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), at the Onondaga Lake Superfund Site in Onondaga County, New York. It was lodged in Manhattan bankruptcy court on Monday, April 8, 2013.

The agreement is the 13th and final agreement in a series of settlements resolving the environmental obligations and liabilities of Old GM. Those settlements have collectively resulted in recoveries or allowed claim amounts totaling approximately $904,500,000.

Manhattan U.S. Attorney Preet Bharara said: “This settlement, if approved, will provide significant additional money to pay for damage to natural resources at the Onondaga Lake Site. More broadly, this last settlement with Old GM and its successors wraps up an intensive, multi-year effort to secure appropriate payment for remediation and natural resource damages at sites that became contaminated as a result of decades of Old GM operations.”

According to a proof of claim filed by the United States in the Old GM bankruptcy, for over four decades, Old GM molded, painted, finished and assembled metal and plastic automobile parts at its Inland Fisher Guide facility, which was adjacent to a tributary of Onondaga Lake. The United States further alleged that Old GM discharged hazardous substances including PCBs that resulted in significant contamination. EPA’s claims at the site were previously settled for roughly $39.2 million. Under the terms of the separate agreement filed earlier this week, the settling governments will receive additional allowed claims in the total amount of $5.5 million to settle claims for damages to natural resources at the Onondaga Lake site. The U.S. Department of the Interior serves as joint natural resource trustee along with the State of New York and the Onondaga Nation.

Under the settlement, $1,232,323 of the $5.5 million amount will be recovered in full by offsetting against other obligations that the United States otherwise owed to Old GM, and the remaining $4,267,677 will be allowed as a general unsecured claim, to be paid in stocks and warrants of GENERAL MOTORS CORPORATION ("New GM") in an amount determined through the bankruptcy. The United States anticipates that, as a function of bankruptcy law, the New GM stocks and warrants received by the Department of the Interior and the other NRD claimants will have a cash value of less than the face amount of the allowed general unsecured claims.

In June 2009, Old GM – then the second-largest automotive manufacturer in the world – and three wholly-owned subsidiaries filed Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of New York. The same day it filed for bankruptcy, Old GM also filed a motion to sell substantially all of its assets to a newly formed corporation, now known as General Motors Company (“New GM”), which was approved by the Bankruptcy Court in July 2009. Old GM thereafter filed a plan of liquidation.

The United States filed proofs of claim against Old GM and its affiliated debtors for environmental liabilities at over 100 sites, and sought amounts due to fund remediation of environmental contamination at most of them. It also asserted natural resource damage claims at six of these sites. The United States previously settled its natural resource damage claims at five of these six sites for approximately $11.5 million; this latest settlement resolves the United States’ sixth and final natural resource damage claim against Old GM. All other United States environmental claims against Old GM have also been resolved.

In total, the United States has entered 12 previous settlements of Old GM=s environmental obligations. Among these settlements, in October 2010, the United States, certain States, and the St. Regis Mohawk Tribe entered into a $773 million settlement agreement with Old GM to resolve its liabilities at 89 sites owned by the debtors. In December 2010, the United States and certain States entered into six additional settlements totaling $25 million with Old GM to resolve its environmental liabilities at six other sites. In addition, in an agreement approved by the Bankruptcy Court on March 29, 2011, the United States on behalf of the Environmental Protection Agency (“EPA”) obtained an allowed general unsecured claim and rights to certain additional funds under environmental law provisions, in a combined total exceeding $50 million, and later settlements granted EPA allowed unsecured claims of more than $62.9 million against Old GM for remediation of contamination at various sites including the Onondaga Lake Superfund Site.

Before being considered by the Bankruptcy Court for approval under environmental laws, the settlement agreement will be lodged with the Bankruptcy Court for a period of 30 days to provide public notice and to afford members of the public the opportunity to comment. It is subject to the approval of U.S. Bankruptcy Judge Robert E. Gerber.

Mr. Bharara praised the U.S. Department of the Interior, the joint trustees at the Onondaga Lake Superfund Site, and the Environment and Natural Resources Division of the Department of Justice for their extraordinary work on this case.

This case has been handled by the Environmental Protection Unit and Tax and Bankruptcy Unit of the U.S. Attorney’s Office. Assistant U.S. Attorneys David S. Jones and Natalie N. Kuehler, along with Alan S. Tenenbaum and Patrick Casey of the Environment and Natural Resources Division of the Department of Justice, are in charge of this case.

GM Onondaga NRD Consent Decree and Settlement
GM Onondaga NRD Settlement - Notice of Lodging 4.8.2013

Preet Bharara, the United States Attorney for the Southern District of New York, and Eric T. Schneiderman, the New York State Attorney General, announced that PHILLIP SMITH was sentenced today in Manhattan federal court to 10 years in prison for running a large-scale identity theft scheme in which he and his co-conspirators used stolen identities of over 180 people to make more than $1 million worth of fraudulent purchases at retail stores in New York City and elsewhere. SMITH pled guilty in November 2012 and was sentenced before U.S. District Judge John F. Keenan.

Manhattan U.S. Attorney Preet Bharara stated: “Phillip Smith and his co-conspirators engaged in a ‘soup-to-nuts’ identity theft scheme that ripped off retailers for more than $1 million and had the potential to compromise his victims’ credit ratings. We take identity theft crimes very seriously and will continue to prosecute them to the full extent of the law.”

New York State Attorney General Eric Schneiderman stated: “This defendant victimized businesses and hundreds of New York consumers in a systematic and elaborate scheme to line his own pockets. My office will aggressively crack down on identity theft – and Phillip Smith will spend a decade behind bars for his crimes.”

According to the Complaint, Indictment, and Superseding Informations filed in this case, as well as statements made during court proceedings:

Beginning in 2008, PHILLIP SMITH obtained stolen identities, including the names and social security numbers of legitimate accountholders at large retail chains, including Home Depot, Sears, Kmart, and Kohl’s. After obtaining the stolen identities, SMITH called the customer service numbers at the retail stores to confirm that the victims had credit accounts and to determine the available credit limit. Once that information was obtained from the stores, SMITH procured fake driver’s licenses in the names of the victim accountholders but with photos of co-conspirators, including Eugene Smith and Winston Harris.

PHILLIP SMITH then drove his co-conspirators, including Harris and Eugene Smith, to retail stores throughout New York, Connecticut, New Jersey, and Pennsylvania, where they purchased more than $1 million of merchandise and gift cards using the victims’ accounts. The co-conspirators used the fake driver’s licenses at the time of those purchases to impersonate the victim accountholders.

PHILLIP SMITH obtained the fake driver’s licenses from Mahmoud Abdul Hussein, Ali Abdul Hussein, and Fadal Abdul Hussein, three brothers who operated out of two storefronts in the Greenwich Village area of Manhattan.

After the fraudulent purchases had been made, PHILLIP SMITH drove his co-conspirators, including Harris and Eugene Smith, to other locations of the retailers, where they returned the fraudulently acquired merchandise for store credits. The credits were then sold to other participants in the scheme, including Francis Hidalgo and Randy White, who in turn resold the store credits and gift cards to others.

In addition, Hidalgo used some of the proceeds and gift cards he obtained through the identity theft scheme to purchase building materials so that he could convert two warehouses in the Bronx into marijuana growhouses for a large marijuana distribution organization. A search of one of these growhouses resulted in the seizure of over 400 marijuana plants.

To date, eight of the nine defendants charged with participating in this scheme have been convicted. Charges remain pending against one defendant.

In addition to the prison term, Judge Keenan sentenced PHILLIP SMITH, 55, of the Bronx, New York, to three years of supervised release. SMITH was also ordered to forfeit $404,000 and to pay restitution of $1,153,000.

Francis Hidalgo, 45, of Pomona, New York, was sentenced by Judge Keenan on March 13, 2013 to 78 months in prison, and was ordered to pay $557,816 in restitution.

Randy White, 57, of the Bronx, New York, was sentenced by Judge Keenan on February 7, 2013 to time served, and was ordered to pay restitution in the amount of $46,000.

Winston Harris, 57, of Brooklyn, New York, was sentenced by Judge Keenan on January 24, 2013 to 48 months in prison, and was ordered to pay $70,000 in restitution.

Eugene Smith, 59, of the Bronx, New York, is scheduled to be sentenced by Judge Keenan on June 18, 2013.

Mahmoud Abdul Hussein, 28, Ali Abdul Hussein, 34, and Fadal Abdul Hussein, 23, of Seaford, New York, are scheduled to be sentenced by Judge Keenan on May 9, 2013.

Charges remain pending against Melissa Morton, who allegedly impersonated female identity theft victims at retailers. Morton is presumed innocent unless and until proven guilty.

Mr. Bharara praised the New York Attorney General’s Office, the Immigration and Customs Enforcement’s Homeland Security Investigations, the New York State Department of Financial Services, and the New Jersey Department of Human Services Police for their excellent assistance in the investigation of this matter. He also thanked the NYPD, the New Jersey Department of Labor and Workforce Development, Home Depot, and Kohl’s for their support and cooperation in the investigation.

The case is being handled by Assistant United States Attorney Joseph P. Facciponti of the

Office’s Complex Frauds Unit, Assistant Attorney General Meryl Lutsky, who has been

designated a Special Assistant U.S. Attorney, and Assistant Attorney General Tyler Reynolds.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that EARL SETH DAVID was sentenced today in Manhattan federal court to five years in prison for running an immigration fraud mill through his Manhattan-based law practice. As part of the scheme, DAVID and his co-conspirators applied for legal status for tens of thousands of illegal aliens based on phony claims that they had been sponsored for employment by U.S. employers. DAVID was indicted in October 2011, and extradited to the United States from Canada in January 2012. He pled guilty in April 2012 to one count of conspiracy to commit immigration fraud, and one count of conspiracy to commit mail and wire fraud. DAVID was sentenced today before U.S. District Judge Naomi Reice Buchwald.

Manhattan U.S. Attorney Preet Bharara stated: “Earl David abused his attorney’s license to exploit his alien clients who were seeking the American dream and to perpetrate a fraud on the federal government. He is now the 12th defendant in this sprawling scheme to be punished.”

According to the Superseding Indictment and statements made during court proceedings:

U.S. law permits an alien to petition for legal status if the alien has obtained a certification from the U.S. Department of Labor (“DOL”) certifying that a U.S. employer wishes to employ, or “sponsor,” the alien. An alien who obtains the DOL certification can then use it to petition the U.S. Citizenship and Immigration Services to obtain legal status in the United States.

From 1996 until early 2009, DAVID operated a Manhattan-based immigration law firm (the “David Firm”) that took in millions of dollars in fees from its alien-clients for purportedly securing them legal immigration status. In return for fees of up to $30,000 per alien-client, the David Firm applied for and obtained thousands of DOL certifications based upon phony employment sponsorships and fabricated documents, including fake pay stubs, fake tax returns, and fake “experience letters,” purporting to show that the sponsorships were real and that the aliens possessed special employment skill sets justifying labor-based certification by DOL. In reality, the sponsors had no intention of hiring the aliens, and the sponsor companies often did not even exist other than as shell companies for use in the fraudulent scheme. As a result of the fraud, DOL issued thousands of certifications, and immigration authorities granted legal status to thousands of the David Firm’s clients, when such adjustments were unwarranted and otherwise would not have been made. The Government has identified at least 25,000 immigration applications submitted by the David Firm – the vast majority of which have been determined to contain false, fraudulent, and fictitious information.

In furtherance of the scheme, DAVID and his employees recruited many people to participate, including dozens of individuals who, in exchange for payment, agreed to falsely represent to DOL that they were sponsoring aliens for employment; corrupt accountants who created fake tax returns for the fictitious sponsor companies; and a corrupt DOL employee who helped ensure that DOL certifications were granted based upon the fraudulent applications.

DAVID continued to operate the scheme even after he was suspended from the practice of law in New York State in March 2004. He fled to Canada in 2006 after learning that his firm was under federal criminal investigation. However, illicit profits from the scheme continued to be funneled to him in Canada, including through a bank account in the name of a biblical treatise he had authored entitled “Code of the Heart.” The David Firm ceased operations in early 2009, when federal search warrants were executed at several locations associated with the firm.

To date, a total of 26 individuals have been charged with participating in the scheme. Twenty-four defendants have been convicted, and two – Ali Gomaa and Sariel Sabale – remain fugitives. The charges against Ali Gomaa and Sariel Sabale are merely accusations, and the defendants are presumed innocent unless and until proven guilty. DAVID is the twelfth defendant to be sentenced.

In addition to the prison term, Judge Buchwald sentenced DAVID, 49, of New York, New York, to two years of supervised release. He was also ordered to forfeit $2.5 million, and to pay a $200 special assessment.

Mr. Bharara praised the work of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the U.S. Department of Labor’s Office of Inspector General, Office of Labor Racketeering and Fraud Investigations for their outstanding work in the investigation.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Janis Echenberg and James Pastore are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that a proposed settlement between the United States and AMBAC FINANCIAL GROUP, INC. (“AMBAC”), AMBAC ASSURANCE CORPORATION (“AAC”), the OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF AMBAC FINANCIAL GROUP, INC., the SEGREGATED ACCOUNT OF AMBAC ASSURANCE CORPORATION (the “Segregated Account”), the REHABILITATOR OF THE SEGREGATED ACCOUNT, and the WISCONSIN OFFICE OF THE COMMISSIONER OF INSURANCE (“OCI”) was submitted to U.S. Bankruptcy Court Judge Shelley Chapman for approval. AMBAC, as debtor in a Chapter 11 proceeding pending in the U.S. Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”), yesterday filed a motion in that court seeking approval of a proposed settlement with the United States that would resolve a dispute arising out of the tax accounting methods used by AMBAC to account for the credit default swap (“CDS”) contract losses it purportedly sustained in the wake of the 2008 financial crisis. If approved, the settlement will require AMBAC and AAC to pay the Government $101.9 million, with the possibility of future additional payments of up to $14.9 million. Under the proposed settlement, AMBAC also agrees to reduce its net operating losses attributable to the CDS contracts at issue by $1 billion.

Manhattan U.S. Attorney Preet Bharara said: “The proposed settlement reflects an extensive investigation into Ambac's reported financial losses and accounting methods in the wake of the financial crisis, and, if approved, will result in a significant recovery of Treasury funds. The settlement will also prevent Ambac from taking $1 billion in future offsets against its income and thus potentially reducing its tax burden by several hundred million dollars, a reduction to which it is not entitled.”

According to the allegations set forth in court filings submitted to the U.S. Bankruptcy Court and to the U.S. District Court in the Southern District of New York:

AMBAC is the New York-based holding company for the financial guaranty insurance company, AAC. Between 2005 and 2008, AAC entered into a number of CDS contracts with financial institution counterparties. Under the CDS contracts, AMBAC agreed to compensate the counterparties in the event of a loan default or other credit event related to their asset-backed securities investments in exchange for a periodic payment. Instead of reporting the income from the payments AMBAC received pursuant to the CDS contracts to the Internal Revenue Service (“IRS”) right away, AMBAC deferred the recognition of income until the end of the contracts, using the “wait and see” method of accounting for federal income tax purposes. Later, in the face of the economic downturn in 2008, AMBAC – without the consent of the IRS – then adopted an “impairment” method of accounting for its CDS losses on its federal income tax returns, which resulted in AMBAC reporting billions of dollars of CDS-related losses against its income between 2007 and 2009. AMBAC used the reported losses to obtain tentative tax refunds from the IRS of approximately $700 million, and sought to carry forward billions of dollars in additional losses to deduct against any income it would receive in the future. However, AMBAC was prohibited from changing its method of accounting for its CDS contracts because the accounting method AMBAC unilaterally changed to did not clearly reflect its income as required by law.

The proposed settlement would resolve more than two years of litigation related to AMBAC’s tax liabilities that had been proceeding simultaneously in the Bankruptcy Court, the United States Court of Appeals for the Seventh Circuit, and the Wisconsin state courts. Under the terms of the proposed settlement, AMBAC and AAC will pay the Government $101.9 million and reduce the amount of CDS-related net operating losses that can be carried forward for future tax years by $1 billion. To the extent that AAC utilizes any of the remaining CDS-related net operating losses in the future, AMBAC would make additional payments to the Government of up to approximately $14.9 million.

Mr. Bharara also praised the work of the attorneys in the U.S. Department of Justice Tax Division who handled related litigation involving AAC in the District of Wisconsin and Seventh Circuit Court of Appeals. DOJ Tax Division attorneys Robert Kovacev, Hilarie Snyder and Anthony Sheehan are in charge of the Wisconsin and Seventh Circuit cases.

In the Southern District of New York, the cases are being handled by the Tax and Bankruptcy Unit of the Office’s Civil Division. Assistant U.S. Attorneys Daniel P. Filor, Ellen London, and Carina H. Schoenberger are in charge of the litigation.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHRISTIANA M. FISHER, the former Executive Director of Ridgewood Bushwick Senior Citizens Council, Inc. (“RBSCC”), was sentenced today to one year of probation for permitting materially false documents about her compensation to be produced by RBSCC in response to a federal grand jury subpoena. FISHER previously pled guilty to one count of criminal contempt and was sentenced today by U.S. Magistrate Judge James C. Francis IV.

According to the Information, the plea agreement, and statements made in court:

In September 2010, while FISHER was serving as the Executive Director of RBSCC, a not-for-profit corporation located in Brooklyn, New York, RBSCC received a grand jury subpoena from the U.S. Attorney’s Office for the Southern District of New York. The grand jury subpoena requested documents related to a significant increase in FISHER’s compensation. FISHER was aware of board documents and tax filings that inaccurately stated that RBSCC’s board of directors had approved increases to her salary, and that the board did so based on an analysis of compensation paid to executive directors at comparable not-for-profit corporations.

FISHER participated in the process of producing documents in response to the grand jury subpoena. During that process, FISHER allowed the false board documents and tax filings to be provided to the Federal Bureau of Investigation (“FBI”) and this Office, and she understood that those documents misrepresented material facts. She also understood that allowing those documents to be produced would mislead the FBI and the U.S. Attorney’s Office in violation of the law governing the grand jury subpoena.

In addition to the sentence of probation, FISHER, 57, of Queens, New York, was ordered to pay a $2,500 fine and a mandatory $10 special assessment. She also has forfeited the amount of $170,659, which represents the amount RBSCC paid to her pursuant to the false board documents.

Mr. Bharara thanked the FBI and the New York City Department of Investigation for their assistance in this investigation.

This case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, Brian R. Crowell, Special Agent-in-Charge of the New York Division of the United States Drug Enforcement Administration (“DEA”), and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today that FRANCISCO ANTONIO HIRALDO-GUERRERO, a former Dominican military official and former chief of operations for the Dominican National Directorate for Drug Control (the “DNCD”), was extradited from the Dominican Republic on charges of conspiracy to import and distribute hundreds of kilograms of cocaine in the United States. HIRALDO-GUERRERO, a citizen of the Dominican Republic, arrived in the Southern District of New York on April 5, 2013. He was presented in U.S. Magistrate Court on Saturday.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, in a classic case of the ‘fox guarding the hen house,’ Francisco Antonio Hiraldo-Guerrero was a corrupt public official who exploited his position atop the Dominican Republic’s drug control office to facilitate the importation of massive quantities of cocaine into the United States. Corruption comes in many forms as does the harm it causes, and we will continue to fight it wherever we find it.”

DEA Special Agent-in-Charge Brian R. Crowell said: “The DNCD is equivalent to the DEA in the Dominican Republic and both law enforcement organizations' focus is on dismantling drug trafficking organizations while seizing illicit drugs and the profit off the sale. Hiraldo-Guerrero allegedly abused his ranking position within the military of the Dominican Republic and betrayed the public trust through his facilitation of drug trafficking. Hiraldo-Guerrero allegedly turned a blind eye to justice, but justice uncovered his alleged charges which brought him to face the consequences of his actions in the United States. The dedicated members of the Strike Force, the DEA Santo Domingo Country Office, and our law enforcement partners within the Dominican Republic worked together to bring him to justice.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Hiraldo-Guerrero allegedly abused his position in the Dominican military and the government's anti-narcotics unit to smuggle tons of cocaine into the United States. In cooperation with U.S. and international law enforcement entities, HSI is a partner in the fight against drug trafficking.”

According to the Indictment unsealed Friday and previously filed in Manhattan federal court:

From 2001 to May 2005, HIRALDO-GUERRERO conspired with others to import and distribute hundreds of kilograms of cocaine from the Dominican Republic to the United States. From 2007 to 2009, HIRALDO-GUERRERO also conspired with others to distribute hundreds of kilograms of cocaine knowing and intending that the cocaine would be imported into the United States.

For example, in September 2003, one of HIRALDO-GUERRERO’s co-conspirators (“CC-1”) sent approximately 300 kilograms of cocaine to New York. In addition, in November 2007, HIRALDO-GUERRERO assisted in the transportation of approximately 600 kilograms of cocaine from Colombia to the Dominican Republic by boat.

HIRALDO-GUERRERO, 53, is charged with one count of conspiracy to distribute cocaine and two counts of conspiracy to import cocaine into the United States. If convicted, he faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison. The case has been assigned to U.S. District Judge John F. Keenan.

Mr. Bharara praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which is comprised of agents and officers of the DEA, the New York City Police Department, ICE 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, the U.S. Secret Service, and the U.S. Marshals Service. Mr. Bharara also thanked the DEA’s Santo Domingo Country Office, the Government of the Dominican Republic, and the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance.

The case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Christian Everdell and Glen Kopp are in charge of the prosecution.

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

U.S. v. Francisco Antonio Hiraldo-Guerrero Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that NICOHLAS LAHINES was sentenced today in Manhattan federal court to five years in prison for manufacturing and dealing in explosives and firearms without licenses, conspiring to distribute methamphetamine, and immigration fraud. LAHINES pled guilty in February 2012, and was sentenced today by U.S. District Judge Kimba M. Wood.

Manhattan U.S. Attorney Preet Bharara stated: “It is bone-chilling to contemplate the damage that the improvised explosive devices Nicholas Lahines manufactured in his Connecticut home could have caused had he not been caught by law enforcement. These devices had the capacity to maim and kill many innocent people, and now he will serve a significant sentence for his crimes.”

According to the Complaint, the Indictment, the Information to which LAHINES pled guilty, the plea agreement, and statements made in Court:

During the spring of 2011, law enforcement officers came to suspect that an individual, later identified as LAHINES, was involved in the distribution of explosive devices, and they directed a confidential source (“CS”) to meet with him. After selling four cylindrical explosive devices to the CS for $3,200, LAHINES was arrested in the Bronx on May 19, 2011. During the sale of the devices, LAHINES discussed with the CS the components that he had used to make them – including ball bearings – and told the CS that he had added glass and metal to similar explosive devices in the past. LAHINES was then placed under arrest, and bomb technicians immediately took custody of the devices, which were determined to be live explosives.

Pursuant to a search warrant executed at LAHINES’s Connecticut residence, agents recovered tubes, cord-like material, and caps similar in appearance to those used to construct the devices that LAHINES sold to the CS. Agents also found a small jar containing powdery residue that detonated in the course of being examined, injuring a law enforcement officer.

In addition to his criminal activity relating to the manufacture and distribution of explosives, LAHINES participated in a conspiracy to distribute methamphetamine. In the course of their search, law enforcement officers found various items that are used in the illegal manufacture and distribution of methamphetamine, including hundreds of ephedrine tablets, in the trunk of his car.

LAHINES had also engaged in immigration fraud. Specifically, he filed false documents and other materials with the United States Department of Homeland Security, U.S. Citizenship and Immigration Service concerning his marriage.

In addition to his prison term, LAHINES, 38, of Bridgeport, Connecticut, was sentenced to four years of supervised release and ordered to forfeit $3,200. He was also ordered to pay a $400 special assessment fee.

Mr. Bharara praised the investigative efforts of the FBI’s Joint Terrorism Task Force (“JTTF”) in New York and Connecticut, especially those JTTF members from the FBI New York Field Office and the New York City Police Department, the Bronx District Attorney’s Office, the Connecticut State Police Department, the FBI New Haven Field Office, the trial attorneys with the U.S. Department of Justice’s National Security Division, and the U.S. Attorney's Office for the District of Connecticut. He also thanked Kimberly Mertz, the FBI Special Agent-in-Charge of the New Haven Field Office.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys John P. Cronan and Sean S. Buckley are in charge of the prosecution.

Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the United States Drug Enforcement Administration (“DEA”) announced that five defendants – JOSE AMERICO BUBO NA TCHUTO, the former head of the Guinea-Bissau navy; MANUEL MAMADI MANE; SALIU SISSE; PAPIS DJEME; and TCHAMY YALA – arrived in the Southern District of New York on April 4, 2013. In a related action, RAFAEL ANTONIO GARAVITO-GARCIA and GUSTAVO PEREZ-GARCIA, both Colombian nationals, were arrested in Colombia today pursuant to Interpol Red Notices. MANE, SISSE, GARAVITO-GARCIA, and PEREZ-GARCIA are charged with conspiring to engage in narco-terrorism; conspiring to import narcotics into the United States; and conspiring to provide aid to the Fuerzas Armadas Revolucionarios de Colombia (the “FARC”), a South American paramilitary group long designated by the United States as a Foreign Terrorist Organization (“FTO”), by storing FARC-owned cocaine in West Africa. MANE, SISSE, and GARAVITO-GARCIA are also charged with conspiring to sell weapons, including surface-to-air missiles, to be used to protect FARC cocaine processing operations in Colombia against U.S. military forces. NA TCHUTO, DJEME, and YALA face charges of conspiring to import narcotics into the United States. NA TCHUTO has been designated a drug kingpin by the U.S. Treasury Department. The five defendants in New York were presented in U.S. Magistrate Court today.

On April 4, 2013, the Drug Enforcement Administration’s (DEA) Special Operations Division (SOD), Bilateral Investigative Unit (BIU) Narco-Terrorism Group (NTG), working in conjunction with the DEA Lisbon Country Office and the DEA Bogota Country Office concluded a long-standing undercover operation conducted in Guinea-Bissau and elsewhere. The operation consisted of two separate undercover investigations. During the first part of the operation, NA TCHUTO, DJEME, and YALA were arrested on April 2 by the DEA Foreign-deployed Advisory Support Team (FAST) and the NTG off the coast of West Africa while onboard a vessel under DEA control in international waters. During the second part of the operation, MANE and SISSE were apprehended on April 4 in a West African Country and transferred thereafter to the custody of the United States. NA TCHUTO, DJEME, YALA, MANE, and SISSE were transported to New York for prosecution. GARAVITO-GARCIA and PEREZ-GARCIA remain in Colombia pending extradition to the United States.

Manhattan U.S. Attorney Preet Bharara said: “The narco-terrorism conspiracy alleged in these indictments shows the danger that can grow unchecked in far away places where unfortunate circumstances can allow narcotics traffickers and terrorism supporters to transact unseen at great risk to the United States and its interests. The link between narcotics traffickers and terrorists, their financers and supporters, needs to be broken wherever it is found. But thanks to the extraordinary efforts of our DEA partners, who have for years attacked the narco-terrorism threat, this conspiracy was thwarted and we can claim yet another victory in our unrelenting campaign against those who would harm Americans and American interests abroad.”

DEA Administrator Michele Leonhart said: “These DEA arrests are significant victories against terrorism and international drug trafficking. Alleged narco-terrorists such as these, who traffic drugs in West Africa and elsewhere, are some of the world’s most violent and brutal criminals. They have no respect for borders, and no regard for either the rule of law or who they harm as a result of their criminal endeavors. These cases further illustrate frightening links between global drug trafficking and the financing of terror networks. Thanks to the skilled work and bravery of our agents and law enforcement partners, these criminals will face accountability in a U.S. court for their heinous deeds.”

According to the Indictments against MANE, SISSE, GARAVITO-GARCIA, and PEREZ-GARCIA unsealed today:

Beginning in the summer of 2012, the defendants communicated with confidential sources (the “CSs”) working with the DEA who purported to be representatives and/or associates of the FARC. The communications occurred by telephone, over e-mail, and in a series of audio-recorded and videotaped meetings over several months in Guinea-Bissau.

During meetings in Guinea-Bissau beginning in June 2012, and continuing through at least mid-November 2012, MANE, SISSE, GARAVITO-GARCIA, and PEREZ-GARCIA agreed to receive and store multi-ton shipments of FARC-owned cocaine in Guinea-Bissau. The defendants agreed to receive the cocaine off the coast of Guinea-Bissau, and to store the cocaine in storage houses there pending its eventual shipment to the United States, where it would be sold for the financial benefit of the FARC. The defendants further agreed that a portion of the cocaine would be used to pay Guinea-Bissau government officials for providing safe passage for the cocaine through Guinea-Bissau.

Also during those meetings, MANE, SISSE, and GARAVITO-GARCIA agreed to arrange to purchase weapons for the FARC, including surface-to-air missiles, by importing them into Guinea-Bissau for the nominal use of the Guinea-Bissau military.

For example, on June 30, 2012, during a recorded meeting in Guinea Bissau with the CSs, MANE, SISSE, and GARAVITO-GARCIA agreed to assist in the distribution of FARC cocaine by facilitating the shipment of cocaine to Guinea Bissau inside loads of military uniforms, and by establishing a front company in Guinea Bissau to export the cocaine from Guinea Bissau to the United States. In addition, MANE agreed to assist in obtaining weapons for the FARC. On or about July 3, 2012, during another recorded meeting in Guinea Bissau, MANE, SISSE, and GARAVITO-GARCIA met with the Confidential Sources and a Guinea Bissau military representative and discussed the benefits of using Guinea Bissau as a transshipment point for cocaine obtained in South America and destined for the United States, the process for offloading the cocaine once it arrived in Guinea Bissau, and the nature of the weapons to be supplied to the FARC to combat American forces in Colombia, including surface-to-air missiles and AK-47 assault rifles with grenade launchers.

On August 31, 2012, during a recorded meeting in Bogota, Colombia, GARAVITO-GARCIA and PEREZ-GARCIA agreed to facilitate the receipt of approximately 4,000 kilograms of cocaine from the FARC in Guinea Bissau, approximately 500 kilograms of which would later be sent to customers in the United States and Canada. During a recorded meeting in Guinea Bissau with MANE and SISSE that took place on November 13, 2012, a Guinea Bissau military official advised one of the CSs that the weapons transaction could be executed once the FARC brought money to Guinea Bissau and that the anti-aircraft missiles to be sold to the FARC could be used against United States helicopters operating in Colombia.

According to the Indictment against NA TCHUTO, DJEME, and YALA also unsealed today:

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

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

MANE, SISSE, GARAVITO-GARCIA, and PEREZ-GARCIA have each been charged with one count of conspiracy to engage in narco-terrorism (Count One), one count of conspiracy to distribute five kilograms or more of cocaine, knowing or intending that the cocaine would be imported into the United States (Count Two), and one count of conspiracy to provide material support and resources to an FTO (Count Three). MANE, SISSE and GARAVITO-GARCIA are also charged with one count of conspiracy to acquire and transfer anti-aircraft missiles (Count Four). Counts One, Two, and Four each carry a maximum potential penalty of life in prison, and Count Three carries a maximum potential penalty of 15 years in prison. MANE and SISSE are next scheduled to appear before U.S. District Judge Jed Rakoff on April 9, 2013 at 11:30 a.m.

NA TCHUTO, DJEME, and YALA have each been charged with one count of conspiring to distribute five kilograms or more of cocaine, knowing or intending that the cocaine would be imported into the United States. The charge carries a maximum potential sentence of life in prison. NA TCHUTO, DJEME, and YALA are next scheduled to appear before U.S. District Judge Richard Berman on April 15, 2013 at 11:00 a.m.

The arrests and transfers of the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York, DEA’s SOD and FAST, the DEA Lisbon Country Office, the DEA Bogota Country Office, the U.S. Department of Justice Office of International Affairs, and the U.S. State Department.

This prosecution is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorneys Aimee Hector and Glen Kopp 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. Na Tchuto et al Indictment
U.S. v. Mane and Sisse Indictment
U.S. v. Garavito-Garcia and Perez-Garcia Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging DANIEL FAMA, an alleged Associate of the Gambino Organized Crime Family of La Cosa Nostra (the “Gambino Organized Crime Family”), with the 1990 murder of a suspected informant, Eddie Garofalo. FAMA was taken into custody yesterday, and was presented and arraigned in Manhattan federal court this afternoon before United States Magistrate Judge Kevin Nathaniel Fox. U.S. District Judge Andrew L. Carter, Jr. has been assigned to this case.

Manhattan U.S. Attorney Preet Bharara said: “More than two decades since Daniel Fama allegedly killed a suspected government informant, he has finally been arrested. Any attack against someone working with, or suspected of working with, law enforcement will be strongly answered, and no matter how long it takes we will bring alleged criminals to justice.”

FBI Assistant Director-in-Charge George Venizelos said: “The charges announced today allege once again that mob families are willing to commit murder to enforce the oath of Omerta. A person suspected of cooperation was gunned down at his doorstep to silence him. The charges also demonstrate the resolve of agents and prosecutors to fulfill their oath to enforce the law and see justice done.”

According to the allegations in the Indictment unsealed today in Manhattan federal court and other court documents:

The Gambino Organized Crime Family is a criminal organization whose members and associates engaged in numerous acts of violence, including murder. The head of the family is known as the “Boss,” and he is typically assisted by an “Underboss.” At all times relevant to the charges in the Indictment, John Gotti, Sr., was the Boss and Salvatore Gravano, a/k/a “Sammy the Bull,” was the Underboss of the Gambino Organized Crime Family.

The Gambino Organized Crime Family operates through groups of individuals known as “crews” and “regimes.” Each crew consists of “made” members, sometimes known as “Soldiers,” “wiseguys,” “friends of ours,” and “good fellows.” Soldiers are aided in their criminal endeavors by other trusted individuals, known as “Associates,” who sometimes are referred to as “connected” or identified as “with” a Soldier. Associates participate in the various activities of the crew and its members.

In 1990, Gravano ordered Associate FAMA and others to murder Eddie Garofalo for, among other things, purportedly cooperating with a law enforcement investigation into the Gambino Organized Crime Family. On August 8, 1990, FAMA and others shot and killed the Garofalo in front of his Brooklyn, New York, home.

FAMA, 48, of Staten Island, New York, is charged with killing a person with the intent to prevent that person from communicating to a law enforcement officer information related to the commission of a federal offense. The charge carries a mandatory term of life in prison.

Mr. Bharara praised the investigative work of the FBI.

The prosecution is being handled by the Office’s Organized Crime Unit. Assistant United States Attorneys Harris Fischman and Jason Masimore are in charge of the prosecution.

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

U.S. v. Daniel Fama, et al. Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, Helen R. Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), and David A. Montoya, Inspector General of HUD, announced today that the United States has filed a civil mortgage fraud lawsuit against GOLDEN FIRST MORTGAGE CORP. (“GOLDEN FIRST”), and its owner, operator, and president, DAVID MOVTADY. The Government’s Complaint seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) for years of misconduct in connection with GOLDEN FIRST’s participation in the Federal Housing Administration’s (“FHA’s”) Direct Endorsement Lender Program. The Complaint alleges that GOLDEN FIRST and MOVTADY intentionally, knowingly, and recklessly approved loans since 2002 that should never have been federally insured.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Golden First and David Movtady churned out bad loans and lied about their compliance with HUD requirements, leaving taxpayers on the hook for millions of dollars when the loans inevitably defaulted. This Office continues its work to hold the perpetrators of mortgage fraud accountable, as this latest complaint demonstrates.”

HUD General Counsel Helen R. Kanovsky said: “Our program depends on lenders properly originating FHA loans and certifying their compliance with our rules. Today’s complaint should send an unmistakable message that we will use the False Claims Act to protect working families and FHA’s insurance fund from allegedly unscrupulous lenders.”

HUD Inspector General David A. Montoya said: “The alleged utter disregard and willful failure to abide by the standards set by the FHA make this one of the worst examples of mortgage fraud that I have seen since becoming Inspector General. My office will continue its dedicated efforts to protect the integrity of FHA’s mortgage insurance program. Safeguarding HUD’s programs from exploitation and ensuring that they are managed with honesty, competency, and stewardship is our commitment to the public we serve.”

The following allegations are based on the Complaint filed today in Manhattan federal court:

GOLDEN FIRST was a participant in the Direct Endorsement Lender Program – a federal program administered by FHA – from 1989 until 2010. MOVTADY was the owner, president, and operator of GOLDEN FIRST from 1979 until 2010. As a Direct Endorsement Lender, GOLDEN FIRST had the authority to originate, underwrite, and certify mortgages for FHA insurance. If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the costs associated with the defaulted loan, which HUD must then pay.

Under the Direct Endorsement Lender program, HUD relies on lenders to properly review, underwrite, and certify loans before they are endorsed for FHA insurance. Direct Endorsement Lenders are required to follow HUD’s program rules, including certifying mortgages and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting. The quality control program requirements include maintaining a program independent of the lender’s business units; disclosing to HUD, within 60 days of initial discovery, all loans containing evidence of fraud or other serious underwriting problems; and conducting a full review of all loans that go into default within the first six payments GOLDEN FIRST and MOVTADY failed to comply with all three of these basic requirements.

Since 2002, GOLDEN FIRST and MOVTADY failed to maintain a quality control program independent of the company’s business units even though HUD expressly warned the company in 2005 that its quality control plan failed to conform to HUD requirements. Closing and selling loans trumped quality control, as GOLDEN FIRST employees closed loans at rates inconsistent with any semblance of due diligence, paid employees to expedite loan approvals, and spent minimal time on underwriting. GOLDEN FIRST and MOVTADY also did not meet their obligation to disclose to HUD all loans containing evidence of fraud or other serious underwriting problems. The defendants failed to pass on to HUD any such reports even though the default rate on the company’s loans exceeded 75% in 2008 and the company’s contractor advised it of significant deviations from HUD guidelines. In addition, GOLDEN FIRST and MOVTADY failed to conduct a full review of loans that defaulted within the first six payments, even though in 2008 nearly one of every three loans underwritten by GOLDEN FIRST defaulted shortly after closing. Notwithstanding these failures, MOVTADY fraudulently certified that GOLDEN FIRST “conforms to all HUD-FHA regulations necessary to maintain its HUD-FHA approval.”

In addition, GOLDEN FIRST and MOVTADY engaged in a regular practice of originating and underwriting FHA loans that GOLDEN FIRST and MOVTADY knew should have never been approved. GOLDEN FIRST certified that more than a thousand FHA loans met HUD’s requirements and were eligible for FHA insurance. In some instances, MOVTADY personally performed the underwriting and provided false certifications that the loans conformed to HUD’s requirements. Despite these certifications, GOLDEN FIRST and MOVTADY knew that the company’s underwriters routinely failed to perform basic due diligence, failed to verify information in the loan file that bore directly on the borrower’s ability to make payments on the mortgage, and repeatedly certified mortgage loans that contained serious defects and departures from HUD’s underwriting standards. The extremely poor quality of GOLDEN FIRST’s loans stemmed from GOLDEN FIRST’s and MOVTADY’s determination to increase volume and profits irrespective of the quality of the loans being originated.

As a result of GOLDEN FIRST’s and MOVTADY’s refusal to truthfully advise HUD of its failures to comply with HUD requirements, their false certifications to HUD, and their approval of loans that should never have been approved, FHA has paid more than $12 million in insurance claims on loans underwritten by GOLDEN FIRST and MOVTADY since July 2007. Claims for millions of additional dollars in defaulted loan obligations have not yet been, but likely will be submitted to HUD, and will likely result in additional Government expenditures stemming from defendants’ fraud.

The Complaint seeks treble damages and penalties under the False Claims Act, as well as FIRREA penalties for millions of dollars in insurance claims already paid by HUD for mortgages wrongfully certified by GOLDEN FIRST and MOVTADY. In addition, the United States seeks compensatory damages under the common law theories of gross negligence, negligence, and breach of fiduciary duty for the millions of dollars in insurance claims that HUD has paid, and expects to pay in the future, for mortgages wrongfully certified by GOLDEN FIRST and MOVTADY.

The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud, including mortgage fraud.

The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

Mr. Bharara thanked HUD and HUD-OIG for its assistance in this case. He also expressed his appreciation for the support of the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C.

Assistant U.S. Attorneys Lara K. Eshkenazi and Lawrence H. Fogelman are in charge of the case.

U.S. v. David Movtady and Golden First, Corp. Complaint

Second Assemblyman Cooperated in the Investigation and Has Agreed to Resign

Preet Bharara, United States Attorney for the Southern District of New York, and Robert T. Johnson, the District Attorney for Bronx County, announced today the unsealing of a Complaint charging New York State Assemblyman ERIC STEVENSON with accepting bribes in exchange for official acts. STEVENSON is charged with taking more than $22,000 in bribes from IGOR BELYANSKY, ROSTISLAV BELYANSKY (a/k/a “SLAVA”), IGOR TSIMERMAN, and DAVID BINMAN, all of whom are also charged, in exchange for STEVENSON’s official acts, which include drafting, proposing, and agreeing to enact legislation. Specifically, BELYANSKY, SLAVA, TSIMERMAN, and BINMAN, who were interested in operating and constructing adult day care centers in the Bronx, allegedly paid STEVENSON to sponsor, and ultimately cause to be enacted, legislation that would declare a three-year moratorium on the construction of adult day care centers in New York City, but from which their current centers would be exempted. In connection with one of the defendants’ adult day care centers on Jerome Avenue in the Bronx (the “Jerome Avenue Center”), STEVENSON is also alleged to have used his office to facilitate the issuance of a certificate of occupancy and the installation of a gas line. In addition, he is alleged to have held events in his official capacity to recruit senior citizens to attend a second center on Westchester Avenue in the Bronx (the “Westchester Avenue Center”). Four of the defendants were arrested this morning and the fifth, TSIMERMAN, self-surrendered . All of the defendants will be presented in Manhattan federal court later today.

Manhattan U.S. Attorney Preet Bharara said: “For the second time in three days, we unseal criminal charges against a sitting member of our state legislature. As alleged, Assemblyman Eric Stevenson was bribed to enact a statutory moratorium to give his co-defendants a local monopoly – a fairly neat trick that offends core principles of both democracy and capitalism, simultaneously, and it is exactly what the defendants managed to do. The allegations illustrate the corruption of an elected representative’s core function – a legislator selling legislation. And based on these allegations, it becomes more and more difficult to avoid the sad conclusion that political corruption in New York is indeed rampant and that a show-me-the- money culture in Albany is alive and well.”

Bronx County District Attorney Robert T. Johnson said: “The conduct alleged in these charges can only shake public confidence in those who have been entrusted to govern and deliver taxpayer funded services fairly and honestly. What is most disturbing here is that an elected official allegedly acted not only to personally enrich himself, but was willing to limit the community’s access to a needed service by advancing legislation designed to effectively bar any other providers of day care for seniors from operating in a specified geographical area.

While it is our hope that every prosecution of this type should help drive home the message that honest, hard-working citizens will not tolerate elected officials who serve themselves rather than the members of the communities who put them into office, the message is sometimes ignored. These bribes allegedly were solicited even with the knowledge of successful past prosecutions of a long list of corrupt politicians. If there is any good news regarding today’s arrests, it is that talented investigators, such as those in my office and the U.S. Attorney’s office, will continue to do everything possible to bring alleged betrayals of the public trust to light and those responsible to justice.”

According to the Complaint unsealed today in Manhattan federal court:

STEVENSON has served as a member of the New York State Assembly since 2011 representing District 79, which includes various neighborhoods in the Bronx. ASSEMBLYMAN-1 is another member of the New York State Assembly who has been cooperating in this investigation since January 2012. ASSEMBLYMAN-1 has been charged with multiple felonies in a sealed Indictment in Bronx County Supreme Court (the “Bronx Indictment”), but has entered into a non-prosecution agreement under which he has agreed to continue to cooperate and to resign his office with the New York State Assembly. BELYANSKY, SLAVA, TSIMERMAN, and BINMAN are individuals who, during 2012 and 2013, were seeking to open and manage adult day care centers in the Bronx, New York, including the Westchester Avenue Center, within STEVENSON’s Assembly District and the Jerome Avenue Center, within ASSEMBLYMAN-1’s District. During that time period, they made multiple bribe payments to STEVENSON and ASSEMBLYMAN-1, who was cooperating with the government at the time, in connection with efforts to open and operate both centers.

For example, at a meeting on July 23, 2012, STEVENSON, BELYANSKY, and TSIMERMAN discussed the opening of the Westchester Avenue Center. During this meeting, STEVENSON said that on the following Thursday, July 26, 2012 he was “having a night [event]” for “my reelection” and that [he needed] the support and help like everyone else.” Subsequently, on July 25, 2012, SLAVA provided a cooperating witness (the “CW”) with a check for $2,000 made out to STEVENSON’s political action committee, which the CW provided to STEVENSON.

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

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

During that meeting, the CW and STEVENSON also discussed the possibility of STEVENSON introducing legislation that would establish a temporary moratorium on the construction and/or opening of new adult day care centers (the “Moratorium Legislation”), which would have the effect of eliminating competition with the Jerome Avenue Center and the Westchester Avenue Center, thereby substantially increasing the profits earned by those two centers. STEVENSON told the CW: “All you gotta do is tell me what you want in the bill, and the bill drafter will put it together…I just need you to tell me what they [the co-defendants] want; we prepare the bill . . . . You can write down the language, basically what you want.” STEVENSON then asked: “Are Igor [BELYANSKY] and them putting together a nice little package [of money] for me, huh?” He said: “I got my inauguration I gotta take care of, I got a lot of sh*t man.” STEVENSON then said to the CW, in reference to the legislation, “I’m telling you, it’s done. It’s no problem.” Subsequently, the CW met with TSIMERMAN and BELYANSKY. TSIMERMAN said that as a result of the Moratorium Legislation, the value of their adult day care centers was “gonna skyrocket. . . . As long as [there’s a] moratorium, I can guarantee you at least a triple [in profits].”

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

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

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

STEVENSON introduced and sponsored Bill Number A05139, which places a temporary moratorium on the construction and/or opening of new adult day care centers within New York City on February 20, 2013 and it is currently pending before the New York State Assembly’s Committee on Aging. Two days later, in a meeting between the CW and BELYANSKY, TSIMERMAN and BINMAN, BELYANSKY said that the legislation would double the value of his share in the Jerome Avenue and Westchester Avenue Centers from approximately $350,000 to $700,000.

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

Charts containing the names, ages, residences, charges, and maximum penalties for the defendants are attached.

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

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

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

U.S. v. Eric Stevenson et al Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of charges against ALEXANDER GOLDSHMIDT, ALEX PUZAITZER, MICHAEL VAX, PAUL ORENA, YITZ GROSSMAN, EFIM AKSANOV, and STEVE KOIFMAN for their roles in a conspiracy to commit securities fraud and the extortion of a co-conspirator whom they believed owed them money and stock related to the scheme. Together, the defendants worked to fraudulently inflate the prices and trading volumes of publicly traded stock of small companies, also known as “penny stocks,” and then to sell shares of the stock at the fraudulently inflated prices to the investing public for a profit. GOLDSHMIDT, PUZAITZER, VAX, ORENA and GROSSMAN were arrested this morning in connection with today’s charges and were presented in Manhattan federal court before Magistrate Judge Kevin Nathaniel Fox this afternoon. EFIM AKSANOV and STEVE KOIFMAN were arrested in Florida and presented in federal court in the Southern District of Florida.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants preyed on unsuspecting investors by manipulating the share price of a publicly traded stock in a classic ‘pump and dump’ scheme that they thought would reap big dividends. But when their pot of gold failed to materialize, they allegedly turned on a co-conspirator with threats and extortion, showing that their greed was strong enough to make them turn to violence.”

FBI Assistant Director-in-Charge George Venizelos said: “Pump and dump schemes depend on unwitting investors who are deceived by grossly inflated claims about the stocks they are induced to buy. One group of victims in this case was those defrauded investors. But this was not white collar crime in the traditional sense. Another victim was the co-conspirator who, as alleged, was repeatedly threatened by the defendants with grievous harm to him and his family.”

The following allegations are based on the Complaint unsealed today in Manhattan federal court:

From 2012 through March 27, 2013, GOLDSHMIDT, PUZAITZER, VAX, ORENA, GROSSMAN, AKSANOV, and KOIFMAN conspired to commit securities fraud. As part of their “pump and dump” scheme, various defendants acquired control of a large block of shares of Face Up Entertainment Group, Inc. (“FUEG”), and then inflated the stock price and trading volume of FUEG before selling, or “dumping,” those shares at inflated prices to unsuspecting traders for a profit. FUEG was a publicly traded company that was purportedly involved in the reality gaming social network market with its principal place of business located in Valley Stream, New York. As captured through judicially authorized wiretap interceptions, the defendants coordinated control over a significant portion of FUEG shares and then promoted the stock through the dissemination of false press releases sent over the Internet. In addition, the defendants coordinated trading of FUEG shares to create the impression of increased trading volume to make FUEG appear to be an attractive purchase for unsuspecting investors. However, the defendants were unable to reap a profit from trading FUEG stock timed to the promotions, and their scheme ultimately failed.

As a result of the failed promotion of FUEG stock, GOLDSHMIDT, PUZAITZER, VAX, ORENA, GROSSMAN, AKSANOV, and KOIFMAN conspired to extort one of their co-conspirators, referred to as “CC-1” in the Complaint. In the summer of 2012, AKSANOV, KOIFMAN, GOLDSHMIDT and PUZAITZER met with CC-1 in New York, New York, and demanded that CC-1 pay them $350,000 and return shares of FUEG, or AKSANOV would “put slugs into” CC-1’s chest. In several subsequent telephone calls and meetings, various defendants continued to demand that CC-1 repay them for their stake in the failed FUEG scheme, or they would harm CC-1. During a meeting on or about March 5, 2013, GOLDSHMIDT, PUZAITZER, ORENA and VAX met with CC-1 at a hotel in New York City and further threatened CC-1 and CC-1’s family if CC-1 did not comply with their demands.

GOLDSHMIDT, PUZAITZER, VAX, ORENA, GROSSMAN, AKSANOV, and KOIFMAN are each charged with one count of conspiracy to commit securities fraud, which carries a maximum penalty of five years in prison, and one count of conspiracy to commit extortion, which carries a maximum penalty of 20 years in prison.

Mr. Bharara praised the efforts of the FBI’s Eurasian Organized Crime Squad and thanked the FBI for its work on the case. Mr. Bharara also thanked the Securities and Exchange Commission for its assistance on the case.

The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Jennifer E. Burns and Jason A. Masimore are in charge of the prosecution.

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

Click here to view chart(s)

U.S. v. Alexander Goldshmidt, et al Complaint

U.S. v. Eric Stevenson, et al Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that MATTHEW TAYLOR pled guilty today in Manhattan federal court to wire fraud in connection with a scheme to accumulate and conceal an unauthorized trading position in an account that TAYLOR managed at Goldman, Sachs & Co. (“Goldman Sachs”). TAYLOR was formerly a vice president at Goldman Sachs and a trader on Goldman Sachs’s Capital Structure Franchise Trading (“CSFT”) desk. He pled guilty today before U.S. District Judge William H. Pauley III.

According to the Information filed in Manhattan federal court:

While employed at Goldman Sachs as a vice president, TAYLOR was a member of the CSFT desk and was responsible for a trading account called the CSFT Equity Volatility Portfolio (the “Trading Account”), which included trading in equity derivatives products. Among the products that TAYLOR traded on the CSFT desk were Standard & Poor’s E-mini futures contracts (“S&P E-mini futures”), which are futures contracts tied to the S&P 500 stock index. TAYLOR traded in S&P E-mini futures using an electronic trading platform called “Globex.”

In November 2007, TAYLOR had lost a significant portion of the profits that he had accumulated in the Trading Account earlier that year. As a result, he was instructed by his supervisors to reduce the overall risk in the Trading Account. These supervisors had also previously informed TAYLOR and other traders on the CSFT desk about risk limits for the CSFT desk and acceptable risk levels and trading limits.

Despite these instructions to reduce the risk in the Trading Account, on December 13, 2007, TAYLOR significantly increased the notional value of his long position in S&P E-mini futures by entering a series of electronic trades through Globex. In so doing, he amassed a position that far exceeded all trading and risk limits set by Goldman Sachs, not only for individual traders, but for the entire CSFT desk. TAYLOR increased the profitability of the Trading Account in order to restore his professional reputation with Goldman Sachs and to increase his performance-based compensation.

At the same time that TAYLOR increased his S&P E-mini futures position, he actively concealed this position from others at Goldman Sachs. He recorded multiple false entries for S&P E-mini futures trades that he never made in a manual trade entry system (the “Manual Trade Entry System”), which was typically intended to be used by traders for recording trades that – unlike S&P E-mini futures – could not be executed through the Globex electronic trading platform. TAYLOR recorded multiple false trading entries in the Manual Trade Entry System that were in the opposite direction of the electronic trades he made in the Trading Account. Where TAYLOR purchased S&P E-mini futures in the Trading Account via Globex, he then manually entered fictitious S&P E-mini futures sales in the Manual Trade Entry System. The purpose of entering these fabricated trades was to conceal and understate the true size of the S&P E-mini futures position within the Trading Account, as the fictitious sales functioned to offset portions of TAYLOR’s actual purchases.

In addition, at the end of the trading day on December 13, 2007, TAYLOR prepared a false profit and loss report for the Trading Account (the “December 13, 2007 P&L Report”) that served to conceal his actual oversized position and market risk. He then forwarded the December 13, 2007 P&L Report to his supervisors and others at Goldman Sachs. By the morning of December 14, 2007, however, various employees at Goldman Sachs had detected a significant discrepancy between TAYLOR’s actual position in the Trading Account and what TAYLOR had falsely reported in the December 13, 2007 P&L Report. In response to questioning from these employees, TAYLOR made various false statements about his position and risk in the Trading Account. His fraudulent scheme resulted in significant losses to Goldman Sachs.

TAYLOR, 34, of West Palm Beach, Florida, is charged with one count of wire fraud. This count carries a maximum sentence of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense. He is scheduled to be sentenced before Judge Pauley on July 26, 2013 at 11:30 a.m.

Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Commodity Futures Trading Commission.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.

The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Steve Lee is in charge of the prosecution.

U.S. v. Matthew Taylor Information

Preet Bharara, the United States Attorney for the Southern District of New York, announced that SCOTT ERIC SANDERS was found guilty yesterday on all counts against him in an Indictment charging him with participating in a long-running automobile insurance fraud scheme and aggravated identity theft. As part of the scheme, SANDERS, who owns fleets of commercial vehicles, systematically misled insurance companies as to where the vehicles he owned and controlled were garaged and operated, and how those vehicles were being used, so that he could obtain automobile insurance for those vehicles at substantially lower premiums. SANDERS was convicted after a four-week jury trial before U.S. District Judge Lewis A. Kaplan.

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

In New York State, owners of fleets of commercial vehicles, including livery cars and ambulettes, are required to obtain commercial automobile liability and physical damage insurance coverage. The insurance policy premiums are based, in part, on where the insured vehicles are garaged and operated, as well as how the vehicles are used. Vehicles that are principally garaged or operated in New York City are charged a substantially higher premium than vehicles that are principally garaged or operated elsewhere. Vehicles that are primarily used as livery cabs are charged a substantially higher insurance premium than vehicles that are operated for many other commercial purposes. Owners of livery fleets obtain automobile insurance through the voluntary insurance market or, when they are unable to obtain insurance through the voluntary market, through the New York Automobile Insurance Plan (“NYAIP”). The NYAIP assigns policy applications to insurance carriers doing business in New York State, who are then required to provide insurance coverage to the applicant.

From 2005 through 2010, SANDERS controlled fleets of livery cars that were garaged and operated in New York City. During that time period, SANDERS engaged in a widespread conspiracy to defraud automobile insurance companies in order to obtain automobile insurance for his vehicles at lower premiums by misrepresenting where the vehicles were garaged and operated, and in some instances, how those vehicles were being used. SANDERS caused insurance applications to be submitted to both NYAIP and directly to insurance companies that claimed his vehicles were garaged and operated outside of New York City, when they were not. In addition, on some of those applications, he represented that his vehicles were being used for commercial purposes other than as livery vehicles when they were in fact being used as livery vehicles. In addition, in some of these applications, SANDERS falsely listed other people as the presidents and owners of his companies to conceal his ownership and control of those companies. Relying on these misrepresentations, the insurance companies issued insurance policies for the vehicles controlled by SANDERS at lower premiums than those for which they would have been eligible had the insurance companies been aware of the true locations of garaging, operation, and true use of these vehicles.

In addition, as part of the same scheme, SANDERS helped other commercial fleet owners whose vehicles operated in New York City obtain insurance at lower premiums using the same misrepresentations about how those vehicles were being used and where those vehicles were being garaged and operated. Over the course of his scheme, insurance companies lost millions in premiums that they would have otherwise charged had they been provided accurate garaging, operating, and usage information about the vehicles.

SANDERS was convicted of one count of conspiracy to commit mail and wire fraud, five counts of mail fraud, and one count of aggravated identity theft.

SANDERS, 41, of Saddle River, New Jersey, faces a maximum sentence of 120 years in prison on the seven fraud counts and a mandatory consecutive sentence of two years in prison for the aggravated identity theft count. In addition, he faces a maximum fine of at least $1.5 million and forfeiture of the proceeds of the crime. SANDERS is scheduled to be sentenced by Judge Kaplan on July 9, 2013.

Mr. Bharara praised the United States Postal Inspection Service for its outstanding work in the investigation. Mr. Bharara also thanked the NYAIP and the National Insurance Crime Bureau for their assistance.

This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Paul Krieger and Brent Wible are in charge of the criminal case.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that THOMAS C. CONRADT, a former stock broker at a securities trading firm (“Securities Trading Firm-1”), pled guilty today in Manhattan federal court to charges arising from his involvement in an insider trading scheme. The alleged scheme involved the misappropriation of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009. CONRADT was charged in November 2012, and pled guilty today before U.S. District Judge Andrew L. Carter, Jr. pursuant to a cooperation agreement.

According to the Indictment to which CONRADT pled guilty, statements made during the plea proceeding, and other court documents:

The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over its market price, with his close friend, Trent Martin, a former research analyst at an international financial services firm. The information was shared in confidence and, based on their longstanding history of sharing confidences, Attorney-1 expected that Martin would not share the information or use it to trade.

However, in June and July 2009, Martin bought SPSS common stock and call option contracts based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, CONRADT, who worked as a stock broker at a securities trading firm (“Securities Trading Firm-1”). In June and July 2009, CONRADT bought SPSS common stock and tipped David J. Weishaus, his co-worker at Securities Trading Firm-1, who also bought SPSS common stock and call options. CONRADT and Weishaus also tipped their co-workers at Securities Trading Firm-1 (“CC-1 and CC-2”), who then bought SPSS call option contracts. When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day. Thereafter, Martin, CONRADT, Weishaus, CC-1, and CC-2 sold their SPSS positions, yielding total profits of approximately $1 million.

CONRADT, 35, of Denver, Colorado, pled guilty to one count of conspiracy to commit securities fraud and two counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of $250,000, or twice the gross gain or loss from the offense. The securities fraud counts each carry a maximum sentence of 20 years in prison and a maximum fine of $5 million. As part of his plea agreement, CONRADT agreed to forfeit his share of the proceeds obtained from the offense. He is scheduled to be sentenced by Judge Carter on October 3, 2013.

Weishaus is next scheduled to appear before Judge Carter on June 5, 2013. Martin was arrested in in Hong Kong in December 2012 pursuant to a request from the United States and extradited to the United States in March 2013. Martin is next scheduled to appear before Judge Carter on April 10, 2013. The charges against Weishaus and Martin are merely accusations. They are presumed innocent unless and until proven guilty.

Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission. Mr. Bharara noted that the investigation is continuing.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John T. Zach and David B. Massey are in charge of the prosecution.

U.S. v. Thomas C. Conradt and David J. Weishaus Indictment

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”), today announced charges against 28 members of the Briggs Avenue Organization, a criminal organization that controls narcotics distribution around the area of 194th Street and Briggs Avenue in the Bronx, New York, for conspiracy to distribute heroin and crack cocaine. The Indictment, which was unsealed today, also charges ten of the defendants with firearms offenses.

Of the 28 defendants named in the Indictment, 16 were taken into custody as part of a coordinated operation involving federal, state, and local law enforcement officers. Four of the remaining defendants are in state custody on other charges, two are in federal custody, and six are at large. The defendants who were taken into custody today were presented and arraigned in Manhattan federal court this afternoon before U.S. Magistrate Judge Kevin Nathaniel Fox. U.S. District Judge Shira A. Scheindlin is assigned to the case.

Manhattan U.S. Attorney Preet Bharara said: “Step-by-step and case-by-case, this Office, along with our law enforcement partners is doing everything within its power to eliminate the scourge of gangs along with the narcotics trafficking and violence that are tools of their trade. Today’s indictment of 28 members of this alleged criminal organization is the latest in our campaign to give the streets of the Southern District back to its residents.”

FBI Assistant Director-in-Charge George Venizelos said: “It is almost axiomatic that where there are drugs there will be guns. Drug trafficking organizations use guns and violence to secure turf and intimidate or eliminate competition. We will continue to work with the Police Department to make the city safer and more secure, and we will do it neighborhood by neighborhood.”

NYPD Commissioner Raymond W. Kelly said: “NYPD officers routinely risk their own lives to improve public safety for New Yorkers, and this investigation of a violent drug trafficking crew is no exception. The subjects in this case possessed and sold assault weapons to police, and used threats of violence to bolster their business of exploiting drug addicts, until the NYPD and federal partners stepped in. I commend the detectives in this case, especially those working undercover, as well as FBI investigators and prosecutors in the U.S. Attorney's office, on their efforts to return peace to law-abiding residents of the Bronx.”

As alleged in the Indictment and other documents filed in Manhattan federal court:

Members of the Briggs Organization have been engaged in the sale of heroin and crack cocaine since 2008. Between May 2012 and March 2013, several NYPD officers, working in an undercover capacity (the “UCs”) made approximately 21 separate purchases of heroin from at least 18 different members of the Briggs Organization. On each of those occasions, members of the Briggs Organization sold heroin to UCs which was branded with one of the Briggs Organization's stamps, including, “Oh Yeah” and “Fugitive.” During the course of this investigation, the UCs purchased over 900 “bundles” of heroin and firearms, including an AK-47 assault rifle and an UZI 9mm machine gun. In the course of the charged conspiracy, members of the drug trafficking organization used firearms, threats of violence and violence to secure and enforce their drug territory.

MARK ALLIE, JOSE VERA, JONATHAN SAMBULA, GUILLERMO ORTIZ, MICHAEL ORTIZ, JAMAINE TAYLOR, RACHEL DIAZ, CHRISTIAN FABRE, DAMON GROOMS, ROBERT HENDERSON, NOEL FELICIANO, JOSE AVILES, JONATHAN MIRABAL, ANDRE CUNNINGHAM, HARANAKK DINGLE, LUIS GUZMAN, ZOA BRIGGS, ROBERT TORRES, DARNELL HOPKINS, JELFREY GUTIERREZ, JASON LEWIS, MAX JORDAN, EDWARD ALEXIS MEDRANO, LUZ FIGUEROA, FNU LNU, a/k/a “Kat,” MICHAEL McDUFFIE, and DAVID WILSON, are charged with conspiring to distribute and possessing with intent to distribute heroin and crack cocaine.

ALLIE, SAMBULA, ORTIZ, TAYLOR, GROOMS, CUNNINGHAM, JORDAN, FIGUEROA, FNU LNU, a/k/a “Kat,” are also charged with possessing, brandishing and discharging firearms in connection with the drug crimes.

STEVE RAMSNAMY is charged with being a felon in possession of a firearm, specifically an AK-47 assault rifle.

A chart containing the ages, residency information, and charges against the defendants, as well as the maximum penalties they face is attached.

Mr. Bharara praised the outstanding investigative work of the FBI and the NYPD. He added that the investigation is continuing.

The prosecution of this case is being overseen by the Office’s Violent Crimes Unit. Assistant United States Attorneys Jessica Ortiz and Jessica Masella are in charge of the prosecution.

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

Click here to view chart(s)

U.S. v. Allie, Mark et al. Indictment

“Today’s charges demonstrate, once again, that a show-me-the-money culture seems to pervade every level of New York government. The complaint describes an unappetizing smorgasbord of graft and greed involving six officials who together built a corridor of corruption stretching from Queens and the Bronx to Rockland County and all the way up to Albany itself. As alleged, Senator Malcolm Smith tried to bribe his way to a shot at Gracie Mansion – Smith drew up the game plan and Councilman Halloran essentially quarterbacked that drive by finding party chairmen who were wide open to receiving bribes. After the string of public corruption scandals that we have brought to light, many may rightly resign themselves to the sad truth that perhaps the most powerful special interest in politics is self-interest. We will continue pursuing and punishing every corrupt official we find, but the public corruption crisis in New York is more than a prosecutor’s problem.”

U.S. v. Malcolm Smith, et al. Complaint

Charges Include Cash Bribes of More Than $100,000 Changing Hands in Connection With Republican Mayoral Ballot, City Council Discretionary Funds, and Spring Valley Development Project

Preet Bharara, United States Attorney for the Southern District of New York, and GEORGE VENIZELOS, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Complaint charging New York State Senator MALCOLM SMITH, New York City Council Member DANIEL HALLORAN, and four others with bribery, extortion, and fraud charges. The charges against the defendants arise from an undercover investigation of three distinct but related bribery schemes involving public corruption. In the first scheme, SMITH allegedly arranged for cash bribes totaling $40,000 to be paid to VINCENT TABONE and JOSEPH SAVINO, two New York City Republican county leaders, as part of an effort by SMITH, who is a Democrat, to appear on the Republican primary ballot as a mayoral candidate in the 2013 election. HALLORAN is alleged to have received approximately $20,500 in cash bribes to act as an intermediary with TABONE and SAVINO on SMITH’s behalf. In the second scheme, HALLORAN allegedly received approximately $18,300 in cash bribes and $6,500 in straw donor campaign contribution checks in exchange for agreeing to steer up to $80,000 of New York City Council discretionary funding to a company he believed was controlled by those who paid him the bribes. The final scheme involved NORAMIE JASMIN and JOSEPH DESMARET, the Mayor and Deputy Mayor of the Village of Spring Valley in Rockland County, and their alleged receipt of financial benefits, including JASMIN’s receipt of a hidden interest in a real estate project and DESMARET’s receipt of approximately $10,500 in cash bribes, in exchange for official acts. All six defendants were arrested this morning and will be presented later today in White Plains federal court before U.S. Magistrate Judge Lisa Margaret Smith.

Manhattan U.S. Attorney Preet Bharara said: “Today’s charges demonstrate, once again, that a show-me-the-money culture seems to pervade every level of New York government. The complaint describes an unappetizing smorgasbord of graft and greed involving six officials who together built a corridor of corruption stretching from Queens and the Bronx to Rockland County and all the way up to Albany itself. As alleged, Senator Malcolm Smith tried to bribe his way to a shot at Gracie Mansion – Smith drew up the game plan and Councilman Halloran essentially quarterbacked that drive by finding party chairmen who were wide open to receiving bribes. After the string of public corruption scandals that we have brought to light, many may rightly resign themselves to the sad truth that perhaps the most powerful special interest in politics is self-interest. We will continue pursuing and punishing every corrupt official we find, but the public corruption crisis in New York is more than a prosecutor’s problem.”

FBI Assistant Director-in-Charge George Venizelos said: “Elected officials are called public servants because they are supposed to serve the people. Public service is not supposed to be a shortcut to self-enrichment. People in New York, in Spring Valley -- in any city or town in this country -- rightly expect their elected or appointed representatives to hold themselves to a higher standard. At the very least, public officials should obey the law. As alleged, these defendants did not obey the law; they broke the law and the public trust. There is a price to pay for that kind of betrayal.”

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

Scheme to Bribe New York City Republican Party Committee Leaders

Under New York State law, a person seeking to run for a citywide position in New York City may not have his or her name listed as a candidate on the ballot if he or she is not a registered member of the party having the primary contest unless he or she receives the approval of at least three of the five chairmen of the county committees for that party. The approval is given in the form of what are known as Wilson Pakula certificates, which are signed by the approving chairmen.

SMITH, a Democrat, was first elected to the New York State Senate in March 2000, and represents the 14th Senatorial District in Queens, New York. He is chairman of the Independent Democratic Conference of the State Senate and, among other positions, has served as the State Senate’s minority and majority leader. SMITH has spoken publicly about his desire to run for Mayor of New York City in 2013.

HALLORAN, a Republican, was elected to the New York City Council in 2009, and represents the City Council’s 19th District in Queens, New York. HALLORAN ran unsuccessfully for the United States Congress in 2012. TABONE and SAVINO are New York City Republican Party officials. SAVINO is the Chairman of the Bronx County Republican Party and TABONE is the Vice Chairman of the Queens County Republican Party. Their duties include endorsing candidates for public office and voting on Wilson Pakula certificates.

In November 2012, SMITH agreed with HALLORAN, an undercover FBI agent posing as a wealthy real estate developer (the “UC”), and a cooperating witness (“CW”) to bribe New York City Republican Party county leaders in exchange for their issuance of Wilson Pakula certificates that would enable SMITH to run as a Republican candidate for New York City Mayor in 2013. When asked by the UC what he wanted in exchange for his help securing the certificates, HALLORAN said that he wanted to get his “mortgage situation resolved,” and that if SMITH was elected mayor, he would expect to be named Deputy Police Commissioner if he asked for the job. He also solicited and received from the UC and the CW approximately $20,500 in cash for himself.

In furtherance of the scheme, HALLORAN arranged for the UC and the CW to meet TABONE and SAVINO, and negotiated the amounts of the cash bribes to be paid by the UC and the CW to TABONE and SAVINO on SMITH’s behalf. HALLORAN told the UC and the CW that, “you gotta get [SAVINO] business but put twenty-five in an envelope….TABONE is twenty-five up front, twenty-five when the Wilson Pakula is delivered.” After his meeting with the UC and the CW, SAVINO accepted $15,000 in cash and agreed to accept another $15,000 after he formally approved Smith’s appearance on the 2013 Republican ballot for New York City Mayor. After meeting with the UC and the CW, TABONE accepted $25,000 in cash and agreed to accept another $25,000 after his committee approved Smith’s appearance on the 2013 Republican ballot for New York City Mayor.

In exchange for the payment of bribes to TABONE and SAVINO by the UC and CW, in his capacity as a New York State Senator, SMITH agreed to help obtain $500,000 in New York State funds for road work that would benefit a real estate project in Spring Valley that SMITH understood was being developed by a company controlled by the UC and CW (“the Company”).

Bribery of HALLORAN to Steer City Council Discretionary Funding

Since August 2012 to the present, HALLORAN accepted approximately $18,300 in cash bribes and approximately $6,500 in straw donor campaign contribution checks from the UC and the CW in exchange for agreeing to steer up to $80,000 in New York City Council discretionary funding to the Company.

For example, at a meeting on September 7, 2012, at which HALLORAN and the UC discussed HALLORAN’s need to raise money for his congressional campaign, HALLORAN agreed to hire someone of the CW’s choosing for a congressional staff or some equivalent position, and to help him raise money for his campaign. During the discussion, HALLORAN said: “That’s politics, that’s politics, it’s all about how much. Not whether or will, it’s about how much, and that’s our politicians in New York, they’re all like that…And they get like that because of the drive that the money does for everything else. You can’t do anything without the f***ing money.” During the meeting, the CW paid HALLORAN $7,500. And near the end of the meeting, HALLORAN remarked: “Money is what greases the wheels – good bad, or indifferent.”

In furtherance of this scheme, HALLORAN wrote two letters on New York City Council letterhead about this funding, one to civic organizations and the other to the Company. Despite suggesting in these letters that work would be done by the Company to support the allotment of up to $80,000, HALLORAN agreed with the UC and the CW that the Company would provide no services.

Bribery of the Spring Valley Mayor and Deputy Mayor

NORAMIE JASMIN and JOSEPH DESMARET were sworn in as Mayor and Deputy Mayor of the Village of Spring Valley, New York in December 2009. From September 2011 through the date of the Complaint, JASMIN and DESMARET accepted financial benefits from the UC and the CW in exchange for official acts. DESMARET accepted approximately $10,500 worth of cash bribes from the UC and the CW in exchange for, among other things, his vote in favor of a sale of land owned by Spring Valley to the Company a company he believed was controlled by the UC and that would be used to build a community center (the “Real Estate Project”).

In exchange for her vote awarding the Real Estate Project to the Company, JASMIN demanded a partnership interest in the Company, stating: “So for me, it’s better for us to partner, that’s what I said to you before; a partnership will be best.” When the CW later suggested that JASMIN have a 20% stake in the project, she replied: “Partnership is fifty fifty, right?”

In support of the scheme, JASMIN coached the UC on how to make his presentation to the Spring Valley Village Board of Trustees about why the board should award the Real Estate Project to his company. She also coached two other individuals, whom she understood were associates of the UC and who would pose as competing developers, but who were actually undercover FBI agents, on how to make their presentation to the Village Board. In addition, both JASMIN and DESMARET agreed to steer to the UC’s company the New York State funding for road work that SMITH agreed to help the CW and the UC obtain.

Charts containing the names, ages, residences, charges, and maximum penalties for the defendants are attached.

Mr. Bharara praised the investigative work of the FBI. He also thanked the Rockland County District Attorney’s Office and the Spring Valley Police Department for their invaluable assistance to the investigation.

This case is being handled by the Office’s White Plains Division and Public Corruption Unit. Assistant U.S. Attorneys Douglas B. Bloom and Alvin Bragg are in charge of the prosecution.

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

Click here to view chart(s)

U.S. v. Malcolm Smith et al. Complaint

Preet Bharara, the United States Attorney for the Southern District of New York, today announced the appointment of Joon H. Kim as the Office’s Chief Counsel.

Mr. Kim returns to the U.S. Attorney’s Office from Cleary Gottlieb Steen & Hamilton LLP, where he has been a partner in the litigation and enforcement group. At Cleary Gottlieb, which Mr. Kim rejoined in 2006 and where he also worked as an associate from 1997 to 2000, Mr. Kim’s practice has focused on white-collar criminal defense and regulatory enforcement, as well as commercial civil litigation and international arbitration. He has also represented corporations and individuals in a wide range of investigations and disputes, including matters involving securities fraud, insider trading, accounting fraud, antitrust violations and corruption.

From 2000 to 2006, Mr. Kim was an Assistant U.S. Attorney in the Southern District, where he investigated and prosecuted a variety of crimes, including racketeering, murder, money laundering, securities fraud, firearms and narcotics offenses, tax evasion, and terrorism. He spent his last four years in the Office in the Organized Crime and Terrorism Unit, prosecuting violent organized crime syndicates, including Asian gangs and the Mafia. During his tenure, Mr. Kim convicted a number of high-ranking organized crime figures, including Peter Gotti, then Boss of the Gambino Family, for conspiring to kill Salvatore “Sammy the Bull” Gravano.

Mr. Kim graduated Phi Beta Kappa from Stanford University in 1993 and graduated cum laude from Harvard Law School in 1996. After law school, he clerked for the Honorable Miriam Goldman Cedarbaum of the Southern District of New York until 1997.

In making the appointment, Manhattan U.S Attorney Preet Bharara said: “I am thrilled to welcome Joon back to the Office, where we will be lucky to have his smart and thoughtful judgment. I am confident that his rigor and intellect will enormously benefit the people of the Southern District of New York.”

Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today that NARENDRA TULSIRAM pled guilty in Manhattan federal court to sexually exploiting a child, transporting child pornography, and possessing child pornography. TULSIRAM, who has been in federal custody since his arrest in this case on January 11, 2012, pled guilty today before U.S. District Judge J. Paul Oetken.

Manhattan U.S. Attorney Preet Bharara said: “The depraved acts that Narenda Tulsiram committed against his 13-year-old victim brought an abrupt end to her childhood, and then he went even further – using pictures of the sexual abuse he forced her to endure in a campaign of extortion. Nothing can reclaim what Tulsiram stole from his victim, but we hope that his guilty plea and the time he will spend in jail bring some measure of closure.”

ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Narendra Tulsiram shamelessly sexually exploited a child for nearly five years. HSI New York will continue to work with Federal and state prosecutors to arrest and prosecute predators who target young children."

According to the Complaint, the Superseding Indictment, other court documents, and statements made at the defendant’s plea proceeding:

From 2006 through September 2011, TULSIRAM sexually abused a female minor (the “Victim”). The abuse began when the Victim was 13-years old. From approximately 2008 through September 2011, TULSIRAM also took sexually explicit photographs chronicling his abuse of the Victim. In November 2011, after the Victim resisted TULSIRAM’s requests for additional sexual encounters, he used his e-mail account to send sexually explicit photographs of the Victim to the Victim’s e-mail account. In those e-mails, TULSIRAM threatened to send the sexually explicit photographs of the Victim to others, including her family, in an effort to get her to accede to his demands.

After TULSIRAM’s arrest, search warrants were executed for his cell phone and e-mail account. Forensic analysis of TULSIRAM’s cell phone recovered photographs depicting the Victim, and in some instances, the Victim and TULSIRAM, engaging in sexually explicit conduct. Forensic analysis of TULSIRAM’s cell phone also recovered threatening e-mails sent from TULSIRAM’s e-mail account to the Victim attaching the sexually explicit photographs of the Victim.

TULSIRAM, 50, of the Bronx, New York, pled guilty to two counts of sexual exploitation of a minor, one count of possessing child pornography, and one count of transporting child pornography. He faces a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison for each of the sexual exploitation counts, a maximum sentence of 10 years in prison for the child pornography possession count, and a mandatory minimum sentence of 5 years in prison and a maximum sentence of 20 years in prison for the transportation of child pornography count. He is scheduled to be sentenced by Judge Oetken on September 6, 2013 at 2:30 p.m.

Mr. Bharara praised the outstanding investigative work of ICE HSI and the New York City Police Department.

The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Kristy J. Greenberg, Rahul Mukhi and Adam Fee are in charge of the prosecution.

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.

Your browser does not support the audio element.

“As alleged, Michael Steinberg was another Wall Street insider who fed off a corrupt grapevine of proprietary and confidential information cultivated by other professionals who made their own rules to make money. With lightning speed in at least one case, Mr. Steinberg seized on the opportunity to cash in and tried to keep his crime quiet, as charged in the Indictment. As alleged, where once Mr. Steinberg answered only to his own rules, now he will have to answer to the rule of law, like so many others before him.”

Michael Steinberg Indictment Statement-US Attorney Preet Bharara Audio 3.29.13 (mp3)
Michael Steinberg Indictment Statement-US Attorney Preet Bharara Audio 3.29.13 (wav)

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 conspiracy and securities fraud charges against Michael STEINBERG, a portfolio manager at a hedge fund located in New York, New York (“Hedge Fund A”), for his alleged involvement in an insider trading scheme. As alleged, STEINBERG executed trades based on material, nonpublic information (“Inside Information”) provided to him by a Hedge Fund A analyst who worked for him, John Horvath, who previously pled guilty to securities fraud charges pursuant to a cooperation agreement. In particular, STEINBERG is alleged to have traded in two publicly traded technology companies, Dell, Inc. (“Dell”) and NVIDIA Corporation (“NVIDIA”), based on Inside Information that Horvath obtained from a circle of research analysts at several different investment firms, all of whom have also pled guilty for their roles in the scheme. Those individuals are: Jesse Tortora, a former research analyst at Diamondback; Spyridon “Sam” Adondakis, a former research analyst at Level Global; Danny Kuo, a former research analyst and fund manager at Whittier Trust Company; and Sandeep “Sandy” Goyal, a former research analyst who worked at the Manhattan office of Neuberger Berman. STEINBERG’s trading in Dell and NVIDIA earned Hedge Fund A $1.4 million in illegal profits. STEINBERG was arrested this morning in Manhattan, and will be presented and arraigned in Manhattan federal court before U.S. District Judge Richard J. Sullivan at 11:00 a.m.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, Michael Steinberg was another Wall Street insider who fed off a corrupt grapevine of proprietary and confidential information cultivated by other professionals who made their own rules to make money. With lightning speed in at least one case, Mr. Steinberg seized on the opportunity to cash in and tried to keep his crime quiet, as charged in the Indictment. As alleged, where once Mr. Steinberg answered only to his own rules, now he will have to answer to the rule of law, like so many others before him.”

FBI Assistant Director-in-Charge George Venizelos said: “Mr. Steinberg’s arrest is the latest in the FBI’s campaign to root out insider trading at hedge funds and expert networking firms, resulting in more than 70 arrests so far. As alleged, Mr. Steinberg was at the center of an elite criminal club, where cheating and corruption were rewarded. Research was nothing more than well-timed tips from an extensive network of well-sourced analysts. The law is clear for everyone including Mr. Steinberg. Trading on inside information is illegal. The FBI will continue to police our markets and arrest anyone who violates the law.”

In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against STEINBERG.

According to the allegations in the Superseding Indictment, other court documents, and evidence adduced at a related trial:

A group of analysts at different hedge funds, including Tortora, Adondakis, Horvath, and Kuo obtained Inside Information directly or indirectly from employees who worked at certain public companies, and then shared the Information with each other and with the hedge fund portfolio managers for whom they worked, including STEINBERG. In particular, Tortora provided Horvath and others with Inside Information related to Dell’s quarterly earnings (the “Dell Inside Information”), which Tortora obtained from Goyal who, in turn, had obtained the Information from an employee at Dell (the “Dell Insider”). For Dell’s quarter ended August 1, 2008, the results for which were publicly announced by Dell on August 28, 2008 (the “Dell Announcement”), the Dell Inside Information indicated that Dell would report gross margins that were materially lower than market expectations. In advance of the Dell Announcement, Horvath reported this negative Inside Information to STEINBERG.

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

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

After the close of the market on August 28, 2008, Dell publicly announced gross margins that were substantially below market expectations. At the end of the next trading day following Dell’s Announcement, its stock price dropped by more than 13%. Shortly thereafter, STEINBERG covered his short position, and closed out his position in Dell option contracts, resulting in an illegal profit for Hedge Fund A of approximately $1 million.

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

On May 7, 2009, NVIDIA publicly announced gross margins that were substantially lower than the market expected. At the end of the trading day following the NVIDIA Announcement, NVIDIA’s stock price dropped by more than 13%. Shortly thereafter, STEINBERG caused Hedge Fund A to liquidate its position in NVIDIA, resulting in an illegal profit for Hedge Fund A of over $400,000.

STEINBERG, 40, of New York, New York, is charged with one count of conspiracy to commit securities fraud and four counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense. Each of the securities fraud counts carries a maximum sentence of 20 years in prison and a fine of $5 million or twice the gross gain or loss from the offense.

The allegations in the Indictment against STEINBERG are merely accusations and he is presumed innocent unless and until proven guilty.

Horvath, 43, and Kuo, 37, each pled guilty to one count of conspiracy to commit securities fraud and two substantive counts of securities fraud in September 2012 and April 2012, respectively.

Tortora, 35, Adondakis, 41, and Goyal, 40, each pled guilty to one count of conspiracy to commit securities fraud and one substantive count of securities fraud in May 2011, April 2011, and June 2011, respectively.

Mr. Bharara praised the investigative work of the FBI. He also thanked SEC. Mr. Bharara noted that the investigation is continuing.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps and John T. Zach are in charge of the prosecution.

U.S. v. Michael Steinberg S4 Indictment

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 the arrival of TRENT MARTIN, who was extradited from Hong Kong yesterday to face insider trading charges. He was arrested in Hong Kong on December 22, 2012, pursuant to a request from the United States. MARTIN will be presented in Manhattan federal court before U.S. Magistrate Judge Henry B. Pitman this afternoon at 2:30 p.m.

MARTIN, a former research analyst at an international financial services firm, was charged for his alleged involvement in an insider trading scheme with Thomas C. Conradt and David J. Weishaus, two stock brokers who were arrested for their roles in the scheme on November 29, 2012. MARTIN, Conradt, Weishaus, and their co-conspirators allegedly traded on the basis of material, non-public information (“Inside Information”) concerning IBM’s acquisition of a software company, SPSS, Inc., in 2009, earning more than $1 million in profits in the aggregate.

Manhattan U.S. Attorney Preet Bharara said: “Like other insider traders, Trent Martin allegedly exploited his access to confidential information to turn an illegal profit. With his arrival here to face charges for his alleged conduct, he now knows that the long arm of the law will reach out – even thousands of miles – to hold alleged lawbreakers accountable.”

FBI Assistant Director-in-Charge George Venizelos said: “As alleged, Trent Martin acquired information he knew was confidential, and then traded on it and shared it, which he knew was illegal. In fact, as alleged, he was aware this conduct could land him in prison. What Martin may not have realized was that being halfway around the globe did not insulate him from arrest and prosecution.”

The following allegations are based on the Superseding Indictment against MARTIN that was unsealed on December 26, 2012 in Manhattan federal court, and other court documents:

The Inside Information concerning IBM’s acquisition of SPSS originated from a corporate lawyer who was part of the legal team that represented IBM in the transaction (“Attorney-1”) in 2009. On May 31, 2009, Attorney-1 shared Inside Information concerning the transaction, including the names of the parties and the fact that IBM was going to acquire SPSS for a significant premium over SPSS’s market price, with his close friend, MARTIN. The information was shared in confidence. Based on their longstanding history of sharing confidences, Attorney-1 expected that MARTIN would not share the information or use it to trade.

However, in June 2009, MARTIN bought SPSS common stock based on the Inside Information he was given by Attorney-1 and, in turn, shared the tip with his roommate, Conradt, who worked as a stock broker at a securities trading firm (“Securities Trading Firm-1”). Conradt then bought SPSS common stock and tipped Weishaus, his co-worker at Securities Trading Firm-1. On June 24, 2009, Weishaus started buying call option contracts in SPSS. In addition, Conradt and Weishaus tipped their co-workers at Securities Trading Firm-1 (“CC-1 and CC-2”), who also bought SPSS call option contracts in June and July 2009 based on the Inside Information.

On July 23, 2009, MARTIN told Attorney-1 that he had purchased SPSS common stock and call options on the basis of the Inside Information that Attorney-1 had disclosed to MARTIN on May 31, 2009.

When IBM announced its acquisition of SPSS on July 28, 2009, the share price of SPSS common stock rose by 41% in one day, from the prior day’s closing price of $35.09 per share to a closing price of $49.45 per share. Thereafter, MARTIN, Conradt, Weishaus, CC-1, and CC-2 sold their SPSS positions, yielding profits of $7,900, $2,538, $129,290, $629,954, and $254,360, respectively, for a total profit in excess of $1 million.

In the fall of 2010, after the U.S. Securities and Exchange Commission (“SEC”) had begun investigating insider trading in SPSS, MARTIN told Attorney-1 that he had profited approximately $8,000 from the Inside Information concerning IBM’s acquisition of SPSS and had disclosed it to his roommate, Conradt, before the transaction was publicly announced. MARTIN also told Attorney-1 that MARTIN believed Conradt had taken a large position in SPSS before the announcement and had, in turn, shared the Inside Information with others. MARTIN further stated to Attorney-1 that he was returning to Australia in light of the SEC investigation, and that he knew that insider trading can result in jail sentences, referring to the criminal prosecution of Martha Stewart.

MARTIN, 33, has been charged with one count of conspiracy to commit securities fraud and one count of securities fraud. Count One, the conspiracy charge, carries a maximum potential penalty of five years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. Count Two, the securities fraud charge, carries a maximum potential penalty of 20 years in prison and a maximum fine of $5 million.

Following their earlier arrests in the United States, Conradt and Weishaus pled not guilty on December 7, 2012. The case against MARTIN, Conradt, and Weishaus is assigned to U.S. District Judge Andrew L. Carter, Jr. Conradt and Weishaus are scheduled to appear before Judge Carter next on April 3, 2013, at 12:00 p.m.

Mr. Bharara praised the investigative work of the FBI and thanked authorities in Hong Kong. He also thanked the SEC and the U.S. Department of Justice’s Office of International Affairs. Mr. Bharara noted that the investigation is continuing.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John T. Zach and David B. Massey 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 Trent Martin Indictment

U.S. v. Michael Steinberg S4 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that POLINA BERENSON and ANNA ZINGER pled guilty today in Manhattan federal court to conspiring to defraud programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), established to aid the survivors of Nazi persecution, out of more than $57 million. BERENSON, a former employee of the Claims Conference, also pled guilty to witness tampering. BERENSON was arrested in November 2010, and ZINGER was arrested in October 2011, as part of an ongoing investigation that has resulted in charges against a total of 31 defendants, 10 of whom were former Claims Conference employees, including a former director. Both defendants pled guilty today before U.S. District Judge Thomas P. Griesa.

Manhattan U.S. Attorney Preet Bharara said: “Not only did Polina Berenson help perpetrate a despicable fraud on an organization dedicated to providing aid to Holocaust victims, but she also attempted to obstruct the investigation into that fraud to save her own skin. With her plea today, along with the plea of her co-defendant Anna Zinger, we are that much closer to the end of this very ugly story.”

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

The Fraudulent Scheme

The Claims Conference, a not-for-profit organization which provides assistance to victims of Nazi persecution, supervises and administers several funds that make reparation payments to victims of the Nazis, including “the Hardship Fund” and “the Article 2 Fund,” both of which are funded by the German government. Applications for disbursements through these funds are processed by employees of the Claims Conference’s office in Manhattan, and the employees are supposed to confirm that the applicants meet the specific criteria for payments under the funds.

As part of the charged scheme, a web of individuals systematically defrauded the Article 2 Fund and Hardship Fund programs for over a decade. The Claims Conference first suspected the fraud in December 2009, and immediately reported their suspicions to law enforcement, which conducted a wide-reaching investigation.

The Hardship Fund pays a one-time payment of approximately $3,500 to victims of Nazi persecution who evacuated the cities in which they lived and were forced to become refugees. Members of the conspiracy submitted fraudulent applications for people who were not eligible. Many of the recipients of fraudulent funds were born after World War II, and at least one person was not even Jewish. Some members of the conspiracy recruited other individuals to provide identification documents, such as passports and birth certificates, which were then fraudulently altered and submitted to corrupt insiders at the Claims Conference, who then processed those applications. When the applicants received their compensation checks, they kept a portion of the money and passed the rest back up the chain.

From the investigation to date, the Claims Conference has determined that at least 3,839 Hardship Fund applications appear to be fraudulent. These applications resulted in a loss to the Hardship Fund of approximately $12.3 million.

The Article 2 Fund makes monthly payments of approximately $400 to survivors of Nazi persecution who make less than $16,000 per year, and either lived in hiding or under a false identity for at least 18 months; lived in a Jewish ghetto for 18 months; or were incarcerated for six months in a concentration camp or a forced labor camp. The fraud involved doctored identification documents in which the applicant’s date and place of birth had been changed. The fraud also involved more sophisticated deception, including altering documents that the Claims Conference obtains from outside sources to verify a person’s persecution by the Nazis. Some of the detailed descriptions of persecution in the fraudulent Article 2 Fund applications were completely fabricated.

From the investigation to date, the Claims Conference has determined that at least 1,112 Article 2 Fund cases it processed have been determined to be fraudulent. Those cases have resulted in a loss to the Claims Conference of approximately $45 million.

While employed as a caseworker in the Hardship Fund program at the Claims Conference, BERENSON knowingly processed fraudulent applications in return for payments from her co-conspirators.

ZINGER recruited individuals to provide identification documents that were subsequently used in connection with the preparation of fraudulent Hardship Fund and Article 2 Fund applications, in exchange for a portion of the money paid out to those applicants.

Witness Tampering

When BERENSON learned that the FBI was investigating her involvement in the fraudulent scheme, she attempted to give money to a witness and to persuade that witness to lie to the FBI. Specifically, BERENSON tried to persuade another participant in the fraudulent scheme to state falsely that she did not know anything about the fraud at the Claims Conference or BERENSON’s role in it.

With today’s pleas, a total of 28 defendants charged in the scheme have pled guilty. Charges are still pending against the remaining three defendants in the case, who are presumed innocent unless and until proven guilty.

BERENSON, 83, of Brooklyn, New York, faces a maximum sentence of 60 years in prison. ZINGER, 66, who resides in Highland Park, Illinois, faces a maximum sentence of 20 years in prison. BERENSON and ZINGER are scheduled to be sentenced by Judge Griesa on September 12, 2013 at 4:30 p.m. and August 8, 2013 at 4:30 p.m., respectively.

Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its extraordinary continued cooperation in this investigation, which he noted is ongoing.

This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Christopher D. Frey and Special Assistant U.S. Attorney Rebecca Rohr are in charge of the prosecution.

Domnitser S1 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that RICHARD EHRLINGER a former Long Island Railroad conductor, 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. EHRLINGER pled guilty today before United States Magistrate Judge Henry Pitman. He is the 23rd 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 in court:

The RRB is an independent U.S. agency that administers benefit programs, including disability benefits, for the nation’s railroad workers and their families. A unique LIRR contract allowed employees to retire at the relatively young age of 50 – the age of eligibility has since changed to 55 – if they had been employed by the LIRR for at least 20 years. Eligible employees are entitled to receive an LIRR pension, which is a portion of the full retirement payment for which they are eligible at 65. In addition, at full retirement age (between age 60 and age 65 depending on years of service), they are eligible to receive an RRB retirement pension. 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 oath 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 (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.

EHRLINGER, 66, of Bay Shore, New York, pled guilty to one count of making a false statement to the RRB, and he faces a maximum sentence of five years in prison. He will be sentenced by the U.S. District Judge Victor Marrero on September 6, 2013. EHRLINGER also agreed to make restitution to the RRB in the amount of $32,000.

Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 23 of whom have now pled guilty. 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. Lesniewski, et al S10 Indictment

Preet Bharara, the United States Attorney for the Southern District of New York, announced that MOHAMED IBRAHIM AHMED was sentenced today in Manhattan federal court to 111 months in prison for conspiring to provide material support to, and receive military-type training from, al Shabaab, a terrorist organization based in Somalia. The U.S. Department of State has designated al Shabaab as a Foreign Terrorist Organization. He was sentenced by U.S. District Judge P. Kevin Castel.

Manhattan U.S. Attorney Preet Bharara said: “Mohamed Ibrahim Ahmed traveled thousands of miles to align himself with al Shabaab, to aid their campaign of terror, and to learn their ‘ways of war.’ Today, his journey ends in prison and marks the latest victory in our constant effort to protect Americans from terrorism at home and around the world.”

According to the Superseding Information filed in Manhattan federal court, and prior court filings:

Al Shabaab has used violent means to destabilize the government of Somalia and to force the withdrawal of foreign troops from the country. The group has recruited foreign fighters to join in its “holy war” in Somalia, resulting in men from other countries, including the United States, traveling there to engage in violent jihad. Al Shabaab has also made numerous public statements demonstrating its intent to harm the United States.

In early 2009, AHMED left his home in Sweden and traveled to Somalia in order to support and receive military-type training from al Shabaab. While in Somalia, AHMED contributed approximately 3,000 Euros to al Shabaab, received training and instruction with respect to bomb-making and bomb-detonation, and purchased an AK-47 rifle, additional magazines, and two grenades. AHMED subsequently provided the rifle and magazines to an al Shabaab military commander.

In addition to the prison term, an order of judicial removal was signed, and AHMED will be deported upon completion of the sentence. He was also ordered to pay a mandatory $200 special assessment.

AHMED, 38, a native of Eritrea and a lawful resident of Sweden, was arrested in Nigeria in November 2009. On March 6, 2010, AHMED was transferred to the custody of the United States and subsequently transported to the Southern District of New York for prosecution.

AHMED pled guilty in June 2012 to one count of conspiracy to provide material support to a Foreign Terrorist Organization (al Shabaab) and one count of conspiracy to receive military-type training from a Foreign Terrorist Organization (al Shabaab).

Mr. Bharara praised the outstanding investigative work of the FBI’s Joint Terrorism Task Force based in Manhattan – which principally consists of special agents of the FBI and detectives of the New York City Police Department. He also expressed gratitude to the U.S. Department of Justice’s National Security Division, the Office of International Affairs, and the U.S. Department of State for their extraordinary assistance in the case. Mr. Bharara also thanked the Governments of Sweden and Nigeria for their assistance in this matter.

This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Benjamin Naftalis, John P. Cronan, and Rachel P. Kovner are in charge of the prosecution.