Southern District of New York
Press releases recorded for this federal judicial district.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Federal Corruption Charges Against New York State Senator Malcolm Smith and New York City Council Member Daniel HalloranRead the Press Release
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.
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U.S. v. Malcolm Smith et al. Complaint
Manhattan U.S. Attorney Announces the Appointment of Chief CounselRead the Press Release
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.”
Bronx Man Pleads Guilty in Manhattan Federal Court to the Sexual Exploitation of A Child and Child Pornography-Related ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today 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.
Statement of Manhattan U.S. Attorney Preet Bharara on the Indictment of Hedge Fund Portfolio Manager Michael Steinberg on Insider Trading ChargesRead the Press Release
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“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)Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Insider Trading Charges Against Hedge Fund Portfolio ManagerRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York 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
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Extradition of Australian Research Analyst on Insider Trading ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced 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
Charging Documents: U.S. V. Michael SteinbergRead the Press Release
U.S. v. Michael Steinberg S4 Indictment
Two Defendants Plead Guilty in Manhattan Federal Court to Participating in $57.3 Million Fraud on Organization That Makes Reparations to Victims of Nazi PersecutionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that 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
Twenty-Third Defendant Pleads Guilty in LIRR Disability Fraud SchemeRead the Press Release
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
Al Shabaab Operative Sentenced in Manhattan Federal Court to 111 Months in Prison for Conspiring to Support and Receive Military-Type Training from A Foreign Terrorist OrganizationRead the Press Release
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.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Insider Trading Charges Against Former Chief Information Officer of Technology Company and Hedge Fund AnalystRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced conspiracy and securities fraud charges against DAVID RILEY, a former Chief Information Officer and Vice-President for Foundry Networks, Inc. (“Foundry”), and MATTHEW TEEPLE, an analyst for an investment advisory firm to a family of hedge funds located in San Francisco, California (“Investment Adviser A”), for their alleged involvement in an insider trading scheme. RILEY allegedly provided material, nonpublic information (“Inside Information”) concerning Foundry, a publicly traded technology company, to TEEPLE. TEEPLE then caused others to execute trades based upon the Inside Information, including in accounts managed by Investment Adviser A. In total, these trades earned Investment Adviser A profits of over $16 million and enabled Investment Adviser A to avoid losses in excess of $11 million. TEEPLE was arrested this morning in San Clemente, California, and is expected to be presented later today in federal district court in the Central District of California. Riley was arrested this morning in San Jose, California, and is expected to be presented later today in federal district court in the Northern District of California.
The Manhattan U.S. Attorney and the FBI also announced the unsealing of the guilty plea of JOHN JOHNSON to conspiracy and securities fraud charges in connection with this insider trading scheme. JOHNSON pled guilty to these charges on March 18, 2013, before U.S. District Judge John F. Keenan.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, when David Riley and Matthew Teeple chose to traffic in inside information involving high-tech companies, they embarked on a high-stakes game that has repeatedly proven to be unwinnable. With the charges against them and the plea of John Johnson that we announce today, the ranks of privileged professionals who behave as if they are above the law continue to swell.”
FBI Assistant Director-in-Charge George Venizelos said: "There may be little to distinguish this case from the dozens of others we have made against industry insiders and investment advisers in the past several years. There is certainly nothing unique about the outcome: If you allegedly traffic in inside information, by providing it or trading on it, you will inevitably be found out, charged and prosecuted."
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against RILEY, TEEPLE, and JOHNSON.
According to the Complaint and other court documents:
Throughout the insider trading scheme, RILEY obtained Inside Information from Foundry and shared it with TEEPLE. As Chief Information Officer and a Vice President at Foundry, RILEY had access to monthly and quarterly financial reporting, along with other sensitive, non-public information relating to Foundry, well before such information became public. After receiving Inside Information concerning Foundry from RILEY, TEEPLE then shared this information with others, including another analyst who works at Investment Adviser A (the “Investment Adviser A Analyst”), and others who then traded in Foundry securities. Investment Adviser A was an investment adviser for a family of hedge funds.
For example, on July 16, 2008, RILEY provided TEEPLE with Inside Information concerning Foundry’s acquisition by another technology company, Brocade Communications Systems, Inc. (“Brocade”), before it was publicly announced on July 21, 2008. Within two hours of this conversation between RILEY and TEEPLE, TEEPLE made a phone call to the Investment Adviser A Analyst. While TEEPLE and the Investment Adviser A Analyst were on the phone, Investment Adviser A began purchasing a large amount of Foundry stock and call option contracts and selling put option contracts for Foundry. From approximately July 16, 2008 until the July 21, 2008 public announcement of Brocade’s acquisition of Foundry, Investment Adviser A purchased approximately 3,245,380 shares of Foundry. Based upon its trading in connection with the Inside Information concerning Foundry’s acquisition by Brocade, Investment Adviser A profited in the amount of approximately $13.6 million and avoided losses of approximately $7.4 million that it would have incurred due to its prior positions in Foundry.
TEEPLE also provided the Inside Information concerning Brocade’s impending acquisition of Foundry to two acquaintances of his, JOHN JOHNSON and Karl Motey, before the July 21, 2008 public announcement. TEEPLE told JOHNSON and Motey that Foundry was going to be acquired by Brocade, and the approximate price at which Foundry was going to be acquired, which turned out to be substantially accurate when the terms of the acquisition were made public. JOHNSON traded on this Inside Information and profited in excess of $136,000.
In addition, on multiple occasions, RILEY provided Inside Information concerning Foundry’s quarterly financial reporting to TEEPLE in advance of any public announcement. TEEPLE contacted the Investment Adviser A Analyst shortly after these conversations with RILEY in April 2008 and October 2008. Investment Adviser A subsequently traded in large quantities of Foundry equities based upon this Inside Information, amassing millions of dollars in both profits and avoided losses.
RILEY, 47, of San Jose, California, is charged with one count of conspiracy to commit securities fraud, and three substantive securities fraud counts. 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.
TEEPLE, 41, of San Clemente, California, is charged with one count of conspiracy to commit securities fraud, and three substantive securities fraud counts. 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.
JOHNSON, 46, of Arvada, Colorado, is charged with one count of conspiracy to commit securities fraud, and one substantive securities fraud count. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a fine of $5 million or twice the gross gain or loss from the offense.
Mr. Bharara praised the investigative work of the FBI. He also thanked the SEC. He 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.
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.
The charges contained in the Complaint against TEEPLE and RILEY are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Riley, David and Teeple, Matthew Complaint
Johnson, John InformationManhattan U.S. Attorney Announces Guilty Plea of Ahmed Warsame, A Senior Terrorist Leader and Liaison Between Al Shabaab and Al Qaeda in the Arabian Peninsula for Providing Material Support to Both Terrorist OrganizationsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York and John Carlin, Acting Assistant Attorney General for National Security, announced today the unsealing of the guilty plea of AHMED ABDULKADIR WARSAME to a nine-count Indictment charging him with providing material support to al Shabaab and al Qaeda in the Arabian Peninsula (“AQAP”) - two designated foreign terrorist organizations - as well as conspiring to teach and demonstrate the making of explosives, possessing firearms and explosives in furtherance of crimes of violence, and other violations. WARSAME pled guilty on December 21, 2011, before U.S. District Judge Colleen McMahon in Manhattan federal court, pursuant to a cooperation agreement with the United States.
WARSAME, a Somali national in his mid-twenties, was captured in the Gulf of Aden between Somalia and Yemen by the U.S. military on April 19, 2011, and was questioned for intelligence purposes for more than two months. Thereafter, WARSAME was read his Miranda rights and, after waiving those rights, he spoke to law enforcement agents for several days. WARSAME arrived in the Southern District on July 5, 2011.
Manhattan U.S. Attorney Preet Bharara said: “The capture of Ahmed Warsame and his lengthy interrogation for intelligence purposes, followed by his thorough questioning by law enforcement agents, was an intelligence watershed. The handling of Warsame represents a seamless orchestration by our military, intelligence, and law enforcement agencies that significantly furthered our ability to find, fight and apprehend those who wish to do us harm. Warsame’s capture, cooperation, and prosecution is a major victory for the United States, for its citizens, and for justice.”
Acting Assistant Attorney General for National Security John Carlin said: “Ahmed Warsame served as a critical link between two foreign terrorist organizations and was an operational terrorist leader, commanding hundreds of fighters. His capture, successful interrogation and guilty plea demonstrate how U.S. military, intelligence and law enforcement assets coordinate to neutralize threats and protect the country. I thank all those responsible for this important operation.”
According to the Indictment, WARSAME’s sworn guilty plea allocution before Judge McMahon, and other public information:
From 2007 until April 2011, WARSAME conspired with others, including American citizens, to provide material support to al Shabaab. He fought as a soldier on behalf of al Shabaab in Somalia in 2009 and provided other forms of support to the terrorist organization, including explosives, weapons, and training. In addition, WARSAME possessed and used destructive devices, machine guns, and an AK-47 semi-automatic assault weapon in Somalia in support of al Shabaab.
WARSAME also brokered a weapons deal, arranging for al Shabaab to purchase weapons directly from AQAP. From 2009 until April 2011, he conspired with others, including American citizens, to provide material support to AQAP, in the form of money, training, communications equipment, and personnel. While WARSAME was in Yemen in 2010 and 2011, he received weapons, explosives, and other military-type training from the terrorist organization. In addition, he possessed and used grenades and an AK-47 semi-automatic assault weapon in Yemen in support of AQAP.
From 2010 until April 2011, WARSAME conspired to teach and demonstrate the making of explosives and instruct other terrorists and would-be terrorists how to do so. Specifically, WARSAME received training in explosives directly from members of AQAP, intending to share that training with al Shabaab when he returned to Somalia.
WARSAME was captured at sea by the U.S. in April 2011 on his way back to Somalia from Yemen.
Al Shabaab was designated by the U.S. Department of State as a foreign terrorist organization in February 2008. AQAP was so designated in January 2010.
WARSAME pled guilty to all nine counts of the Indictment with which he was charged, and he faces the possibility of life in prison. The charges and maximum penalties are reflected in the attached chart.
Mr. Bharara praised the extraordinary investigative work of the FBI’s Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD. He also thanked the Department of Defense and the National Security Division of the Department of Justice.
This case is being handled by the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York, with assistance from the Counterterrorism Section of the Justice Department’s National Security Division. Assistant U.S. Attorneys Benjamin Naftalis, Adam S. Hickey, Sean S. Buckley, and Anna Skotko are in charge of the prosecution.
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U.S. v. Ahmed Warsame Indictment
Yonkers Resident Sentenced to 41 Months Imprisonment for Impersonating an IRS Officer in Furtheranceof A Fraudulent Tax Refund SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JARED BREWTON was sentenced in White Plains federal court to 41 months in prison for his participation in a fraudulent tax refund scheme involving identity theft, subscribing to false and fraudulent tax returns, and impersonating an IRS employee and a New York State Department of Labor official. BREWTON pled guilty in July 2012 to a six-count Indictment before U.S. District Judge Vincent L. Briccetti, who also imposed today’s sentence.
U.S. Attorney Preet Bharara stated: “Jared Brewton concocted an elaborate charade in his efforts to steal thousands of dollars from the IRS. His substantial sentence should deter others who contemplate doing the same thing.”
According to the previously filed Indictment:
From about 2006 through about 2010, BREWTON engaged in a scheme to obtain fraudulent tax refunds from the IRS. BREWTON carried out this scheme by preparing and causing to be sent to the IRS various federal income tax returns – in his own name and in the names of others – that fraudulently inflated income and withholding figures. For example, BREWTON falsely reported that his wages for the calendar year 2006 were $783,981 and that $359,750 in taxes had been withheld by his employers. BREWTON also fraudulently obtained tax refunds in other people’s names by stealing the names or defrauding the people into giving him their personal identifying information, then filing fraudulent tax returns in their names, and directing that the resulting refunds be sent to his address.
To further the scheme, on at least one occasion BREWTON posed as someone affiliated with the New York State Department of Labor in order to persuade a taxpayer to provide him with the taxpayer’s name, date of birth, and Social Security number. On multiple other occasions, BREWTON posed as an employee of the IRS claiming to be an “Audit Group Representative” named “Susan Waters.”
Mr. Bharara praised the outstanding investigative work of the Internal Revenue Service, Criminal Investigations, and the U.S. Treasury Inspector General for Tax Administration.
This case is being handled by the Office's White Plains Division. Assistant U.S. Attorney John P. Collins, Jr. is in charge of the prosecution.
Former Deutsche Bank Broker Sentenced in Manhattan Federal Court to 42 Months in Prison for Promoting Illegal Tax Shelters That Generated Billions of Dollars in Fraudulent Tax LossesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Tamara Ashford, the Principal Deputy Assistant Attorney General for the Tax Division, Department of Justice (“DOJ”), announced that DAVID PARSE, a former broker at Deutsche Bank (“DB”), was sentenced in Manhattan federal court today to 42 months in prison on tax obstruction and mail fraud charges stemming from his work in assisting lawyers from the Jenkens & Gilchrist (“J&G”) law firm and BDO Seidman (“BDO”) accounting firm in the design, marketing, and implementation of fraudulent tax shelters that allowed his clients to claim billions of dollars in fraudulent tax losses. Parse was sentenced by U.S. District Judge William H. Pauley III.
Manhattan U.S. Attorney Preet Bharara said: “David Parse used his professional acumen to help his wealthy clients make an end-run around the IRS, depriving the treasury of billions in tax revenue. And for his role in this sprawling and massive fraud, he is now paying the price.”
Principal Deputy Assistant Attorney General for the DOJ’s Tax Division Tamara Ashford said: “Today’s sentencing reflects the Justice Department’s continuing commitment to the investigation and prosecution of accountants and other professionals who promote fraudulent tax shelters. The sentence imposed is a clear warning that those who commit such frauds risk significant jail time and other criminal sanctions.”
According to the Indictment previously filed in Manhattan federal court, the proof at Parse’s trial, and statements made during his sentencing proceeding:
PARSE, who was also a certified public accountant, was a broker and investment representative at DB’s Chicago offices between 1997 and 2003. During that period, he worked with attorneys at J&G and accountants from BDO, as well as other DB brokers, on the design, marketing and implementation of high-fee tax strategies for individual clients. Those strategies, or “tax shelters,” were designed to allow high-net-worth clients to eliminate, reduce, or defer taxes on significant income or gains.
Among the fraudulent tax shelters designed, marketed, and implemented by PARSE and his co-conspirators were “Short Sales,” “Short Options Strategy” (“SOS”), “Swaps,” and “HOMER.” The Short Sale tax shelter was marketed and sold from 1994 through 1999 to at least 290 wealthy individuals, and generated at least $2.6 billion in false and fraudulent tax losses. The SOS tax shelter was marketed and sold from 1998 through 2000 to at least 550 wealthy individuals, and generated at least $3.9 billion in false and fraudulent tax losses. The Swaps tax shelter was marketed and sold in 2001 and 2002 to at least 55 wealthy individuals, and generated more than $420 million in false and fraudulent tax losses.
In return for receiving a fee from tax shelter clients based on a percentage of their purported tax losses and the nature of the losses – usually 5% for ordinary losses and 4% for capital losses – PARSE and other DB brokers assisted the J&G attorneys in marketing and implementing the fraudulent tax shelters, including attending sales pitches for the shelters, setting up bank accounts for the entities employed in the fraudulent tax shelters, and effectuating transfers between the various bank and financial accounts used in the transactions. PARSE also helped to identify and select certain stocks that would be utilized in the tax shelters to disguise from the Internal Revenue Service (“IRS”) the fraudulent losses claimed by the clients. He also steered his own DB clients to the fraudulent shelters, and was given a free tax shelter opinion letter by the J&G attorneys, which he used to evade hundreds of thousands of dollars of his own income taxes. PARSE was paid over $3 million in commissions by DB attributable to the fraudulent tax shelters.
In addition to his involvement in the marketing and implementation of the fraudulent tax shelters, PARSE also took part in the illegal back-dating of certain tax shelter transactions. The backdating occurred when attorneys at J&G realized, after the close of certain tax years, that certain steps of the tax shelter transaction had been done improperly, and the correct amount or nature of the tax shelter losses could not be produced through the transactions. The J&G attorneys worked with PARSE to create documents and effectuate securities transactions at the bank after the close of the tax year and back-dated them using “as of” dates, which treated the documents as if they had been signed prior to the close of the tax year, in violation of tax accounting rules.
In addition to his prison term, PARSE, 51, of Hinsdale, Illinois, was also sentenced to three years of supervised release and ordered to pay $115,700,000 in restitution and to forfeit $1 million.
PARSE and co-defendants Paul Daugerdas, Denis Field, and Donna Guerin were convicted of various tax fraud charges in May 2011 after an 11-week jury trial. Daugerdas, Field, and Guerin were granted a new trial as a result of certain juror misconduct. Guerin pled guilty in December 2012 to conspiracy and tax evasion charges and was sentenced by Judge Pauley on March 1, 2013 to 96 months in prison. She was also ordered to pay $190 million in restitution and to forfeit $1.6 million.
The re-trial of Daugerdas and Field is scheduled to begin on September 9, 2013. The charges against these defendants are merely accusations, and they are presumed innocent unless and until proven guilty.
Former J&G partner Erwin Mayer pled guilty to related charges of conspiracy and personal tax evasion in October 2010. Former BDO Seidman Vice Chairman and board member Charles W. Bee, Jr., pled guilty in June 2009 to related charges of conspiracy to defraud the IRS, tax evasion, and perjury. Michael Kerekes, a principal of BDO Seidman and also a former member of BDO's TSG and Tax Opinion Committee, pled guilty in February 2009 to related conspiracy and tax evasion charges. Adrian Dicker, a former Vice Chairman of BDO Seidman and TSG member, pled guilty in March 2009 to related conspiracy and tax evasion charges. BDO partner Robert Greisman pled guilty in July 2009 to related conspiracy, tax evasion, and IRS obstruction charges. BDO partner Mark Bloom pled guilty in July 2009 to a related IRS obstruction charge.
Mr. Bharara thanked the IRS and the Tax Division of DOJ for their work on this case.
This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Stanley J. Okula, Jr. and Jason P. Hernandez, and DOJ Tax Division Assistant Chief Nanette L. Davis, are in charge of the prosecution.
David Levy and Donna Levy Found Guilty in Manhattan Federal Court of Orchestrating “Pump and Dump” Stock Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID LEVY and DONNA LEVY were found guilty yesterday on all counts against them in an Indictment charging them with orchestrating so-called “pump and dump” stock fraud schemes that employ the Internet and social networking sites, among other tools, to manipulate the price of penny stocks. DAVID LEVY also was found guilty of participating in an international money laundering scheme. The defendants were convicted after a three-week jury trial before U.S. District Judge Paul A. Crotty.
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
The Start-Up Company Stock Fraud Scheme
DAVID LEVY and DONNA LEVY were convicted of conspiracy to commit wire fraud and securities fraud, and of committing securities fraud, in connection with their efforts to orchestrate multi-year pump and dump schemes involving two companies that they helped take public: Cardiac Network, Inc., which has traded under symbol “CNWI,” and Banneker, Inc., which has traded under symbol “BANI.” The scheme worked as follows: DAVID LEVY and DONNA LEVY offered to help start-up companies obtain financing, take the start-up companies public, and coordinate marketing and investor relations for the companies, in exchange for company shares.
Once the companies had gone public, DONNA LEVY put out press releases on behalf of the target companies, and she worked with DAVID LEVY to secretly fund and distribute misleading third-party “buy” recommendations concerning the targeted companies.
This misleading promotional campaign, along with other manipulative conduct, caused demand for stock in the targeted companies, and the price of the stock to rise. DAVID LEVY, DONNA LEVY, and their co-conspirators took advantage of the “pumped-up” stock trading volume and prices to “dump” their shares into the market until the misleading promotional campaign had run out of steam. They would repeat the scheme multiple times until the target companies’ shares were essentially valueless, thereby harming company founders and executives, as well as innocent investors who bought in reliance on the misleading promotional campaigns they orchestrated.
DAVID LEVY was also convicted of securities fraud in connection with his efforts to orchestrate a multi-year pump and dump scheme involving a third company that he helped take public: Greenway Design Group, Inc., which has traded under symbol “GDGI.” Evidence presented at trial demonstrated that DAVID LEVY awarded himself secret shares in GDGI in the name of a Panamanian shell company maintained by a money launderer.
The International Money Laundering Scheme
Additionally, DAVID LEVY was convicted of a money laundering conspiracy for his efforts to conceal more than $2.3 million in proceeds from the fraudulent schemes in Panamanian shell company bank accounts maintained at a bank in Panama. In connection with the scheme, DAVID LEVY wire transferred $150,000 in fraud proceeds to a Panamanian shell company bank account through a bank account in New York. He carried over to Panama $2 million in cashiers’ checks, representing proceeds from stock fraud, and deposited it into the shell company bank account.
The Manipulation-For-Hire Scheme
In addition to being convicted of the charges above, DONNA LEVY also was convicted of two counts arising from her participation in a manipulation-for-hire scheme. As demonstrated at trial, DONNA LEVY was paid by others who were interested in dumping large holdings of penny stocks into the market, or through intermediaries, to post or fund misleading stock “buy” recommendations on purportedly independent stock analysis websites and email newsletters. Participants in the scheme would also engage in manipulative trading activity concerning stocks that they were paid to help manipulate. They did so knowing that their conduct would help pump up the prices of the stocks they were manipulating so that they could sell and make quick profits from unsuspecting investors who would be harmed once the secretly-funded manipulative campaign ended and the stock crashed.
DONNA LEVY was convicted of conspiracy to commit wire fraud and securities fraud, and of committing securities fraud, in connection with her efforts to orchestrate a pump and dump scheme as a manipulator for hire in connection with a purported company called Emerging World Pharma, Inc., which has traded under symbol “EWPI.”
DAVID LEVY, 60, of Fort Lauderdale, Florida, faces a maximum sentence of 85 years in prison, and a fine of over $5,000,000, in addition to forfeiture of the proceeds of the crimes. DONNA LEVY, 57, of Fort Lauderdale, Florida, faces a maximum sentence of 70 years in prison, and a fine of over $5,000,000, in addition to forfeiture of the proceeds of the crimes. A sentencing date has not yet been set for either defendant.
Nine additional defendants have already pled guilty to charges arising out of the conduct alleged in the Indictment, and three of the nine have been sentenced. The relevant plea dates and, where applicable, the sentences imposed are set forth in the attached chart.
This case originated and the schemes were uncovered as part of the Government’s long-term investigation into criminal conduct at the Port of New York-New Jersey. Mr. Bharara thanked the Internal Revenue Service-Criminal Investigations’ New Jersey office, as well as the other participants in the High Intensity Drug Trafficking Area Task Force, which includes the Drug Enforcement Administration and Immigration and Customs Enforcement’s Homeland Security Investigations’ New Jersey Offices, for their assistance with the investigation. Mr. Bharara also thanked the Securities and Exchange Commission and the Financial Industry Regulatory Authority for supporting the investigation, which is ongoing.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Howard S. Master and Carrie H. Cohen are in charge of the prosecutions, and Andrew D. Goldstein is responsible for the asset forfeiture aspects of the case.
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U.S. v. David Levy, et al. S5 Indictment
Brooklyn Woman Pleads Guilty in Manhattan Federal Court to Participating in $57.3 Million Fraud on Organization That Makes Reparations to Victims of Nazi PersecutionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ELLA VOSKRESENSKIY 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. VOSKRESENSKIY, a former employee of the Claims Conference, 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. She pled guilty today before U.S. District Judge Thomas P. Griesa.
Manhattan U.S. Attorney Preet Bharara said: “Ella Voskresenskiy’s abuse of her position at the Claims Conference and her continued exploitation of the organization even after her employment ended is an all-too-familiar story in this case. But guilty pleas have also become very familiar in this case, and hers is the 26th.”
According to the Complaint and the Indictment filed in Manhattan federal court:
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 network of individuals systematically defrauded the Article 2 Fund and Hardship Fund programs for over a decade. The Claims Conference first suspected the fraud in 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 obtained from outside sources to verify a person’s persecution by the Nazis. Some of the detailed descriptions of persecution in the fraudulent Article 2 Fund applications were completely fabricated.
From the investigation to date, the Claims Conference has determined that at least 1,112 Article 2 Fund cases it processed have been determined to be fraudulent. Those cases have resulted in a loss to the Claims Conference of approximately $45 million.
While employed as a caseworker in the Article 2 Fund program at the Claims Conference, VOSKRESENSKIY knowingly processed fraudulent applications in return for payments from her co-conspirators. In addition, when she was no longer employed at the Claims Conference, VOSKRESENSKIY passed materials, including identification documents, to a co-conspirator still employed at the Claims Conference to support fraudulent Hardship Fund applications.
VOSKRESENSKIY is the 26th of the 31 defendants charged in the scheme to plead guilty, including eight former Claims Conference employees. Charges remain pending against the remaining five defendants in the case, who are presumed innocent unless and until proven guilty.
VOSKRESENSKIY, 42, of Brooklyn, New York, faces a maximum sentence of 40 years in prison. She is scheduled to be sentenced by Judge Griesa on August 5, 2013 at 4:30 p.m.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its 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.
U.S. v. Semem Domnitser, et al. S1 Indictment
Seventeen Peekskill, N.Y. Residents Charged in White Plains Federal Court with Narcotics and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Eric Johansen, Chief of the Peekskill Police Department, and George N. Longworth, Commissioner of the Westchester County Department of Public Safety, today announced the unsealing of two separate Indictments and two Complaints charging 17 defendants with a series of crimes, including the distribution of narcotics and the use of firearms in Peekskill, New York. Fifteen of the defendants charged in the Indictments and one of the Complaints were arrested today or were previously taken into custody. Fourteen of those defendants were presented in White Plains federal court this afternoon before U.S. Magistrate Judge Lisa M. Smith. The 15th defendant, Kenyata Burnett, is in state custody, and is expected to appear in White Plains federal court next week. The two remaining defendants, Paul Lockett and Phillip Guzman, are still at large.
U.S. Attorney Preet Bharara stated: “Even small towns like Peekskill are not immune from the narcotics trade and the violence with which it is inextricably linked. With today’s charges against these 17 defendants who were allegedly responsible for visiting this plague on the community, we are taking an important step forward in returning Peekskill to its law-abiding residents.”
FBI Assistant Director-in-Charge George Venizelos stated: “Drug trafficking and the gun violence that inevitably comes with it are not only big-city problems. As this case and others have shown, these twin problems affect smaller cities and towns as well. The residents of all these communities have the right to safety and security in their homes, and we will continue to work to make that a reality.”
Peekskill Police Chief Eric Johansen stated: “These arrests send a clear message that drugs and violence are not tolerated anywhere in Peekskill. Our narcotics unit worked closely with the U.S. Attorney’s Office, the FBI, and the Westchester County Police to break up this violent drug ring. Our department will continue to set a high standard of performance and excellence to protect all of our citizens and businesses now and in years to come.”
Westchester County Department of Public Safety Commissioner George N. Longworth stated: “The Department of Public Safety remains firmly committed to working with all federal and local law enforcement partners to combat drug dealing in Westchester County. The Peekskill community is safer today because of the outstanding work of all of the agencies involved in this investigation.”
The following allegations are based on the Indictments unsealed today in White Plains federal court:
LORENZO WAGNER, JR. was the effective leader of a drug trafficking organization (the “Organization”), whose members and associates have, since January 2008, sold crack cocaine and heroin in Peekskill, New York. Organization members worked together to ensure that all members profited from drug sales. For a period of time in 2011 and 2012, the Organization operated out of apartments in the Dunbar Heights housing complex in Peekskill. Organization members and associates used those apartments to cook crack cocaine and to package, store, and resell drugs. At other times, the Organization operated out of other locations in Peekskill. In order to secure the Organization’s control of portions of the Peekskill narcotics trade, WAGNER, JR. ordered multiple shootings against rivals. These shootings were carried out by the Organization’s enforcers, including associates of the Organization who were paid to commit acts of violence against rivals.
Eight of the Organization’s members and associates – WAGNER, JR., 29, PHILLIP GUZMAN, 28, JUAN URENA, 23, STEFANO DEMICHELI, 25, JAMES PATTERSON, 27, MARQUISE ROBERSON, 24, MYRON WAGNER, 19, and LORENZO WAGNER, SR., 48 –are charged with conspiring to distribute, and possessing with intent to distribute, crack cocaine and heroin from January 2008 to March 2013. WAGNER, JR. and PATTERSON are also charged with using, carrying, possessing, and discharging firearms during the narcotics conspiracy. GUZMAN is charged with being a felon in possession of a firearm.
Seven other Peekskill residents are named in a second Indictment that charges four individuals – LAMAR KINGWOOD, 34, JAMEL BAILEY, 33, MELISSA DABBS, 43, and ISAAC MALLORY, 33 – with conspiring to distribute, and possessing with intent to distribute, crack cocaine and heroin from January 2008 to March 2013, and three individuals –
TYRON BRICKHOUSE, 28, KENYATA BURNETT, 37, and RONALD CARTER, 47 – with conspiring to distribute, and possess with intent to distribute, crack cocaine from at least November 2010 to March 2013. Two other individuals – HAKIM ANDERSON, 33, and PAUL LOCKETT, 32 – were charged in separate Complaints with conspiring to distribute, and possess with intent to distribute, crack cocaine.
The charges against each defendant and the corresponding maximum potential penalties are outlined in the charts attached to this press release.
Mr. Bharara praised the outstanding investigative work of the FBI, the Peekskill Police Department, and the Westchester County Department of Public Safety. He added that the investigation is continuing.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Douglas Bloom, Ilan Graff, and Sarah Krissoff are in charge of the prosecution.
The charges contained in the Indictments and Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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U.S. v. Lamar Kingwood, et al. Indictment
U.S. v. Lorenzo Wagner, Jr. et al. Indictment
U.S. v. Paul Lockett Complaint
U.S. v. Hakim Anderson ComplaintManhattan U.S. Attorney Announces Charges Against Bronx Pharmacy Owner for Participating in Medicaid Fraud Scheme Involving the Diversion of Prescription DrugsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York and
George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of charges against DAVID CORREA, a Bronx pharmacy owner, for his participation in a Medicaid fraud scheme involving the unlawful diversion of prescription drugs that had previously been dispensed to Medicaid recipients in the New York City area (“second-hand” drugs). Today’s charges are a result of the continuing investigation which led to the arrests on July 17, 2012 of dozens of people in connection with a $500 million Medicaid fraud scheme. CORREA was arrested this morning, and will be presented and arraigned in Manhattan federal court before U.S. Magistrate Judge Michael H. Dolinger later this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “With today’s charges, we continue to target alleged black marketeers of second-hand drugs for prosecution. The alleged scheme enabled David Correa to defraud Medicaid and other insurance providers out of hundreds of thousands of dollars, while potentially compromising the health of very sick people in need of life-saving drugs. Our investigation remains very much ongoing.”
FBI Assistant Director-in-Charge George Venizelos said: “Today’s arrest is part of our ongoing investigation that previously uncovered a massive, multi-state drug diversion conspiracy. This scheme – including the defendant’s alleged conduct – defrauded Medicaid and, indirectly, U.S. taxpayers. It also threatened the health of the patients whose prescriptions were filled with diverted and repackaged medications. Health care fraud is a multibillion-dollar industry it is our mission to put out of business.”
The following allegations are based on the Complaint unsealed today in Manhattan federal court:
From at least 2010 through July 2012, CORREA conspired to purchase various second-hand prescription pills at heavily discounted prices from two individuals, who are now cooperating with the Government, in order to resell the pills at his pharmacy. The prescription drugs were designed to treat various illnesses, including HIV, schizophrenia, and asthma, and were originally dispensed to Medicaid recipients and private insurance beneficiaries in the New York City area, who then sold them into collection and distribution channels that ultimately ended at pharmacies, including the pharmacy CORREA owned. CORREA regularly purchased approximately 50 to 100 bottles of prescription drugs per month for $5,000 to $10,000 from the cooperators. He purchased the pills with cash in transactions outside of his pharmacy or in the parking lot of a nearby department store, where the drugs were delivered to him in plastic bags and beer boxes. By re-selling second-hand prescription pills as “new” to unsuspecting patients, and fraudulently seeking reimbursement from health care benefit programs, including Medicaid, CORREA could potentially reap hundreds of thousands of dollars in unlawful profits. For example, CORREA purchased HIV medication from the cooperators for $200 per bottle, and would have been reimbursed by Medicaid for more than $1,100 per bottle. So he stood to make more than $900 on each bottle of second-hand prescription medication he sold.
CORREA, 43, of Yonkers, New York, is charged with one count of conspiracy to commit health care fraud, which carries a maximum penalty of 10 years in prison, and one count of conspiracy to commit various violations of the Food, Drug and Cosmetic Act relating to the misbranding and adulteration of prescription drugs, which carries a maximum penalty of five years in prison.
Mr. Bharara praised the efforts of the FBI's Health Care Fraud Task Force and thanked the FBI for its work on the case.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Jason A. Masimore, Russell Capone, and Edward B. Diskant 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. David Correa Complaint
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Insider Trading Charges Against Former Galleon Portfolio Manager Rengan RajaratnamRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced conspiracy and securities fraud charges against RAJARENGAN RAJARATNAM (“RENGAN RAJARATNAM”), a former portfolio manager at the hedge fund management firm Galleon Group, for his alleged involvement in an insider trading scheme. RENGAN RAJARATNAM allegedly conspired with his brother, Galleon founder Raj Rajaratnam, to trade on the basis of material, non-public information (“Inside Information”) concerning Clearwire Corp. (“Clearwire”) and Advanced Micro Devices, Inc. (“AMD”) in 2008, earning nearly $1.2 million in profits in the aggregate. RENGAN RAJARATNAM has not yet been arrested on these charges.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Rengan Rajaratnam and his brother shared more than DNA, they also shared a penchant for insider trading. Along with his brother Raj, Rengan Rajaratnam was allegedly at the heart of an insider trading scheme that swept up an unprecedented number of people in its web of corruption, and with his indictment, we are one step closer to closing that chapter.”
FBI Assistant Director-in-Charge George Venizelos said: “Rengan Rajaratnam’s career arc paralleled his brother’s. He followed in Raj’s footsteps by obtaining an MBA from a top-flight business school. He went to work for Raj at Galleon. As alleged in the indictment, Rengan also engaged in the same illegal conduct as Raj. He reaped the benefit of insider information obtained by Raj, and he planned to reciprocate by cultivating his own source of inside information. Now Rengan’s career arc has descended to the same place his brother’s did less than four years ago: defendant.”
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against RENGAN RAJARATNAM.
The following allegations are based on the Indictment filed yesterday and unsealed today in Manhattan federal court, and other court documents:
The Inside Information concerning Clearwire originated from Rajiv Goel, an employee of Intel Corp. (“Intel”). In March 2008, Goel provided Inside Information to his friend Raj Rajaratnam concerning a significant transaction in which Intel would invest approximately $1 billion in Clearwire in exchange for a 10 percent equity position. Raj Rajaratnam, in turn, shared the Inside Information with his brother, RENGAN RAJARATNAM. RENGAN RAJARATNAM and Raj Rajaratnam used this Inside Information to buy Clearwire stock on March 24 and 25, 2008.
After the U.S. stock markets closed on March 25, 2008, a major news organization published an article describing, in part, the proposed Clearwire transaction. Shortly afterward, RAJARATNAM called his brother to alert him to the news report. In that call, RAJARATNAM said, “We’re f***ed man” because the “Clearwire stuff … just hit” the newspaper. RENGAN RAJARATNAM explained that the news article was “short on details . . . they don’t have any of the equity split. But they named . . . Comcast, they named Time Warner, Clearwire, Sprint.” Raj Rajaratnam replied, “O.K., sh*t.” RAJARATNAM then said, “So, I don’t know how much you got in today,” referring to Raj Rajaratnam’s purchases of Clearwire stock that day, “but I think [Clearwire’s share price] is gonna rip [rise sharply] tomorrow.” In fact, Clearwire’s share price did rise sharply the following day in response to the news article, after which RENGAN RAJARATNAM and Raj Rajaratnam made nearly $1.2 million in profits from the Inside Information concerning Clearwire.
The Inside Information concerning AMD originated from Anil Kumar, who was, at the time, a partner of McKinsey & Co. (“McKinsey”), the global management consulting firm. In 2008, AMD hired McKinsey to advise it in relation to a strategic transaction in which AMD would spin off its manufacturing business into a new entity, and the investment authority of Abu Dhabi would invest in the new entity and in AMD itself. On August 15, 2008, Kumar advised Raj Rajaratnam that AMD and the Abu Dhabi investment authority had “shaken hands and said that they’re going ahead with the deal.” Three hours later, Raj Rajaratnam told RENGAN RAJARATNAM, “I just heard that . . . AMD had a handshake with the . . . Arabs. . . . The Arabs to put [in] six billion dollars.” He also told his brother that he had bought AMD shares based on Kumar’s Inside Information about AMD, and that he was “buying two fifty” – meaning, 250,000 shares of AMD – “for you, OK?” RENGAN RAJARATNAM replied, “Alright, thanks a lot man, I appreciate it.” On August 15, 2008, Raj Rajaratnam bought 3 million shares of AMD for a Galleon hedge fund that he managed, and 250,000 shares of AMD for a Galleon hedge fund that RAJARATNAM managed.
Later that day, RENGAN RAJARATNAM and Raj Rajaratnam spoke again about the AMD Inside Information and also about the affirmative efforts that RAJARATNAM was making to cultivate another McKinsey partner (“McKinsey Partner A”) as a source of Inside Information. Specifically, RENGAN RAJARATNAM advised Raj Rajaratnam that he had just finished a meeting with McKinsey Partner A in which McKinsey Partner A “spilled his beans” and “volunteered the information about the investments” in AMD. Raj Rajaratnam said, “[W]hat we wanna do is . . . get him and then have access to, you know, be able to chat with him” about other Inside Information. Raj Rajaratnam said to RENGAN RAJARATNAM, “[H]e is a little dirty, right?” RAJARATNAM responded, “[H]e’s a little dirty.” RAJARATNAM said that when he had asked McKinsey Partner A what other stocks McKinsey Partner A liked, McKinsey Partner A said, “‘You know, the problem is all my best ideas . . . are inside information.’”
RAJARATNAM, 42, of New York, New York, has been charged with one count of conspiracy to commit securities fraud and six counts 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. Counts Two through Seven, the securities fraud charges, each carry a maximum potential penalty of 20 years in prison and a maximum fine of $5 million.
Raj Rajaratnam was found guilty of conspiracy and securities fraud charges in 2011 and is currently serving an 11-year prison sentence. Rajiv Goel and Anil Kumar both pled guilty pursuant to cooperation agreements and were sentenced to two years of probation in 2012.
Mr. Bharara praised the investigative work of the FBI. He also thanked the 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. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney David B. Massey is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Rajarengan Rajaratnam Indictment
Manhattan Man Sentenced to 90 Months in Prison for Distributing and Possessing Child Pornography Involving Children as Young as TwoRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARK HEALEY was sentenced today in Manhattan federal court to 90 months in prison for transporting, distributing, and possessing child pornography. HEALEY was convicted of two counts of transporting and distributing child pornography, and two counts of possessing child pornography, after a one-week trial in September 2011. He was sentenced by U.S. District Judge Shira A. Scheindlin.
Manhattan U.S. Attorney Preet Bharara stated: “The exploitation of children through pornography is a vile and disturbing crime. We take our responsibility to protect children very seriously as the prosecution and sentencing of this defendant once again demonstrates.”
According to the Complaint, the Superseding Indictment, evidence presented at trial, and statements made in court:
Between February 2009 and June 2010, HEALEY used a peer-to-peer file-sharing program called GigaTribe to download child pornography from the Internet and to distribute it to others, including multiple videos of the abuse of children as young as approximately two years old. In the course of the investigation, the Federal Bureau of Investigation (“FBI”) seized a computer belonging to HEALEY, which contained numerous videos and images of child pornography. The computer also contained chats that HEALEY had engaged in over the file-sharing program, in which he sought out videos and images of the most violent abuse of the youngest children, or as he wrote online, “the yngr and more abusive the better.” HEALEY also suggested in chats that he had previously abused unidentified children.
In addition to his prison term, HEALEY, 39, was also sentenced to 10 years of supervised release and ordered to pay a $400 special assessment.
Mr. Bharara praised the FBI for its outstanding work in the investigation.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Daniel C. Richenthal is in charge of the prosecution.
The FBI encourages the public to report suspected child predators and any suspicious activity through its toll-free hotline at (212) 384-1000. It is staffed around the clock by investigators. Suspected child sexual exploitation or missing children may be reported to the National Center for Missing and Exploited Children, an Operation Predator partner, at (800) 843-5678 or http://www.cybertipline.com.
Two Members of Violent Robbery Crew Found Guilty in Manhattan Federal Court of Murder, Nine Robberies, and Firearms ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Joseph Anarumo, the Special-Agent-in-Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Raymond W. Kelly, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that JERMAINE DORE and DWAYNE BARRETT, two members of a violent robbery crew operating in the Bronx and Westchester County, New York, were found guilty yesterday in Manhattan federal court of murder, nine robberies, and firearms charges. DORE and BARRETT were convicted after a two-week jury trial before U.S. District Judge Richard J. Sullivan.
According to the Superseding Indictment and the evidence presented at trial:
Between August 2011 and January 2012, DORE and BARRETT participated in nine separate robberies. They carried out those robberies, using weapons – including firearms and knives – to injure, terrorize, and in one case murder, one of their victims. The nine robberies were:
- A robbery that took place on August 22, 2011, in Matamoras, Pennsylvania, during which an individual who owns a gas station and store was assaulted and robbed of approximately $45,000 in business proceeds;
- A robbery that took place on October 5, 2011, in the Bronx, New York, during which two individuals who sell telephone calling cards to bodegas, grocery stores, and other commercial locations, were robbed of approximately $700;
- A robbery at knifepoint that took place on October 10, 2011, in the Bronx, New York, during which the employee of a bodega was robbed of a cellphone and laptop computer;
- A robbery at knifepoint that took place on October 11, 2011, in New Rochelle, New York, during which an individual who sold telephone calling cards was beaten and robbed of more than $6,000 and telephone calling cards valued at approximately $6,000;
- A robbery at gunpoint that took place on October 29, 2011, of an individual who owns a poultry market in the Bronx, New York, during which approximately $15,000 in business proceeds were taken;
- A robbery at gunpoint on December 12, 2011, in Mount Vernon, New York, during which the defendants attempted to rob three victims engaged in the business of selling cigarettes to other individuals and commercial establishments, and shot and killed one of the victims;
- A robbery that took place on December 12, 2011, in the Bronx, New York, during which an individual employed by a company that sells tobacco products to commercial establishments was threatened with a gun and a knife and robbed of more than $15,000;
- A robbery that took place on December 31, 2011, in the Bronx, New York, during which an individual who sold telephone calling cards was beaten and robbed of approximately $3,000 and 100 telephone calling cards; and
- A robbery at knifepoint that took place on January 7, 2012, in the Bronx, New York, during which an individual who owns a business that supplies merchandise to bodegas was assaulted and robbed of approximately $1000.
BARRETT also acted as the driver in connection with many of the robberies.
DORE, 26, of the Bronx, New York, and BARRETT, 35, of Yonkers, New York, were convicted of the following seven counts: (1) participating in a conspiracy to commit robberies from 2010 through January 2012; (2) using, carrying, or possessing firearms in connection with the robbery conspiracy; (3) committing a robbery on October 29, 2011, at an apartment on Radcliff Avenue in the Bronx, New York; (4) using, carrying, or possessing firearms in connection with the October 29 robbery; (5) committing a robbery on December 12, 2011, in the vicinity of 267 South Fourth Avenue, Mount Vernon, New York; (6) using, carrying, or possessing firearms in connection with the December 12 robbery; and (7) causing the death of Gamar Dafalla, one of the victims of the December 12, 2011, robbery. They both face a maximum penalty of life in prison. DORE and BARRETT are scheduled to be sentenced by Judge Sullivan on July 26, 2013.
Three other defendants pled guilty to related charges prior to trial: Fahd Hussain, Taijay Todd, and Tameshwar Singh. Hussain was the operator of One M Stationery Store, located on White Plains Road in the Bronx, New York, who exploited his relationships with other business owners, including individuals who supplied Hussain’s store with telephone calling cards and other merchandise, personal friends, and family members in targeting the robbery victims. Many of the victims, were business owners and members of the Yemeni community in New York City, as was Hussain. Todd participated in several of the robberies with DORE and BARRETT. Singh was a business associate of HUSSAIN who engaged in the transportation of untaxed cigarettes. Hussain, Todd, and Singh are scheduled to be sentenced by Judge Sullivan on June 21, July 10, and June 19, 2013, respectively.
Mr. Bharara praised the ATF and the NYPD for their work in this investigation.
The prosecution of this case is being overseen by the Office’s Violent Crimes Unit. Assistant United States Attorneys Amy Lester and Jessica Masella are in charge of the prosecution.
U.S. v. Fahd Hussain, et al. S2 Indictment
Participant in Multi-Million Dollar Fraudulent Credit Repair Scheme Sentenced in Manhattan Federal Court to 51 Months in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that EDWIN MANSOUR, JR. was sentenced today in Manhattan federal court to 51 months in prison for his role in what is believed to be the largest known credit repair fraud scheme ever charged. His co-defendant, Denise Hudson was sentenced earlier this month to 30 months in prison. MANSOUR and Hudson were ordered to pay more than $9.3 million in restitution for the losses caused by the scheme. In October 2012, MANSOUR and Hudson each pled guilty to one count of conspiracy to commit bank fraud and Hudson also pled guilty to one count of conspiracy to cause damage to a protected computer. Their sentences were imposed by U.S. District Judge Naomi Reice Buchwald. Edwin Jacquet (“Jacquet”), the leader of the scheme, was sentenced by Judge Buchwald to 63 months in prison in December 2012.
Manhattan U.S. Attorney Preet Bharara said: “A credit score is a critical data point relied upon by banks and other lenders in deciding whether to extend loans, and a good one takes years to develop and must be carefully maintained. As a result, the integrity of credit reporting is crucial for the proper functioning of the financial system. Mansour will now pay a steep price for attempting to corrupt that system for his own benefit.”
According to the Indictment to which MANSOUR and Hudson pled guilty, statements made during their guilty pleas and sentencing proceedings, and other court documents:
Consumer reporting agencies, commonly known as “credit bureaus,” are businesses that provide reports to third parties about the credit-worthiness of consumers. Credit bureaus gather information used to generate credit reports from many sources, including “furnishers.” Furnishers include entities that provide consumers with credit, such as credit card companies, mortgage lenders, automobile lenders, and department stores.
In September and October 2007, Highway Furniture, Inc. (“Highway Furniture”), a Brooklyn-based business that Jacquet managed, became a furnisher. In July 2008, New York Funding Group Inc. (“New York Funding”), a Long Island-based business which Jacquet created, also became a furnisher. These businesses became furnishers by entering into various agreements with at least two credit bureaus that allowed Highway Furniture and New York Funding to furnish their customers’ data to the credit bureaus with which they had agreements.
From 2007 through 2009, through Highway Furniture and after that through New York Funding, MANSOUR, Hudson, and others including Jacquet, engaged in a scheme to fraudulently improve the credit histories and credit scores of thousands of individuals who were purported customers of the two entities (the “Purported Customers”). New York Funding and Highway Furniture obtained these customers principally by working through a network of brokers who promised the customers that the brokers could have their credit “repaired.” In exchange for thousands of dollars in fees, MANSOUR, Hudson, and their co-conspirators provided credit bureaus with fictitious information showing that Highway Furniture and New York Funding had extended credit to the Purported Customers and that the loans had been, or were being, repaid. In fact, the individuals had never been extended credit by Highway Furniture or New York Funding. The purpose of providing the fraudulent information to the credit bureaus was to generate fake positive credit history and, in so doing, improve the credit scores of the Purported Customers.
Over the course of the scheme, MANSOUR, Hudson, and their co-conspirators added nearly 3,000 fake lines of credit to the credit history of hundreds of Purported Customers of New York Funding and Highway Furniture. After having their credit fraudulently improved, the Purported Customers obtained more than $47.8 million in loans, including mortgages, car loans, student loans, and credit card loans. The losses sustained by the lenders who extended credit to the purported customers and who could not repay the loans, totaled more than $9.3 million.
MANSOUR, Hudson, and their co-conspirators also fraudulently improved the credit histories and credit scores of some of the Purported Customers by deleting accurate, but negative, credit information maintained by one or more credit bureaus. They did so by exploiting loopholes in a software tool called e-OSCAR that the credit bureaus made available to Highway Furniture, the purpose of which was to help resolve disputes about individuals’ credit histories. Instead, MANSOUR, Hudson, and their co-conspirators used their access to e-OSCAR as part of the fraudulent credit repair scheme. Over the course of the scheme, MANSOUR, Hudson, and their co-conspirators fraudulently deleted or modified over 4,400 legitimate debts from the credit files of hundreds of people.
In addition to the prison terms and restitution, Judge Buchwald sentenced MANSOUR, 45, of Staten Island, New York, and Hudson, 49, of Brooklyn, New York, to two years of supervised release.
Mr. Bharara praised the outstanding efforts of United States Secret Service in the investigation. He also thanked Experian Information Solutions, Inc., and TransUnion LLC for their assistance in the investigation.
In sentencing MANSOUR, Judge Buchwald commented on MANSOUR’s submission of a fraudulent claim for disaster assistance after Hurricane Sandy, and said: “What is ultimately so staggering is that he has been absolutely disrespectful of the legal system since his arrest.”
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Daniel W. Levy and Zachary A. Feingold are in charge of the prosecution.
Iranian Narcotics Broker Sentenced in Manhattan Federal Court to 210 Months in Prison for Conspiring to Import Hundreds of Kilograms of Heroin to the United StatesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SIAVOSH HENAREH, a citizen of Iran, was sentenced in Manhattan federal court to 210 months in prison for conspiring to import heroin into the United States. HENAREH was convicted in November 2012 after a two-week jury trial before U.S. District Judge Jed S. Rakoff. HENAREH was one of three defendants charged in connection with an international investigation of narcotics and weapons traffickers. His co-defendant, Cetin Aksu, pled guilty in August 2012 to conspiring to provide material support to Hizballah, conspiring to acquire anti-aircraft missiles, conspiring to import heroin into the United States, and making false declarations before a federal court. HENAREH’s other co-defendant, Bachar Wehbe, pled guilty in November 2011 to conspiring to provide material support to Hizballah, conspiring to acquire anti-aircraft missiles, and obstruction of justice. Judge Rakoff imposed HENAREH’s sentence.
Manhattan U.S. Attorney Preet Bharara stated: “The conduct for which Siavosh Henareh was sentenced today, along with the conduct of his co-defendants, serves as a stark reminder of the nexus between international narcotics trafficking and terrorist funding. Today’s stiff sentence befits the gravity of his crime, and we will continue to pursue narco-traffickers across the globe.”
According to the Indictment and evidence presented at trial:
Beginning in June 2010, HENAREH – an international narcotics broker – had over 30 meetings in countries including Turkey, Romania, and Greece with DEA confidential sources (the “CSs”) and potential heroin suppliers. During those meetings, and in a series of telephone calls, HENAREH agreed to arrange the importation of hundreds of kilograms of high-quality heroin into the United States. The CSs represented to HENAREH that the profits from the sale of the heroin in the United States would be used, among other things, to purchase weapons. In April 2011, in Bucharest, Romania, the CSs received a one-kilogram heroin sample from HENAREH’s co-conspirator in order to inspect its quality, and in anticipation of a subsequent, multi-hundred kilogram load. In July 2011, HENAREH volunteered his home as the location where approximately three million Euros would be brought to pay for 189 kilograms of heroin. He then helped his co-conspirators verify and count that money, before being arrested by the Romanian National Police.
While negotiating the heroin transaction, members of the narcotics conspiracy began to negotiate a weapons deal with the CSs. Specifically, Aksu, who also participated in the heroin conspiracy, met with the CSs and with Wehbe in furtherance of the weapons deal. Aksu and Wehbe subsequently arranged to purchase military-grade weaponry from the CSs on behalf of Hizballah. In those meetings, and in telephone calls and email messages, Aksu and Wehbe discussed the purchase of American-made Stinger surface-to-air missiles (“SAMs”), Igla SAMs, AK-47 and M4 assault rifles, M107 .50 caliber sniper rifles, and ammunition from an American base in Germany and other locations. In June 2011, in Kuala Lumpur, Malaysia, Aksu and Wehbe signed a written contract for the purchase of 48 American-made Stinger SAMs, 100 Igla SAMs, 5,000 AK-47 assault rifles, 1,000 M4 rifles, and 1,000 Glock handguns, for a total price of approximately $9.5 million. During the course of the weapons negotiations, Wehbe stated that he was purchasing the weapons on instructions from, and on behalf of Hizballah. Shortly thereafter, Wehbe and others caused approximately $100,000 to be transferred to the CSs as a down payment for the weapons purchase, including a $50,000 wire transfer to an undercover bank account.
In addition to his prison term, HENAREH, 58, was also sentenced to five years of supervised release. He was also ordered to pay a $100 special assessment.
Wehbe and Aksu are scheduled to be sentenced by Judge Rakoff on November 4, 2013 and August 22, 2014, respectively. Both defendants face a maximum term of life in prison, with a mandatory minimum term of 25 years in prison.
Mr. Bharara praised the outstanding work of the Special Operations Division of the DEA, the DEA Bucharest Country Office, the DEA Istanbul Country Office, the DEA Kuala Lumpur Country Office, the DEA Copenhagen Country Office, the DEA New Delhi Country Office, the DEA Athens Country Office, and the DEA Cyprus Country Office. Mr. Bharara also expressed his gratitude to the Southeast European Law Enforcement Center, the Romanian National Police, the Turkish National Police, the Malaysian National Police, the Greek Hellenic Police, the Cyprus National Police, and the Maldives Police Service. Mr. Bharara also thanked the U.S. Department of Justice Office of International Affairs, the National Security Division, and the United States Department of State for their ongoing assistance.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Benjamin Naftalis and Rachel Kovner are in charge of the prosecution.
Manhattan U.S. Attorney Announces Charges Against 37 Members of Nationwide Marijuana and Cigarette Distribution ConspiracyRead the Press Release
Illegally Distributed Nearly 44 Million Cigarettes, Which Resulted in Over $7 Million in Lost Tax Revenue
Preet Bharara, the United States Attorney for the Southern District of New York, and James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), announced today the unsealing of a three-count Indictment charging 37 members of a Chinese marijuana and contraband cigarette trafficking organization (the “Organization”) that operated throughout the United States. The Organization allegedly conspired to manufacture and distribute over $45 million worth of marijuana, and to illegally distribute nearly 44 million cigarettes, which resulted in over $7 million in lost tax revenue. Thirty-two members of the Organization were arrested this morning in New York, New Jersey, California, Tennessee, Alabama, and Rhode Island as part of a coordinated operation involving federal, state, and local law enforcement officers. The Indictment has been assigned to U.S. District Judge Miriam Goldman Cedarbaum; the 14 defendants arrested in New York and New Jersey will appear before Judge Cedarbaum this afternoon in Manhattan federal court. The remaining 18 defendants will appear before U.S. Magistrate Judges in the Eastern and Central Districts of California, the Northern District of Alabama, the Middle District of Tennessee, and the District of Rhode Island. One additional defendant is scheduled to surrender in Arkansas this afternoon, and four others are still at large.
Manhattan U.S. Attorney Preet Bharara said: “Today’s arrests deal a blow to an organization that allegedly conspired to manufacture multi-million dollar quantities of marijuana that they would then distribute, along with millions of contraband cigarettes, nationwide. Thanks to the coordinated efforts of federal, state, and local law enforcement around the country, this alleged supply chain has effectively been broken.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr., said: “This alleged drug trafficking organization was a highly organized network. These allegedly corrupt people were savvy in their alleged scheme to move hundreds of thousands of dollars and drugs throughout the United States. While some may mistakenly perceive smuggling and trafficking in narcotics as a path to a quick profit, these arrests demonstrate the serious consequences that await those who engage in the smuggling and sale of illegal drugs.”
As alleged in the Indictment and other court documents:
Since 2010, the defendants were part of a nationwide organization that produced and distributed marijuana, and distributed contraband cigarettes from California to various places throughout the U.S., including the New York City area. PAUL COONG LAY and his brother CHAN COONG LAY maintained a network of marijuana grow locations throughout California and elsewhere. For example, in October 2012, law enforcement executed a search warrant at one such location in Porterville, California – after observing PAUL and CHAN LAY visiting the premises – seizing more than 200 pounds of processed marijuana and approximately 185 live marijuana plants.
Marijuana grown by the LAY brothers, along with contraband cigarettes, were then shipped by tractor trailer from the Los Angeles region throughout the U.S., using a trucking company owned and operated by STEVEN QU and his wife YUN XING (the “Trucking Company”). QU’s trucks were followed by law enforcement to locations in Colorado, Tennessee, and New York, where they off-loaded hundreds of pounds of marijuana and/or cases of cigarettes. For example, in the New York area, law enforcement observed on numerous occasions WAI C. AU-YEUNG, RU XIANG MEI, and XIUZHEN LIN meet and unload QU’s trucks at a warehouse in Jersey City, New Jersey. AU-YEUNG, MEI, and LIN then transported the contraband to locations in Manhattan and Brooklyn, where it was distributed. During the course of the investigation, law enforcement seized in excess of 120 pounds of marijuana, 1,816 cartons of contraband cigarettes, and 545,860 counterfeit cigarette tax stamps from the New York arm of the Organization alone.
In the Tennessee area, law enforcement observed on various occasions DENISE RAGLAND and others unloading the trucks at a warehouse maintained by QU’s Trucking Company. Earlier this month, for example, law enforcement observed CHAN LAY – who had traveled from California to Tennessee to supervise the shipment – and OAKLEY SIMPSON, among others, unloading one of the Organization’s trucks. Law enforcement subsequently arrested SIMPSON, who was in possession of approximately 80 pounds of marijuana.
Money generated by the sale of the Organization’s marijuana and contraband cigarettes was also laundered by members of the Organization through a variety of means. For example, members regularly flew from New York and elsewhere to California carrying hundreds of thousands of dollars. In October 2011, for instance, law enforcement seized approximately $180,000 from WAI C. AU-YEUNG, XIUZHEN LIN, and HOA PHAN as they were about to board a flight from New York to California. Other members of the Organization shipped cash from the East Coast back to California using the trucks registered to QU’s Trucking Company. For example, in September 2012, law enforcement seized approximately $110,000 in cash from PAUL LAY, which was concealed in cardboard shipping boxes otherwise filled with lollipops.
Other members of the Organization laundered proceeds of the marijuana and cigarette operations through financial institutions. For example, in September 2012, law enforcement seized approximately $114,000 from TONGMIAO YAN. According to YAN, those funds belonged to JIA QIAO. A review of QIAO’s bank records, among other sources of information, revealed that QIAO and her husband, JAMES CHEN, have been laundering funds for the Organization through two entities that they control.
In conjunction with today’s arrests, law enforcement also seized the contents of 17 banks accounts used by the Organization to launder the proceeds of its marijuana and contraband cigarette distribution business, including accounts belonging to STEVEN QU’s Trucking Company and to the entities controlled by JAMES CHEN and JIA QIAO. Law enforcement also seized a number of vehicles, including four tractor trailers registered to the Trucking Company.
A chart containing the names, ages, residence information, charges against the defendants, and the maximum penalties they face, is attached.
Mr. Bharara praised the outstanding investigative work of ICE HSI. He also thanked the Nassau County Police Department, the Los Angeles Police Department, the U.S. Marshals, and the Internal Revenue Service – Criminal Investigations for their assistance in the case.
This case is being handled by the Office’s Narcotics Units. Assistant United States Attorneys Matthew L. Schwartz, Paul Monteleoni, and Eun Young Choi 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.
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U.S. v. Paul Coong Lay, et al. Indictment
Manhattan U.S. Attorney Announces Arrest of Florida Investment Adviser in Connection with $8 Million Securities Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Richard T. Vignogna, the Acting Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced that CRAIG L. BERKMAN was arrested today for perpetrating two separate securities fraud schemes involving the purported sale of pre-Initial Public Offering (“IPO”) shares of Facebook, Inc. stock that neither he nor the entities he controlled owned. BERKMAN received a total of at least $8 million from these schemes – the majority of which he misappropriated for his own benefit. He was arrested at his home in Odessa, Florida, this morning, and is expected to be presented today in federal court in Tampa, Florida.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Craig Berkman seized on the interest in a highly coveted investment opportunity to swindle investors out of millions. With his arrest, this Office continues our work to identify the perpetrators of financial fraud, hold them accountable, and protect investors.”
USPIS Acting Inspector-in-Charge Richard T. Vignogna said: “Today's arrest of Mr. Berkman for allegedly using the popularity of the social networking site Facebook to defraud investors out of millions of dollars is an example of the investigative tenacity of Postal Inspectors to bring to justice anyone who uses the US Mail for fraud.”
In a separate action, the U.S. Securities and Exchange Commission (“SEC”) announced civil charges against Berkman.
According to a criminal complaint unsealed today in Manhattan federal court:
Beginning in December 2010, BERKMAN created Ventures Trust II, LLC, a Delaware private equity investment limited liability company that he also controlled. He falsely represented to investors that Ventures Trust II owned shares in Facebook, which at the time was privately held. Owning interests in Facebook stock was a particularly attractive opportunity for investors because of the expectation that it would soon go public through an IPO.
In reality, Ventures Trust II never had any interest in Facebook except for a small indirect interest through another investment fund (“Fund-1”). In early 2012, Fund-1 discovered that Ventures Trust II management had been showing investors a forged letter that purported to be from Fund-1’s lawyer, and which misrepresented Ventures Trust II’s true interest in Fund-1. As a result, Fund-1 terminated Ventures Trust II’s interest.
As recently as August 2012 – after Facebook’s IPO, when investors were beginning to try to redeem their investments – a lawyer acting on behalf of Ventures Trust II wrote to investors to reassure them that the company still owned Facebook stock through Fund-1, and insisted that Ventures Trust II “is not a Ponzi scheme.” Based on misrepresentations by BERKMAN and others, more than 50 investors sent approximately $5.5 million to various accounts in the name of Ventures Trust II, which were controlled by BERKMAN.
In a separate but related fraud, beginning in March 2012, BERKMAN created Face Off Acquisitions LLC, an entity that, according to its offering materials, was designed to acquire a New York-based LLC that already held more than 1 million pre-IPO shares of Facebook (“Fund-2”). BERKMAN told investors that the acquisition would cost approximately $40 to $50 million. He also falsely stated that a prominent billionaire investor had already committed to invest in Face Off, when in fact the billionaire investor had never heard of Face Off. BERKMAN obtained approximately $2.5 million from at least 14 Face Off investors, and then falsely told those investors that Face Off had successfully acquired Fund-2, although he had held only exploratory conversations with Fund-2 intermittently over a period of about two years.
The approximately $5.5 million BERKMAN acquired from the Ventures Trust II investors and the approximately $2.5 million that he acquired from the Face Off investors were subsequently transferred to his personal account. Instead of using the investor funds to acquire shares of Facebook, BERKMAN misappropriated a substantial portion of the money for his own benefit and the benefit of others. He transferred several million dollars of investor funds to lawyers representing him in bankruptcy proceedings, apparently to fund an altogether different settlement with his creditors.
BERKMAN, 71, was arrested at his home in Odessa, Florida. He is charged with two counts of securities fraud and two counts of wire fraud. He faces a maximum sentence of 20 years in prison on each of the four counts in the complaint. He also faces a fine of the greater of $5 million or twice the gross gain or gross loss from the offense on the securities fraud charges, as well as fines of lesser amounts on the wire fraud charges.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the USPIS, which jointly investigated this case. He also thanked the SEC.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys John J. O’Donnell and Matthew L. Schwartz are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Craig Berkman Complaint
Former Chairman and Ceo of West End Financial Advisors Sentenced in Manhattan Federal Court to 42 Months in Prison for Securities FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that WILLIAM LANDBERG, former Chairman and Chief Executive Officer (“CEO”) of West End Financial Advisors, LLC (“West End”), was sentenced today to 42 months in prison in connection with an $8.7 million investment scheme. LANDBERG pled guilty in November 2011 to one count of securities fraud before U.S. District Judge Laura Taylor Swain, who also imposed today’s sentence.
According to the Information filed in Manhattan federal court:
West End was a boutique financial services firm located in New York, New York, specializing in alternative investment opportunities and traditional asset management for various types of clients, including institutions and high net worth individuals. West End served as the investment manager for various partnerships it established as investment vehicles or investment funds and raised money for them through the sale of limited partnership interests. In addition to serving as West End's Chairman, CEO, and Manager, LANDBERG also served as the Chairman of Sentinel Investment Management Corporation (“Sentinel”), an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) that shared office space with West End.
Among the funds managed by West End was the West End/Mercury Short Term Mortgage Fund LP (the “Hard Money Fund”). According to a private placement memorandum issued to investors by the Hard Money Fund (the “Hard Money Fund PPM”), its objective was to “achieve short term, high-yield interest income through the making, servicing, purchasing, selling and repurchasing, and purchasing and selling participation in, mortgage loans” (the “Mortgage Loans”). According to the Hard Money Fund PPM, the Hard Money Fund would sell mortgage loans on particular properties to MCC Funding, Inc. (“MCC Funding”), a wholly owned subsidiary of the Hard Money Fund. MCC Funding would purchase the Mortgage Loans using capital contributions made to MCC Funding by Hard Money Fund investors, as well as principal and interest advances it received from the New York branch of West LB AG (“West LB”), a bank headquartered in Germany. In return, West LB would receive the Mortgage Loans as collateral for the fund advances.
The Hard Money Fund PPM specifically stated that MCC Funding would use the proceeds from West LB “only to purchase Mortgage Loans from the [Hard Money] Fund and to satisfy reserve and fee obligations under the Credit and Security Agreement.” Instead, from January 2009 to April 2009, LANDBERG obtained three loan advances from West LB totaling $8.7 million – all purportedly for Hard Money Fund transactions – and diverted the funds to other uses, including for his own benefit. He also put some of the money into a separate fund managed by West End.
In addition to his prison term, LANDBERG, 61, of New York, New York, was sentenced to three years of supervised release, with 18 months on home confinement. He was also ordered to forfeit $8.7 million, which is the amount he misappropriated during the scheme, and pay $1.125 million in restitution.
Mr. Bharara praised the work of the Federal Bureau of Investigation and thanked the SEC for its assistance in the investigation.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over
the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
Assistant United States Attorney Jenna Dabbs is in charge of the prosecution.
Lawyer Pleads Guilty to Involvement in Massive No-Fault Automobile Insurance Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that SOL NAIMARK, an attorney, pled guilty to his role in two separate conspiracies to defraud private insurance companies under New York’s no-fault automobile insurance law, including one charge related to the largest single no-fault automobile insurance fraud scheme ever charged. NAIMARK pled guilty yesterday before U.S. District Judge J. Paul Oetken. Recently, ALEXANDER SANDLER, an owner and controller of several fraudulent no-fault clinics, GREGORY MIKHALOV, an owner and controller of medical clinics, LYNDA TADDER, a manager at a no-fault clinic, and CHAD GREENSHNER, a licensed chiropractor, also pled guilty to conspiracy to commit mail fraud and health care fraud in connection with the scheme before Judge Oetken.
The five defendants were arrested in February 2012, along with 31 others, and charged with conspiracy to commit mail fraud and health care fraud in connection with a systemic scheme to defraud private insurance companies of more than $279 million under New York’s no-fault automobile insurance law. Some of the defendants were also charged with racketeering and money laundering. A total of 10 defendants, including one licensed doctor, have now pled guilty. NAIMARK also pled guilty to a separate conspiracy to commit health care fraud.
Manhattan U.S. Attorney Preet Bharara said: “Sol Naimark actively solicited clients for whom he could churn out bogus lawsuits as part of a multi-million dollar insurance fraud scheme. It is particularly egregious when an attorney uses his license to perpetrate a fraud.”
According to the Superseding Information and other publicly filed information in the case, and the defendants’ statements in open court:
Under New York State Law, every vehicle registered in New York State is required to have no-fault automobile insurance, which enables the driver and passengers of a registered and insured vehicle to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault, (the “No-Fault Law”). The No-Fault Law requires prompt payment for medical treatment, thereby obviating the need for claimants to file personal injury lawsuits in order to be reimbursed. Under the No-Fault Law, patients can assign their right to reimbursement from an insurance company to others, including medical clinics that provide treatment for their injuries. New York State Law also requires that all medical clinics in the State be incorporated, owned, operated, and/or controlled by a licensed medical practitioner in order to be eligible for reimbursement under the No-Fault Law. Insurance companies will not honor claims for medical treatments from a medical clinic that is not actually owned, operated, and controlled by a licensed medical practitioner.
In order to mislead New York authorities and private insurers, some of the defendants in this case who were the true owners of these medical clinics (“No-Fault Clinic Controllers”) paid licensed medical practitioners, including doctors, to use their licenses to form the professional corporations through which the medical clinics would then bill the private insurers for the bogus medical treatments. SANDLER owned, operated, and controlled at least four of these no-fault clinics, and TADDER was a manager at one of the clinics.
The No-Fault Clinic Controllers also instructed the clinic doctors to prescribe excessive and unwarranted referrals for various “modality treatments” for nearly every patient they saw. The treatments included physical therapy, acupuncture and chiropractic treatments – as much as five times per week for each – and treatments for psychology, neurology, orthopedics, and range of motion, in addition to functional capacity tests. Clinic doctors also prescribed unnecessary MRI’s, x-rays, orthopedics, and medical supplies. The No-Fault Clinic Controllers received thousands of dollars in kickbacks for patient referrals from the owners of the modality clinics (“Modality Controllers”). MIKHALOV was a Modality Controller who admitted to owning modality clinics that purported to be owned by licensed doctors, as required by New York Law. GREENSHNER was a chiropractor who provided unnecessary medical treatments at one of the modality clinics.
Patients were also referred to personal injury lawyers to file lawsuits against the insurance companies arising out of their exaggerated injuries from automobile accidents. The success of these lawsuits hinged on how many medical treatments the patients received, providing the necessary incentive for the patients to receive multiple treatments at the no-fault and modality clinics. NAIMARK admitted to paying a No-Fault Clinic Controller to refer him patients that received unnecessary treatments so that he could file personal injury lawsuits on behalf of the patients.
The second charge to which NAIMARK pled guilty relates to payments he made to a runner to bring him no-fault patients so that he could file personal injury lawsuits on their behalf.
NAIMARK, 54, of Flushing, New York, pled guilty to two counts of conspiracy to commit health care fraud. He faces a maximum sentence of 20 years in prison. He is scheduled to be sentenced by Judge Oetken on July 22, 2013.
SANDLER and MIKHALOV each pled guilty to conspiracy to commit health care fraud and conspiracy to commit mail fraud, and each faces a maximum sentence of five years in prison. TADDER pled guilty to conspiracy to commit health care fraud and conspiracy to commit mail fraud and faces a maximum sentence of 30 years in prison. GREENSHNER pled guilty to conspiracy to commit health care fraud, and faces a maximum sentence of 10 years in prison.
GREENSHNER, MIKHALOV, SANDLER, and TADDER are scheduled to be sentenced by Judge Oetken on July 1, 2013, July 8, 2013, July 9, 2013, and September 27, 2013, respectively.
U.S. Attorney Preet Bharara thanked the Federal Bureau of Investigation and the New York City Police Department for their continued outstanding work in this investigation.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Daniel S. Goldman, Nicholas L. McQuaid, Carolina A. Fornos and Daniel S. Noble are in charge of the prosecution. Assistant U.S. Attorneys Jason L. Cowley and Martin Bell of the Office’s Asset Forfeiture Unit are responsible for the forfeiture of assets.
U.S. v. Sol Naimark S11 Information
Manhattan U.S. Attorney Announces Criminal Division Appointment of Chief of AppealsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today the appointment of Michael A. Levy as Chief of the Appeals Unit. Mr. Levy will replace Katherine P. Failla, who was recently confirmed by the U.S. Senate to serve as a federal judge in the Southern District of New York.
Mr. Levy joined the Office in October 2002. Prior to being named Chief of the Appeals Unit, he was a member of the Office’s Securities and Commodities Fraud Task Force. Mr. Levy was also Deputy Chief of the Appeals Unit from 2009 to 2010, and served in the Public Corruption, Major Crimes, Narcotics, and General Crimes Units. During his time in the Office, Mr. Levy successfully prosecuted Joseph Collins for his participation in the $2.4 billion Refco fraud, Efrain Gonzalez, Jr., a former New York State senator from the Bronx, for fraudulently using two not-for-profit organizations to pay his personal expenses, and all three defendants in U.S. v. Jorge Cedeno, et al. for their roles as armed gunmen in a truck hijacking ring that operated in the tri-state area.
After law school, Mr. Levy clerked for the Honorable Jed S. Rakoff of the U.S. District Court for the Southern District of New York, and worked as an associate at Sidley Austin LLP. Mr. Levy is a graduate of Harvard College and the University of Virginia School of Law.
In making this appointment, Mr. Bharara stated: “Michael Levy has established a track record of excellence more than a decade-long during his tenure in this Office. I have no doubt he will continue his exceptional work as Chief of the Appeals Unit and I thank him for his service.”
Manhattan U.S. Attorney Announces Charges Against Demolition Company Operators for Scheme to Underpay Employees by More Than $650,000 in Violation of Federal Prevailing Wage LawRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Rose Gill Hearn, the Commissioner of the New York City Department of Investigation (“DOI”), Robert Panella, the Special Agent-in-Charge of the New York Field Office of the U.S. Department of Labor's Office of Inspector General, Office of Labor Racketeering and Fraud Investigations ("DOL-OIG"), and Vanessa Jones-Allen, the Assistant Special Agent-in-Charge of the New York Area Office of Criminal Enforcement for the United States Environmental Protection Agency ("EPA") announced the filing of a four-count criminal Complaint charging JOVER NARANJO, the owner and president of Enviro & Demo Masters, Inc. (“Enviro”), and his father, LUPERIO NARANJO, SR., a foreman for Enviro, for allegedly perpetrating a scheme to underpay employees in violation of the federal prevailing wage law. NARANJO and NARANJO, SR. were arrested this morning in Queens, New York, and are expected to be presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis later today.
Manhattan U.S. Attorney Preet Bharara said: “Federal contracts come with certain legal obligations, and in this case, one of them was to pay the prevailing wage – a legal requirement this father and son allegedly violated. Protecting workers and ensuring that federal funds are not abused by dishonest contractors is a priority of this office.”
DOI Commissioner Rose Gill Hearn said: “These defendants worked overtime to spin a web of lies around their employees and the City taxpayers, according to the criminal complaint. Their charged conduct is not the way to do business in New York City. DOI was pleased to join its federal partners to expose and stop the fraud and protect workers.”
DOL-OIG Special Agent-in-Charge Robert Panella said: “Today’s charges are the result of our commitment to investigate those who would allegedly falsify payroll records to avoid paying their workers the required prevailing wage. The Office of Inspector General will continue to work closely with its law enforcement partners to this end.”
EPA Assistant Special Agent-in-Charge Vanessa Jones-Allen said: “Through the course of this investigation, we were able to uncover an illegal scheme and stop a business owner who cut workers’ pay and benefits to make a profit. While EPA federal agents focus on investigating allegations of environmental crimes, we also readily provide support and expertise to our state and federal colleagues in developing cases that protect Americans from criminal activity that threatens their lives or livelihoods.”
According to the Complaint unsealed earlier today in Manhattan federal court:
In August 2009, NARANJO was awarded a sub-contract by the general contractor on a New York City project to demolish buildings in Upper Manhattan (the “Contract”) that was federally-funded. From August 2009 through February 2010, he and NARANJO, SR. participated in a scheme to submit fraudulent certified payrolls to the New York City Department of Housing Preservation and Development (“HPD”) in connection with the Contract.
The fraudulent certified payrolls indicated that Enviro was paying its employees the federal prevailing wage, as required by federal law, but in reality, they were being paid far less. Although the lowest applicable federal prevailing wage for Enviro employees working on the Contract was $20.74 per hour for demolition laborers, NARANJO and NARANJO, SR. paid their demolition workers as little as $13 per hour. In the six-month period charged in the Complaint, the total amount of salary underpaid by NARANJO and NARANJO, SR. to Enviro employees working on the Contract was in excess of $650,000.
NARANJO and NARANJO, SR. took a number of steps to conceal their fraud. For example, they told their employees to lie about their identities, work schedules, and pay rates if they were questioned by investigators. When an employee truthfully told investigators that the employee was paid below the prevailing wage, NARANJO and NARANJO, SR. fired the employee and the employee’s relative.
On certain occasions when the defendants did pay their employees the prevailing wage, it was part of a kickback arrangement. The defendants paid the prevailing wage by check to document their supposed compliance with the law, but then required employees to return the portion of the check that was above and beyond the employees’ illegally low wage.
NARANJO, 36, and NARANJO, SR., 65, both of Queens, New York, are each charged with one count of mail fraud, conspiracy to commit mail fraud, witness tampering, and conspiracy to commit witness tampering. Each faces a maximum total sentence of 65 years in prison if convicted.
Mr. Bharara praised the investigative work of DOL-OIG, DOI, and the EPA.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Alvin Bragg is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Jover Naranjo et al. Complaint
Investment Research Firm President Sentenced in Manhattan Federal Court to One Year and One Day in Prison for Insider Trading Conspiracy ChargeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that TAI NGUYEN was sentenced today in Manhattan federal court to one year and one day in prison for conspiring to commit securities fraud and wire fraud in connection with an insider trading scheme in which NGUYEN, the president of Insight Research, LLC, an investment research firm, and a paid consultant of an expert networking firm, provided material, nonpublic information to members of the investment community. NGUYEN obtained the information which concerned quarterly financial results for Abaxis Inc., a California biotechnology company (the “Abaxis Inside Information”), from a family member employed in Abaxis’s Finance Department (the “Abaxis Insider”). He pled guilty in June 2012. NGUYEN was sentenced by U.S. District Judge Naomi Reice Buchwald.
Manhattan U.S. Attorney Preet Bharara said: “Tai Nguyen exploited a family member’s access to confidential and proprietary information to make a quick buck for himself, and to curry favor with others who could help his business. And now he is the latest in a long line of privileged professionals who has lost his liberty as a result.”
According to the Information and statements made during NGUYEN’s guilty plea and other court proceedings:
From 2006 through mid-2009, NGUYEN obtained detailed information from the Abaxis Insider about the company’s anticipated revenues, earnings, gross margins, and other financial results prior to the company’s quarterly announcements. On multiple occasions, NGUYEN provided the Abaxis Inside Information to Noah Freeman, a research analyst at a hedge fund based in Boston, Massachusetts, and to Samir Barai, a portfolio manager at two separate hedge funds in New York, New York.
As a result of NGUYEN having provided the Abaxis Inside Information, Freeman’s hedge fund earned more than $4.5 million between July 2006 and May 2009, and Barai’s hedge fund earned over $1.7 million between July 2008 and September 2009. In exchange for the Abaxis Inside Information, Freeman’s and Barai’s hedge funds paid Insight Research and/or NGUYEN consulting fees of several thousand dollars per month. At various times, Insight Research earned consulting fees of more than $15,000 a month from just one of these hedge fund clients.
In addition to passing on the Abaxis Inside Information to Freeman and Barai, NGUYEN used the information to trade Abaxis stock in his personal brokerage account on numerous occasions between 2006 and 2009. As a result of his own trading activity, NGUYEN earned over $147,000 during that time period.
In addition to the prison term, Judge Buchwald sentenced NGUYEN, 49, of Oregon City, Oregon, to one year of supervised release. NGUYEN was also ordered to forfeit $400,000 and pay a $100 special assessment fee.
Freeman, 37, of Boston, Massachusetts, pled guilty in February 2011 to one count of conspiracy to commit securities fraud and wire fraud, and one count of securities fraud. He is awaiting sentencing.
Barai, 41, of New York, New York, pled guilty in May 2011 to one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, one count of wire fraud, and one count of obstruction of justice. He is awaiting sentencing.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney David I. Miller is in charge of the prosecution.
Manhattan U.S. Attorney Announces Arrest of Four Bronx Men in Connection with Robbery and Shooting of Off-Duty Police OfficerRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Joseph Anarumo, Jr., Special-Agent-in-Charge of the New York Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced that JEFFREY OKINE, MARQUIS DANIELS, RAYSHAUN JONES, and TYQUEZ HARRELL were arrested today on robbery and gun charges in connection with their alleged January 2013 attempt to rob employees at a used car dealership in the Bronx, including off-duty NYPD Police Officer Juan Pichardo. Officer Pichardo was allegedly shot in the leg by OKINE during the course of the robbery. OKINE, DANIELS, JONES, and HARRELL were arrested and taken into federal custody today at Rikers Island, where they were being held since January 4, 2013, on state charges for these offenses. All four defendants will be presented in Manhattan federal court before U.S. Magistrate Judge Ronald L. Ellis this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “Officer Juan Pichardo was true to his NYPD badge, even off duty, when he bravely resisted this alleged armed robbery and it was sheer luck that he was not fatally injured doing so. These four defendants, who are alleged to have engaged in a robbery spree in the Bronx, will now have to answer for their conduct.”
ATF Special Agent-in-Charge Joseph Anarumo, Jr. said: “Gun violence in our community is unacceptable. Particular to this arrest, allegations involving the use of firearms in a violent act to include the shooting of an off-duty NYPD Officer will not be tolerated. The United States Attorney’s Office, NYPD and ATF have worked jointly on this matter to ensure that these perpetrators are punished severely under federal law. I commend all who have participated in this investigation.”
NYPD Commissioner Raymond W. Kelly said: “Officer Pichardo was one of three NYPD officers shot in separate incidents in Brooklyn and the Bronx within one hour on Jan. 3. Despite their injuries, he and his colleagues took swift and courageous action to prevent harm from coming to others. The arrests of Officer Pichardo’s alleged assailants show that the New York City police and prosecutors will not relent in bringing to justice those who wield illegal guns and squander the public’s safety.”
According to the allegations in the Complaint unsealed today in Manhattan federal court and other documents in the public record:
OKINE, DANIELS, JONES, and HARRELL robbed employees at a variety of commercial establishments in the Bronx. During a January 3, 2013, robbery, OKINE and HARRELL went to a car dealership and posed as potential buyers. When the off-duty officer and another employee brought them into the dealership’s office, HARRELL took out a gun and ordered the employees to empty their pockets. OKINE and HARRELL took their money and cellphones. HARRELL then gave OKINE the gun and went to inspect a safe. OKINE got into a skirmish with the off-duty police officer and shot him in the leg. He then tried to flee, but two other employees stopped him. HARRELL managed to run away and got into a getaway car, but NYPD officers apprehended and arrested him along with DANIELS and JONES. Among the items recovered from the car was the off-duty officer’s cell phone.
OKINE, 21, DANIELS, 23, JONES, 25, and HARRELL, 22, have all been charged with one count of Hobbs Act robbery conspiracy, which carries a maximum sentence 20 years in prison, and one count of using, possessing and discharging a firearm in relation to a crime of violence, which carries a maximum sentence of life in prison.
Mr. Bharara praised the ATF and the NYPD for their work in this investigation.
The prosecution is being overseen by the Office's Violent Crimes Unit. Assistant United States Attorneys Jessica Ortiz and Parvin Moyne 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. Jeffrey Okine, et al. Complaint
Manhattan U.S. Attorney Announces Appointment of Garden City Group as Claims Administrator for Forfeited Funds in U.S. V. Pokerstars That Will Be Returned to VictimsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has retained the Garden City Group (“GCG”) to serve as Claims Administrator to oversee the process of compensating eligible victims of the fraud committed by Full Tilt Poker against United States players that was set forth in both the civil money laundering and forfeiture action United States v. PokerStars, et al., and the indictment United States v. Bitar, et. al.
Manhattan U.S. Attorney Preet Bharara said “The Garden City Group brings a track record of handling the administration of some of the country’s largest and most complicated settlements. With their selection, we take a significant step forward in the process of compensating victims of the Full Tilt Poker scheme.”
In July 2012, the United States entered into settlement agreements with Full Tilt Poker and PokerStars – two of the three online poker companies named as defendants in a civil forfeiture action brought by the United States alleging bank fraud, wire fraud, money laundering, and illegal gambling offenses. Under the terms of the settlement with Full Tilt Poker, the company agreed to forfeit virtually all of its assets to the United States (the “Forfeited Full Tilt Assets”) in order to fully resolve the action. The amended complaint filed in that action alleged that Full Tilt Poker defrauded its players by misrepresenting to the public that player funds held by Full Tilt Poker were safe, secure and available for withdrawal at any time. In reality, the company did not maintain funds sufficient to repay all of its players and instead, utilized player funds to finance more than $400 million in dividend payments to Full Tilt’s owners.
Under the terms of the settlement with PokerStars (the “PokerStars Settlement”), the company agreed, among other things, to forfeit $547 million to the United States and to assume Full Tilt Poker’s liability for the approximately $184 million owed by Full Tilt to foreign players. The PokerStars Settlement also provides that PokerStars will acquire the Forfeited Full Tilt Assets from the Government and also precludes PokerStars from offering online poker for real money in the United States unless and until it becomes permissible to do so under relevant law.
Utilizing funds forfeited from PokerStars in this action, the Department of Justice will establish a process by which eligible U.S. fraud victims will be able to seek compensation for their losses (“Petitions for Remission”). The Garden City Group has been selected as Claims Administrator by the United States to process Petition for Remission claims submitted by the U.S. Full Tilt fraud victims.
GCG is a class action settlement and bankruptcy administration company that has provided comprehensive legal administration services for nearly three decades. GCG has worked on numerous complex administrations, including the Gulf Coast Claims Facility; the Deepwater Horizon Economic and Property Damage Settlement; the Visa Check/MasterMoney Antitrust Litigation; the WorldCom Securities Litigation; and the IPO Securities Litigation.
Eleven defendants were charged criminally in connection with the original Internet poker Indictment, eight of whom have been arrested. The defendants who have been arrested are: Brent Beckley; Raymond Bitar; Nelson Burtnick; John Campos; Chad Elie; Bradley Franzen; Ryan Lang; and Ira Rubin. Seven of the arrested defendants previously pled guilty and four have been sentenced. Beckley was sentenced to 14 months in prison in July 2012, Rubin was sentenced to 36 months in prison in July 2012, Campos was sentenced to three months in prison in June 2012, and Elie was sentenced to five months in prison in October 2012. Burtnick, Franzen, and Lang await sentencing. The charges against Bitar remain pending as do the charges against Isai Scheinberg, Paul Tate, and Scott Tom, who remain at large. The charges and accusations against them are allegations and they are presumed innocent unless and until proven guilty.
U.S. Attorney Preet Bharara praised the Federal Bureau of Investigation for its outstanding leadership in the investigation, which he noted is ongoing.
The victim claims process will begin shortly. Information about the claims administration will be posted on the dedicated website GCG has established in connection with the victim compensation process, www.FullTiltPokerClaims.com. Information is also available from the toll-free hotline number at (866) 250-2640.
This matter is being handled by the Office’s Asset Forfeiture and Complex Frauds Unit. Assistant U.S. Attorneys Sharon Cohen Levin, Michael Lockard, Jason Cowley, and Andrew Goldstein are in charge of the civil money laundering and forfeiture action. Assistant U.S. Attorneys Arlo Devlin-Brown, Nicole Friedlander and Niketh Velamoor are in charge of the criminal case.
Statement of Manhattan U.S. Attorney Preet Bharara on the Conviction of New York City Police Officer Gilberto ValleRead the Press Release
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“Today, a unanimous jury found that Gilberto Valle’s detailed and specific plans to abduct women for the purpose of committing grotesque crimes were very real, and that he was guilty as charged. The Internet is a forum for the free exchange of ideas, but it does not confer immunity for plotting crimes and taking steps to carry out those crimes. I want to thank the jury for their time, their diligence, and their willingness to serve on a case of this nature, and I want to thank the dedicated prosecutors from my office who did such an outstanding job investigating and prosecuting this disturbing case.”
Gilberto Valle Verdict Statement - U.S. Attorney Preet Bharara Audio 3.12.13 (mp3)
Gilberto Valle Verdict Statement - U.S. Attorney Preet Bharara Audio 3.12.13 (wav)South America-Based Cocaine Trafficker Sentenced in Manhattan Federal Court to 12 Years in Prison on International Cocaine Conspiracy ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that MARCEL ACEVEDO SARMIENTO was sentenced today in Manhattan federal court to 12 years in prison for conspiring to import cocaine into the United States. ACEVEDO, whose prosecution was part of “Operation Relentless,” the historic, joint undercover operation undertaken by the United States and the Government of Liberia, pled guilty in April 2012. He was sentenced today by U.S. District Judge Jed. S. Rakoff.
Manhattan U.S. Attorney Preet Bharara said: “With today’s sentencing of Marcel Acevedo Sarmiento for his role in an international cocaine distribution conspiracy, we continue to bear the fruits of our unprecedented partnership with the Government of Liberia. International cooperation is essential to our efforts to stamp out the drug trade, and there can be no better example of the results that can be achieved when we work together than this case.”
According to the Indictment, documents previously filed in Manhattan federal court, and other information in the public record:
During the last decade, drug trafficking organizations based in South America have increasingly used countries along or near the West African coast as trans-shipment hubs for importing massive quantities of cocaine to be later distributed in Europe or elsewhere within Africa. Through a combination of privately owned aircraft and maritime vessels, these organizations, predominantly based in Colombia and Venezuela, have transported hundreds of tons of cocaine, worth billions of dollars, to West African countries including Liberia.
ACEVEDO, a cocaine supplier based in Colombia and Venezuela, had the capacity to transport thousand-kilogram loads of cocaine from South America to various locations in West Africa, for later distribution within Africa, Europe, and elsewhere. The conspiracy in which he participated involved a 4,000 kilogram shipment of cocaine, with a retail value of over $100 million, which was to be flown from Venezuela to Monrovia, Liberia.
ACEVEDO, 48, a citizen of Colombia, also coordinated efforts to arrange a cocaine shipment of over 2,000 kilograms by aircraft from Venezuela to Liberia, during recorded telephone conversations with a confidential source (“the CS”) working for the Drug Enforcement Administration (“DEA”). ACEVEDO confirmed to the CS that the cocaine shipment had been protected by the Fuerzas Armadas Revolucionarias de Colombia, an international terrorist group dedicated to the violent overthrow of the democratically elected Government of Colombia.
On May 29, 2010, ACEVEDO indicated that Venezuelan authorities had seized a plane he owned worth $35 million, as well as the cocaine on board the plane, and had directed him to leave the country. He informed the CS of the seizure and then invited the CS to participate in a new cocaine shipment from Bolivia, understanding that the CS would import the CS’s 500-kilogram share of the shipment into New York.
None of the three cocaine shipments that ACEVEDO conspired to transport to Liberia actually occurred.
Mr. Bharara praised the work of the Special Operations Division of the DEA, the DEA Lagos Country Office, the U.S. Department of Justice Office of International Affairs, and the U.S. State Department. He also thanked the U.S. Embassy in Liberia and the Republic of Liberia and its National Security Agency for their efforts.
This prosecution is being handled by the Office's Terrorism and International Narcotics Unit. Assistant United States Attorneys Randall Jackson and Jenna M. Dabbs are in charge of the prosecution.
Former New York City Police Officer Found Guilty in Manhattan Federal Court of Kidnapping Conspiracy and Illegally Accessing Federal Law Enforcement DatabaseRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that former New York City Police Officer GILBERTO VALLE was found guilty today in Manhattan federal court of conspiracy to kidnap and illegally accessing the federal National Crime Information Center (“NCIC”) database. The jury found that VALLE, who was an active-duty officer with the New York City Police Department (“NYPD”) at the time of his arrest, conspired with more than one individual to kidnap, rape, torture, kill, and cannibalize a number of women, and that he illegally used the NCIC database to obtain information about one of his intended victims. He was convicted after a three-week trial before U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Preet Bharara said: “Today, a unanimous jury found that Gilberto Valle’s detailed and specific plans to abduct women for the purpose of committing grotesque crimes were very real, and that he was guilty as charged. The Internet is a forum for the free exchange of ideas, but it does not confer immunity for plotting crimes and taking steps to carry out those crimes. I want to thank the jury for their time, their diligence, and their willingness to serve on a case of this nature, and I want to thank the FBI and the dedicated prosecutors from my office who did such an outstanding job investigating and prosecuting this disturbing case.”
According to the Complaint and the Indictment filed in Manhattan federal court and the evidence presented at trial:
In September 2012, the FBI learned that VALLE was sending e-mail and instant messages discussing plans with multiple co-conspirators to kidnap, rape, torture, kill, and cannibalize a number of women. A court-authorized search of his computer revealed that VALLE had created files pertaining to at least 80 women and containing multiple photographs of each woman. The computer also contained personal information about some of these women - including relevant addresses, physical descriptions, and photographs - and electronic communications in which VALLE and co-conspirators detailed their plans. Additionally, VALLE used the NCIC database and other methods to locate potential victims, surveilled a victim, drafted an “operation plan” to abduct and “cook” an identified woman, researched methods of disabling and drugging women, and agreed with at least one other individual to kidnap a woman in exchange for $5,000.
Victim-1
In July 2012, VALLE had a series of online communications with a co-conspirator (“CC-1”) in which they discussed how best to kidnap, murder, and cannibalize Victim-1, including where to find a recipe for chloroform. During this time period, VALLE also created a document entitled “Abducting and Cooking [Victim-1]: a Blueprint.” The document contains pedigree information about Victim-1—including her name, ethnicity, height, weight, and bra size. The document also contains a section called “Materials Needed” in which VALLE wrote, in part, the following:
Car (I have it)
Chloroform (refer to website for directions)
Rope (Strongest kind to tie her up)
In subsequent instant message conversations, CC-1 asked VALLE, “How was your meal?” to which VALLE immediately responded, “I am meeting her [i.e., Victim-1] on Sunday.” On the following Sunday, VALLE met with Victim-1 at a restaurant for brunch. Following this meeting, VALLE communicated with CC-1 regarding the brunch with Victim-1 and said that “[Victim-1] looked absolutely mouthwatering.”
Victim-2
VALLE also had conversations with another co-conspirator (“CC-2”) in late February 2012, in which they negotiated and agreed to a price for which VALLE would kidnap another woman (“Victim-2”). In those conversations, VALLE insisted upon a price no less than $5,000 and assured CC-2 that Victim-2 would be bound, gagged, and alive when he delivered her. In a post-arrest statement to the FBI, VALLE admitted that, in early March 2012, he was present on the block in Manhattan where Victim-2’s apartment building is located. When the FBI later interviewed Victim-2, she stated that she has never invited VALLE to her home and does not know him well.
The NCIC Database
On May 31, 2012, VALLE accessed the NCIC database and obtained information about a woman (“Victim-3”) whose name matched the name of one of the Individual Files he created. VALLE did not have authorization to perform that search or to access any information about Victim-3.
VALLE, 28, was convicted of 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 loss from the offense. He was also convicted of one count of intentionally and knowingly accessing a computer without authorization and exceeding his authorized access, thereby obtaining information from a department and agency of the United States. This count carries a maximum sentence of one year in prison, and a maximum fine of $100,000. VALLE is scheduled to be sentenced by Judge Gardephe on June 19, 2013 at 11:00 a.m.
Mr. Bharara praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department.
This case is being handled by the Office’s Violent Crimes Unit. Assistant United States Attorneys Hadassa Waxman and Randall W. Jackson are in charge of the prosecution.
U.S. v. Gilberto Valle Indictment
Former IRS Official Pleads Guilty in Manhattan Federal Court to Violating Conflict of Interest Law and Illegally Disclosing Audit InformationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DENNIS LERNER, a former employee of the Internal Revenue Service (“IRS”), pled guilty yesterday in Manhattan federal court to violating a criminal conflict of interest law and to illegally disclosing confidential audit information during the time he was an IRS employee. LERNER was arrested in September 2012. He pled guilty before U.S. District Judge John F. Keenan.
Manhattan U.S. Attorney Preet Bharara said: “Dennis Lerner betrayed the trust put in him as a public servant by parlaying his position at the IRS into a high-powered job at a bank he was auditing through a scheme that may now land him in prison. We will not tolerate corrupt government employees and will prosecute and punish them to the full extent of the law.”
According to the allegations in the Criminal Complaint and the Criminal Information, along with statements made during today’s plea proceeding in Manhattan federal court:
From June 2010 through August 2011, LERNER worked as an International Examiner in the New York office of the IRS. For several months leading up to his resignation from the IRS, one of his chief responsibilities involved conducting an audit of an international bank (“Bank 1”) related to approximately $1 billion in allegedly unreported income. Shortly before his resignation, LERNER led negotiations on behalf of the IRS which resulted in a proposed $210 million settlement between Bank 1 and the IRS. The settlement was still pending final approval at the time of his departure. Unbeknownst to his colleagues and supervisors, LERNER applied for, interviewed for, and accepted the position of Tax Director at Bank 1 during the time period in which he was representing the IRS in the Bank 1 settlement discussions. He also sent multiple emails to an individual in which he expressed both his dissatisfaction with his job at the IRS and his hope that he would secure the Bank 1 job. At no time did he notify the IRS of his efforts to obtain employment with Bank 1.
LERNER also engaged in improper disclosure of IRS tax return information during the time period that he worked as an IRS International Examiner. Specifically, he revealed the identity of a bank he was auditing to an individual who was not employed by the IRS.
LERNER, 60, of Edgewater, New Jersey, faces a maximum sentence of 10 years in prison. He is scheduled to be sentenced by Judge Keenan on July 11, 2013 at 11 a.m.
Mr. Bharara praised the outstanding investigative work of the Treasury Inspector General for Tax Administration, which included the assistance and cooperation of IRS management.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Randall W. Jackson is in charge of the prosecution.
U.S. v. Dennis Lerner Information
LIRR Retiree Sentenced in Manhattan Federal Court to 20 Months in Prison for Role in Massive Disability Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that GARY SATIN, a former electrician with the Long Island Railroad (“LIRR”), was sentenced today to 20 months in prison for his participation in a massive fraud scheme in which LIRR workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. SATIN previously pled guilty to his participation in the scheme as well as to perjury for making false statements to the grand jury that was hearing evidence in this case. SATIN was sentenced by U.S. District Judge Victor Marrero.
Manhattan U.S. Attorney Preet Bharara said: “With his sentence today, Gary Satin becomes the first in a long line of perpetrators to learn the price for his participation in this reprehensible scheme, but he will not be the last.”
According to the Complaint and the Superseding Information:
The LIRR Disability Fraud Scheme
The Railroad Retirement Board (“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 2004 through 2008, 61% of LIRR employees who stopped working and began receiving RRB disability benefits were between the ages of 50 and 55. In contrast, only 7% of employees at Metro-North who stopped working and received disability benefits during the same time period were between the ages of 50 and 55.
SATIN’s Fraud
GARY SATIN was an LIRR electrician who retired in June 2005 at the age of 55. In his last year of employment, SATIN received approximately $84,000 in compensation. After retirement, he sought and obtained sickness and disability benefits from the RRB. In 2010, he received approximately $32,000 in LIRR pension payments and approximately $36,000 from his RRB disability annuity, for a total of $68,000 in annual benefits.
In applying for disability benefits, SATIN claimed that he was unable to perform his railroad job and that indoor and outdoor chores were “difficult.” However, as SATIN admitted in his plea allocution, no medical condition prevented him from performing his railroad job. Instead, SATIN had pre-planned his false disability to supplement his retirement income. In fact, in the 18 months prior to his retirement, SATIN did not take a single day of sick leave, and in the five months prior to his retirement, he worked approximately 154 overtime hours. In the years after his retirement, SATIN performed landscaping, contracting, and electrical work for pay. SATIN also exploited his false disability to obtain other benefits to which he was not entitled, such as a handicapped parking pass from New York State, claiming that his disability “severely limited” his “ability to walk.”
SATIN’s Perjury
On April 28, 2011, SATIN appeared before a grand jury in the Southern District of New York. After swearing to tell the truth, and after having been advised of his rights and his obligation to provide truthful testimony, SATIN intentionally provided false and misleading testimony on material matters, including falsely denying that he performed landscaping, contracting, and electrical work post-retirement.
In addition to the prison term, Judge Marrero sentenced SATIN, 63 of Mooresville, North Carolina, to three years of supervised release and ordered him to pay restitution and forfeiture in the amount of $247,000, and a $200 special assessment.
Manhattan U.S. Attorney Bharara praised 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.
Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 22 of whom have pled guilty. The charges against the remaining defendants are merely allegations and they are all presumed innocent unless and until proven guilty.
The Office’s Complex Frauds Unit is handling the case. Assistant U.S. Attorneys Justin Weddle, Nicole Friedlander, and Daniel Tehrani are in charge of the prosecution.
Two Defendants Plead Guilty in Manhattan Federal Court to Participating in $57.3 Million Fraud on Organization That Makes Reparations to Victims of Nazi PersecutionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that POLINA STAROSELETSKY and ASYA GALINDO 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. STAROSELETSKY was arrested in November 2010, and GALINDO 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. STAROSELETSKY pled guilty before U.S. District Judge Thomas P. Griesa, and GALINDO pled guilty before U.S. Magistrate Judge Sarah Netburn.
Manhattan U.S. Attorney Preet Bharara said: “The sad drumbeat continues in this appalling, multi-million dollar fraud scheme against an organization dedicated to providing aid to victims of the Nazis, with 25 of the 31 defendants charged now having pled guilty. We will continue to aggressively prosecute each and every individual who allegedly played a role in this fraud, and we will not stop until justice is served.”
According to the Complaints and the Indictment filed in Manhattan federal court:
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 network of individuals systematically defrauded the Article 2 Fund and Hardship Fund programs for over a decade. The Claims Conference first suspected the fraud in 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 obtained from outside sources to verify a person’s persecution by the Nazis. Some of the detailed descriptions of persecution in the fraudulent Article 2 Fund applications were completely fabricated.
From the investigation to date, the Claims Conference has determined that at least 1,112 Article 2 Fund cases it processed have been determined to be fraudulent. Those cases have resulted in a loss to the Claims Conference of approximately $45 million.
While employed as a caseworker in the Article 2 Fund program at the Claims Conference, STAROSELETSKY knowingly processed fraudulent applications in return for payments from her co-conspirators. In addition, after she was no longer employed by the Claims Conference, STAROSELETSKY passed materials, including identification documents, to a co-conspirator still employed at the Claims Conference to support fraudulent Hardship Fund applications.
GALINDO 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.
With today’s pleas, a total of 25 defendants charged in the scheme have pled guilty, including seven former Claims Conference employees. Charges remain pending against the remaining six defendants in the case, who are presumed innocent unless and until proven guilty.
STAROSELETSKY, 50, of Brooklyn, New York, and GALINDO, 73, of Sherman Oaks, California, each face a maximum sentence of 20 years in prison. STAROSELETSKY and GALINDO are scheduled to be sentenced by Judge Griesa on August 14 and August 27, 2013, 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.
U.S. v. Semen Domnitser, et al S1 Indictment
Sulaiman Abu Ghayth, Associate of Usama Bin Laden, Arrested for Conspiring to Kill AmericansRead the Press Release
Sulaiman Abu Ghayth, a/k/a “Suleiman Abu Gayth”, a former associate of Usama Bin Laden, has been arrested and charged in an indictment unsealed today in New York City with conspiracy to kill U.S. nationals, announced Attorney General Eric Holder, Assistant Attorney General for National Security Lisa Monaco, U.S. Attorney for the Southern District of New York Preet Bharara, the Assistant Director-in-Charge of the FBI’s New York Field Office George Venizelos, and the Police Commissioner of the City of New York (NYPD) Raymond W. Kelly. Abu Ghayth is expected to be presented and arraigned tomorrow, March 8, 2013, at 10:00 a.m. before U.S. District Judge Lewis A. Kaplan.
Attorney General Eric Holder said: “No amount of distance or time will weaken our resolve to bring America's enemies to justice. To violent extremists who threaten the American people and seek to undermine our way of life, this arrest sends an unmistakable message: There is no corner of the world where you can escape from justice because we will do everything in our power to hold you accountable to the fullest extent of the law.”
Assistant Attorney General Lisa Monaco said: “The arrest of Abu Ghayth is an important milestone in our ongoing counterterrorism efforts. I applaud the many agents, analysts and prosecutors responsible for bringing about this significant case and arrest.”
Manhattan U.S. Attorney Preet Bharara said: “The law has a long arm and justice has a long memory. It has been 13 years since Abu Ghayth allegedly worked alongside Usama Bin Laden in his campaign of terror, and 13 years since he allegedly took to the public airwaves, exhorting others to embrace al Qaeda’s cause and warning of more terrorist attacks like the mass murder of 9/11. The memory of those attacks is indelibly etched on the American psyche, and today’s action is the latest example of our commitment to capturing and punishing enemies of the United States, no matter how long it takes.”
FBI Assistant Director-in-Charge George Venizelos said: “Sulaiman Abu Ghayth held a key position in al Qaeda, comparable to the consigliere in a mob family or propaganda minister in a totalitarian regime. He used his position to persuade others to swear loyalty to al Qaeda’s murderous cause. He used his position to threaten the United States and incite its enemies. His apprehension is another important step in the campaign to limit the reach of al Qaeda and enhance our national and international security.”
NYPD Commissioner Raymond W. Kelly said: “While New York City must remain vigilant to continued terrorist threats against it, Abu Ghayth's apprehension and prosecution promises to close another chapter in al Qaeda's notoriously violent history of killing Americans. This case also represents another success in the ongoing partnership between Federal agents and NYPD detectives through the JTTF.”
As alleged in the Superseding Indictment that has been filed against Abu Ghayth in federal court:
Since around 1989, al Qaeda has been an international terrorist organization, dedicated to opposing non-Islamic governments with force and violence. Usama Bin Laden served as the leader or “emir” of al Qaeda until his death on or about May 2, 2011. Members of al Qaeda typically have pledged an oath of allegiance, called bayat, to Bin Laden and to al Qaeda.
The core purpose of al Qaeda, as stated by Bin Laden and other leaders, is to support violent attacks against property and nationals, both military and civilian, of the United States and other countries. Between 1989 and 2001, al Qaeda established training camps, guest houses, and business operations in Afghanistan, Pakistan, and other countries for the purpose of training and supporting its agenda of violence and murder. Members and associates of al Qaeda have executed a number of terrorist attacks, all in furtherance of the organization’s stated conspiracy to kill Americans, including the attacks on the United States on September 11, 2001 in New York, Virginia, and Pennsylvania, which killed approximately 2,976 people.
From at least May 2001 up to around 2002, Abu Ghayth served alongside Usama Bin Laden, appearing with Bin Laden and his then-deputy Ayman al-Zawahiri, speaking on behalf of the terrorist organization and in support of its mission, and warning that attacks similar to those of September 11, 2001 would continue.
In particular, around May 2001, Abu Ghayth urged individuals at a guest house in Kandahar, Afghanistan, to swear bayat to Bin Laden. On the evening of September 11, 2001, after the terrorist attacks on the United States, Bin Laden summoned Abu Gayth and asked for his assistance and he agreed to provide it. On the morning of September 12, 2001, Abu Ghayth, appeared with Bin Laden and Zawahiri, and spoke on behalf of al Qaeda, warning the United States and its allies that “[a] great army is gathering against you” and called upon “the nation of Islam” to do battle against “the Jews, the Christians and the Americans.” Also, after the September 11, 2001 terrorist attacks, Abu Ghayth delivered a speech in which he addressed the then-U.S. Secretary of State and warned that “the storms shall not stop, especially the Airplanes Storm,” and advised Muslims, children, and opponents of the United States “not to board any aircraft and not to live in high rises.”
Abu Gayth arranged to be, and was, successfully smuggled from Afghanistan into Iran in 2002.
The indictment charges Abu Ghayth with participating in a conspiracy to kill United States nationals, in violation of Title 18, United States Code, Section 2332(b). The offense carries a maximum term of imprisonment of life. No trial date has yet been set in the case.
The charges and arrest of Abu Ghayth are the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI’s Joint Terrorism Task Force – which principally consists of agents and detectives of the FBI and the New York City Police Department – the United States Marshals Service and the National Security Division of the U.S. Department of Justice. The Justice Department’s Office of International Affairs and the U.S. Department of State also provided assistance.
The prosecution is being handled by Assistant United States Attorneys John P. Cronan and Michael Ferrara of the Terrorism and International Narcotics Unit of the U.S. Attorney’s Office for the Southern District of New York, with assistance from Trial Attorney Jolie Zimmerman of the National Security Division’s Counterterrorism Section.
The charges contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Sulaiman AbuGhayth Indictment
Massachusetts Man Sentenced in Manhattan Federal Court for Hiding Millions from Irs in Swiss Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JACQUES WAJSFELNER was sentenced today to six months of probation, including three months of home confinement, for willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) with the IRS, regarding Swiss bank accounts that he maintained and controlled. WAJSFELNER used the services of Beda Singenberger, a Swiss financial adviser who was charged in July 2011 with conspiring with various U.S. taxpayers and others to hide more than $184 million offshore at various Swiss banks. WAJSFELNER also had undeclared accounts at Wegelin & Co., a Swiss bank sentenced yesterday for conspiring to evade taxes, file false tax returns, and defraud the IRS in the Southern District of New York, and Credit Suisse. As part of his resolution of the criminal charges against him, WAJSFELNER agreed to pay a civil penalty of over $2.8 million, representing 50% of the high value of the accounts that he maintained. Today’s sentence was imposed by U.S. District Judge Naomi Reice Buchwald.
According to the Information filed in Manhattan federal court, other court documents, and statements made in connection with WAJSFELNER’s guilty plea and sentencing:
Under federal law, when filing Individual Income Tax Returns, form 1040, U.S. taxpayers are required to report their worldwide income. Taxpayers who have a financial interest in, or signature or other authority over, a bank account in a foreign country with an aggregate value of more than $10,000 at any time during a particular year, are required to file FBARs every year for each qualifying account. The FBAR requires the disclosure of the financial institution where the account is held, the type of account, the account number, and the maximum value of the account during the calendar year for which it is being filed.
Beginning in 1995, WAJSFELNER held an account in his own name at Credit Suisse, a Swiss bank with its headquarters in Zurich, Switzerland. In June 2006, with the assistance of Singenberger, WAJSFELNER opened an undeclared account at Credit Suisse in the name of a sham corporation formed under the laws of Hong Kong, Ample Lion Ltd. (“Ample Lion”). By opening the Ample Lion account at Credit Suisse, WAJSFELNER was attempting to obscure his ownership of the assets in the account from the IRS. As of December 31, 2007, WAJSFELNER’s account at Credit Suisse in the name of Ample Lion held assets valued at nearly $5.7 million.
In the fall of 2008, Credit Suisse began the process of exiting its U.S. cross-border banking business. In order to continue hiding money in Switzerland, in June 2009, WAJSFELNER opened an undeclared account at Wegelin. With Singenberger’s assistance, WAJSFELNER then transferred the assets from his account at Credit Suisse into his account at Wegelin. As of December 31, 2010, WAJSFELNER’s account at Wegelin held assets valued at nearly $5.5 million.
For each of the calendar years from 1995 through 2011, WAJSFELNER failed to file an FBAR with the IRS disclosing his authority over his accounts at the Credit Suisse and at Wegelin. His tax returns for the years 2005 through 2011 were similarly false in omitting the information about his Swiss bank accounts. WAJSFELNER’s sentencing is the latest in a series of prosecutions in the Southern District of New York of U.S. taxpayers who held undeclared accounts in Switzerland at UBS, Wegelin, Credit Suisse, and/or other Swiss banks, and who failed to make timely voluntary disclosures to the IRS as part of the IRS’s Voluntary Disclosure Program.
In addition to his probation, WAJSFELNER, 83, of Weston, Massachusetts, was also ordered to pay back taxes of $419,940 and a fine of $20,000.
The case against Singenberger is pending. The charge and allegations against him are merely accusations, and he is presumed innocent unless and until proven guilty.
Wegelin was sentenced yesterday and ordered to pay approximately $58 million to the United States. Together with the April 2012 forfeiture of more than $16.2 million from Wegelin’s U.S. correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation, which he noted is ongoing. Mr. Bharara also thanked U.S. Department of Justice’s Tax Division for their 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 are in charge of the prosecution.
Manhattan U.S. Attorney Sues Park Avenue Medical Associates for Medicare Billing FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed a lawsuit against PARK AVENUE MEDICAL ASSOCIATES (“PAMA”) and PARK AVENUE MEDICAL ASSOCIATES, P.C. (“PAMA PC”), and related entities, alleging that they billed Medicare for services purportedly provided to elderly, mentally ill patients that were not medically necessary, were not documented in the medical record, and/or failed otherwise to comply with Medicare rules and regulations. The Government’s Complaint alleges that, as a consequence of the conduct of PAMA and PAMA PC, the entity that allegedly submitted claims to Medicare on behalf of PAMA, Medicare paid the defendants for thousands of claims that were not eligible for payment, resulting in over $1 million in damages.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Park Avenue Medical Associates inundated Medicare with bogus claims, including bills for unnecessary psychiatric services for vulnerable elderly patients, who did not have the ability to benefit from the services. We will continue our efforts to protect this taxpayer-funded program and the people who rely on it for care from fraud and abuse.”
According to the Complaint filed today in Manhattan federal court:
PAMA directly employs physicians, nurses, and other medical professionals who provide services to elderly patients at hospitals, including inpatient psychiatric facilities, nursing homes, assisted living facilities, and other types of long-term care facilities. The patients and residents at these facilities suffer from various chronic health conditions, including Alzheimer’s disease, dementia, schizophrenia, psychosis, depression, and anxiety. The doctors and nurses employed by PAMA receive a salary from PAMA, which contracts with the facilities. In addition to their regular salaries, psychiatrists and psychologists employed by PAMA receive bonuses based on how many services they provide and the level of reimbursement they generate for PAMA from government and other insurance providers, including Medicare.
Medicare prohibits payment for services that are not reasonable and necessary for the diagnosis or treatment of an illness or injury. Medicare also prohibits payment for any claim without adequate documentation substantiating the reasonableness and necessity of the services provided. In particular, Medicare does not cover psychotherapy services rendered to patients with Alzheimer’s disease or dementia unless the patient’s dementia is mild, the patient has the capacity to recall what occurred at the therapy from one session to the next, and that capacity is documented in the patient’s record. Psychotherapy services are not covered when dementia has produced a severe enough cognitive deficit to prevent them from being effective. In addition, Medicare provides that psychiatric diagnostic examinations are generally covered only once for each episode of illness or suspected illness in a patient and must be medically necessary.
In violation of Medicare policies, as well as its own policies, PAMA provided psychotherapy to patients who lacked the capacity to benefit from it due to severe dementia. In addition, PAMA PC billed for psychiatric evaluations that were duplicative, failed to comply with Medicare rules, and reflected a lack of coordination of care both among PAMA’s own psychiatrists, psychologists and nurses, and between PAMA’s employees and staff at the facilities with which PAMA contracted to provide services. Moreover, PAMA PC billed for services for which it lacked any documentation whatsoever. PAMA PC billed Medicare for a far larger number of services per psychiatrist and psychologist during the period 2001 through 2012 than any other provider with a similar patient population in the New York area.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Heidi A. Wendel and Mara E. Trager are in charge of the case.
U.S. v. Park Ave Medical Associates, et al. Complaint
Former Partner at Major International Law Firm Pleads Guilty in Manhattan Federal Court to Tax Fraud ViolationsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that THEODORE L. FREEDMAN, a former senior partner at a major international law firm (the “Law Firm”), pled guilty today in Manhattan federal court to four counts of tax fraud for under-reporting his partnership income at the Law Firm by a total of approximately $2 million from 2001 to 2004. FREEDMAN pled guilty before U.S. District Judge Deborah A. Batts.
Manhattan U.S. Attorney Preet Bharara stated: “Theodore Freedman was an attorney at a high-powered and prestigious law firm who lied about his multi-million dollar compensation in order to avoid paying taxes, breaking the law and violating his professional code of conduct. Two things are certain: Freedman will now have to pay his taxes and more; and Freedman is now an admitted felon who has sacrificed his reputation, career, and potentially his liberty, for a few dollars. Others should not make the same bad calculation.”
According to the Indictment and statements made at today’s plea proceeding:
FREEDMAN was a senior partner in the New York office of a major international law firm, where he was a member of the Law Firm’s restructuring group. In that capacity, FREEDMAN received income that was calculated as a percentage of the Law Firm’s partnership income for a given year. The Law Firm issued FREEDMAN the IRS form that reports an individual partner’s share of income or loss from the partnership. According to the form, FREEDMAN's aggregate income for calendar years 2001 through 2004 was approximately $5,388,699.
FREEDMAN self-prepared, signed, and filed tax returns for calendar years 2001 through 2004. Rather than reporting the true and correct amount of partnership income he received from the Law Firm for the years in question, FREEDMAN falsely and fraudulently under-reported his income in the aggregate amount of approximately $2,097,211.
FREEDMAN, 65, of Pine Plains, New York, faces a maximum sentence of three years in prison on each of the tax fraud counts, for a total maximum sentence of 12 years in prison. As part of his plea agreement, FREEDMAN is also required to pay more than $671,000 in restitution to the IRS and more than $169,000 in restitution to New York State. He is scheduled to be sentenced by Judge Batts on September 17, 2013, at 10:30 a.m.
Mr. Bharara praised the work of the Internal Revenue Service, Criminal Investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Jonathan Cohen is in charge of the prosecution.
U.S. v. Theodore L. Freedman Indictment
Two Leaders of the Newburgh Latin Kings Found Guilty in White Plains Federal Court of Three Murders, Racketeering, Drug, Firearms, and Witness Tampering ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that WILSON PAGAN, a/k/a “King Gunz,” and CHRISTIAN SANCHEZ, a/k/a “King Chi Chi,” leaders of the Latin Kings gang in Newburgh, New York (the “Newburgh Latin Kings”), were found guilty today before U.S. District Judge Cathy Seibel in White Plains federal court of 29 counts, including murder, racketeering, drug, firearms, and witness tampering charges, after a six-week jury trial. Judge Seibel set July 11, 2013 for sentencing, at which time PAGAN and SANCHEZ will both face mandatory terms of life in prison.
PAGAN and SANCHEZ are two of 35 members and associates of the Newburgh Latin Kings originally indicted in connection with the case, all of whom have been convicted. Among other charges, PAGAN was found guilty of the May 6, 2008 murder of Jeffrey Zachary, and SANCHEZ was found guilty of the March 11, 2010 murder of Jerome Scarlett, a/k/a “Rudeboy,” and the murder of John Maldonado, a/k/a “Tarzan,” less than 24 hours later, on March 12, 2010.
“U.S. Attorney Preet Bharara stated: For far too long, the residents of Newburgh were plagued by lethal violence and narcotics trafficking at the hands of these two defendants and their cronies, and in just nine hours, the jury unanimously found them guilty of a catalogue of crimes, including the tragic murder of an innocent 15-year-old boy who was in the wrong place at the wrong time. Their reign of terror is now over for good and everyone can breathe easier as a result. Today’s guilty verdicts are the latest example of how we are making good on our promise to eradicate the scourge of gangs and to give neighborhoods back to their residents, and together with our federal, state, and local law enforcement partners, we will continue our fight.”
According to the evidence at trial before Judge Seibel:
Between 2007 and 2011, the Newburgh Latin Kings and their trusted associates sold crack cocaine, heroin, powder cocaine, and marijuana at drug spots in Newburgh, including the areas of Benkard Avenue and William Street, and South Miller Street and Broadway. Gang members and associates protected the gang’s drug turf, drugs, and drug money, with guns and violence. The violence included frequent shootings, stabbings, and assaults of rival drug dealers, including members of another gang in Newburgh known as the Bloods, as well as witnesses and suspected Government witnesses within their own gang.
The Newburgh Latin Kings were governed by a council of five officers, who were referred to as crowns (collectively, the “Crown Council”). PAGAN and SANCHEZ each served as the First Crown, and overall head of the Newburgh Latin Kings -- PAGAN from 2008 through January 2010 and SANCHEZ from February 2010 through February 2011.
The Newburgh Latin Kings had regular chapter meetings at which attendance was mandatory and members were required to pay dues. At the meetings, members discussed their criminal activities and alleged transgressions of chapter rules. They also directed punishments, known as “violations,” against members who were determined to have committed transgressions. Furthermore, at the meetings the Newburgh Latin Kings discussed conflicts with other gangs. In some instances, the Crown Council used meetings to order attacks on individuals and rival gangs.
On May 6, 2008, two members of the Newburgh Latin Kings were ordered by PAGAN and another leader of the gang to shoot a member of the Bloods on Dubois Street in Newburgh. The members of the gang then drove to the vicinity of Dubois Street and shot at individuals they mistakenly believed were members of the Bloods, including Jeffrey Zachary, a 15-year old, who was shot and killed.
The Latin Kings violence continued after the Zachary murder, and included a violent altercation on November 1, 2008 when PAGAN ordered other members of the Latin Kings to bring a gun to South Miller Street in Newburgh, resulting in another member of the gang discharging a gun; the stabbing of a gang member, on orders from PAGAN, in January 2010; and the attempted stabbing of a gang member, who was believed cooperating with law enforcement, on orders from SANCHEZ in February 2010.
The violence culminated in March 2010 with the shooting deaths of Scarlett and Maldonado on back-to-back nights of bloodshed. SANCHEZ along with other leaders of the Newburgh Latin Kings ordered the murder of Maldonado. SANCHEZ spoke on the phone with other members of the gang at they walked Maldonado to the intersection of Benkard and Little Monument Street, where a shooter, recruited by gang members that same day, lay in wait to gun Maldonado down. After the shooting, the same leaders of the gang spoke to SANCHEZ on the phone as they stood over Maldonado, who lay dying in the street.
Finally, in September 2010, SANCHEZ shot another member of the gang during a violent confrontation over the leadership of the gang.
The investigation resulting in the prosecution of members and associates of the Newburgh Latin Kings was conducted by the Federal Bureau of Investigation’s (“FBI”) Hudson Valley Safe Streets Task Force, which combined the efforts of dozens of law enforcement officers from federal, state, and local agencies and departments, including agents and officers with the FBI, the U.S. Bureau of Alcohol, Tobacco, Firearms, and Explosives, the City of Newburgh Police Department, Immigration and Customs Enforcement’s Homeland Security Investigations, the Middletown Police Department, the Orange County Sheriff’s Office, the New York State Police, and the Town of Newburgh Police Department. Mr. Bharara thanked the member agencies of the Task Force for their work in the investigation.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Nicholas McQuaid, Benjamin Allee, and Abigail Kurland are in charge of the prosecution.
U.S. v. Wilson Pagan, et al. S20 Indictment
Swiss Bank Sentenced in Manhattan Federal Court for Conspiring to Evade TaxesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, announced that WEGELIN & CO. (“WEGELIN”), a Swiss private bank, was sentenced today and ordered to pay approximately $58 million to the United States for conspiring with U.S. taxpayers and others to hide approximately $1.5 billion in secret Swiss bank accounts, and the income generated in the accounts, from the Internal Revenue Service (the “IRS”). Together with the April 2012 forfeiture of more than $16.2 million from WEGELIN’s U.S. correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million. WEGELIN pled guilty in January 2013 to one count of conspiracy to defraud the IRS, file false federal income tax returns, and evade federal income taxes before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence. This case represents the first time that a foreign bank has been indicted for facilitating tax evasion by U.S. taxpayers and the first guilty plea and sentencing of such a bank.
Manhattan U.S. Attorney Preet Bharara said: “Wegelin has now paid a steep price for aiding and abetting tax fraud that should be heeded by other banks, bankers, and advisers who engage in the same conduct. U.S. taxpayers with undeclared accounts – wherever those accounts may be – should know that their bank may be next, and they should pay what they owe the IRS before we come find them.”
Assistant Attorney General Keneally said: “When the IRS offered the opportunity to come into compliance through the Offshore Voluntary Disclosure Initiative, some people thought that they could beat the system by instead looking for banks that promised further concealment. We are following that money, and time is rapidly running out for taxpayers who think that they can still hide.”
According to the Superseding Indictment, the forfeiture Complaint filed against the funds in WEGELIN’s correspondent bank account, other court documents filed in the case, and statements made during the guilty plea and sentencing proceedings:
Founded in 1741, WEGELIN is Switzerland’s oldest bank. It provided private banking, asset management, and other services to clients around the world, including U.S. taxpayers living in the Southern District of New York. WEGELIN had no branches outside Switzerland, but it directly accessed the U.S. banking system through a correspondent bank account that it held at UBS AG (“UBS”) in Stamford, Connecticut. As of December 2010, WEGELIN had approximately $25 billion in assets under management.
From 2002 through 2011, WEGELIN conspired with various U.S. taxpayers and others, to hide from the IRS the existence of bank accounts held at WEGELIN, and the income generated in those secret accounts. WEGELIN carried out this scheme through client advisers and others.
In 2008 and 2009, WEGELIN opened and serviced dozens of new undeclared accounts for U.S. taxpayers in an effort to capture clients lost by UBS in the wake of widespread news reports that UBS was being investigated by U.S. authorities for helping U.S. taxpayers evade taxes and hide assets in Swiss bank accounts. By mid-2008, UBS had stopped servicing undeclared accounts for U.S. taxpayers, and WEGELIN took a number of steps to capitalize on the opportunity to assist U.S. taxpayers hide their assets from the U.S. government.
To further the goals of the conspiracy from 2002 through 2011, WEGELIN took steps that included the following:
- Opening and servicing undeclared accounts for U.S. taxpayer-clients in the names of sham corporations and foundations formed under the laws of Liechtenstein, Panama, Hong Kong, and other jurisdictions for the purpose of concealing some clients’ identities from the IRS;
- Accepting documents that falsely declared that the sham entities were the beneficial owners of certain accounts, when in fact the accounts were beneficially owned by U.S. taxpayers, and making the false documents part of WEGELIN’s client files;
- Permitting certain U.S. taxpayer-clients to open and maintain undeclared accounts at WEGELIN using code names and numbers to minimize references to the actual names of the U.S. taxpayers on Swiss bank documents;
- Ensuring that account statements and other mail for U.S. taxpayer-clients were not mailed to them in the United States;
- Communicating with some U.S. taxpayer-clients using their personal email accounts to reduce the risk of detection by law enforcement; and
- Issuing checks drawn on, and executing wire transfers through, its U.S. correspondent bank account for the benefit of U.S. taxpayers with undeclared accounts at WEGELIN and at least two other Swiss banks. In so doing, WEGELIN sometimes separated the transactions into batches of checks or multiple wire transfers in amounts that were less than $10,000 to reduce the risk that the IRS would detect the undeclared accounts.
At the time of Wegelin’s guilty plea before Judge Rakoff on January 3, 2013, Wegelin managing partner Otto Bruderer admitted on behalf of Wegelin that “[f]rom about 2002 through about 2010, Wegelin agreed with certain U.S. taxpayers to evade the U.S. tax obligations of these U.S. taxpayer clients, who, among other things, filed false tax returns with the IRS.” Bruderer also admitted that “[i]n furtherance of its agreement to assist U.S. taxpayers to commit tax evasion in the United States, Wegelin opened and maintained accounts at Wegelin in Switzerland for U.S. taxpayers who did not complete W-9 tax disclosure forms,” which are IRS forms U.S. taxpayers can use to identify themselves as such to a bank, thereby causing the bank to report income generated in the U.S. taxpayers’ account to the IRS. Bruderer further admitted that “Wegelin knew that certain U.S. taxpayers were maintaining non-W-9 accounts at Wegelin in order to evade their U.S. tax obligations, in violation of U.S. law, and Wegelin knew of the high probability that other U.S. taxpayers who held non-W-9 accounts at Wegelin also did so for the same unlawful purpose.” Bruderer also admitted that “Wegelin intentionally opened and maintained non W-9 accounts for [certain U.S.] taxpayers with the knowledge that, by doing so, Wegelin was assisting these taxpayers in violating their legal duties” and that “Wegelin was aware that this conduct was wrong.”
U.S. taxpayers are required to report the existence of any foreign bank account on their federal income tax returns if it holds more than $10,000 at any time during a given year, as well as any income it earns.
By the end of 2009, the collective maximum value of the assets in undeclared accounts beneficially owned by U.S. taxpayer-clients of WEGELIN was approximately $1.5 billion, with many accounts holding more than $10,000 in any one year.
The April 2012 forfeiture of approximately $16.2 million from WEGELIN’s correspondent bank account was the result of a civil forfeiture Complaint filed in February 2012. As alleged in the Complaint, WEGELIN used its correspondent bank account at UBS to help U.S. taxpayers with undeclared accounts repatriate money that they had hidden at WEGELIN. This was often done in a manner designed to evade detection by U.S. authorities. For example, U.S. taxpayers routinely asked WEGELIN to issue and send them checks, which were drawn on WEGELIN’S correspondent bank account, and that represented funds held in their secret accounts at the bank. Further, WEGELIN permitted at least two other Swiss banks to issue checks drawn on its correspondent bank account for the benefit of U.S. taxpayers holding undeclared accounts at these other banks. The sheer volume of transactions in WEGELIN’s correspondent bank account served to conceal the repatriation of money from U.S. taxpayers’ undeclared accounts at WEGELIN and the other banks. On April 24, 2012, U.S. District Judge Laura Taylor Swain entered an order forfeiting over $16.2 million seized from the U.S. correspondent account of WEGELIN. As part of its plea agreement, WEGELIN agreed not to contest the April 2012 forfeiture.
The components of today’s order to pay approximately $58 million to the United States include approximately $20 million in restitution to the IRS; a fine of $22.05 million; and forfeiture in the approximate amount of $15.8 million, representing the gross fees earned by the bank on the undeclared accounts of U.S. taxpayers. Wegelin paid the civil forfeiture amount of $15.8 million to the United States on January 4, 2013.
WEGELIN is headquartered in St. Gallen, Switzerland.
Mr. Bharara praised the outstanding efforts of Internal Revenue Service, Criminal Investigation in the investigation. He also thanked the U.S. Department of Justice’s Tax Division and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Miami Foreign Corruption Investigations Group for their significant assistance in the investigation.
This criminal case is being handled by the Office’s Complex Frauds Unit and the civil forfeiture proceedings are being handled by the Office’s Asset Forfeiture Unit. Assistant U.S. Attorneys David B. Massey, Daniel W. Levy, and Jason H. Cowley are in charge of the prosecution and civil forfeiture proceedings.
Charges remain pending against client advisers Michael Berlinka, Urs Frei, and Roger Keller, who all reside in Switzerland and have not been arrested. The charges and allegations are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Former Head of Yonkers Republican Party Pleads Guilty in White Plains Federal Court to Payroll Tax FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and George Venizelos, the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced that former City of Yonkers Republican Party Chairman ZEHY JEREIS pled guilty today in White Plains federal court to a one-count Information charging him with failing to pay more than $60,000 in payroll taxes to the IRS. JEREIS surrendered this morning in the federal courthouse in White Plains and was presented and arraigned before U.S. Magistrate Judge George A. Yanthis. The case was assigned to U.S. District Judge Edgardo Ramos, who presided over the guilty plea hearing this morning.
Manhattan U.S. Attorney Preet Bharara stated: “On the very day he is surrendering to serve a prison term of 48 months in connection with his conviction on public corruption charges, Zehy Jereis is back in court admitting he defrauded the IRS. Mr. Jereis has a lot to answer for, and today he begins doing so.”
IRS Special Agent-in-Charge Toni Weirauch stated: “The tax law is very clear – employers are responsible for withholding employment taxes from the salaries of their employees. IRS-Criminal Investigation takes payroll tax fraud seriously because it both deprives the United States government of tax revenue and it reduces the future benefits that employees would otherwise be entitled to, including Social Security and Medicare.”
FBI Assistant Director-in-Charge George Venizelos stated: “Jereis, in two separate cases, has been shown to have used a business plan that included cheating. Businessmen who succeed by committing tax fraud and bribing public officials don’t earn our admiration; they go to prison.”
According to the Information and statements made during today’s proceeding:
JEREIS was a part owner and operator of a combination car wash, gas station, auto repair shop, and convenience store located in Brooklyn, New York, known as Atlantic Gas and Wash, LLC (“Atlantic”). Atlantic employed a substantial number of employees to wash and repair cars and to sell gasoline and other products at the convenience store. As an employer, JEREIS was obligated to withhold and pay to the IRS certain payroll taxes and to file accurate quarterly payroll tax forms that reported the wages and other compensation received by employees of Atlantic, and the taxes withheld.
During the tax years 2007 through 2009, JEREIS paid numerous employees of Atlantic, including undocumented aliens, a total of at least $403,127 in cash and failed to report such cash payments to the IRS. He did so in order to avoid his legal obligation to withhold taxes and to pay approximately $61,678 in payroll taxes to the IRS.
JEREIS, 41, of Scarsdale, New York, pled guilty to one count of aiding and assisting in the preparation of false and fraudulent payroll tax returns. He faces a maximum sentence of three years in prison and a maximum fine of the greater of $250,000 or twice the gross gain derived or loss that resulted from the crime. JEREIS will be sentenced by Judge Ramos on June 4, 2013 at 11 a.m.
On March 29, 2012, after a seven-week jury trial before U.S. District Judge Colleen McMahon, JEREIS was convicted of conspiracy, bribery, and extortion in connection with a scheme to bribe a Yonkers City Councilwoman to flip her vote on two real estate development projects. On November 19, 2012, JEREIS was sentenced in that case to 48 months in prison. He is scheduled to begin serving that sentence today.
Mr. Bharara praised the work of the IRS-Criminal Investigation and the FBI in the investigation.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and Jason P.W. Halperin are in charge of the prosecution.
13-067
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 Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and George Venizelos, the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced that former City of Yonkers Republican Party Chairman ZEHY JEREIS pled guilty today in White Plains federal court to a one-count Information charging him with failing to pay more than $60,000 in payroll taxes to the IRS. JEREIS surrendered this morning in the federal courthouse in White Plains and was presented and arraigned before U.S. Magistrate Judge George A. Yanthis. The case was assigned to U.S. District Judge Edgardo Ramos, who presided over the guilty plea hearing this morning.
Manhattan U.S. Attorney Preet Bharara stated: “On the very day he is surrendering to serve a prison term of 48 months in connection with his conviction on public corruption charges, Zehy Jereis is back in court admitting he defrauded the IRS. Mr. Jereis has a lot to answer for, and today he begins doing so.”
IRS Special Agent-in-Charge Toni Weirauch stated: “The tax law is very clear – employers are responsible for withholding employment taxes from the salaries of their employees. IRS-Criminal Investigation takes payroll tax fraud seriously because it both deprives the United States government of tax revenue and it reduces the future benefits that employees would otherwise be entitled to, including Social Security and Medicare.”
FBI Assistant Director-in-Charge George Venizelos stated: “Jereis, in two separate cases, has been shown to have used a business plan that included cheating. Businessmen who succeed by committing tax fraud and bribing public officials don’t earn our admiration; they go to prison.”
According to the Information and statements made during today’s proceeding:
JEREIS was a part owner and operator of a combination car wash, gas station, auto repair shop, and convenience store located in Brooklyn, New York, known as Atlantic Gas and Wash, LLC (“Atlantic”). Atlantic employed a substantial number of employees to wash and repair cars and to sell gasoline and other products at the convenience store. As an employer, JEREIS was obligated to withhold and pay to the IRS certain payroll taxes and to file accurate quarterly payroll tax forms that reported the wages and other compensation received by employees of Atlantic, and the taxes withheld.
During the tax years 2007 through 2009, JEREIS paid numerous employees of Atlantic, including undocumented aliens, a total of at least $403,127 in cash and failed to report such cash payments to the IRS. He did so in order to avoid his legal obligation to withhold taxes and to pay approximately $61,678 in payroll taxes to the IRS.
JEREIS, 41, of Scarsdale, New York, pled guilty to one count of aiding and assisting in the preparation of false and fraudulent payroll tax returns. He faces a maximum sentence of three years in prison and a maximum fine of the greater of $250,000 or twice the gross gain derived or loss that resulted from the crime. JEREIS will be sentenced by Judge Ramos on June 4, 2013 at 11 a.m.
On March 29, 2012, after a seven-week jury trial before U.S. District Judge Colleen McMahon, JEREIS was convicted of conspiracy, bribery, and extortion in connection with a scheme to bribe a Yonkers City Councilwoman to flip her vote on two real estate development projects. On November 19, 2012, JEREIS was sentenced in that case to 48 months in prison. He is scheduled to begin serving that sentence today.
Mr. Bharara praised the work of the IRS-Criminal Investigation and the FBI in the investigation.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and Jason P.W. Halperin are in charge of the prosecution.
U.S. v. Zehy Jereis Information
Woman Pleads Guilty in White Plains Federal Court for Operating A Long-Term Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALICIA HOLMES pled guilty yesterday to a three-count Indictment, charging HOLMES with devising and operating a scheme to defraud individuals and entities of hundreds of thousands of dollars in accommodations, goods, services, and money. HOLMES pled guilty to one count of wire fraud, one count of mail fraud, and one count of providing a false address in furtherance of fraud today in White Plains federal court before U.S. District Judge Kenneth M. Karas, who set a sentencing date for June 24, 2013.
According to the allegations in the Indictment filed in White Plains federal court:
From at least in or about April 2007 through in or about May 2011, HOLMES made false and fraudulent representations to hotel managers and staff, real estate brokers, property builders, home owners, and school administrators, among others, through emails, telephone calls, and letters, including statements that:
- she owned and/or was in the process of purchasing certain high-end properties, including homes valued between approximately $6,255,000 and $17,000,000;
- she had assets of great value that she would gain access to in as soon as a few days;
- she required financial assistance from the victims until she was in possession of those assets, and
- once she was in possession of her purported assets, she would use those assets to purchase certain high-end properties from some of the victims, or to pay money that she owed to the victims.
HOLMES did not have or reasonably expect to have access to assets of great value, did not own any high-end properties, and knew that her representations were false at the time she made them.
HOLMES, 49, is eligible for enhanced penalties at sentencing because she continued her offense while on pretrial release. She faces a maximum term of imprisonment of 65 years, fines of up to $250,000 or twice the gross pecuniary gain or loss resulting from the offense, restitution to victims, and forfeiture of the proceeds of her offenses.
Mr. Bharara praised the investigative work of the United States Postal Inspection Service and the Federal Bureau of Investigation.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Ilan Graff, Lee Renzin, and Anna M. Skotko are in charge of the criminal prosecution.
If you think you may have been a victim in this case or have additional information, please call Postal Inspector Patricia Thornton at 914-993-1930.
U.S. v. Alicia Holmes S2 Indictment
Manhattan U.S. Attorney Announces Agreement with Ernst & Young LLP to Pay $123 Million to Resolve Federal Tax Shelter Fraud InvestigationRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Steven Miller, the Acting Commissioner of the Internal Revenue Service (“IRS), and Tamara Ashford, the Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced today that Ernst & Young LLP (“E&Y”) has admitted wrongful conduct by certain E&Y partners and employees in connection with the firm’s participation, from 1999 to 2004, in four tax shelters that were used by approximately 200 E&Y clients in an effort to defer, reduce, or eliminate tax liabilities of more than $2 billion.
E&Y entered into a non-prosecution agreement (the “NPA”) with the United States, in which the company agreed to pay $123 million to the United States and acknowledged a detailed Statement of Facts in which it admitted the wrongful conduct of certain partners and employees. E&Y also agreed to certain permanent restrictions and controls on its tax practice, including a prohibition against planning, promoting or recommending any “listed transaction.” A "listed transaction" is a transaction that is the same as, or substantially similar to, one that the IRS has determined to be a tax avoidance transaction. The NPA also requires E&Y’s continued cooperation with the Government’s investigation. In exchange, the United States agreed not to criminally prosecute E&Y for its participation in the tax shelter scheme. The NPA applies only to E&Y and not to any individuals. E&Y has cooperated with the Government’s investigation into these tax shelters since approximately 2003. In the event that the firm violates the NPA, the U.S. Attorney’s Office may prosecute E&Y.
According to the Statement of Facts to which E&Y has admitted, and as proven at the criminal trial of certain former E&Y partners:
Beginning in 1999 and ending in 2002, E&Y, in conjunction with various law firms, banks, and investment advisers, developed, marketed and implemented four tax shelter products called COBRA, CDS, CDS Add-On, and PICO. E&Y implemented these four tax shelter products for approximately 200 high net worth clients in an effort to defer, reduce, or eliminate $2 billion in aggregate tax liabilities. E&Y prepared tax returns reflecting tax losses claimed to have been derived from those tax shelter products and subsequently defended certain of its clients in connection with audits of those transactions by the IRS.
A small group within E&Y known as the Strategic Individual Solutions Group (“SISG”) was primarily responsible for supervising and coordinating the marketing, implementation and defense of E&Y’s tax shelter products. Certain SISG tax shelter products were designed to appear to the IRS to be substantive investments that had favorable tax consequences when, in reality, the products were actually designed and marketed to clients as a series of preplanned steps that would defer, reduce or eliminate their tax liabilities. The typical client participating in these shelters was primarily, if not exclusively, motivated to achieve a desired tax savings.
In order to deceive the IRS as to the true nature of the tax strategies, and to bolster arguments that the transactions had economic substance, some SISG personnel agreed upon and directed other E&Y employees to participate in a concerted effort not to create, disseminate, or publicize documents reflecting the tax motivation behind the strategies, or the preplanned sequence of steps necessary to effect the strategies. These SISG personnel thereby sought to prevent the IRS from detecting their clients’ purposes in employing these strategies. For example, in certain instances, members of SISG falsely portrayed the transactions under examination as purely investment-driven transactions, and falsely denied a tax motivation for the transactions in response to IRS Information Document Requests and in testimony to the IRS.
Further, in implementing the sale of tax shelter products, certain members of SISG also prepared documents or correspondence that falsely and inaccurately reflected events or conversations, and that were designed to improperly influence the IRS’s view of the merits of the transactions in the event of an audit. These activities continued into 2003 and 2004.
Mr. Bharara thanked the IRS for their outstanding work in the investigation of this matter. He also thanked the Department of Justice’s Tax Division for its assistance.
This investigation is being overseen by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Richard C. Tarlowe, and Senior Litigation Counsel John E. Sullivan of the Tax Division, are in charge of the prosecution.
EY NPA
Former Jenkens & Gilchrist Attorney Sentenced in Manhattan Federal Court to Eight Years in Prison for Promoting Illegal Tax Shelters That Generated Billions of Dollars in Fraudulent Tax LossesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DONNA GUERIN, an attorney, was sentenced today to eight years in prison on conspiracy and tax evasion charges stemming from her work on the design, marketing, and implementation of fraudulent tax shelters that allowed her clients to claim billions of dollars in fraudulent tax losses. GUERIN pled guilty in September 2012 and was sentenced by U.S. District Judge William H. Pauley III.
Manhattan U.S. Attorney Preet Bharara said: “Donna Guerin abused her position as an attorney to help clients flout the law she swore to uphold, which contributed to the loss of billions of dollars in tax revenue. With her sentence today, she joins the other professionals who built and perpetrated this fraud, but did not find shelter from justice.”
According to the Indictment previously filed in Manhattan federal court and statements made during GUERIN’s guilty plea and sentencing proceedings:
GUERIN was a partner at Altheimer & Gray (“A&G”), a Chicago law firm, between 1994 and 1998, and later moved with a small group of A&G attorneys to the newly-formed Chicago office of Jenkens & Gilchrist (“J&G”), a Texas-based law firm with offices throughout the United States. At different times between 1999 and 2005, GUERIN was a shareholder or partner at J&G.
Between 1996 and 2004, GUERIN and other attorneys at J&G worked on the design, marketing and implementation of high-fee tax strategies for individual clients. Those strategies, or “tax shelters,” were designed to allow high-net-worth clients to eliminate, reduce, or defer taxes on significant income or gains. GUERIN and other J&G attorneys worked together with brokers from a financial institution, partners and employees of the accounting firm BDO Seidman, and other entities, in marketing and implementing the tax shelters.
Among the fraudulent tax shelters designed, marketed, and implemented by GUERIN and her co-conspirators were “Short Sales,” “Short Options Strategy” (“SOS”), “Swaps,” and “HOMER.” The Short Sale tax shelter was marketed and sold from 1994 through 1999 to at least 290 wealthy individuals, and generated at least $2.6 billion in false and fraudulent tax losses. The SOS tax shelter was marketed and sold from 1998 through 2000 to at least 550 wealthy individuals, and generated at least $3.9 billion in false and fraudulent tax losses. The Swaps tax shelter was marketed and sold in 2001 and 2002 to at least 55 wealthy individuals, and generated more than $420 million in false and fraudulent tax losses.
In return for receiving a fee from tax shelter clients based on a percentage of their purported tax losses – usually 5% for ordinary losses and 4% for capital losses – GUERIN and others at J&G assisted clients in implementing all of the stages of the fraudulent tax shelters, including setting up bank accounts and entities such as corporations and partnerships. GUERIN and others at J&G also provided the tax shelter clients a “more likely than not” legal opinion from J&G.
In addition to her involvement in the marketing and implementation of the fraudulent tax shelters, GUERIN also took part in the illegal back-dating of certain tax shelter transactions when attorneys at Jenkens & Gilchrist realized, after the close of certain tax years, that certain steps of the tax shelter transaction had been done improperly. GUERIN and others helped create documents after the close of the tax year and back-dated them using “as of” dates --- effectively treating the documents as if they had been signed prior to the close of the tax year, in violation of tax accounting rules.
GUERIN was paid in excess of $17 million from 1998 to 2002 as a result of her involvement in the tax shelter conspiracy.
In addition to her prison term, GUERIN, 52, of Scottsdale, Arizona, was sentenced to three years of supervised release and ordered to pay restitution in the amount of $190 million.
GUERIN and co-defendants Paul Daugerdas, Denis Field, and David Parse were convicted of various tax fraud charges in May 2011 after an 11-week jury trial trial. GUERIN, Daugerdas, and Field were granted a new trial as a result of certain juror misconduct. David Parse is scheduled to be sentenced on March 22, 2013. The retrial of Daugerdas and Field is scheduled to begin on September 9, 2013. The charges against these two defendants are merely accusations, and they are presumed innocent unless and until proven guilty.
Former J&G partner Erwin Mayer pled guilty to related charges of conspiracy and personal tax evasion in October 2010. Former BDO Seidman Vice Chairman and board member Charles W. Bee, Jr., pled guilty in June 2009 to related charges of conspiracy to defraud the Internal Revenue Service (“IRS”), tax evasion, and perjury. Michael Kerekes, another principal of BDO Seidman and also a former member of BDO's TSG and Tax Opinion Committee, pled guilty in February 2009 to related conspiracy and tax evasion charges. Adrian Dicker, a former Vice Chairman of BDO Seidman and TSG member, pled guilty in March 2009 to related conspiracy and tax evasion charges. BDO partner Robert Greisman pled guilty in July 2009 to related conspiracy, tax evasion, and IRS obstruction charges. BDO partner Mark Bloom pled guilty in July 2009 to a related IRS obstruction charge.
Mr. Bharara thanked the IRS and the Tax Division of the Department of Justice for their work on this case.
This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Stanley J. Okula, Jr., and Jason P. Hernandez, and DOJ Tax Division Assistant Chief Nanette L. Davis, are in charge of the prosecution.
Manhattan U.S. Attorney Settles Lawsuit Against New York City over Hiring Procedures That Violated the Americans with Disabilities ActRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed and simultaneously settled a federal civil rights lawsuit alleging that NEW YORK CITY (the “City”), and specifically the NEW YORK CITY POLICE DEPARTMENT (“NYPD”), violated the Americans with Disabilities Act of 1990 (“ADA”) in the course of its failure to hire an applicant for a School Crossing Guard position. The settlement agreement, in the form of a Consent Decree, was filed today by U.S. District Judge Paul A. Crotty.
Manhattan U.S. Attorney Preet Bharara said: “The ADA expressly prohibits medical and psychological exams until a conditional offer of employment has been made – so that an applicant will know if his or her disability is the reason he or she didn’t get the job. This transparency in the hiring process is crucial because it protects the applicant from disability-based discrimination that might otherwise be masked by an employer.”
According to the Complaint filed Tuesday in Manhattan federal court, the applicant applied for the position of School Crossing Guard, and immediately after doing so was directed to report for medical testing. At the time the NYPD directed the applicant to report for medical testing, it had not extended the applicant a conditional offer of employment, in clear violation of the ADA which generally prohibits medical and psychological exams until a conditional offer of employment has been made. After a conditional offer has been made, an employer may then require a prospective employee to undergo a medical examination. The purpose of this two-step process is so that an applicant will be able to discern if he or she was rejected for medical or psychological reasons.
In the Consent Decree, the City admits and acknowledges that it had a hiring procedure at the time that violated the ADA, and agrees to make the applicant a conditional offer of employment and pay her $65,000.
More information on the obligations of employers with respect to job applicants with disabilities is available at www.ada.gov and www.eeoc.gov .
Mr. Bharara thanked the Equal Employment Opportunity Commission for its initial investigation of the Complaint.
The case is being handled by the Office’s Civil Rights Unit. Assistant United States Attorney David J. Kennedy is in charge of the case.
US v.City of New York ADA Settlement Consent Decree
US v. City of New York ADA Settlement ComplaintManhattan U.S. Attorney Charges Seven Members and Associates of Bronx Narcotics Organization with Drug Trafficking and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Joseph Anarumo, Jr., the Special Agent-in-Charge of the New York Field Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Raymond W. Kelly, the Police Commissioner for the City of New York (“NYPD”), announced today the unsealing of an Indictment charging seven members and associates of a drug trafficking organization (the “Organization”) that operated in the Bronx with narcotics trafficking. Six of the defendants are also charged with possessing, brandishing, and discharging firearms in connection with their drug trafficking.
One of the defendants charged, ADONY NINA, was originally arrested by ATF agents in April 2012 for possession of ammunition by a convicted felon and has been in federal custody since that time. Three additional defendants, CANDIDO ANTOMATTEI, JORGE CRUZ, and TIARA FELIX, were arrested last night. Two additional defendants, STEPHANIE MESA and JASON MORALES, who are already in custody on state charges, will be transferred to federal custody tomorrow. One defendant, EDUARDO RODRIGUEZ, remains at large. The three defendants arrested last night are expected to be presented and arraigned today in Manhattan federal court before U.S. Magistrate Judge Frank Maas. The case has been assigned to U. S. District Judge Richard J. Sullivan.
Manhattan U.S. Attorney Preet Bharara said: “With today’s takedown in the Bronx, we are once again reminded of the connection between narcotics trafficking, guns and violence. These defendants allegedly conspired to blanket a section of the Bronx with heroin and crack cocaine, using guns as their calling cards. Today’s arrests represent the latest coordinated work of law enforcement to clean the drug trade and the people who peddle drugs out of our neighborhoods and to make those communities safe for their residents.”
ATF Special Agent-in-Charge Joseph Anarumo, Jr. said: “This investigation is extremely vital not only because it has resulted in the arrests of violent individuals known to be using firearms in furtherance of their drug trafficking, but also because it exemplifies inter-agency cooperation at its best. By combining the investigative resources and techniques of the NYPD and ATF, an organized and defined heroin and crack trafficking operation has been effectively dismantled. The essence of law enforcement is realized when we can rid the streets of criminals and also cause the initiation of additional investigations into even more serious offenders.”
NYPD Commissioner Raymond W. Kelly said: “Police investigated the source of New Year’s Day gunfire and discovered alleged crack cocaine and heroin trafficking, much of it occurring within feet of a school and playground. Law-abiding New Yorkers in nearby public housing and elsewhere in the Bronx bore the brunt of the subjects’ drug dealing and gun violence - until NYPD detectives, their ATF partners, and Federal prosecutors stepped in. I commend their dedication to public safety, and congratulate them on the arrests in this case.”
According to the allegations in the Indictment filed in Manhattan federal court, other publicly filed documents, and statements made in court earlier today:
From 2008 through 2012, the Organization’s members sold crack cocaine and heroin to street level drug customers, and supplied those drugs to other Bronx drug dealers, primarily in the vicinity of Longwood Avenue and Beck and Kelly Streets in the Bronx.
For example, in October 2011, JORGE CRUZ sold a quantity of crack cocaine to an NYPD undercover officer. And in March 2010, JASON MORALES was in possession of four firearms, at least one of which was brandished and discharged in connection with a drug trafficking crime.
The federal investigation into the Organization’s narcotics trafficking began in concert with the arrest of ADONY NINA by NYPD officers after he allegedly fired a handgun into the air early on the morning of January 1, 2012 in the Bronx. NINA is a leading member of the Organization.
All of the defendants are charged with one count of conspiring to distribute, and possess with the intent to distribute, crack cocaine and heroin, which carries a mandatory minimum sentence of 10 years in prison and a potential maximum sentence of life in prison. In addition, six of the defendants are charged with possessing firearms, which were brandished and discharged, in connection with their drug trafficking, which carries a mandatory minimum sentence of 10 years in prison. A chart containing the names, ages, residences, and charges for the defendants is attached.
Mr. Bharara praised the outstanding investigative work of the ATF, and added that the investigation is continuing.
The prosecution is being handled by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Daniel Noble and Laurie Korenbaum 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.
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US v Nina et al Indictment