Southern District of New York
Press releases recorded for this federal judicial district.
Former NYC Department of Corrections Chaplain and His Brother Sentenced in Manhattan Federal Court for Housing Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that LEIB GLANZ, a former New York City Department of Corrections chaplain who conspired with his brother MENASHE GLANZ to defraud the government of more than $220,000 in federal housing subsidies, was sentenced today in Manhattan federal court to 45 days in prison. He previously pled guilty to making false statements to the U.S. Department of Housing and Urban Development (“HUD”) with the intent to defraud and was sentenced by U.S. District Judge P. Kevin Castel. MENASHE GLANZ previously pled guilty to theft of government funds and was sentenced to six months in prison last week by Judge Castel.
According to the Information, Indictment, and other court documents, as well as statements made during proceedings in the case:
LEIB GLANZ is a former Chaplain with the New York City Department of Corrections, who previously worked at the Brooklyn Detention Complex, in Brooklyn, New York, and the Manhattan Detention Complex, in Manhattan, New York, from October 2006 through June 2009.
LEIB and MENASHE GLANZ participated in a scheme to fraudulently obtain Section Eight Program housing benefits. Under the Section Eight Program, HUD subsidizes the rent of low-income tenants who meet certain income and eligibility requirements. In New York City, this program is administered by the New York City Housing Authority (“NYCHA”) and the New York City Department of Housing Preservation and Development (“HPD”).
As part of this scheme, MENASHE GLANZ applied for and obtained Section Eight housing benefits to live at an apartment located in Brooklyn, New York (the “Section Eight Apartment”). While MENASHE GLANZ received these benefits, his brother LEIB GLANZ actually resided at this apartment from 1996 through September 2011, while MENASHE GLANZ lived at another apartment that was not subsidized by the Section Eight Program. Additionally, according to documents submitted to NYCHA and HPD, LEIB GLANZ previously signed contracts with NYCHA on behalf of the landlord of the Section Eight Apartment, the United Talmudical Academy, which also purportedly employed MENASHE GLANZ. In the course of this scheme, LEIB and MENASHE GLANZ defrauded NYCHA and HPD of a total of approximately $222,985, with LEIB GLANZ responsible for defrauding NYCHA and HPD of approximately $36,484, and MENASHE GLANZ responsible for defrauding NYCHA and HPD of approximately $186,501.
In addition to the prison term, Judge Castel sentenced LEIB GLANZ, 54, of Brooklyn, New York to one year of supervised release and ordered him to pay a fine of $3,000 and restitution in the amount of $36,484. Judge Castel sentenced MENASHE GLANZ, 51, of Brooklyn, New York, to 6 months’ home confinement to be followed by three years’ supervised release in addition to his prison term, ordered him to pay a fine of $3,000, and ordered restitution and forfeiture in the amount of $186,501.
Mr. Bharara praised the investigative work of the New York City Department of Investigation and NYCHA in this investigation.
This matter is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Steve C. Lee and Justin Anderson are in charge of the prosecution.
Doctor Pleads Guilty in White Plains Federal Court to Illegal Distribution of OxycodoneRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Brian C. Crowell, the Special-Agent-in-Charge of the New York Division of the Drug Enforcement Administration (“DEA”), announced today that FELIX RODRIGUEZ, a licensed medical doctor, pled guilty to a one-count Information charging RODRIGUEZ with distribution of more than 1,000 pills of Oxycodone, a Schedule II controlled substance. RODRIGUEZ pled guilty today in White Plains federal court before U.S. District Judge Kenneth M. Karas, who set a sentencing date for May 20, 2013.
Manhattan U.S. Attorney Preet Bharara stated: “This doctor took an oath to do no harm and then violated his oath by using his position of trust to distribute Oxycodone outside the scope of his professional medical practice. The abuse of diverted prescription pain medication is the fastest growing drug problem in our country. We will continue to work with federal, state, and local law enforcement organizations to identify and investigate those responsible at all levels.”
DEA Special-Agent-in-Charge Brian C. Crowell stated: “Felix Rodriguez should not be called a doctor by his peers or patients for illegally distributing prescriptions for pain killers to individuals he never examined. Rodriguez made a deal with the devil and profited by the sale of powerful pain medication for illegitimate use. According to the Centers for Disease Control and Prevention painkillers now take the lives of more Americans than heroin and cocaine combined, and since 2008 drug-induced deaths have outstripped those from traffic accidents. Federal, State and Local law enforcement will not tolerate any illegal drug distribution that puts our community in peril.”
According to the allegations in the Complaint and Information filed in White Plains federal court:
From May 2010 through February 2011, FELIX RODRIGUEZ, a doctor who worked out of a medical office in Manhattan, provided Oxycodone prescriptions to individuals who he had never met or examined. When RODRIGUEZ wrote these prescriptions, he knew that by doing so he was violating the law and generally accepted medical practice. Oxycodone is a powerful painkiller with a high potential for addiction and abuse.
FELIX RODRIGUEZ, 52, of Bronx, New York, is a medical doctor who practiced in Manhattan, New York. RODRIGUEZ faces a maximum term of imprisonment of 20 years.
Mr. Bharara praised the efforts of the DEA’s New York City Tactical Diversion Squad; comprised of agents and officers from the DEA, the New York City Police Department, and the New York State Department of Financial Services, and the Westchester County Department of Public Safety. He also praised the assistance of the Westchester County District Attorney’s Office, the U.S. Marshals Service, the New York State Police, the Yonkers Police Department, and Mount Vernon Police Department in this case.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey Alberts and Abigail S. Kurland are in charge of the prosecution.
Rodriguez, Felix Information
Nanuet Man Charged for Threatening to Kill Federal and State Officials and Illegal Possession of A WeaponRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Thomas P. Zugibe, the Rockland County District Attorney, George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Chief Michael Sullivan of the Clarkstown Police Department, announced today the filing of federal and state criminal charges today against LAWRENCE MULQUEEN of Nanuet, New York. MULQUEEN faces federal charges for threatening to kill federal officials and others, and separate state charges for criminal possession of a weapon. He was initially taken into custody on the state charges on February 21, 2013, and was charged federally today. He is scheduled to appear before a U.S. Magistrate Judge in White Plains federal court tomorrow.
U.S. Attorney Bharara stated: “As alleged, Lawrence Mulqueen used the power and reach of Facebook to make incendiary threats, including the use of deadly force, against federally-elected officials and others. He even provided his like-minded Facebook friends with a virtual ‘how to’ on the most effective weapons to use in making good on those threats. The internet is a forum for free expression, but it does not give anyone a carte blanche to break the law.”
Rockland County District Attorney Zugibe stated: "In our fast-paced world of status updates and tweets, behavior of this type must be treated seriously and investigated promptly to ensure that all threats or indications of potential violence are mitigated and do not escalate. Overt threats of the sort made by this defendant against our elected leaders are especially troubling and must be dealt with to the fullest extent of the law. I want to thank U.S. Attorney Bharara and his team for their good work and partnership in bringing this dangerous individual to justice."
FBI Assistant Director-in-Charge George Venizelos stated: “The defendant is alleged not only to have threatened to kill elected officials. He did the virtual equivalent of standing in the town square with a megaphone, using his Facebook page to exhort others to carry out these assassinations. Freedom of speech is a fundamental right, but making overt threats is not protected speech, it’s a crime.”
Clarkstown Police Chief Sullivan stated: “ We’re pleased and proud to work with other local and federal law enforcement agencies to bring this person into custody and to protect our elected officials and all other citizens.”
According to the allegations in the Complaint filed today in White Plains federal court:
In February 2013, MULQUEEN posted numerous messages to his page on the online social networking site “Facebook,” threatening to kill members of the United States Congress, state and local elected officials, and others. Among other things, MULQUEEN posted on February 20 that he “[could] not wait to start killing” multiple United States Senators and Members of the United States House of Representatives, as well as a Governor and Mayor, adding that their “dirt nap [was] coming very soon.”
MULQUEEN instructed people who commented on his posts to secure a “high powered rifle,” and recommended a particular Italian-manufactured shotgun as “very light and . . . semi-automatic, [with] no need to pump or reload.” He added that readers should “[u]se blades when you can to conserve bullets.” In other posts, MULQUEEN commanded readers to seek out and kill other individuals, including at least one political activist.
According to the allegations in the Indictment returned today in Rockland County Court:
MULQUEEN is charged with criminal possession of a weapon in the third degree, a class D felony. MULQUEEN faces a maximum term of three and a half to seven years on this charge
MULQUEEN, 49, is charged with one count of threatening to kill federal officials and one count of transmitting threats in interstate commerce. He faces a maximum federal penalty of 15 years in prison.
Mr. Bharara and Mr. Zugibe praised the investigative efforts of the Federal Bureau of Investigation and the Clarkstown Police Department.
The charges contained in the federal Complaint and the state Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Ilan Graff is in charge of the prosecution.
Mulqueen Complaint Signed
Manhattan Doctor Pleads Guilty to $8.5 Million Medicare Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that Dr. ROBERTO AYMAT, a medical doctor, pled guilty today in Manhattan federal court to participating in a scheme to defraud Medicare out of approximately $8.5 million through the use of fraudulent HIV/AIDS clinics in New York. As part of the scheme, AYMAT and others billed Medicare for medications that were never administered or that were administered but were medically unnecessary. He pled guilty before U.S. District Judge George B. Daniels. Three other participants in the scheme, Asmed Barrera, Augusto Guzman, and Jorge Rivero, previously pled guilty.
Manhattan U.S. Attorney Preet Bharara said: “Roberto Aymat used his medical license to perpetrate a multi-million dollar fraud on Medicare – a program that provides a lifeline to its beneficiaries and that is struggling financially to stay afloat. His exploitation of this vital, taxpayer-funded program was egregious and with his plea today, he has been held to account.”
According to the Complaint and the Indictment filed in this case:
AYMAT, along with Barrera, Guzman, Rivero, also a medical doctor, and others operated three medical clinics in New York City that purported to provide drug treatments to Medicare-eligible HIV/AIDS patients, but that were, in reality, healthcare fraud mills.
The defendants executed the fraudulent scheme by recruiting HIV/AIDS patients eligible for Medicare, and paying them kickbacks in exchange for signing on as patients at the clinics. The defendants then used these patients’ status as Medicare beneficiaries to submit claims for reimbursement to Medicare for drugs that had been prescribed to these patients. In fact, these medications were never purchased and never administered, or were administered, but were medically unnecessary.
From January 2007 to April 2009, AYMAT and his co-conspirators billed Medicare for more than 10 times the number of units of prescription drugs they actually purchased, defrauding the Medicare system of at least $8.5 million.
AYMAT, 44, a resident of Manhattan, pled guilty to conspiring to commit fraud in connection with a health care benefits program, and to committing healthcare fraud and mail fraud. He faces a penalty of up to 50 years in prison and is scheduled to be sentenced by Judge Daniels on June 18, 2013.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation and the Department of Health and Human Services, Office of Inspector General, New York Region.
The prosecution is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorneys Kan M. Nawaday and Jason H. Cowley are in charge of the prosecution.
Aymat, Roberto, et al. Indictment
Florida Man Sentenced in Manhattan Federal Court to 74 Months in Prison for Engaging in A Fraudulent Investment SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CLIFFE R. BODDEN was sentenced today in Manhattan federal court to 74 months in prison for participating in an investment scheme that defrauded foreign investors out of nearly $1 million. As part of the scheme, investors were lured with false promises that their funds would be safely invested in the U.S. financial markets through a legitimate broker-dealer. Instead, the money was misappropriated, used to pay certain expenses, and transferred to, among other places, entities related to BODDEN. He pled guilty in September 2012 to one count of conspiracy to commit wire fraud and one count of wire fraud and was sentenced by U.S. District Judge Katherine B. Forrest.
Manhattan United States Attorney Preet Bharara said: “With today’s sentence, Cliffe Bodden now knows there is a price to be paid for lying to investors, no matter where the victims live. Our ongoing efforts to prosecute the perpetrators of investment fraud are not limited by geographic boundaries.”
According to the court filings and statements made in court:
BODDEN held himself out as a Managing Director of Lempert Capital Management, Ltd., a corporation purportedly incorporated in the Cayman Islands. Starting in approximately 2005, foreign investors were lured into sending nearly $1 million to Lempert Capital’s purported management company Lempert Brothers under the pretense that those funds would be invested in the U.S. financial markets by Lempert Brothers, which was a registered broker-dealer. To induce investors into wiring funds, among other false promises, investors were told that the funds would be safeguarded, and that if the value of the funds dropped more than 20%, the money would be frozen and all remaining funds available for return to investors. In fact, the nearly $1 million of investor funds were misappropriated and diverted to, among other things, entities affiliated with BODDEN.
To keep the scheme going, BODDEN sent fraudulent monthly account statements to the investors. These statements falsely reflected that the investors’ funds were invested and earning substantial income. When investors attempted to withdraw funds from their accounts, BODDEN made additional false and fraudulent representations as to why the funds could not be returned when requested. For example, BODDEN falsely told investors that their money was illiquid because it had been invested in various companies that had not yet gone public.
In addition to the prison sentence of 37 months on each count to run consecutive for a total term of imprisonment of 74 months, Judge Forrest sentenced BODDEN, 49, of Tampa, Florida to two years of supervised release to run consecutively and ordered him to pay a fine of $25,000 and a special assessment of $200. Judge Forrest ordered restitution and forfeiture in the amount of $946,509, which represents the amount of the crime proceeds.
The charges against BODDEN’s co-defendant S. George Milter, 34, of New York, New York, are pending. These charges and the allegations against Milter are merely accusations, and he is presumed innocent unless and until proven guilty.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecution.
Manhattan U.S. Attorney Announces Arrest of Virgin Islands-Based Investment Adviser for Multi-Million Dollar Investment Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Keith Milke, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today that JAMES TAGLIAFERRI, who managed and controlled TAG Virgin Islands, Inc. (“TAG”), an SEC-registered investment adviser, was arrested today for executing a scheme to defraud TAG clients. Through TAG, TAGLIAFERRI received undisclosed payments in exchange for causing his clients to invest in certain securities; used client funds for improper purposes, including making payments to other clients who were demanding their funds; and caused false and fictitious securities instruments to be placed in client accounts. In total, TAGLIAFERRI received more than $3 million in undisclosed payments in connection with the fraud. He was arrested in St. Thomas, U.S. Virgin Islands, and is expected to be presented today in federal court in St. Thomas.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, James Tagliaferri concocted an elaborate scheme to defraud his clients, including taking millions of dollars in undisclosed compensation in exchange for placing their hard-earned money in certain investments. Financial advisers have a professional and legal responsibility to act in their clients’ best interests which is exactly the opposite of the conduct in which Tagliaferri allegedly engaged.”
Inspector-in-Charge Keith Milke said: “Today's arrest of James Tagliaferri for allegedly investing client funds in risky ventures, then using part of their investments as a ‘fee’ violated the trust his clients placed with him, leaving many financially scarred. His arrest should serve as a reminder that whenever someone uses the US Mail for illegal activities Postal Inspectors will bring them to justice.”
According to an Indictment unsealed today in Manhattan federal court:
Beginning in or about 2007, TAGLIAFERRI opened TAG in the Virgin Islands and began offering investment advisory services to clients through that company. He exercised substantial discretion over client investment accounts which, at times, totaled more than $250 million in assets under his management.
Beginning in or about 2007, TAGLIAFERRI executed a multi-faceted scheme to defraud TAG clients. First, he began taking payments he was legally required to disclose but did not, in exchange for placing client funds in investments with certain companies. He received at least $1.6 million in secret fees for causing clients to invest in securities relating to a company located in Garden City, New York (“Company 1”). He also received at least $1.75 million in undisclosed compensation in exchange for placing client funds in investments with several companies affiliated with an associate of his (“Associate 1”).
TAGLIAFERRI often used his clients’ money to finance these undisclosed payments to TAG. He did this by transferring client funds from custodial accounts to a trust account maintained by an attorney. He then diverted a portion of those funds – the undisclosed fee – from the trust account to a TAG account in the Virgin Islands that he controlled. By routing fees to TAG through this trust account and other third-party accounts, TAGLIAFERRI was able to receive these fees with no record of such fees appearing on the monthly statements custodial financial institutions sent to TAG clients.
Second, TAGLIAFERRI used client funds for improper purposes, including making payments to other clients who were demanding their money, and to make payments on behalf of companies he was affiliated with, including Company 1. He orchestrated a complex series of transactions between and among TAG client accounts to access funds for these purposes. For example, when an immediate need for funds arose, he caused clients to purchase shares of a publicly-traded company affiliated with Associate 1 from a client account affiliated with Associate 1 that TAGLIAGERRI controlled. Once those sales took place and TAG client funds were transferred to that account, he used those funds for his own purposes, including for payments to other clients demanding their money.
Third, TAGLIAFERRI caused false and fictitious securities to be placed in client accounts. He signed a series of investment instruments relating to a company located in Pennsylvania (the “Pennsylvania Company”). According to these instruments, the Pennsylvania Company was obligated to make payments to certain TAG clients based on a note agreement between the Pennsylvania Company and TAG. In reality, however, the Pennsylvania Company never executed any agreement with TAG that obligated it to make payments to TAG or TAG clients. As TAGLIAFERRI well knew, these investment instruments, and the obligation they referenced, were false and fictitious.
TAGLIAFERRI, 73, of St. Thomas, has been charged with one count of investment adviser fraud, one count of securities fraud, five counts of wire fraud, and eight counts of violating the Travel Act. The penalties for each of the charged offenses are listed in the attached chart.
Mr. Bharara praised the work of USPIS and the Criminal Investigators of the United States Attorney’s Office, which jointly investigated this case. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. 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 Jason H. Cowley and Richard C. Tarlowe are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Click here to view chart(s)Tagliaferri, James Indictment
Brooklyn Woman Sentenced in Manhattan Federal Court to Two Years in Prison for 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 VALENTINA ROMASHOVA, a/k/a “Tina Rome,” was sentenced today in Manhattan federal court to two years in prison for her participation in a $57 million fraud scheme that targeted programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), and that were established to aid the survivors of Nazi persecution. ROMASHOVA pled guilty in October 2012 to one count of conspiracy to commit mail fraud. She was sentenced by U.S. District Judge Thomas P. Griesa.
Manhattan U.S. Attorney Preet Bharara said: “Valentina Romashova traded on her position at a law firm to manufacture applicants for funds that were intended to compensate victims of one of the darkest periods in world history – the Holocaust – all so she could get a cut of the proceeds. The fraud that she helped perpetrate is reprehensible, and the fact that she did so from a law office makes it that much worse.”
According to the Superseding Indictment, the Complaint, and statements made during court proceedings:
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.
ROMASHOVA worked at a law firm in New York City that advertised in Russian-language newspapers that it could assist people with applying for compensation from the Claims Conference. While employed at this firm, ROMASHOVA used her position to steer applicants who may have been eligible to receive compensation from the Hardship Fund to the Article 2 Fund, and submitted, or caused to be submitted, fraudulent Article 2 Fund applications on their behalf, in exchange for tens of thousands of dollars in fees.
Since 2010, a total of 31 individuals have been charged with participating in the scheme to defraud the Article 2 Fund and Hardship Fund programs. Twenty-three defendants, including ROMASHOVA, have pled guilty, and a total of nine defendants have now been sentenced. Charges remain pending against the remaining eight defendants in the case, and they are presumed innocent unless and until proven guilty.
In addition to her prison term, ROMASHOVA, 65, of Brooklyn, New York, was sentenced to one year of supervised release. She was also ordered to forfeit $150,110 and pay restitution in the amount of $3,278,154.65.
In sentencing ROMASHOVA, Judge Griesa said, “…the fraudulent conduct committed here was of a uniquely serious character and the sentence should reflect that.”
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. Attorneys Christopher D. Frey and Jonathan Cohen, and Special Assistant U.S. Attorney Rebecca Rohr are in charge of the prosecution.
Brooklyn Man 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 HENRY GORDIN 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. GORDIN 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. He pled guilty today before U.S. District Judge Thomas P. Griesa.
Manhattan U.S. Attorney Preet Bharara said: “Henry Gordin was supposed to help survivors of the Holocaust be financially supported in their waning years, but instead he used his position to defraud the Claims Conference and help himself to money intended for victims of the Nazis. With his plea today, we are closer to holding to account all those who participated in this repulsive fraud.”
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 Hardship Fund program at the Claims Conference, GORDIN knowingly processed fraudulent applications in return for payments from his co-conspirators. In addition, after he left the employ of the Claims Conference, GORDIN passed materials, including identification documents, to a co-conspirator still employed at the Claims Conference to support other fraudulent Hardship Fund applications.
GORDIN is the 23rd of the 31 defendants charged in the scheme to plead guilty, including six former Claims Conference employees. Charges remain pending against the remaining eight defendants in the case, who are presumed innocent unless and until proven guilty.
GORDIN, 75, of Brooklyn, New York, faces a maximum sentence of 20 years in prison. He is scheduled to be sentenced by Judge Griesa on August 7, 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. Attorneys Christopher D. Frey and Jonathan Cohen, and Special Assistant U.S. Attorney Rebecca Rohr are in charge of the prosecution.
U.S. v. Domnitser, et al. S1 Indictment
Three Automotive Parts Suppliers Charged in Manhattan Federal Court with Selling Counterfeit Replacement PartsRead 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 Indictments charging three automotive parts suppliers with selling counterfeit replacement parts. The three men – SHASHI MALHOTRA, FADI KILANI, and RICHARD DININNI – were arrested at their homes earlier this morning. MALHOTRA and KILANI will be presented in Manhattan federal court before U.S. Magistrate Judge Gabriel W. Gorenstein this afternoon. DININNI will be presented in federal court in Allentown, Pennsylvania.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, these defendants sold the automobile replacement parts equivalent of designer knock-offs, but represented to their unsuspecting customers that they were buying the ‘name brand.’ And while their replacement parts may have been no different from many other generic parts sold every day in the aftermarket, they were able to command the same higher prices charged by the automobile manufacturers’ whose names they stole. We encourage those who think they may have purchased counterfeit parts from these defendants or from anyone else to call the numbers listed at the end of this release.”
FBI Assistant Director-in-Charge George Venizelos said: “While it is not generally against the law to sell replicas or imitations, it is illegal to try to pass them off as authentic or original. Likewise, there is a legitimate market for aftermarket auto parts, but these defendants allegedly packaged parts to appear to be original manufacturer equipment and sold them as such. That isn’t legitimate; it’s fraud.”
According to the allegations in the Indictments unsealed in Manhattan federal court earlier today:
New automobiles sold to consumers are equipped with automotive parts that are manufactured or provided by the automobile’s manufacturer (“Original Equipment Manufacturer” or “OEM”). When a consumer needs to replace a part in an automobile, he or she can purchase either: parts made by OEMs which are sold under the OEMs’ brand names; or generic parts made by other manufacturers that are commonly referred to as “aftermarket” parts. Generic parts are regularly bought and sold lawfully as aftermarket parts, typically at lower prices than OEM parts. Many types of aftermarket parts – including those sold and falsely packaged as OEM parts by MALHOTRA, KILANI, and DININNI – do not have to meet independent federal safety standards.
MALHOTRA and KILANI
From October 2011 through February 2013, MALHOTRA, who operated Worldwide Auto Parts and S&S International Products and Manufacturing in Paterson, New Jersey, and KILANI, who operated Cypros Trading and Shipping in Paterson, New Jersey, conspired to sell counterfeit OEM parts. Specifically, the defendants and their co-conspirators deceptively packaged and caused to be packaged certain aftermarket automotive parts – including brakes, brake pads, brake shoes, ignition coils, water pumps, window regulators, suspension sway bar links, wheel hubs, anti-lock braking sensors, control arm bushings, transmission filters, pitman arms, tie rod ends, and suspension air springs – to falsely make it appear as though these parts had been manufactured by OEMs such as Ford Motor Company, General Motors, and Federal Mogul (the “Manufacturers”). They sold these parts to individuals and entities that they understood would re-sell them to the general public and to certain automotive repair shops, including repair shops that service New York City’s taxis and limousines, which are subject to separate and regularly scheduled safety testing by the New York City Taxi and Limousine Commission. MALHOTRA obtained some of these counterfeit parts from China, and KILANI exported some of these counterfeit parts to Saudi Arabia.
DININNI
Similarly, from November 2011 through June 2012, DININNI, who operated Professional Parts USA in Easton, Pennsylvania, also conspired to sell counterfeit OEM parts. Along with his co-conspirators, DININNI also deceptively packaged and caused to be packaged certain aftermarket automotive parts, including brake pads and water pumps to falsely make it appear as though these parts had been manufactured by OEMs. DININNI and his co-conspirators then sold these parts to individuals and entities that they understood would re-sell them to the general public and to certain automotive repair shops, including repair shops that service New York City’s taxis and limousines.
MALHOTRA, 67, of Norwood, New Jersey, KILANI, 28, of Englewood, New Jersey, and DININNI, 57, of Easton, Pennsylvania, are each charged with one count of conspiracy to traffic in counterfeit goods, which carries a maximum sentence of five years in prison, and one count of trafficking in counterfeit goods, which carries a maximum sentence of 10 years in prison.
As the U.S. Attorney’s Office and the FBI identify individuals and entities that may have purchased counterfeit automotive parts from these defendants, both will make appropriate notifications. If you believe you may have purchased any counterfeit automotive parts from these defendants or anyone else, you may wish to have your car inspected at an authorized and qualified vehicle inspection facility to determine whether the parts in question are counterfeit.
Mr. Bharara praised the outstanding investigative work of the FBI. He also thanked U.S. Customs and Border Protection, Immigration and Customs Enforcement’s Homeland Security Investigations, and the U.S. Department of Commerce for their assistance with this investigation.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Joseph Facciponti and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture aspects of the case.
If you have questions, you may call the victim witness hotline for the U.S. Attorney’s Office at (866) 874-8900 or the FBI at (212) 384-2135. Several original equipment manufacturers have also established numbers which you may call with questions. You may call Ford Motor Company at (313) 337-3663, Federal Mogul at (877) 489-6659, and Chrysler at (855) 818-7612.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Shashi Malhotra and Fadi Kilani Indictment
U.S v. Richard Dininni IndictmentTwo Clinic Owners Plead Guilty for Their Roles in Massive No-Fault Insurance Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that five defendants have pled guilty for their roles in a systematic scheme to defraud private insurance companies of more than $400 million under New York’s no-fault automobile insurance law. The case is the largest single no-fault automobile insurance fraud scheme ever charged. Earlier today, ANDREY ANIKEYEV, an owner and controller of various acupuncture clinics, pled guilty before U.S. District Judge J. Paul Oetken to conspiracy to commit mail fraud and health care fraud. Yesterday, DMITRY SLOBODYANSKY, who owned and controlled chiropractic clinics, also pled guilty before Judge Oetken to conspiracy to commit mail fraud and health care fraud. SERGEY GABINSKY, a medical doctor, pled guilty before Judge Oetken earlier this month, and PAVEL POZNANSKY, an acupuncturist, and CONSTANTINE VOYTENKO, a chiropractor, pled guilty before Judge Oetken in December 2012. All five were arrested in February 2012 with 31 other defendants, some of whom were also charged with racketeering and money laundering. The 36 defendants include 10 doctors and three attorneys.
Manhattan U.S. Attorney Preet Bharara said: “These five defendants piled up fraud to the tune of $400 million in a scheme to exploit New York’s no-fault auto insurance laws. We remain committed to ensuring that all their alleged co-conspirators, including the corrupt medical and legal professionals charged with using their professional licenses and training to facilitate this brazen fraud, see justice.”
According to the Indictment, Superseding Informations, and other publicly filed information in the case:
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 the practitioners’ licenses to incorporate the professional corporations through which the medical clinics billed the private insurers for the bogus medical treatments. GABINSKY was one such doctor who admitted in open court to prescribing unnecessary medical treatments and to allowing co-conspirators to use his medical license to unlawfully open medical clinics in order to defraud insurance companies. POZNANSKY and VOYTENKO were medical practitioners who billed insurance companies for treatments to patients that were unnecessary.
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 audiology. 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”). ANIKEYEV and SLOBODYANSKY were two such Modality Controllers who admitted to billing insurance companies for treatments that patients did not need.
ANIKEYEV, 38, of Fort Lee, New Jersey; SLOBODYANSKY, 42, of Brooklyn, New York; GABINSKY, 55, of Brooklyn, New York; POZNANSKY, 53, of Brooklyn, New York; and VOYTENKO, 41, of Brooklyn, New York, each face a maximum penalty of five years’ imprisonment, a maximum fine of $250,000, a maximum term of supervised release of three years, and a mandatory special assessment of $100. POZNANSKY, VOYTENKO, GABINSKY, ANIKEYEV, and SLOBODYANSKY are scheduled to be sentenced by Judge Oetken on April 23, 2013, April 24, 2013, June 12, 2013, June 28, 2013, and June 13, 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 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.
Zemlyansky, Mikhail et al. - Indictment
Anikeyev, Andrey Superseding Information
Slobodyansky, Dmitry Superseding InformationTwo Members of Manhattan Trinitarios Gang Sentenced in Manhattan Federal Court for Racketeering and Firearms OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that JONATHAN FELIZ, the former leader of the Manhattan branch of the “Trinitarios,” a violent street and prison gang , and LOUINSKY MINIER, who was also a member of the Trinitarios, were sentenced today for racketeering and firearms offenses. MINIER was also sentenced for the murder of a rival gang member, Roy Abreu, in November 2006. FELIZ was charged with 41 others in March 2009, and MINIER was charged in June 2010. FELIZ and MINIER were each sentenced today by U.S. District Judge George B. Daniels. FELIZ received a sentence of 30 years’ imprisonment. MINIER received a sentence of 220 months’ imprisonment, to be served after he completes a seven-year sentence he is currently serving on related New York state charges.
Manhattan United States Attorney Preet Bharara said: “For much of the past decade, the Trinitarios street gang strangled pockets of Upper Manhattan in its cold-blooded grip infesting neighborhoods with drugs and lethal violence. With today’s sentencings, Jonathan Feliz and Louinsky Minier will be off the streets for years to come, and other gang members should be on notice that we will continue working to end their brutal reigns and see that they are punished.”
According to the Indictment, the Informations, and other documents filed in the case, as well as statements made during the sentencing proceedings:
FELIZ was the leader of the Manhattan faction of the Trinitarios gang, and in that capacity, he ordered acts of violence to be committed by other gang members, acquired and stored guns, and managed a large-scale narcotics trafficking network in Washington Heights. The gang worked with other associates, collectively known as the “Washington Heights Marijuana Organization,” (the “WHMO”) to control drug trafficking – in particular, the trafficking of marijuana – on several blocks in the Washington Heights section of Manhattan. Members and associates of the WHMO operated a business that distributed and sold marijuana and other narcotics, and committed, conspired, attempted, and threatened to commit acts of violence, including murder, against rival traffickers, competitors, and individuals who stole narcotics proceeds from the enterprise. Members and associates of the WHMO conspired and attempted to kill at least two people in addition to Roy Abreu and, on November 23, 2006, MINIER shot Abreu to death. According to arguments made at sentencing, MINIER shot and killed Abreu, and shot another man, in connection with a dispute over $150,000 of drug proceeds that had been stolen from the WHMO. FELIZ and MINIER are half-brothers.
Mr. Bharara praised the work of the Drug Enforcement Administration, the New York City Police Department, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives.
The case is being handled by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Nola B. Heller and Michael D. Maimin are in charge of the prosecution.
Former VA Hospital Workers Union President Pleads Guilty to Theft of Union Funds in Manhattan Federal Court; Former Stage Union President Sentenced for Embezzling Union FundsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that FEDERCK C. PETRO, the former President of the American Federation of Government Employees, Local 2094 (the “VA Hospital Workers Union”), pled guilty today to theft of union funds, and JOHN V. McNAMEE, the former President/Secretary-Treasurer of the Stage and Picture Operators, AFL-CIO Exhibition Employees, Local Union 829 (the “Stage and Picture Operators Union”), was sentenced yesterday in Manhattan federal court to one year and one day in prison for embezzling union funds. PETRO was arrested in December 2011 in connection with the scheme, and pled guilty today before U.S. District Judge George B. Daniels. McNAMEE pled guilty in October 2012 to one count of embezzling funds of a labor organization, and was sentenced by U.S. District Judge Kimba M. Wood.
According to the court filings and statements made in court:
From February 2006 through July 2008, while serving as the President of the VA Hospital Workers Union, PETRO wrote approximately 187 checks to himself from the VA Hospital Workers Union’s checking account, totaling approximately $112,477. The VA Hospital Workers Union checking account contained the monthly dues paid to the union by its members.
From January 2004 through February 2011, while serving as the Stage and Picture Operators Union’s President/Secretary-Treasurer, McNAMEE charged $150,000 in personal expenses on the Stage and Picture Operators Union’s corporate credit cards. These personal expenses included jewelry and clothing purchases, restaurant bills, entertainment tickets, and medical, vacation, and party expenses for himself and his family. McNAMEE paid for the personal charges he made on the corporate credit cards by writing checks from the Stage and Picture Operators Union’s checking account to cover the credit card bills. The Stage and Picture Operators Union checking account contained the monthly dues paid to the union by its members.
PETRO, 59, of Brooklyn, New York, pled guilty to one count of theft of union funds while on United States property. He faces a maximum penalty of five years in prison. PETRO is scheduled to be sentenced by Judge Daniels on June 4, 2013 at 10:00 a.m.
In addition to the prison sentence, Judge Wood sentenced McNAMEE, 53, of New York, New York, to two years of supervised release and ordered him to pay a fine of $25,000 and a $100 special assessment fee. McNAMEE also has made restitution to the Stage and Picture Operators Union of $150,000, representing the amount he embezzled from it.
Mr. Bharara praised the investigative work of the New York District of the U.S. Department of Labor’s Office of Labor-Management Standards and the Northeast Field Office of the U.S. Department of Veterans Affairs, Office of the Inspector General.
These cases are being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorney Carrie H. Cohen is in charge of the prosecutions.
Antiques Dealer Sentenced in Manhattan Federal Court Six Months in Prison for Crimes Relating to Illegal Trafficking of Endangered Rhinoceros HornsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Ignacia S. Moreno, the Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, announced that DAVID HAUSMAN, an antiques dealer in Manhattan, was sentenced today in Manhattan federal court to six months in prison for obstruction of justice and creating false records, in connection with illegal Rhinoceros horn trafficking. In his July 2012 guilty plea, HAUSMAN admitted that he committed these offenses while holding himself out to the U.S. Fish & Wildlife Service (FWS) as an antiques expert who purportedly wanted to help the agency investigate Rhinoceros horn trafficking. HAUSMAN was arrested in February 2012 as part of “Operation Crash,” a nationwide, multi-agency crackdown on those involved in the black market trade of endangered rhinoceros horn. He was sentenced today by U.S. District Judge J. Paul Oetken.
Manhattan U.S. Attorney Preet Bharara said: “With today’s sentence, David Hausman now knows that trafficking in endangered, and legally protected species, and obstructing law enforcement’s ability to do its job have grave consequences.”
Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice, Ignacia S. Moreno said: “Mr. Hausman’s blatant deception of officers conducting a federal investigation was illegal and reprehensible. He posed as someone who was protecting this endangered species when he was really obtaining and using inside information to further the illegal trade in black rhino horns. We will vigorously prosecute all those who violate the wildlife protection laws enacted by Congress to protect endangered species like the black rhinoceros from extinction.”
Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of Rhinoceros are protected under United States and international law and all Black Rhinoceros species are endangered.
Since 1976, trade in Rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”), a treaty signed by over 170 countries around the world to protect fish, wildlife, and plants that are or may become imperiled due to the demands of international markets. The demand for Rhinoceros horn and black market prices have skyrocketed in recent years due to the value that some cultures have placed on ornamental carvings, good luck charms, or alleged medicinal elements made from the horn. This has led to an almost complete decimation of the global Rhinoceros population.
Operation Crash is a continuing investigation being conducted by the Department of the Interior’s FWS, in coordination with other federal and local law enforcement agencies including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. A “crash” is the term for a herd of Rhinoceros. Operation Crash is an ongoing effort to detect, deter, and prosecute those engaged in the illegal killing of Rhinoceros and the unlawful trafficking of Rhinoceros horns.
Hausman’s Offenses
According to the Information, plea agreement, and statements made during court proceedings:
In December 2010, HAUSMAN – while purporting to help the Government crack down on illegal rhinoceros trading – advised FWS that the taxidermied head of a Black Rhinoceros containing two horns had been illegally sold by a Pennsylvania auction house. Upon learning that the sale was not finalized, HAUSMAN covertly purchased the rhinoceros mount himself, using a “straw buyer” to conceal his identification as the true purchaser, because federal law prohibits interstate trafficking in endangered species. HAUSMAN instructed the straw buyer not to communicate with him about the matter by email to avoid creating a paper trail that could be followed by law enforcement. After the purchase was completed, HAUSMAN directed the straw buyer to remove the horns and mail them to him. He then made a realistic set of fake horns using synthetic materials and directed the straw buyer to attach them on the Rhinoceros head in order to deceive law enforcement in the event that they conducted an investigation. After his arrest, HAUSMAN contacted the straw buyer and they agreed that the Rhinoceros mount should be burned or concealed.
In a second incident, in September 2011, HAUSMAN responded to an internet offer to sell a (different) taxidermied head of a Black Rhinoceros containing two horns. Unbeknownst to HAUSMAN, the on-line seller was an undercover federal agent. Before purchasing the horns on November 15, 2011, HAUSMAN directed the undercover agent to send him an email falsely stating that the mounted Rhinoceros was over 100 years old, even though the agent had told him that the rhinoceros mount was only 20 to 30 years old. There is an antique exception for certain trade in rhinoceros horns that are over 100 years old. By falsifying the age of the horns, HAUSMAN sought to conceal his illegal conduct. HAUSMAN also insisted on a cash transaction and told the undercover agent not to send additional emails so there would be no written record. After buying the Black Rhinoceros mount at a truck stop in Princeton, Illinois, agents followed HAUSMAN and observed him sawing off the horns in a motel parking lot.
At the time of his arrest, FWS agents seized four Rhinoceros heads from HAUSMAN’s apartment as well as six Black Rhinoceros horns – two of which were the horns he was seen sawing off in the parking lot – numerous carved and partially carved Rhinoceros horns, fake Rhinoceros horns, and $28,000 in cash.
In addition to the prison term, Judge Oetken sentenced HAUSMAN, 67, of New York, New York, to one year of supervised release. HAUSMAN was also ordered to pay a $10,000 fine to the Lacey Act Reward Fund, $18,000 to the Rhino Tiger Conservation Fund, and a $200 special assessment fee.
Mr. Bharara and Ms. Moreno commended the United States Fish and Wildlife Service and the United States Immigration and Customs Enforcement’s Homeland Security Investigations in Newark for their outstanding work in this investigation. The investigation is being led by the Special Investigations Unit of the FWS Office of Law Enforcement and involves a nationwide task force of agents focused on rhino trafficking.
The case is being handled by the U.S. Attorney’s Complex Frauds Unit and the Environmental Crimes Section of the U.S. Department of Justice’s Environment and Natural Resources Division. Assistant U.S. Attorney Janis M. Echenberg and Richard A. Udell, a Senior Trial Attorney with the Environmental Crimes Section are in charge of the prosecution.
Three 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 GENRIKH KOLONTYRSKIY, MOYSEY KUCHER, and DORA KUCHER 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. MOYSEY KUCHER and DORA KUCHER were arrested in February 2011, and KOLONTYRSKIY was arrested in October 2011, as part of an ongoing investigation that has resulted in charges against a total of 31 participants in the scheme. To date, 10 former Claims Conference employees have been charged, including a former director of the programs that were victimized. All three pled guilty today before U.S. District Judge Thomas P. Griesa.
Manhattan U.S. Attorney Preet Bharara said: “Our efforts to hold to account all of the individuals who participated in defrauding an organization that exists solely for the purpose of aiding victims of Nazi atrocities continues. Today’s guilty pleas today underscore that commitment.”
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 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 Article 2 Fund program at the Claims Conference, KOLONTYRSKIY knowingly processed fraudulent applications in return for payments from his co-conspirators.
MOYSEY KUCHER and DORA KUCHER both 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. In addition, MOYSEY KUCHER received payments from both the Article 2 Fund and the Hardship Fund based on fraudulent applications submitted to those programs in his own name, while DORA KUCHER received the one-time payment from the Hardship Fund based on a fraudulent application in her name.
With today’s pleas, a total of 22 defendants charged in the scheme have pled guilty. Charges remain pending against the remaining nine defendants in the case, who are presumed innocent unless and until proven guilty.
KOLONTYRSKIY, 80, of Brooklyn, New York, faces a maximum sentence of 40 years in prison. MOYSEY KUCHER, 66, and DORA KUCHER, 58, who also reside in Brooklyn, each face a maximum sentence of 20 years in prison. All three defendants are scheduled to be sentenced by Judge Griesa on August 8, 2013 at 2:30 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. Attorneys Christopher D. Frey and Jonathan Cohen, and Special Assistant U.S. Attorney Rebecca Rohr are in charge of the prosecution.
U.S. v. Domnitser, et al. S1 Indictment
U.S. v. Domnitser, et al. Complaint
Claims Conference Fraud Takedown Remarks (11-09-2010)Members of Rhino Smuggling Ring Arrested and ChargedRead the Press Release
WASHINGTON – Three people have been charged this week in Newark, Miami and New York City with wildlife smuggling and related charges for their alleged roles in an international rhino horn smuggling ring, the Department of Justice announced today. The arrests and charges are the result of “Operation Crash”, a nationwide effort led by the U.S. Fish & Wildlife Service (FWS) and the Justice Department to investigate and prosecute those involved in the black market trade of endangered rhinoceros horns.
Federal grand juries in Newark, N.J., and Miami have indicted ZHIFEI LI for international smuggling of rhinoceros horns. SHUSEN WEI, a 44 year old Chinese business executive and an associate of LI, has also been charged with offering to bribe a federal agent in the LI case. QING WANG was charged today in a related criminal complaint in federal court in the Southern District of New York for his role in smuggling libation cups carved from rhinoceros horns from New York to LI via Hong Kong.
According to the indictment filed in Newark on Feb. 11, 2013, LI, a 28 year-old Chinese national, conspired to smuggle more than 20 raw rhinoceros horns from the United States to Hong Kong in 2011 and 2012. LI wired hundreds of thousands of dollars over at least a year to a co-conspirator in the United States to fund purchases of rhinoceros horns. LI’s co-conspirator smuggled the rhino horns in porcelain vases and mailed them to Hong Kong and China to a person other than LI, in an effort to evade detection by U.S. officials. LI and his co-conspirator bought many of the horns in New Jersey from other members of the conspiracy. LI was arrested in January on charges previously filed in New Jersey.
LI also was indicted on Feb. 12, 2013, in Miami on wildlife trafficking and smuggling charges. According to court records and government statements made in court, shortly after arriving in Florida in January 2013 for the Original Miami Beach Antique Show, LI purchased two endangered black rhinoceros horns from an undercover U.S. Fish & Wildlife Service agent in a Miami Beach hotel room for $59,000. LI asked if the undercover officer could procure additional rhinoceros horns and mail them to his company in Hong Kong.
Also arrested on a related criminal complaint filed in Miami was SHUSEN WEI, a Chinese business executive, who also was attending the antique show and sharing a hotel room with LI. According to documents filed in court in Miami, WEI was interviewed by agents after LI’s arrest and admitted to knowing about LI’s smuggling activities and to purchasing rhinoceros carvings from LI that apparently had been purchased in and smuggled from the United States. After being served with a grand jury subpoena to appear in New Jersey, WEI left Miami for New York en route to China. Prior to leaving Miami, WEI allegedly asked an undercover informant to invite a FWS special agent out to dinner in Miami and offer her money to assist LI. After a series of recorded phone calls and text messages, WEI was arrested as he attempted to board a flight bound for China at JFK International Airport in New York on Saturday, Feb. 3, 2013, on charges of bribing a federal official. According to documents filed in court, WEI proposed that the undercover informant offer the agent as much as $10,000.
QING WANG is scheduled to appear in court today to face charges in a criminal complaint in the Southern District of New York for his role in smuggling libation cups carved from rhinoceros horns from New York to LI in Hong Kong. According to documents unsealed today, WANG was one of several that purchased items in the United States for LI. In China, there is a tradition dating back centuries of intricately carved rhinoceros horn cups . Drinking from such a cup was believed to bring good health and such carvings are highly prized by collectors. WANG is alleged to have been smuggling rhinoceros horn cups as well as ivory carvings to LI in Hong Kong.
An indictment or criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under United States and international law, and all black rhinoceros species are endangered. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by more than 175 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets. Nevertheless, the demand for rhinoceros horn and black market prices have skyrocketed in recent years due to the value that some cultures have placed on ornamental carvings, good luck charms or alleged medicinal purposes, leading to a decimation of the global rhinoceros population. As a result, rhino populations have declined by more than 90 percent since 1970. South Africa, for example, has witnessed a rapid escalation in poaching of live animals, rising from 13 in 2007 to more than 618 in 2012.
Operation Crash (named for the term used to describe a herd of rhinoceros) is an ongoing multi-agency effort to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns. The investigation resulting in the charges announced today has been conducted by the Special Investigations Unit of the FWS Office of Law Enforcement, with assistance from the Department of Homeland Security. The LI case is being prosecuted by the U.S. Attorney’s Office of the District of New Jersey by Assistant U.S. Attorney Kathleen O’Leary. The WEI case is being prosecuted by Assistant U.S. Attorney Tom Watts-FitzGerald in the Southern District of Florida. The WANG case is being prosecuted by Assistant U.S. Attorney Janis Echenberg in the U.S. Attorney’s Office of the Southern District of New York. Senior Trial Attorney Richard A. Udell of the Environmental Crimes Section of the U.S. Department of Justice is assisting in and coordinating all of the prosecutions. Additional support has been provided by the U.S. Attorney’s Office in the Eastern District of New York.
Manhattan U.S. Attorney Announces Arrest of New York City Man for $8 Million Identity Theft and International Telecommunications Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Steven G. Hughes, the Special Agent-in-Charge of the New York Office of the U.S. Secret Service, and Kenneth Siegler, the Resident Agent-in-Charge of the New York Office of the Defense Criminal Investigative Service (“DCIS”), announced today the arrest of AMADOU DIA for participating in an international telecommunications fraud scheme that used stolen identity information to activate fraudulent mobile telephone accounts and then make telephone calls to fraudulent overseas telephone numbers that charged a premium connection fee. The scheme allegedly compromised more than 1,000 identities – nearly half of them belonging to members of the U.S. military – and caused at least $8 million in losses to mobile telecommunications providers including AT&T and T-Mobile. DIA was arrested this morning in Manhattan and is expected to be presented in Manhattan federal court before United States Magistrate Judge James L. Cott later today.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Amadou Dia and his co-conspirators dialed for dollars - many millions of them - by stealing countless identities, including hundreds belonging to U.S. military personnel, and racking up international phone bills in their names that left telecom service providers holding the bag. Identity theft is an epidemic of global proportions and we are bound and determined to identify and prosecute those who engage in this illegal conduct.”
Special Agent-in-Charge Steven G. Hughes said: "This investigation is just one example that proves the power of agency partnerships in combating financial fraud and identity theft. This indictment and arrest should serve as a reminder to criminals that law enforcement will continue to pursue individuals engaged in stealing the identities of innocent Americans for financial gain.”
DCIS Resident Agent-in-Charge Kenneth Siegler said: "Today's arrest demonstrates the ongoing commitment of Defense Criminal Investigative Service and its partners in law enforcement to aggressively pursue these crimes and to support their prosecution to the fullest. As a team, we will continue to methodically investigate these allegations, work to ensure confidence in the system, and protect America's war fighters’ identities."
According to the allegations in the Complaint unsealed today in Manhattan federal court:
From 2001 through January 2013, DIA participated in an identity theft and international telecommunications scheme in which he and his co-conspirators obtained stolen identification information from individuals, including names, dates of birth, and social security numbers. He would then activate fraudulent cellular service accounts in their names.
Once the accounts were activated, DIA and members of the fraud ring would create SIM cards and insert them into mobile handsets. They then called premium international telephone numbers that they acquired and controlled, presumably to generate fees for the members of the scheme. The premium numbers were either dead when dialed, or simulated a ringing sound to appear as if a call was not yet connected. The premium numbers – the equivalent of 900 numbers in the United States – charged significant connection fees of as much as $1 per minute that the international carrier then charged to U.S.-based cellular providers such as AT&T and T-Mobile. While the U.S. provider would normally bill subscribers for the calls, in this case the U.S. provider was forced to pay for the calls because the accounts were registered to identity theft victims. The international carrier provided a share of the fees to the holders of the fraudulent international premium telephone numbers, who are believed to be the members of the fraud ring.
Since 2008, approximately 3,400 fraudulent telephone accounts have been activated involving stolen identification information from more than 1,000 individual identity theft victims. According to records maintained by the U.S. Department of Defense, at least 450 or nearly half, of the identity theft victims targeted during the course of this scheme are active duty or retired United States military personnel. The scheme has caused at least $8 million dollars in losses to U.S.-based telephone providers.
DIA, 49, of Manhattan, is charged with one count of conspiracy to commit wire fraud, which carries a maximum of 20 years in prison, one count of conspiracy to commit identity theft, which carries a maximum sentence of 15 years in prison, and one count of aggravated identity theft, which carries a mandatory minimum of two years in prison.
Mr. Bharara praised the Secret Service and DCIS for its outstanding work investigating this case. He also thanked AT&T and T-Mobile USA for their cooperation in the investigation.
This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Timothy T. Howard is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Dia, Amadou Arrest PR
Former Hedge Fund Founder Steven Fortuna Sentenced in Manhattan Federal Court for Insider TradingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that STEVEN FORTUNA, who co-founded the hedge fund S2 Capital LLC (“S2”), was sentenced today to two years of probation for his participation in an insider trading scheme in which he obtained and traded on material, nonpublic information (“Inside Information”) about various publicly-traded companies from employees at other hedge funds. FORTUNA pled guilty in October 2009 to three counts of conspiracy to commit securities fraud and one count of securities fraud pursuant to a cooperation agreement with the Government. He was sentenced today in Manhattan federal court by U.S. District Judge Sidney H. Stein.
According to the Information, statements made during FORTUNA’s guilty plea proceeding, and the Government’s sentencing submission in his case:
From July 2008 through March 2009, while working as a portfolio manager at a hedge fund he co-founded, FORTUNA obtained Inside Information concerning various technology companies from employees at other hedge funds for the purpose of trading on that information. The Inside Information was disclosed by company insiders in breach of their duties to their respective employers.
For example, in July and August 2008, FORTUNA obtained Inside Information concerning Akamai, Inc. (“Akamai”) from Danielle Chiesi, a portfolio manager at New Castle Partners, a hedge fund. Chiesi told FORTUNA that Akamai planned to report that its revenue guidance for the following quarter would miss expectations and that, internally, the company believed that its stock price would fall following the quarterly earnings announcement. FORTUNA executed trades based on that Inside Information, and earned approximately $2.4 million in profits for S2.
As part of the conditions of his probation, FORTUNA, 50, of Westwood, Massachusetts, was ordered to serve six months on home confinement with electronic monitoring, and 120 hours of community service during each of the years of his probation. He was also ordered to pay forfeiture in the amount of $200,000, and a $400 special assessment fee.
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. 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.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Antonia M. Apps is in charge of the prosecution.
Manhattan U.S. Attorney Announces Charges Against Alleged Leaders of International Atm Skimming RingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Steven G. Hughes, the Special Agent-in-Charge of the New York Field Office of the United States Secret Service, announced today the filing of an Indictment against ANTONIO GABOR and SIMION TUDOR PINTILLIE, two alleged leaders of an international scheme to steal customer bank account information using sophisticated “skimming” technology that secretly recorded the data of customers who used Automated Teller Machines (“ATMs”) at banks in New York, New Jersey, Illinois, and Wisconsin. GABOR and PINTILLIE were arrested in Skokie, Illinois on December 6, 2012 and have been in federal custody. GABOR is being transported to New York for arraignment and will arrive at a date to be determined. PINTILLIE will be arraigned before U.S. District Judge Alison J. Nathan on Tuesday, February 19 at 9:30 a.m.
Manhattan U.S. Attorney Preet Bharara said: “While traditional bank robberies may be on the wane, the charges we bring today are a reminder of the threat that cybercrime poses to banks and their customers. Together with our law enforcement partners, we remain committed to stopping these alleged high-tech bank robbers in their tracks.”
U.S. Secret Service Special Agent-in-Charge Steven G. Hughes said: “The U.S. Secret Service is committed to preventing and mitigating financial crimes against our nation’s financial infrastructure. Such threats involve a wide variety of schemes including the emerging trend of ATM compromises. The U.S. Secret Service is focused on investigating these crimes and bringing those responsible to justice.”
According to the allegations of the Indictment filed in Manhattan federal court earlier today:
From at least April 2012 through December 2012, GABOR and PINTILLIE were the leaders of an ATM skimming ring based in New York and Chicago. GABOR, PINTILLIE, and at least nine other co-conspirators placed electronic devices, which GABOR obtained from Hungary, on security card readers that secretly recorded a customer’s bank account data when the customer used an ATM. The co-conspirators also installed hidden “pin hole” video cameras on ATM machines that secretly recorded customers’ Personal Identification Numbers (PINs) as the customers pressed these numbers on ATM keypads in order to access their accounts. After a period of time, the co-conspirators would remove the skimming devices and provide them to GABOR and PINTILLIE, who would use the stolen bank account and PIN numbers in order to create new bank cards that could be used to withdraw funds from victim accounts.
GABOR and PINTILLIE also maintained stash locations at multiple self-storage facilities where they stored skimming devices and other equipment and materials necessary to execute the scheme. At one location in Queens, New York, GABOR and PINTILLIE stored computer equipment that contained hundreds of hours of video camera footage of individual customers inputting PIN numbers onto ATM keypads, over 1,000 plastic cards encoded with stolen account information, and components for ATM skimming devices and pin hole cameras.
GABOR and PINTILLIE targeted J.P. Morgan Chase (“Chase”), and Capital One, N.A. banks. Throughout the course of the scheme, they engaged in over 50 skimming incidents that resulted in the compromise of over approximately 6,000 individual bank accounts, from which the defendants made and attempted to make over approximately $3 million in unauthorized withdrawals.
GABOR, 30, allegedly a citizen of Denmark, and PINTILLIE, 32, a Romanian citizen, are each charged with one count of conspiracy to commit bank fraud, which carries a maximum of 30 years in prison, one count of conspiracy to commit access device fraud, which carries a maximum of seven and one half years, and one count of aggravated identity theft, which carries a mandatory minimum of two years in prison.
Mr. Bharara praised the Secret Service for its outstanding work investigating this case. He also thanked J.P. Morgan Chase Bank, Capital One Bank, N.A., and Prairie du Sac Bank for their cooperation in the investigation.
This case is being prosecuted by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Timothy T. Howard is in charge of the prosecution.
The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.
US v. Gabor, Pintillie Indictment
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Arrest of Manhattan Business Owner for Allegedly Running A $1.5 Million Ponzi SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), announced today that JASON J. KONIOR, the founder and manager of a number of related business entities in New York City, collectively referred to as “Absolute,” was arrested today for orchestrating a Ponzi scheme. Through Absolute, KONIOR stole approximately $1,500,000 from three hedge fund investors and used the proceeds to pay off prior investors and to pay himself. He was arrested in Manhattan, and is expected to be presented in Manhattan federal court before United States Magistrate Judge James L. Cott on Wednesday.
According to a Complaint unsealed today in Manhattan federal court:
From late 2011 through May 2012, KONIOR organized and managed a Ponzi scheme in which he misappropriated $1.5 million in funds he had solicited from three hedge fund investors. He represented to these hedge funds that Absolute would provide additional trading funds of up to nine times the investment they made in Absolute. As part of Absolute’s “first loss” investment program, KONIOR claimed that he would place the combined funds – the investors’ funds and the additional funds to be provided by Absolute – in a brokerage account designated by Absolute. According to KONIOR, the hedge fund investors would then be able to trade securities utilizing that brokerage account. Under the arrangement, the hedge funds would be responsible for trading losses, and they would share any profits with Absolute.
Instead of establishing brokerage accounts for the three hedge funds, KONIOR misappropriated the funds they provided by paying redemptions to prior investors, making payments to himself, and paying various personal and business expenses. In e-mails, text messages, and telephone conversations, he pretended that he was establishing brokerage accounts for the three hedge fund investors, when he had already stolen their money. In one case, after he repeatedly failed to set up a brokerage account for one of the hedge funds, the manager of the fund sent him a text message stating, “I want my money back. What did you do to it anyway? Are you going to tell me or do you want the SEC to find out?” KONIOR responded with a text message that said, “[w]e have your funds in our acct. Where else would they be?” At the time he wrote the message, he had already used that hedge fund’s investment to pay off other investors and his own expenses.
KONIOR, 39, of Manhattan, has been charged with one count each of securities fraud and wire fraud. The maximum potential penalty for securities fraud is 20 years in prison and a fine of $5,000,000 or twice the gross gain or loss from the offense. The maximum potential penalty for wire fraud is 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense.
Mr. Bharara praised the work of the FBI and the Securities and Exchange Commission.
This case was brought in coordination with President BARACK OBAMA's Financial Fraud Enforcement Task Force, on which Mr. BHARARA serves as a Co-Chair of the Securities and Commodities Fraud Working Group. 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 T. Zach and Jason H. Cowley are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant are presumed innocent unless and until proven guilty.
Konior, Jason Complaint
Former Galleon Group Employee and Hedge Fund Founder Ali Far Sentenced in Manhattan Federal Court for Insider TradingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ALI FAR, a former employee of Galleon Group and founder/portfolio manager of Spherix Capital Partners, was sentenced today to one year of probation for his participation in multiple insider trading schemes during which he obtained, shared, and traded based on material, nonpublic information (“Inside Information”) stolen from several public companies. FAR pled guilty in October 2009 to one count of conspiracy to commit securities fraud and one count of securities fraud pursuant to a cooperation agreement with the government. He was sentenced today in Manhattan federal court by U.S. District Judge Robert P. Patterson.
According to the Information and statements made during FAR’s guilty plea proceeding and his sentencing:
Between 2003 and March 2009 – a period that spanned FAR’s tenure at Galleon and Spherix – he solicited Inside Information from a number of sources who provided the information in breach of duties to their employers, for purposes of trading securities. FAR traded on the Inside Information for the benefit of the hedge funds where he worked. He also shared certain Inside Information with others in the hedge fund industry in exchange for trading ideas and other Inside Information. Together, he and his co-conspirator at Spherix gained approximately $5,209,464 for their hedge fund by placing trades in Spherix accounts based on Inside Information.
For example, FAR solicited Inside Information from Ali Hariri, a family friend and technology executive, who pleaded guilty and was sentenced to prison as a result of his participation in illegal insider trading. On multiple occasions, beginning in 2008, Hariri provided FAR with Inside Information about the business performance of Hariri’s company, and FAR traded based on that Inside Information, reaping hundreds of thousands of dollars in illegal profits.
In addition to his probation, FAR, 51, of Saratoga, California, was sentenced to a fine of $100,000, a $200 special assessment, and 100 hours of community service.
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. 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.
The case is being handled by the Office's Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Reed Brodsky is in charge of the prosecution.
Leader of Armenian Organized Crime Ring Sentenced in Manhattan Federal Court to 37 Months in Prison for His Role in $100 Million Medicare Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ARMEN KAZARIAN was sentenced today in Manhattan federal court to 37 months in prison for his involvement with the Mirzoyan-Terdjanian Organization, an Armenian-American organized crime enterprise engaged in a wide range of criminal activity. KAZARIAN pled guilty to racketeering conspiracy in July 2011, and was sentenced today by U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Preet Bharara said: “Armen Kazarian sat at the top of a criminal organization and now he will sit in a jail cell for a long time. International mobsters who think they can export their criminal enterprises to the United States and target our government programs and our citizens are in for a rude awakening – they will face U.S. justice and be made to answer for their crimes.”
According to the Indictment, other documents filed in this case, and statements made during the guilty plea proceeding:
KAZARIAN was a “Vor,” a term translated as “Thief-in-Law.” The term refers to a member of a select group of high-level criminals from Russia and the countries that had been part of the former Soviet Union, including Armenia. “Vors” offer prestige and protection to criminal organizations in return for a share of criminal earnings, and use their position of authority to resolve disputes among criminals. KAZARIAN used his status as a “Vor” within the criminal community to assist the Mirzoyan-Terdjanian Organization, an Armenian-American organized crime ring that engaged in an extensive range of criminal offenses including the operation of a $100 million dollar Medicare fraud billing ring. As part of his involvement with the group, KAZARIAN engaged in extortion on the Organization’s and his own behalf.
In addition to the prison term, Judge Gardephe sentenced KAZARIAN, 47, of Glendale, California, to three years of supervised release. He was also ordered to pay a $60,000 fine.
Mr. Bharara thanked the New York Field Office of the Federal Bureau of Investigation, the New York City Police Department, the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and the New York Office of the Inspector General, Department of Health and Human Services for their work in the investigation.
The prosecution is being handled by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Jennifer Burns, Arlo Devlin-Brown, and Harris Fischman are in charge of the prosecution.
Manhattan U.S. Attorney Files and Simultaneously Settles Lawsuit Against St. Luke’s-Roosevelt Hospital Center for Fraudulently Billing Medicare and MedicaidRead 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 health care fraud lawsuit under the False Claims Act against the ST. LUKE’S-ROOSEVELT HOSPITAL CENTER (the “Hospital”), CONTINUUM HEALTH PARTNERS, INC., and SLR PSYCHIATRIC ASSOCIATES (“SLR”) (collectively, “ST. LUKE’S”) for improperly billing Medicare and Medicaid for out-patient services provided at its mental health clinics. As part of the settlement, ST. LUKE’S agreed to pay $2,325,000 to settle the Government’s claims for damages and penalties under the False Claims Act, with $1,258,115.17 of that amount to be paid to the United States and the balance to the State of New York for its share of the Medicaid overpayment. The settlement was approved yesterday by United States Circuit Court Judge Denny Chin, sitting by designation.
Manhattan U.S. Attorney Preet Bharara stated: “As they admitted today, St. Luke’s engaged in billing shenanigans that siphoned millions of taxpayer dollars out of government health care programs intended to benefit elderly and low-income individuals. Medicare and Medicaid fraud divert precious and dwindling resources from those who truly need help, and this Office will keep protecting those resources.”
According to the Complaint and Settlement filed in this case:
ST. LUKE’S double-billed the United States for psychiatric services provided by the Hospitals’ physicians at SLR, one of its out-patient mental health clinics, in two ways: (1) the Hospital sought and received reimbursement pursuant to Medicare for non-reimbursable costs relating to outpatient psychiatric visits conducted by SLR during the period 1999 to 2002; and (2) the Hospital billed out-patient psychiatric services to Medicaid as a rate-based service, which included the care provided by the physician and all other related costs. At the same time, SLR billed the Government on a fee-for-service basis for the same care provided by the physician. As a result, ST. LUKE’S received Medicare and Medicaid payments that it was not entitled to receive.
As part of the settlement, ST. LUKE’S has admitted, acknowledged, and accepted responsibility for the following conduct:
- During the period 1999 to 2002, the Hospital sought and received reimbursement pursuant to Medicare for non-reimbursable costs relating to outpatient psychiatric visits conducted by SLR.
- During the period from on or about February 1998 through 2002, the Hospital and SLR overbilled the United States and New York State in connection with claims for reimbursement under Medicaid relating to outpatient psychiatric visits conducted by SLR; specifically, SLR submitted claims and received reimbursement under Medicaid for costs that were already included in, and reimbursed to the Hospital pursuant to, separate claims submitted by the Hospital.
- From 2003 through 2010, the Hospital submitted claims and received reimbursement under Medicaid relating to services furnished by physicians in the Hospital’s outpatient mental health clinic. Department of Social Services regulations provide that “[t]he costs of routine physicians' services are included in facilities' rate or fee and shall not be billed separately.” The Hospital billed for such physician services separately, although the Hospital had removed the physician costs from its institutional cost report.
Pursuant to the settlement, ST. LUKE’S will pay $1,258,115.17 to the United States and $1,066,884.83 to the State of New York in damages and civil penalties within ten days of the settlement.
Mr. Bharara thanked the Office of the Inspector General for the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services for their assistance with the case. He also thanked the Medicaid Fraud Control Unit of the Office of the New York State Attorney General.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Joseph A. Pantoja is in charge of the case.
US v. St. Luke's Roosevelt Complaint
US v. St. Luke's Hospital Order of Settlement and Dismissal
US v. St Luke's Hospital Order of Settlement and ReleaseManhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Arrests of Three Defendants in $2.5 Million Ponzi SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation ("FBI"), announced the filing of a three-count criminal Complaint charging CHARLES HUGGINS, CHRISTOPHER BUTCHKO, and ANNE THOMAS for allegedly perpetrating a $2.5 million Ponzi scheme involving investments in gold and diamonds purportedly mined in West Africa for sale in the United States. HUGGINS and THOMAS were arrested this morning in Edgewater, New Jersey, and Cliffside Park, New Jersey, respectively. BUTCHKO was arrested this morning in Murrieta, California. HUGGINS and THOMAS are expected to be presented in Manhattan federal court before Magistrate Judge Debra Freeman later today, and BUTCHKO is expected to be presented in federal court in the Central District of California later today.
Manhattan U.S. Attorney Preet Bharara said: “The promise of riches mined in Africa was fool’s gold that these defendants allegedly dangled in front of investors in what was nothing more than a scam. For those Ponzi schemers who have yet to get the message, be aware that you will be exposed by law enforcement and punished accordingly.”
Assistant Director-in-Charge George Venizelos said: “As alleged, these defendants lied about their intentions regarding investors’ money, pocketing most of it for personal use. So long as there are people with money to invest, there will likely be investment swindlers eager to take their money under false pretenses. There will also be the FBI to arrest the swindlers.”
According to the Complaint filed in Manhattan federal court:
From 2008 through September 2011, HUGGINS, BUTCHKO, and THOMAS solicited $2.5 million from various investors through companies known as JYork Industries Inc. (“JYork”) and Urogo Inc. (“Urogo”). HUGGINS and
BUTCHKO and others repeatedly made false and misleading representations about how they would use the investors’ money to mine gold and diamonds from Sierra Leone and Liberia, and promised high rates of return, based on the profits they said would be generated by the sale of the gold and diamonds in the United States.
HUGGINS, BUTCHKO, and THOMAS misappropriated the majority of the money they raised and kept it for themselves or used it to repay other investors. For example, investor funds were diverted to Orpheus Inc., a record label owned by HUGGINS, and VASNC Pvt Ltd., a petroleum company owned by BUTCHKO, and used to pay monthly apartment rental payments, restaurant bills, personal credit card bills, and other expenses. THOMAS personally received more than $90,000 in cash and disbursed more than $830,000 in investor proceeds through wire transfers to the Bahamas and checks repeatedly issued in amounts less than $10,000 in an apparent attempt to avoid the reporting threshold. Contrary to the defendants’ representations, only a small portion of the money they raised was transferred to Africa.
When investors complained that they had not received the return on their investment that they were promised, HUGGINS, BUTCHKO, and THOMAS frequently converted or offered to convert their investment into restricted shares of Oraco Resources, a publicly traded company of which HUGGINS, BUTCHKO, and THOMAS were majority shareholders. The investigation has revealed that only one investor to date has been made whole. That investor received the principal of his investment only after he threatened to bring civil litigation.
HUGGINS, 66, of Edgewater, New Jersey, and BUTCHKO, 43, of Murrieta, California, are each charged in the Complaint with one count of conspiracy to commit wire fraud and one count of wire fraud. Those counts each carry a maximum potential penalty of 20 years in prison and a fine of the greater of $250,000 or twice the gross gain or loss derived from the offense. THOMAS, 68, of Cliffside Park, New Jersey, is charged with one count of conspiracy to commit wire fraud and one count of money laundering. The money laundering count carries a maximum potential penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the money laundering transactions.
Mr. Bharara praised the investigative work of the FBI in this case. He added that the investigation is ongoing.
The case is being handled by the General Crimes Unit of the United States Attorney's Office. Assistant United States Attorney Edward A. Imperatore is in charge of the prosecution.
The charges contained in the Compliant are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Huggins, Butchko, Thomas Complaint
Statement of Manhattan U.S. Attorney Preet Bharara on the Conviction of Nicole ZobkiwRead the Press Release
“The jury spoke clearly today through its verdict: lying to a federal grand jury and thereby obstructing its ability to seek the truth is against the law, and those who do so will be punished.”
Philadelphia Businessman and New Jersey Lawyer Convicted in Manhattan Federal Court in Connection with Multiple Investment Fraud SchemesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that a jury found TYRONE L. GILLIAMS, JR., a Philadelphia businessman, and EVERETTE L. SCOTT, JR., a New Jersey attorney, guilty yesterday afternoon on fraud charges stemming from two separate schemes. In the larger of the two schemes, the defendants solicited and misappropriated $5 million in investments in a bogus United States Treasury Strips investment program. In the other scheme, the defendants solicited and misappropriated a $450,000 investment in a Utah coal mine. In addition to buying luxury cars, jewelry, and other items, GILLIAMS spent hundreds of thousands of dollars of investor money organizing and promoting a multi-day festival in Philadelphia that headlined Sean “Diddy” Combs. GILLIAMS and SCOTT were convicted after a two-week trial before U.S. District Judge Deborah A. Batts.
Manhattan U.S. Attorney Preet Bharara stated: “Tyrone Gilliams may have had his 15 minutes of fame as a result of his flagrant, multi-million dollar deception, but now he and his partner in crime face a significantly longer time to pay the price of their fraud.”
According to the Indictment and the evidence presented at trial:
In 2009 and 2010, GILLIAMS was the owner of TL Gilliams, LLC, which purported to engage in transactions in commodities like oil and gold. SCOTT was an attorney at a small law firm in New Jersey and acted as TL Gilliams’s general counsel.
In the summer of 2010, GILLIAMS solicited $5 million dollars from two investors for purposes of trading in U.S. Treasury Strips, which are a derivative of U.S. Treasury Bonds. GILLIAMS and SCOTT arranged for the investors to make their investments by wiring them into an attorney trust account maintained by SCOTT’s law firm. Upon receiving the money, SCOTT – at GILLIAMS’ direction – misappropriated more than $700,000 to satisfy expenses stemming from an unrelated and failed venture to buy a coal mine in Utah. SCOTT also claimed $50,000 of the investment money for himself as purported fees. At GILLIAMS’ direction, SCOTT transferred most of the remainder to bank and brokerage accounts that he controlled.
At most, GILLIAMS purchased $250,000 worth of Treasury Strips with the more than $4 million in investment money transferred by SCOTT. Over a span of less than six months, GILLIAMS spent more than $1.6 million on an unrelated gold investment; more than $200,000 to purchase a commercial warehouse in Denver; at least $100,000 to buy or lease luxury cars; at least $50,000 for construction work on his home; at least $100,000 on luxury hotel and travel expenses; and more than $500,000 promoting both a festival called “Joy to the World” involving an album release party with Jamie Foxx at the Vault nightclub in Philadelphia, and culminating in a red carpet, black tie gala at the Philadelphia Ritz-Carlton, headlined for a $120,000 fee by Sean “Diddy” Combs, and a December 2010 December 2010 comedy performance in Nassau, Bahamas called the “Gatta Be Jokin’ Comedy Jam.”
GILLIAMS did not engage in any trading of Treasury Strips and, as a result, did not derive any profits. Nonetheless, during the period when he was spending investor money, GILLIAMS provided them with false reports of trades and profits, and made occasional, nominal payments that he falsely claimed represented profits from Treasury Strips trading. Other than these purported profit payments, which totaled approximately $100,000, neither investor received any of their combined $5 million investment back.
In a separate scheme, GILLIAMS and SCOTT arranged in late 2009 for an investor to transfer $450,000 to SCOTT’s attorney trust account, to be held in escrow until used in connection with a venture to purchase the assets of a bankrupt Utah coal mine. Once the money was in SCOTT’s account, he secretly misappropriated approximately $112,000 by claiming it as purported fees, and transferred the rest to GILLIAMS or other individuals and entities at GILLIAMS’direction. Until August 2010, GILLIAMS and SCOTT falsely assured the victim that his $450,000 remained safely in escrow, long after SCOTT’s escrow account had been emptied. Although the victim repeatedly demanded the return of his funds, GILLIAMS and SCOTT pacified him by producing forged bank documents and a false attorney attestation letter written by SCOTT purporting to show that GILLIAMS was in possession of the millions of dollars necessary to purchase and operate the Utah coal mine. In August 2010, after an attorney for the victim threatened SCOTT with professional discipline for his failure to return the escrowed funds, GILLIAMS and SCOTT paid the victim $450,000 using funds they raised for investment in Treasury Strips.
GILLIAMS, 45, of Philadelphia, Pennsylvania, and SCOTT, 51, of Sewell, New Jersey, were each convicted of one count of securities fraud and two counts of wire fraud. Each count carries a maximum potential penalty of 20 years in prison. They also each face a maximum fine of $5 million or twice the gross gain or loss from the offense on the securities fraud count, and of $250,000 or twice the gross gain or gross loss from the offense on each wire fraud count. GILLIAMS and SCOTT are scheduled to be sentenced on September 17, 2013, at 10:30 a.m., and September 24, 2013, at 10:30 a.m., respectively, before Judge Batts.
Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney's Office and the Federal Bureau of Investigation, which jointly investigated this case. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. 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 Michael A. Levy and David B. Massey are in charge of the prosecution.
Manhattan U.S. Attorney Announces Arrest of Former Accounting Firm Partner for Stealing Nearly $4 Million in Client PaymentsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Keith Milke, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), today announced the arrest of CRAIG B. HABER, a former partner of a global accounting firm, for stealing nearly $4 million in client payments intended for the firm. HABER was arrested by Postal Inspectors this morning at his residence in New York, New York, and will be presented this afternoon before U.S. Magistrate Judge Debra Freeman in Manhattan federal court.
Manhattan U.S. Attorney Preet Bharara said: “From his perch at a prestigious accounting firm, Craig Haber allegedly betrayed his partners, by deceiving the firm’s clients in order to rob the firm blind – diverting millions of dollars of client payments into his own pocket. Fraud is always serious, but it is especially alarming when, as alleged here, it is committed by professionals who are supposed to be gatekeepers responsible for ensuring financial rectitude.”
USPIS Inspector-in-Charge Keith Milke said: “Mr. Haber's alleged abuse of the trust given to him by his clients and employer is a classic example of greed overcoming honest business practices. His arrest should serve as a reminder that whenever someone uses the US Mail for illegal activities Postal Inspectors will bring them to justice.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:
From 1993 through July 2012, HABER was a partner at a global accounting firm headquartered in Chicago, Illinois, that provided a variety of auditing, accounting, and tax preparation services to businesses and individuals in the U.S. and abroad (the “Accounting Firm”). HABER worked at the Accounting Firm’s office in New York, New York, and provided tax preparation and advisory services to investment partnerships and other clients of the firm.
The Accounting Firm’s bills to clients ordinarily included payment instructions directing clients to pay the firm by wire transfer or by sending checks to its headquarters in Chicago. However, on multiple occasions from 2004 through July 2012, HABER sent bills to clients containing payment instructions directing them to send checks to him at the Accounting Firm’s New York, New York, office instead of the Chicago headquarters.
Upon receiving those checks, HABER deposited a number of them into a bank account that he had opened in the name of a sham business that was very similar to the name of the Accounting Firm. HABER opened the bank account specifically to receive checks from clients that were intended for the Accounting Firm. After depositing the clients’ checks into that account, HABER then transferred the money from that account to two personal bank accounts which he used to pay various personal expenses, including mortgage payments for his residence in New York, New York.
HABER stole a total of nearly $4 million in client payments.
HABER, 59, is charged with one count of mail fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or gross loss from the offense.
Mr. Bharara praised the outstanding investigative work of the USPIS.
The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant United States Attorney Joseph Facciponti is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Craig Haber Complaint
Former Consultant Karl Motey Sentenced in Manhattan Federal Court for Insider TradingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that KARL MOTEY was sentenced today to time served followed by one year of supervised release for his participation in an insider trading scheme in which MOTEY provided material, nonpublic information (“Inside Information”) about publicly traded companies to a number of individuals, including Doug Whitman, the president and founder of Whitman Capital. MOTEY pled guilty in December 2010 to securities fraud and conspiracy to commit securities fraud pursuant to a cooperation agreement with the Government. He was sentenced in Manhattan federal court by U.S. District Judge Jed S. Rakoff.
According to the Information, statements made during MOTEY’s guilty plea proceeding, MOTEY’s testimony during the criminal trial of Doug Whitman, and the Government’s sentencing submission in MOTEY’s case:
From approximately late 2007 through early 2009, MOTEY, through his consulting company, the Coda Group, provided Inside Information relating to Marvell Technology Group (“Marvell”) and Marvell’s customers to co-conspirators including Whitman, who regularly purchased and sold securities. MOTEY provided this Inside Information with the understanding that his tippees would use the information to trade securities. In exchange for providing this information, the Coda Group received quarterly consulting fees from its clients, including soft-dollar payments from Whitman Capital.
MOTEY, 48, was ordered to pay $40,000 in forfeiture and a $200 special assessment fee.
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. 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.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jillian B. Berman, Christopher L. LaVigne, and Antonia M. Apps are in charge of the prosecution.
Hedge Fund Analyst Sentenced in Manhattan Federal Court for Insider Trading SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JASON PFLAUM, a former research analyst with the hedge fund Barai Capital Management (“BCM”), was sentenced today to time served followed by two years of supervised release for his participation in an insider trading scheme in which PFLAUM obtained material, nonpublic information (“Inside Information”) about various publicly-traded companies, and provided it to the head of BCM, Samir Barai. PFLAUM pled guilty in December 2010 to one count of conspiracy to commit securities fraud and one count of securities fraud pursuant to a cooperation agreement with the Government. He was sentenced today in Manhattan federal court by U.S. District Judge Jed S. Rakoff.
According to the Information to which PFLAUM pled guilty, statements made during his guilty plea proceeding, PFLAUM’s testimony during the criminal trial of Winifred Jiau, and the Government’s sentencing submission in his case:
From mid-2008 through October 2010, while working as an analyst for Barai, PFLAUM obtained Inside Information about publicly traded technology companies and provided it to Barai, who then traded on it. In one example, PFLAUM obtained Inside Information from company insiders who worked as “experts” or “consultants” for the expert network firm Primary Global Research (“PGR”), and provided it to Barai. BCM paid PGR a fee, and PGR in turn paid the experts to talk to PFLAUM. PFLAUM also facilitated the passing of Inside Information to Barai from Barai’s own network of company insiders and consultants, including Winifred Jiau, who provided details of the quarterly earnings announcement of NVIDIA Corporation and Marvell Technology Group, Ltd.
PFLAUM, 39, of New York, New York, was ordered to pay a $200 special assessment fee and forfeiture in the amount of $500,000 for which he and his coconspirators are jointly and severally liable.
Jiau was convicted following a June 2011 jury trial of one count of conspiracy to commit securities fraud and wire fraud, and one count of securities fraud. She was sentenced in September 2011 to four years in prison.
Barai 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 awaits 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. 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.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps and David Miller are in charge of the prosecution.
Former Consultant, Roomy Khan, Sentenced in Manhattan Federal Court to One Year in Prison for Insider Trading and Obstruction of JusticeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ROOMY KHAN was sentenced today to one year in prison for her participation in insider trading schemes in which KHAN provided material, nonpublic information (“Inside Information”) about various publicly-traded companies to a number of individuals, including Raj Rajaratnam, the founder and former head of the Galleon Group, and Doug Whitman, the president and founder of Whitman Capital. KHAN pled guilty in October 2009 to securities fraud, conspiracy to commit securities fraud, and obstruction of justice pursuant to a cooperation agreement with the Government. She was sentenced in Manhattan federal court by U.S. District Judge Jed S. Rakoff.
According to the Information, statements made during KHAN’s guilty plea proceeding, KHAN’s testimony during the criminal trial of Doug Whitman, and the Government’s sentencing submission in KHAN’s case:
From approximately 2004 through 2007, KHAN provided Rajaratnam, Whitman, and others with Inside Information relating to several companies, including Polycom and Google, with the understanding that these individuals would use the information to trade securities. KHAN also used some of the Inside Information to make personal trades. In exchange for the information she provided to her co-conspirators, KHAN received Inside Information about numerous other companies. In addition, KHAN obstructed the Government’s investigation of her co-conspirators by, among other things, deleting an incriminating email she received from a co-conspirator and alerting others to a pending investigation by the U.S. Securities and Exchange Commission.
In addition to the prison term, Judge Rakoff sentenced KHAN, 54, to three years of supervised release. KHAN was also ordered to pay $1,525,000 in forfeiture and a $300 special assessment fee.
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. 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.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Christopher L. LaVigne and Jillian Berman are in charge of the prosecution.
Manhattan U.S. Attorney Settles Lawsuit Against Owners and Operators of Rosa Mexicano Restaurants for Violations of the Americans with Disabilities ActRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today a settlement of a lawsuit against the owners and operators of the three Manhattan locations of the popular Rosa Mexicano restaurant chain for violations of the Americans With Disabilities Act of 1990 (“ADA”). The defendant owners and operators of the Rosa Mexicano restaurants are ROSA MEXICANO COMPANY, WEST 62 OPERATING LLC, FENIX RESTAURANT, INC., and ROSA MEXICANO USQ LLC. The settlement, in the form of a consent decree, was approved today by U.S. District Judge Richard J. Sullivan.
The lawsuit was the first to be brought as a result of the Manhattan Restaurants ADA Compliance Initiative, announced in September 2011. As part of the initiative, the U.S. Attorney’s Office is reviewing and evaluating the ADA compliance of the “most popular” restaurants in Manhattan as designated by the 2011 Zagat Guide.
Manhattan U.S. Attorney Preet Bharara said: “The comprehensive corrective measures agreed to by Rosa Mexicano will give individuals with disabilities an equal opportunity to enjoy one of New York City’s most popular restaurants, as is required by the ADA. While we hope that other proprietors will voluntarily comply with this important civil rights law rather than face litigation, our Office remains committed, through our ongoing Restaurants Initiative, to ensuring that everyone can have access to the world-class offerings on the menu in New York City restaurants.”
According to the Complaint filed in Manhattan federal court and other public documents:
The U.S. Attorney’s Office identified numerous violations of the ADA at each of Rosa Mexicano’s Manhattan locations: 61 Columbus Avenue (“Rosa Mexicano Lincoln Center”), 1063 First Avenue (“Rosa Mexicano First Avenue”), and 9 East 18th Street (“Rosa Mexicano Union Square”). Most significantly, Rosa Mexicano Lincoln Center lacks an accessible main entrance, and its “alternate entrance” is also non-compliant in several respects. Rosa Mexicano
First Avenue similarly lacks an accessible entrance, and all three of its restrooms are inaccessible to persons with disabilities. At Rosa Mexicano Union Square, both the main and “alternate” entrances fail to comply with the ADA, as do the men’s and women’s restrooms.
Today’s consent decree requires the restaurants to improve the accessibility of their entrances, waiting areas, bar areas, dining areas, and restrooms. Notably, the consent decree provides for renovations to the main and alternate entrances at Rosa Mexicano Lincoln Center; the creation of an accessible alternate entrance and the construction of an accessible restroom at Rosa Mexicano First Avenue; and renovations to the entrance and the men’s and women’s restrooms at Rosa Mexicano Union Square. In addition, the owners and operators of the restaurants will pay a $30,000 civil penalty to the United States.
Since President George H.W. Bush signed the ADA into law in 1990, the U.S. Attorney’s Office for the Southern District of New York has taken a leading role in bringing numerous New York City institutions into compliance with the ADA regulations. They include Avery Fisher Hall at Lincoln Center, the Metropolitan Opera, Yankee Stadium, Madison Square Garden, the Apollo Theater, the Puck Building, the Shubert Theaters, the Rainbow Room, and Radio City Music Hall.
Mr. Bharara thanked the Disability Rights Section of the Department of Justice, in particular its architectural staff, for their assistance in this matter.
The Restaurants Initiative is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Amy A. Barcelo, Christopher Connolly, and Cristine Irvin Phillips are in charge of the Initiative.
To file a complaint alleging that a restaurant or any other place of public accommodation within the Southern District of New York is not accessible to persons with disabilities, use the Civil Rights Complaint Form available on the United States Attorney’s Office’s website, www.usdoj.gov/usao/nys. Complaints should be sent to:
U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York, 10007
Attention: Chief, Civil Rights Unit
U.S. v. Rosa Mexicano Settlement
Manhattan U.S. Attorney Sues TestQuest, Criminally Charges One Former TestQuest Manager, and Announces Guilty Pleas of Two Former Directors at Princeton Review for Defrauding Federal Government into Paying for Tutoring Services That Were Never ProvidedRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Brian M. Hickey, the Special Agent-in-Charge of the Northeastern Region of the United States Department of Education’s Office of Inspector General (“ED-OIG”), announced today a number of civil and criminal actions relating to false claims for reimbursement submitted by educational testing services companies, TESTQUEST, INC. (“TESTQUEST”) and THE PRINCETON REVIEW, INC. (“PRINCETON REVIEW”) in connection with a federally-funded program that provides tutoring services to public school children. The actions include: (1) the filing of a civil fraud lawsuit earlier today against TESTQUEST and MICHAEL LOGAN, a former Manager at TestQuest, seeking treble damages and civil penalties under the False Claims Act for the fraudulent reimbursement claims submitted by TESTQUEST between 2005 and 2012; (2) the arrest this morning of LOGAN on fraud charges; (3) the guilty pleas of ANA AZOCAR and ZORAYMA AZOCAR, two former Site Managers and then Directors of PRINCETON REVIEW’s New York City Supplemental Educational Services program (“SES”), to fraud charges and the settlement of civil claims filed against them; and (4) the settlement of civil claims filed against ROBERT STEPHEN GREEN, a former Director and Vice President of PRINCETON REVIEW. LOGAN was presented before U.S. Magistrate Judge James C. Francis IV this afternoon. ZORAYMA AZOCAR pled guilty before U.S. District Judge John F. Keenan on January 11, 2013, and ANA AZOCAR pled guilty before U.S. District Judge Jesse M. Furman on January 15, 2013.
The Government reached a settlement in December 2012 with EDUCATION HOLDINGS, INC. which was formerly known as THE PRINCETON REVIEW, INC. for its role in the government billing fraud.
Manhattan U.S. Attorney Preet Bharara said: “Today, we continue our push to clean up corruption in the tutoring of our school kids perpetrated by those who put their pockets before their pupils. In little more than a month since we exposed and resolved a scheme by Princeton Review to fraudulently bill the government for critical tutoring services that could make the difference between a child’s academic success or failure, we are now holding individuals to account – both criminally and civilly – for their roles in that scheme. But today we go even further – charging a second company and one of its principals for allegedly feeding at the trough of government largesse by targeting the same Supplemental Education Services program and manufacturing student beneficiaries of those services out of whole cloth.”
ED-OIG Special Agent-in-Charge Brian M. Hickey said: “The Supplemental Education Services program provides critical resources for children to improve their academic performance. Ana Azocar, Zorayma Azocar, and Robert Stephen Green were trusted to provide those services, but instead they chose to abuse that trust for personal gain, and that is unacceptable. And Michael Logan is alleged to have done the exact same thing. I am proud of the work of our office in holding these individuals accountable for their fraudulent actions and we will continue to track down those who cheat this important program and the students and families that rely on it.”
According to the Criminal Complaint against LOGAN, the Criminal Informations against the AZOCARS, the Civil Complaints against PRINCETON REVIEW and TESTQUEST, and the Settlement with GREEN filed in Manhattan federal court:
The Supplemental Educational Services Program
Each year, the New York City Department of Education (“NYCDOE”) receives funds from the federal government to pay for SES, such as after-school tutoring and other remedial and supplemental academic enrichment services for students attending underperforming public schools. NYCDOE typically enters into contracts with private entities and organizations to provide SES tutoring to students in New York City public schools. Students are eligible to receive SES tutoring if they meet certain criteria, such as attending a school that has been identified as needing improvement or restructuring for at least two years. Private entities contracted by NYCDOE to provide SES tutoring are required to have each student who attends a class sign a standard attendance form. The tutor of each class also is required to sign the form attesting that he or she provided SES tutoring to the students whose signatures appear on the attendance form. As a condition of getting paid for providing tutoring, the private entities are required to certify to the NYCDOE that their attendance records are “true and accurate.”
TESTQUEST
From 2005 through 2012, TESTQUEST contracted with the NYCDOE to provide SES tutoring to students in New York City. It provided individual tutoring to students at their homes and group tutoring at various New York City public schools, including the Monroe Academy of Business and Law/High School of World Cultures (“Monroe”) and the Global Enterprise Academy/Christopher Columbus High School (“Columbus”). TESTQUEST received tens of millions of dollars of federal funding for tutoring during this time period, including more than $2.3 million for purportedly providing tutoring at Monroe and Columbus alone.
MICHAEL LOGAN was an employee of TESTQUEST responsible for managing its SES tutoring program at Monroe and later at Columbus. LOGAN also worked as a long-term substitute teacher and computer technician at Monroe and, at times, coached Monroe’s baseball team. As a result of LOGAN’s conduct, TESTQUEST employees repeatedly submitted to the NYCDOE bills for students who never received any tutoring. LOGAN instructed TESTQUEST employees to forge student signatures on attendance forms and to have students sign attendance forms for tutoring classes they had not in fact attended. On some occasions, LOGAN caused TESTQUEST employees to fraudulently obtain students’ signatures by collecting them from students assembled in the school cafeteria or participating in afterschool activities such as baseball or basketball practice. LOGAN would direct employees to participate in this fraud by saying, for example, “if you can’t find the students, sign them in,” “make them sign or you won’t get paid,” and “I already got paid, this is how you get paid.” Further, when LOGAN learned of the criminal investigation, he coached others to lie. In one recorded conversation, LOGAN encouraged another witness to lie about teaching classes that occurred when the witness and LOGAN were actually coaching after-school sports, saying “…we just gotta stick to we taught the classes.” Through the fraud conducted at LOGAN’s direction, TESTQUEST was paid substantial sums for tutoring that never occurred.
TESTQUEST’s management knew of, deliberately ignored or recklessly disregarded the fraud by LOGAN. For example, during the 2008/2009 academic year, little or no tutoring was taking place at Monroe, and employees collected student signatures on attendance forms in the school cafeteria. During other years, the reported attendance at TESTQUEST's afterschool tutoring at Monroe and Columbus was greater than the number of students actually receiving tutoring. Moreover, TESTQUEST’s management was exposed to clear warning signs of the fraud, including one occasion in 2010 when TESTQUEST’s President saw student signatures on an attendance form and expressly stated that they looked forged.
PRINCETON REVIEW
From 2002 to 2010, PRINCETON REVIEW contracted with the NYCDOE to provide SES tutoring to students in New York City. Between 2006 and 2010, however, Site Managers at PRINCETON REVIEW’s New York City SES division falsified entries on daily student attendance sheets to make it appear that more students had attended the PRINCETON REVIEW’s SES classes than had, in fact, attended. In some cases, Site Managers falsified entire daily student attendance sheets for SES classes that did not, in fact, take place. If a Site Manager failed to report a sufficiently high rate of student attendance at PRINCETON REVIEW’s SES classes, the Site Manager’s Director would threaten to terminate and/or lower the hours and pay of the Site Manager.
ANA AZOCAR and ZORAYMA AZOCAR worked as Site Managers and then as Directors of PRINCETON REVIEW’s New York City SES division, responsible for supervising Site Managers at schools throughout New York City, including in Manhattan and the Bronx. As described in the Informations to which they pled guilty, as well as the civil settlements they entered into, ANA AZOCAR and ZORAYMA AZOCAR not only falsified attendance records on their own, but also pressured and instructed the Site Managers they supervised to commit fraud in this manner. ROBERT STEPHEN GREEN was also a Director at PRINCETON REVIEW and, later, the Vice President in charge of PRINCETON REVIEW’s New York City SES program. As he admitted in the civil settlement he entered into, he gave the Site Managers he supervised a daily quota for student attendance and pressured the Site Managers to meet the quota, including by threatening to fire them or lower their pay if they reported low attendance. He texted or called the Site Managers on a daily basis demanding that they continually report higher attendance and said, for example, “find 15 more students,” “get more students,” and “make it happen, I don’t want any excuses.” GREEN admitted that even after he became Vice President, he was “repeatedly put on notice that Site Managers were in fact falsifying entries on the daily student attendance sheets.” Through the fraud committed at the direction of ANA AZOCAR, ZORAYMA AZOCAR and GREEN, PRINCETON REVIEW billed for and received millions of dollars in federal funds for SES tutoring that it had not provided.
MICHAEL LOGAN, 48 of White Plains, New York, was charged with one count of conspiracy to commit mail and wire fraud and one count of conspiracy to defraud the United States and the U.S. Department of Education, and faces a maximum sentence of 25 years in prison. The charges in the Criminal Complaint against him are merely allegations and he is presumed innocent unless and until proven guilty.
By filing its Civil Complaint, the Government joined a private whistleblower lawsuit that had previously been filed against TESTQUEST under the False Claims Act.
ANA AZOCAR, 36 of New York, New York, and ZORAYMA AZOCAR, 35 of New York, New York, each pled guilty to one count of conspiracy to defraud a federal program and one count of federal program fraud. They both face a maximum sentence of 15 years in prison. ANA AZOCAR will be sentenced by Judge Furman on May 23, 2013, and ZORAYMA AZOCAR will be sentenced by Judge Keenan on June 26, 2013.
Separately, ANA AZOCAR and ZORAYMA AZOCAR settled civil claims filed against them, made admissions concerning their conduct, and agreed to pay $1,043,400 and $1,020,500, respectively, in restitution and forfeiture in satisfaction of the civil claims against them.
ROBERT STEPHEN GREEN also settled civil claims filed against him, made admissions concerning his conduct, and agreed to execute a judgment in favor of the Government in the amount of $3.2 million, and to pay $221,058 in satisfaction of the civil claims against him. The $221,058 represents the maximum of GREEN’s ability to pay a monetary settlement to the Government. In addition, in connection with their civil settlements, ANA AZOCAR, ZORAYMA AZOCAR and GREEN have each agreed not to participate in any procurement or non-procurement transactions with the federal Government for a period of five years.
The Government reached a settlement in December 2012 with EDUCATION HOLDINGS, INC. which was known as THE PRINCETON REVIEW, INC. until May 2012, for PRINCETON REVIEW’s repeated submission of false claims for reimbursement. In the settlement, EDUCATION HOLDINGS admitted, acknowledged, and accepted responsibility for engaging in fraudulent conduct while it was doing business as PRINCETON REVIEW and agreed to pay up to $10 million to the United States in damages and penalties under the False Claims Act.
Mr. Bharara thanked the Office of the ED-OIG for its extraordinary assistance in this case.
The criminal cases are being handled by the Complex Frauds Unit and Assistant U.S. Attorneys Joseph P. Facciponti and Christopher B. Harwood are in charge of the prosecution. The civil cases are being handled by Christopher B. Harwood of the Office’s Civil Frauds Unit.
The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. 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.
The charges contained in the Criminal Complaint against LOGAN are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. TestQuest, Inc, et al. Complaint
U.S. v. Michael Logan Michael Complaint
U.S. v. Education Holdings1, Inc (Princeton Review) Amended Complaint
U.S. v. Zorayma Azocar Information
U.S. v. Ana Azocar InformationCourt Authorizes IRS to Seek Records from UBS Relating to U.S Taxpayers with Swiss Bank AccountsRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Justice Department’s Tax Division, and Steven T. Miller, the Acting Commissioner of the Internal Revenue Service (“IRS”) today announced that U.S. District Judge William H. Pauley III entered an order authorizing the Internal Revenue Service to issue a summons requiring UBS AG (“UBS”) to produce information about U.S. taxpayers who may hold accounts at the Swiss bank Wegelin & Co. (“Wegelin”) and other banks based in Switzerland to evade federal income taxes. Specifically, the IRS summons seeks records of Wegelin’s United States correspondent account at UBS, which will allow the United States to determine the identity of the U.S. taxpayers who hold or held interests in financial accounts at Wegelin and other Swiss financial institutions that used Wegelin’s UBS account. Wegelin pled guilty in Manhattan federal court on January 3, 2013, to conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret Swiss bank accounts and to conceal the income they generated from the IRS. As part of its guilty plea, Wegelin agreed to pay approximately $20 million in restitution to the IRS and an additional $22.05 million criminal fine. In addition, Wegelin also agreed to a civil forfeiture of $32 million, $16.2 million of which was seized and forfeited by the Government from Wegelin’s correspondent account with UBS in Stamford, Connecticut (the “Correspondent Account”) in April 2012.
Manhattan U.S. Attorney Preet Bharara said: “This summons is the latest step in our efforts to identify and prosecute U.S. taxpayers who think they can evade their legal responsibility to pay taxes by secreting their money away in anonymous off-shore accounts at Wegelin and other banks, and to recover the hundreds of millions of dollars that is owed to the IRS. Wegelin’s recent guilty plea for facilitating this conduct – the first such plea by a Swiss financial institution - made it possible for us to take this step and our work continues in earnest.”
Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division said: “The Department of Justice will use all means available, and there are many, to pursue U.S. taxpayers who continue to attempt to evade their tax obligations by using foreign bank accounts. This John Doe summons is just one of many actions that we are taking. The world is shrinking, and time is running out for taxpayers to come into voluntary compliance before either the IRS or the Justice Department finds them.”
Steven T. Miller, IRS Acting Commissioner said: “The summons provides an important tool to help with international tax enforcement efforts and detect U.S. taxpayers hiding offshore accounts to evade taxes. This effort reflects a long-term strategy by the IRS and Justice Department to break through international bank secrecy and protect our nation's taxpayers.”
According to the Government’s Indictment and forfeiture Complaint:
Wegelin and at least two other Swiss banks used Wegelin’s Correspondent Account to covertly launder U.S. taxpayers’ funds from their undeclared accounts in Switzerland. As set forth in the papers filed with the district court, the IRS has reason to believe that these funds were transferred in a manner designed to reduce the risk of detection by U.S. authorities, so that the account holders could continue to avoid paying taxes due and owing to the IRS.
In this action, the Court granted the IRS permission to serve what is known as a “John Doe” summons on UBS. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. This John Doe summons directs UBS to produce records identifying U.S. taxpayers with accounts at Wegelin and other Swiss banks that used Wegelin’s Correspondent Account. Wegelin has admitted that certain of its U.S. taxpayer clients were maintaining accounts at Wegelin in order to evade their U.S. tax obligations.
Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. A deliberate failure to report a foreign account can result in a penalty of up to 50 percent of the amount in the account at the time of the violation.
This case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney Natalie N. Kuehler is in charge of this case.
U.S. v. Wegelin & Co. Signed Order
U.S. v. Wegelin & Co. Notice of Petition
U.S. v. Wegelin & Co. Memo of Law in Support of Petition
Kiger Declaration
U.S. v. Wegelin & Co. Exhibit A - S1 Indictment
U.S. v. Wegelin & Co. Exhibit B - Forfeiture Complaint
U.S. v. Wegelin & Co Exhibit C - Plea Agreement
U.S. v. Wegelin & Co. Exhibit D - Guilty Plea Transcript
U.S. v. Wegelin & Co Exhibit E - SummonsSchool Director Pleads Guilty in Manhattan Federal Court to Bribery and Visa Fraud 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 that CHRISTIE HWANG, the director of a vocational and career training school in Manhattan, guilty today in Manhattan federal court to conspiring to bribe employees of New York City Workforce1 Career Centers in order to secure federal funds for students, and to conspiring to engage in visa fraud for using her school to illegally obtain F-1 student visas.
U.S. District Judge Katherine B. Forrest presided over HWANG’s plea proceeding. Two employees of Workforce1 Career Centers in Manhattan and Queens, Romero Johnson and Lois Powell, have also pled guilty to bribery conspiracy charges as part of the scheme, and a similar scheme involving a driving school located in Manhattan. Johnson and Powell pled guilty before Judge Forrest on December 20, 2012, and January 18, 2013, respectively.
According to the Complaint, the Indictment to which HWANG pled guilty, other documents previously filed in Manhattan federal court, and statements made during plea proceedings:
The New York City Workforce Investment Board (“NYC-WIB”) disburses federal funds to student-oriented programs within New York City. Its mission, in part, is to ensure that New York City businesses have access to qualified workers by helping candidates find job openings and giving them vocational training. New York City’s Department of Small Business Services, operating under the NYC-WIB umbrella, contracts with, and oversees, several privately owned “Workforce1 Career Centers” across the five boroughs. Among other things, the career centers match student applicants to appropriate schools for job training, and approve school attendance vouchers. Staff members at Workforce1 Career Centers receive and adjudicate numerous competing applications for vouchers from students seeking to develop job skills.
HWANG was a director and owner of one such school, Global Education New York (“GENY”), a facility in Manhattan that offered training in several vocational disciplines, as well as English as a Second Language, and other career-related training. Between 2008 and 2011, HWANG arranged for an intermediary to pay employees at Workforce1 Career Centers a set percentage of NYC-WIB voucher funds secured on applications the employees handled. In return, the Workforce1 Career Center employees gave GENY vouchers special treatment and sent the school business, thereby corrupting unbiased processes that were designed to award vouchers based exclusively on the merits. During that time period, GENY received NYC-WIB vouchers totaling $575,845. Vouchers secured by Johnson, Powell and a third Workforce1 Career Center employee for GENY during this period totaled at least $300,000. Johnson and Powell also engaged in similar conduct with respect to a driving school located in Manhattan.
Additionally, HWANG participated in a visa fraud scheme, in which GENY made misrepresentations in Form I-20 student visa applications it issued that resulted in students receiving, and entering the U.S. based on, F-1 student visas to which they were not entitled.
HWANG, 50, of Weehawken, New Jersey, pled guilty today to one count of bribery conspiracy and one count of visa fraud conspiracy. She faces a maximum sentence of five years in prison on each count, and a maximum fine of $250,000 or twice the gross gain or loss from the offense on each count.
POWELL, 51, of the Bronx, New York, pled guilty to a Superseding Information charging her with two counts of conspiracy, representing the separate bribery schemes involving GENY and the driving school. She faces a maximum sentence of five years in prison on each count, and a maximum fine of $250,000 or twice the gross gain or loss from the offense on each count. JOHNSON, 42, of the Bronx, New York, also pled guilty to a Superseding Information charging him with two counts of conspiracy, representing the separate schemes involving GENY and the driving school. He faces a maximum sentence of five years in prison on each count, and a maximum fine of $250,000 or twice the gross gain or loss from the offense on each count.
Mr. Bharara praised the investigative efforts of ICE HSI.
The case is being prosecuted by the Office’s General Crimes Unit. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
U.S. v. Christie Hwang, et al. Indictment
California Hedge Fund Manager Doug Whitman Sentenced to 24 Months in Prison in Manhattan Federal Court for Insider TradingRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DOUG WHITMAN, a portfolio manager at Whitman Capital, LLC, was sentenced today in Manhattan federal court to 24 months in prison for his involvement in two insider trading schemes that earned his firm more than $900,000 in illegal profits. As part of the schemes, WHITMAN executed trades based on material, non-public information (“Inside Information”), related to three publicly traded companies: Marvell Technology Group, Ltd. (“Marvell”); Polycom, Inc. (“Polycom”); and Google, Inc. (“Google”). WHITMAN was convicted in August 2012 on two counts of conspiracy to commit securities fraud and two counts of securities fraud. He was sentenced by U.S. District Judge Jed S. Rakoff.
Manhattan U.S. Attorney Preet Bharara said: “With his sentence today, Doug Whitman joins scores of other privileged professionals who traded on inside information to gain an illegal edge and now live behind bars. His punishment shows yet again that supposedly elite financial players must operate by the same rules that apply to everyone else.”
According to the Indictment, evidence presented at Whitman’s trial, and testimony from other trials and court proceedings:
From 2007 through 2009, while running Whitman Capital, WHITMAN bought and sold Marvell stock and options based on Inside Information, including earnings, revenue, and/or other material financial and business information. The Inside Information was provided to WHITMAN by Karl Motey, an independent research consultant, who had obtained it from certain Marvell employees. In exchange for the Inside Information, WHITMAN paid Motey through a soft dollar payment arrangement between Whitman Capital and Motey’s consulting firm. WHITMAN also provided the Marvell Inside Information to Wesley Wang in exchange for other Inside Information.
In another scheme, from 2006 to 2007, WHITMAN obtained Inside Information, including earnings information and other material financial information pertaining to Polycom and Google from Roomy Khan, who worked in the hedge fund industry. Khan obtained the Polycom Inside Information from an employee at the company, and she obtained the Google Inside Information from an employee of a firm that provided investor relations services to Google. WHITMAN used the Polycom and Google Inside Information to execute securities transactions that earned his firm more than $900,000 in illegal profits. In exchange for the Inside Information, WHITMAN provided Khan with information about other publicly traded technology companies.
In addition to his prison term, WHITMAN, 55, of Atherton, California, was sentenced to one year of supervised release. He was also ordered to pay a $250,000 fine, a special assessment of $400, and to forfeit $935,306.
In issuing Whitman’s sentence, Judge Rakoff said, “Mr. Whitman was someone who had no compunctions about going across the legal lines that he was very well aware of, and excusing them, and even carrying those excuses into the courtroom when it served his interest.”
WHITMAN’s co-conspirators, Karl Motey, Roomy Khan, and Wesley Wang, previously pled guilty to insider trading charges. Wang was sentenced in Manhattan federal court to two years’ probation on January 9, 2013 by Judge Rakoff. Khan and Motey are scheduled to be sentenced by Judge Rakoff on January 31, 2013 and February 4, 2013, respectively.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”) and 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. 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 Jillian Berman, Christopher LaVigne, and Micah Smith are in charge of the prosecution.
Three Alleged International Cyber Criminals Responsible for Creating and Distributing Virus That Infected over One Million Computers and Caused Tens of Millions of Dollars in Losses Charged in Manhattan Federal CourtRead the Press Release
NASA Computers Among the 40,000 U.S. Computers Infected With Gozi Virus
Preet Bharara, the United States Attorney for the Southern District of New York, Lanny A. Breuer, the Assistant Attorney General of the U.S. Department of Justice’s Criminal Division, 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 Indictments against three individuals who played critical roles in creating and distributing the Gozi Virus, one of the most financially destructive computer viruses in history. The Gozi Virus infected over one million computers globally and caused tens of millions of dollars in losses. NIKITA KUZMIN, a Russian national who created the Gozi Virus, was arrested in the U.S. in November 2010 and pled guilty before U.S. District Judge Leonard B. Sand to various computer intrusion and fraud charges in May 2011. DENISS CALOVSKIS, a/k/a “Miami,” a Latvian national who allegedly wrote some of the computer code that made the Gozi Virus so effective, was arrested in Latvia in November 2012. MIHAI IONUT PAUNESCU, a/k/a “Virus,” a Romanian national who allegedly ran a “bulletproof hosting” service that enabled cyber criminals to distribute the Gozi Virus, the Zeus Trojan and other notorious malware, and conduct other sophisticated cyber crimes, was arrested in Romania in December 2012.
Manhattan U.S. Attorney Preet Bharara said: “In an information-age update on Willie Sutton, these men allegedly ran a modern-day bank robbery ring, and like Sutton, they targeted banks because that’s where the money still is. But as we have seen with increasing frequency, cyber criminals’ bank heists require neither a mask nor a gun, just a clever program and an Internet connection. This case should serve as a wake-up call to banks and consumers alike, because cybercrime remains one of the greatest threats we face, and it is not going away any time soon.”
FBI Assistant Director-in-Charge George Venizelos said: “This long-term investigation uncovered an alleged international cybercrime ring whose far-reaching schemes infected at least one million computers worldwide and 40,000 in the U.S., and resulted in the theft or loss of tens of millions of dollars. Banking Trojans are to cyber criminals what safe-cracking or acetylene torches are to traditional bank burglars – but far more effective and less detectable. The investigation put an end to the Gozi virus.”
According to the allegations in the Indictments and the Complaint unsealed today in Manhattan federal court:
The Gozi Virus
The Gozi Virus is malicious computer code or “malware” that steals personal bank account information, including usernames and passwords, from the users of affected computers. It was named by private sector information security experts in the U.S. who, in 2007, discovered that previously unrecognized malware was stealing personal bank account information from computers across Europe on a vast scale, while remaining virtually undetectable in the computers it infected. To date, the Gozi Virus has infected over one million victim computers worldwide, among them at least 40,000 computers in the U.S., including computers belonging to the National Aeronautics and Space Administration (“NASA”), as well as computers in Germany, Great Britain, Poland, France, Finland, Italy, Turkey and elsewhere, and it has caused tens of millions of dollars in losses to the individuals, businesses, and government entities whose computers were infected.
The Gozi Virus was distributed to victims’ computers in several different ways. In one method, the virus was disguised as an apparently benign .pdf document which, when opened, secretly installed the Gozi Virus on the victim’s computer. Once installed, the Gozi Virus – which was intentionally designed to be undetectable by anti-virus software – collected data from the infected computer in order to capture personal bank account information including usernames and passwords. That data was then transmitted to various computer servers controlled by the cyber criminals who used the Gozi Virus. These cyber criminals then used the personal bank account information to transfer funds out of the victims’ bank accounts and ultimately into their own personal possession.
The Creation of the Gozi Virus
KUZMIN conceived of the Gozi Virus in 2005 when he created a list of technical specifications for the virus and hired a sophisticated computer programmer (“CC-1”) to write its source code, which is the unique code that enabled the Gozi Virus to operate. Once the Gozi Virus had been coded, KUZMIN began providing it to co-conspirators in exchange for a weekly fee through a business he ran called “76 Service.” Through “76 Service,” KUZMIN made the Gozi Virus available to co-conspirators, allowed them to configure the virus to steal data of their choosing, and stored the stolen data for them. He advertised “76 Service” on one or more Internet forums devoted to cybercrime and other criminal activities. Beginning in 2009, KUZMIN began to sell the Gozi Virus outright to his co-conspirators.
The Refinement of the Gozi Virus
KUZMIN and his co-conspirators regularly paid others to refine, update, and improve the Gozi Virus. For example, CALOVSKIS, a co-conspirator, was hired to develop certain computer code, known as “web injects,” which altered how the webpages of particular banks appeared on infected computers. Specifically, CALOVSKIS’s web injects changed the webpages of banks so that, when a victim used an infected computer to access the webpage, the victim was tricked into divulging additional personal information that cyber criminals would need in order to successfully steal money from the victim’s bank account. One web inject CALOVSKIS designed altered the customer welcome page of a bank so that the victim was prompted to disclose additional personal information – mother’s maiden name, social security number, driver’s license information, and a PIN code – in order to continue accessing the website.
The Gozi Virus and Bulletproof Hosting Services
Bulletproof hosting” services helped cyber criminals distribute the Gozi Virus with little fear of detection by law enforcement. Bulletproof hosts provided cyber criminals using the Gozi Virus with the critical online infrastructure they needed, such as Internet Protocol (“IP”) addresses and computer servers, in a manner designed to enable them to preserve their anonymity.
PAUNESCU operated a “bulletproof host” that helped cyber criminals distribute the Gozi Virus and commit other cyber crimes, such as distributing malware including the “Zeus Trojan” and the “SpyEye Trojan,” initiating and executing distributed denial of service (“DDoS”) attacks, and transmitting spam. PAUNESCU rented servers and IP addresses from legitimate Internet service providers and then in turn rented them to cyber criminals; provided servers that cyber criminals used as command-and-control servers to conduct DDoS attacks; monitored the IP addresses that he controlled to determine if they appeared on a special list of suspicious or untrustworthy IP addresses; and relocated his customers’ data to different networks and IP addresses, including networks and IP addresses in other countries, to avoid being blocked as a result of private security or law enforcement scrutiny.
A chart setting forth the names, ages and residences of the defendants, the charges each defendant faces, and the statutory maximum penalty associated with these charges is attached. Extradition proceedings against CAVLOSKIS in Latvia and PAUNESCU in Romania are ongoing.
The case against PAUNESCU is being prosecuted jointly with the Department of Justice’s Computer Crime and Intellectual Property Section (“CCIPS”), which is overseen by Assistant Attorney General Lanny A. Breuer. Mr. Bharara thanked CCIPS for its important partnership in this matter, and he also thanked the Department of Justice’s Office of International Affairs. Mr. Bharara praised the FBI for its outstanding work in the investigation, which he noted is ongoing. He also specially thanked the National Aeronautics and Space Administration Office of Inspector General, the Central Criminal Police Department of the Latvian State Police, the Romanian Intelligence Service, the Romanian Directorate for Combating Organized Crime, the Romanian Directorate for Investigating Organized Crime and Terrorism, and the Romanian Ministry of Justice.
The cases are being handled by the Complex Frauds Unit of the United States Attorney's Office. Assistant United States Attorneys Sarah Lai, Nicole Friedlander, and Thomas G.A. Brown, along with Trial Attorney Carol Sipperly of the Computer Crime and Intellectual Property Section of the Department of Justice on the PAUNESCU case, 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.
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California Economist Found Guilty on All Counts in Manhattan Federal Court of Tax Evasion and Mail Fraud ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DAVID GILMARTIN, a Ph.D. economist, was found guilty today in Manhattan federal court of tax fraud charges stemming from his failure to file income tax returns, report more than $1.7 million in income, and pay over $1.5 million in taxes, penalties, and interest for the years 1989 through 2010. GILMARTIN was convicted after a one-week jury trial before U.S. District Judge Miriam G. Cedarbaum.
Manhattan U.S. Attorney Preet Bharara stated: “David Gilmartin repeatedly and systematically flouted the tax laws, and during his journey through the criminal justice system he got to see other people’s tax dollars at work, all the way through his conviction. With his conviction today, he trades his status as tax evader for tax felon. This Office will continue to prosecute tax cheats of all stripes and will not tolerate those who think the laws do not apply to them.”
According to the Indictment and the evidence presented during the trial:
GILMARTIN, who has a Ph.D. in economics, worked from 1989 to 2010, as an economist, performing computer analysis for a variety of companies, some of which were located in New York. Despite being paid compensation for every tax year during that 22-year period, GILMARTIN failed to file tax returns with the IRS as required, and evaded paying more than $1.5 million in taxes, penalties, and interest. GILMARTIN claimed that he did not have to file income tax returns or pay income taxes. He based his views in large part on the conduct of others who evaded paying taxes, and who are currently in prison on various tax charges.
GILMARTIN took various steps to evade his tax obligations and obstruct the IRS’s ability to collect back taxes. He used a false Social Security Number, submitted IRS forms to certain employers fraudulently claiming to be exempt from taxes, and caused checks that were paid to him as compensation to be cashed against a personal bank account rather than be deposited. GILMARTIN also caused checks paid to him as compensation to be made payable to a finance company, in order to pay down a personal line of credit and to prevent the IRS from seizing, pursuant to bank levies, the funds paid to him as compensation. GILMARTIN also engaged in a scheme to defraud New York out of state income taxes.
Over the years, GILMARTIN ignored many warnings and statements of courts, the IRS, and New York tax authorities, and associates who told him that he was required to file and pay income taxes. GILMARTIN admitted to an undercover agent earlier this year that he “may be living in prison next year.”
GILMARTIN, 69, of Phelan, California, faces five years’ incarceration on the tax evasion and charge and 20 years’ incarceration on the mail fraud charge. GILMARTIN also faces three years’ incarceration on the tax obstruction charge, and one year each on the failure to file and pay taxes charges.
United States District Judge Miriam G. Cedarbaum set April 30, 2013 as the sentencing date for GILMARTIN.
Mr. Bharara praised the work of the New York Field Office of the Internal Revenue Service, Criminal Investigations.
The prosecution was handled by Assistant United States Attorney Stanley Okula, and Nanette L. Davis, Assistant Chief with the Northern Criminal Enforcement Section of the Tax Division of the Department of Justice.
U.S. v. David Gilmartin S1 Indictment
CHARGING DOCUMENTS: U.S. V. Nikita Kuzmin, U.S. V. Mihai Ionut Paunescu, and U.S. V. Deniss CalovskisRead the Press Release
U.S. v. Nikita Kuzmin Information
U.S. v. Deniss Calovskis S4 Indictment
U.S. v. Mihai Ionut Paunescu Complaint
U.S. v. Mihai Ionut Paunescu Indictment
U.S. v. Nikita Kuzmin ComplaintFormer New Jersey Teacher Pleads Guilty in Manhattan Federal Court to Child Exploitation and Child Pornography OffensesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that EVAN ZAUDER, a former sixth-grade teacher at a private school in New Jersey, pled guilty in Manhattan federal court to charges of using the Internet to entice a minor to engage in illegal sexual activity, and to receipt, distribution, and possession of child pornography. ZAUDER pled guilty before United States District Court Judge Lewis A. Kaplan. His criminal conduct is not currently known to have involved any students at the school.
Manhattan U.S. Attorney Preet Bharara stated: “Evan Zauder’s abuse and exploitation of minors was heinous criminal conduct perpetrated on some of the most vulnerable and powerless members of society. This Office treats the protection of children as an extraordinarily serious responsibility, and as this case demonstrates, we will persist in our efforts to ensure that those who prey on minors are found and held accountable.”
According to the Complaint, the Superseding Information, and statements made in court:
Between April and November of 2011, ZAUDER used the Internet to entice a minor in New Jersey who was 14 to 15 years old at the time to engage in sexual activity, and to attempt to entice the minor to do so a second time. ZAUDER also received and distributed files containing child pornography from his desktop computer between December of 2010 and May of 2011, and possessed hundreds of images and videos of child pornography on four devices that were seized from his Manhattan apartment in May of 2012.
ZAUDER, 27, pled guilty to a Superseding Information charging him with one count of enticement of a minor to engage in illegal sexual activity, one count of transportation, receipt, and distribution of child pornography, and one count of possession of child pornography. He faces a minimum sentence of 10 years in prison and a maximum sentence of life in prison on the enticement count, a minimum sentence of 5 years in prison and a maximum sentence of 20 years on the transportation, receipt, and distribution count, and a maximum sentence of 10 years on the possession count. For each of the three counts in the Superseding Information, ZAUDER faces a maximum fine of $250,000 or twice the gross gain or loss from the offense. He will be sentenced by Judge Kaplan on May 22, 2013, at 4:00 p.m.
Mr. Bharara praised the Federal Bureau of Investigation (“FBI”) for its outstanding work in the investigation.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorney Paul Monteleoni is in charge of the prosecution. Assistant U.S. Attorney Harry A. Chernoff represented the government at today’s plea proceeding.
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.
US v Evan Zauder S1 Information
Disability Doctor Peter J. Ajemian Pleads Guilty in Manhattan Federal Court for His Role in LIRR Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that PETER J. AJEMIAN, a Board-certified orthopedist, pled guilty to charges related to the alleged massive fraud scheme in which Long Island Railroad (“LIRR”) workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. As described in the Complaint, between the late 1990s and 2008, AJEMIAN recommended that at least 734 retiring LIRR employees receive disability benefits, and was responsible for treating nearly half of all LIRR employees who retired and received disability benefits in one four-year period. AJEMIAN pled guilty before U.S. District Judge Victor Marrero. Three additional LIRR retirees, KARL BRITTEL, GREGORY BIANCHINI, and BRIAN DELGIORNO, also pled guilty to charges related to their participation in the LIRR fraud scheme this week. BRITTEL pled guilty before Judge Marrero today; BIANCHINI pled guilty before U.S. Magistrate Judge Kevin Nathaniel Fox on January 16, 2013; and DELGIORNO pled guilty before Judge Fox on January 17, 2013. Of the 32 defendants charged, 21 have now pled guilty.
Manhattan U.S. Attorney Preet Bharara stated: “Dr. Ajemian used his medical license to facilitate a massive fraud at the LIRR. By running the functional equivalent of a 'disability mill' and fraudulently qualifying hundreds of LIRR patients for undeserved disability benefits, Dr. Ajemian enriched himself and debased his degree. Twenty-one defendants have now pled guilty for their roles in this breathtaking and brazen fraud that cost the Railroad Retirement Board untold millions of dollars.”
According to the Complaint, the Superseding Indictments, the Superseding Informations, and statements made in other public filings and in court:
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 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.
PETER J. AJEMIAN is a Board-certified orthopedist who was instrumental in helping LIRR retirees receive disability benefits to which they were not entitled. As set forth in the Complaint, between the late 1990s and 2008, AJEMIAN declared over 94% of the LIRR employees he saw as patients disabled. As part of the massive fraud scheme, AJEMIAN prepared fraudulent medical narratives for LIRR retirees well before the employees’ planned retirement dates so that the narratives could be submitted to the RRB upon retirement. These medical narratives were completely fabricated or grossly exaggerated so that AJEMIAN could recommend a set of restrictions that, if legitimate, would render it impossible for the LIRR employees to continue performing their jobs. Many of the purportedly “objective” findings from the tests he conducted showed nothing more than normal degenerative changes one would expect to see in patients within the relevant age bracket.
AJEMIAN received approximately $800 to $1,200, often in cash, for these fraudulent assessments and narratives, as well as millions of dollars in health insurance payments for unnecessary medical treatments and fees for preparing fraudulent medical support for the claimed disabilities. Of approximately 453 LIRR annuitants studied, AJEMIAN received approximately $2.5 million in related payments from patients and insurance companies. In turn, those patients received over $90 million in RRB disability benefit payments.
As alleged in the Complaint, between 1998 and 2008, AJEMIAN recommended that at least 734 LIRR employees receive these disability benefits. During one four-year period, August 2004 through August 2008, AJEMIAN was the treating physician for nearly half of all LIRR retirees younger than 65 years old who filed for RRB disability benefits.
AJEMIAN, 63, of Oyster Bay Cove, New York pled guilty to one count of conspiracy to commit mail fraud, wire fraud, and health care fraud, as well as one count of health care fraud, and faces a maximum of 30 years in prison. He has also agreed to forfeit $116.5 million and pay $116.5 million in restitution. He will be sentenced by Judge Marrero on May 24, 2013, at 2:00 p.m.
BRITTEL, 62, of Atlantic City, New Jersey, pled guilty to conspiracy to commit mail fraud, wire fraud and health care fraud; conspiracy to defraud the United States; health care fraud; mail fraud; wire fraud; and perjury, and he faces a maximum of 80 years in prison. BIANCHINI, 59, of Key Largo, Florida, pled guilty to conspiracy to commit mail fraud, wire fraud and health care fraud; conspiracy to defraud the United States; health care fraud; mail fraud; and wire fraud, and he faces a maximum of 75 years in prison. DELGIORNO, 54, of Howard Beach, New York, pled guilty to conspiracy to commit mail fraud, wire fraud and health care fraud; conspiracy to defraud the United States; false claims; health care fraud; mail fraud; wire fraud; and perjury, and he faces a maximum of 85 years in prison. They will be sentenced by Judge Marrero on July 19, May 16, and May 17, 2013, respectively.
Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 21 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 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 Office’s Complex Frauds Unit is handling the case. Assistant U.S. Attorneys Justin Weddle, Daniel Tehrani, Nicole Friedlander, and Danya Perry are in charge of the prosecution.
U.S. v. Ajemian, et al. S1 Indictment
U.S. v. Ajemian, et al. S9 IndictmentSpiro Baltatzidis, Former Founder and Chief Executive Officer of Starwich, Inc., Pleads Guilty in Manhattan Federal Court to Wire FraudRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Keith Milke, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced that SPIRO BALTATZIDIS, the former Founder and Chief Executive Officer of Starwich, Inc. (“Starwich”), pled guilty today in Manhattan federal court to a one-count Information charging him with wire fraud. BALTATZIDIS pled guilty before United States District Judge Ronnie Abrams.
Manhattan U.S. Attorney Preet Bharara stated: “Spiro Baltatzidis engaged in an elaborate charade to dupe a financial institution into lending him many millions of dollars – creating fraudulent bank statements, and doctoring emails. Fortunately, the financial institution did not ultimately lend him the $25 million he was seeking, his charade was discovered, and he has acknowledged his guilt.”
USPIS Inspector-in-Charge Keith Milke said: “Mr. Baltatzidis’ attempt to defraud investors is a classic case of greed overcoming honest business practices. Postal Inspectors are steadfast in investigating and stamping out fraud, keeping the US Mail and all modes of communication safe and secure for the American public.”
According to the Information and statements made in today’s plea proceeding:
Starwich was a privately held corporation headquartered in New York that engaged in the food services business, and more specifically, the upscale specialty sandwich business. Starwich operated a micro-chain of restaurants located around Manhattan and maintained multiple corporate bank accounts (collectively, the “Starwich Bank Accounts”) at Citibank, N.A. (“Citibank”) into which investor funds were deposited.
From the summer of 2007 through May 2008, BALTATZIDIS solicited a $25 million investment from a financial institution (the “Victim Financial Institution”). BALTATZIDIS represented that the purpose of the investment was to expand the business operations of Starwich. In connection with the investment solicitation, the Victim Financial Institution conducted due diligence to determine whether Starwich was a prudent investment opportunity. This due diligence included, among other things, a review of Starwich’s financials. Accordingly, at the Victim Financial Institution’s request, on September 16, 2007, it received a fax from Starwich containing Citibank statements for one of the Starwich Bank Accounts. The first statement purported to cover the period December 1, 2006 through December 31, 2006, and reflected an ending balance of approximately $450,000. Another statement for the same account purported to cover the period June 1, 2007 through June 30, 2007, reflected an ending balance of approximately $1.2 million – an increase in the ending balance of well over 100% in the six-month period between December 2006 and June 2007.
Based in part on the fake bank statement that showed a balance of approximately $1.2 million in the account as of June 30, 2007, the Victim Financial Institution entered into a Memorandum of Terms (“the Memorandum”) with Starwich on November 2007. The Memorandum detailed the principal terms of a proposed $25 million investment in shares of Starwich to be divided into three stages of disbursements – $5 million, $10 million, and $10 million, respectively – provided that Starwich met certain conditions. However, the bank statements provided to the Victim Financial Institution were in fact fake. The actual bank account records from Citibank showed a balance of approximately $400 as of December 31, 2006, and approximately $200 as of June 30, 2007.
In furtherance of its due diligence, the Victim Financial Institution requested a further update of Starwich’s financials and in response to this request, BALTATZIDIS forwarded an email chain between BALTATZIDIS and an employee of Citibank (the “Bank Employee”) on November 15, 2007. The content of the email chain forwarded to the Victim Financial Institution (the “Victim Financial Institution Email”) reflected that BALTATZIDIS asked the Bank Employee for the balance of one of the Starwich accounts for the period ending September 30, 2007, and the Bank Employee purportedly responded that the account’s current balance was approximately $1.3 million.
In fact, the email chain forwarded by BALTATZIDIS to the Victim Financial Institution on November 15, 2007, was materially altered from its original version (the “Authentic Citibank Email”). Specifically, in the Authentic Citibank Email, the Bank Employee wrote that the account’s current balance was “-$3,963.93,” whereas the Victim Financial Institution Email reflected a balance of “$1,317,963.93.” In addition, the Authentic Citibank Email included a copy of the account statement for the period ending September 30, 2007, whereas the Victim Financial Institution Email omitted the account statement.
From November 15, 2007 through May 2008, BALTATZIDIS and the Victim Financial Institution continued their discussions regarding the solicited financial investment in Starwich. By May 2008, however, the Victim Financial Institution decided against investing with Starwich and ended its discussions with BALTATZIDIS. In August 2008, Starwich filed for bankruptcy.
BALTATZIDIS, 37, faces a maximum prison term of 20 years and a maximum fine of the greater of $250,000 or twice the gross pecuniary gain or loss resulting from the crime. He is scheduled to be sentenced by Judge Abrams on April 23, 2013, at 3:00 p.m.
Mr. Bharara praised the investigative work of the United States Postal Inspection Service.
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.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Julian J. Moore is in charge of the prosecution.
U.S. v. Spiro Baltatzidis Information
Manhattan U.S. Attorney Charges Yonkers Pharmacy Store Manager with Illegal Distribution of OxycodoneRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Brian R. Crowell, the Special Agent in Charge of the New York Field Office of the Drug Enforcement Administration (“DEA”), announced the arrest today of JI YUN LEE for conspiring to distribute oxycodone and for distribution of oxycodone at a pharmacy (the “Pharmacy”) in Yonkers, New York. LEE will be presented later today before U.S. Magistrate Judge Kevin N. Fox.
Manhattan U.S. Attorney Preet Bharara said: “Our society is in the throes of its own ‘opiates war’ and some pharmacies are serving more as pass-through ‘opiate dens’ than as legitimate professional dispensers of dangerous drugs. As alleged, Ji Yun Lee exploited his access to highly addictive pain medication and functioned as a ‘go-to’ prescription pill dispenser for those who were willing to pay his inflated prices. The number of people who die from prescription pill abuse ever year is staggering and bears repeating – almost 16,500 – which is more than illegal street drugs like heroin and cocaine combined. We are bound and determined to thwart those who facilitate the spread of this epidemic and to ensure that they are prosecuted for their crimes.”
Special Agent-in-Charge Brian R. Crowell said: “The perception that illegal prescription drug abuse is a safer high than street drugs, has spread like wildfire through our communities. According to the Drug Abuse Warning Network (DAWN), visits to hospital emergency rooms involving the misuse or abuse of pharmaceutical drugs have doubled over the past five years and there were more visits from pharmaceutical drug overdoses than all other illicit drugs combined. Over 7 million Americans reported using prescription medication for non-medical purposes and the rate is steadily rising each year as opiate abusers find new methods of obtaining diverted medication. As alleged, Ji Yun Lee took advantage of his position to allegedly accept and fill fraudulent prescriptions in exchange for money, just like a street dealer who puts lives at risk throughout our community. The investigations of medical professionals who choose the path to intentionally fuel this deadly threat to our society, just like traditional heroin traffickers, are one of our highest investigative priorities.”
The following allegations are based on the Complaint unsealed today in Manhattan Federal Court:
From 2011 to January 2013, LEE served as the store manager at the Pharmacy in Yonkers, New York, but was not a licensed pharmacist or physician in the State of New York. The investigation revealed that LEE was distributing large amounts of oxycodone by filling prescriptions for several individuals that he knew were fraudulently issued without a legitimate medical purpose. A confidential informant (“CI-1”) told law enforcement that LEE filled multiple fraudulent oxycodone prescriptions for CI-1 each month beginning in early 2011, prior to the time that CI-1 began working with law enforcement. LEE never requested identification prior to filling the fraudulent prescriptions. When CI-1 presented the fraudulent prescriptions, CI-1 would initially provide them to an employee of the Pharmacy, who would in turn provide them to LEE who would then approach CI-1, tell CI-1 when the oxycodone would be ready and what the price would be. LEE typically charged $1,075 for 180 30-milligram oxycodone pills.
When presented with a prescription from CI-1, LEE would enter information from the fraudulent prescription into a computer, return the prescription to CI-1, and provide a time that the oxycodone would be ready. Legitimate pharmacies retain prescriptions at the time they are initially presented for their records and for reporting requirements. According to CI-1, LEE engaged in this unusual practice to avoid a situation whereby other co-conspirators – who sometimes knew when fraudulent prescriptions were brought to the Pharmacy by others, and knew the fake names on those prescriptions – would visit the Pharmacy before the person who had dropped off the prescription and, without that person’s knowledge or permission, pick up the oxycodone.
A second confidential informant (“CI-2”) also knew that fraudulent oxycodone prescriptions were filled at the pharmacy. Together, CI-1 and CI-2, working with law enforcement, presented multiple fraudulent oxycodone prescriptions to LEE from September 2012 to January 2013, which LEE filled and the confidential informants paid for in cash. On at least two occasions, the names on the prescriptions provided to LEE were for people of different genders than those of the confidential informants. CI-1 and CI-2 would provide cash in exchange for the oxycodone, often placing the cash into paper or plastic bags, which were then handed to LEE. A review of the Pharmacy bank records revealed monthly cash deposits between January and September 2012 of over $100,000.
Records from the DEA and New York State’s Bureau of Narcotics Enforcement revealed that:
o The number of oxycodone dosage units purchased by the Pharmacy in 2012 is more than double the number of oxycodone dosage units purchased by any other pharmacy in the same zip code.
o The number of dosage units of oxycodone purchased by the Pharmacy more than doubled from 2010-2011 and then again more than doubled from 2011-2012.
o Many of the oxycodone prescriptions issued by the same practitioner contained sequential serial numbers, and were paid for in cash.
If convicted of the charges in the complaint, LEE faces a maximum penalty of 20 years in prison and a fine of $1 million.
Mr. Bharara praised the efforts of the DEA’s New York City Tactical Diversion Squad, comprised of members from the DEA, New York City Police Department, Westchester County Department of Public Safety, the New York State Insurance Bureau, the Rockland County Drug Task Force and the Internal Revenue Service. Mr. Bharara also thanked the Westchester County District Attorney’s Office, comprised of members of the New York State Police, the Yonkers Police Department, and District Attorney Investigators for their work on the investigation. He noted that the investigation is ongoing.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorney Elisha Kobre is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Ji Yun Lee Complaint
Manhattan U.S. Attorney Charges 13 Members and Associates of Bronx Narcotics Organization with Crack Cocaine and Heroin DistributionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Police Commissioner for the City of New York (“NYPD”), announced today the unsealing of an Indictment charging 13 members and associates of a drug trafficking organization (the “Organization”) operating in the Bronx with narcotics trafficking. Of the defendants charged, all thirteen defendants were arrested today, including four defendants who were already in custody on state charges that have been transferred to federal custody. Eleven defendants arrested today were presented in Manhattan federal court before Chief United States Magistrate Judge Kevin Nathaniel Fox. The case has been assigned to U. S. District Judge Deborah A. Batts.
Manhattan U.S. Attorney Preet Bharara said: “Today we continue our efforts to rid the Southern District of drug trafficking crews who peddle their lethal product in our neighborhoods, this time by taking down an alleged group of crack cocaine and heroin dealers in the Bronx. This case is the latest example of law enforcement working together to keep our neighborhoods safe.”
FBI Assistant Director-in-Charge George Venizelos said: “Crack and heroin are a blight on the communities they infest. Even absent the violence that almost always comes with the territory, there would be reason enough to target drug trafficking. But it isn’t just a matter of stopping the spread of poison. Drug trafficking entails violence with such frequency that curbing drug activity means reducing violent crime.”
NYPD Commissioner Raymond W. Kelly said: “Just as the NYPD collaborates with landlords in our "Clean Halls" program to suppress drug dealing and its associated violence in privately-owned buildings in the Bronx, we collaborated with the FBI and Federal prosecutors to suppress drug trafficking in and around Bronx public housing in this case. Residents of crime-prone neighborhoods deserve a modicum of safety others take for granted. Thanks to the detectives, agents and prosecutors who worked together on this case, law-abiding residents of the Bronx are that much safer today.”
According to the allegations in the Indictment filed in Manhattan federal court, other publicly filed documents, and statements made in court earlier today:
Since at least June 2012, the Organization’s members have sold crack cocaine and heroin to street level drug customers, and supplied it to other Bronx drug dealers, primarily in and around the John Adams Housing Project near Tinton Avenue in the Bronx.
The investigation into the Organization’s narcotics trafficking included the court-authorized interception of phone calls and text messages to and from the cellular telephone of a member of the Organization, as well as a number of controlled buys of heroin and crack cocaine by a confidential informant. The investigation was conducted in concert with an investigation into the 2010 murder of an individual on Nelson Avenue in the Bronx. The murder was suspected to have been committed by, among others, Jermaine Smalls, a leading member of the Organization. In October 2012, during the course of the investigations, Smalls was shot and killed outside a Manhattan night club. The investigation into both murders continues.
The defendants are charged with one count of conspiring to distribute, and possess with intent to distribute, crack cocaine and heroin, which carries a mandatory minimum sentence of ten years in prison and a potential maximum sentence of life in prison. Charts containing the names, ages, and residences for the defendants are attached.
Mr. Bharara praised the outstanding investigative work of the FBI and the NYPD, and added that the investigation is continuing.
The prosecution is being handled by the Office’s Violent Crimes Unit. Assistant U.S. Attorneys Kan Nawaday and Andrew Bauer are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Click here to view chart(s)
Brooklyn Woman Sentenced in Manhattan Federal Court to One Year and One Day in Prison for 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 MARINA ZAYTSEVA was sentenced today in Manhattan federal court to one year and one day in prison for her participation in a $57 million fraud scheme that targeted programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”) and that were established to aid the survivors of Nazi persecution, and for instructing others to lie to the FBI if questioned about the fraud. ZAYTSEVA pled guilty in July 2012 to one count of conspiracy to commit mail fraud, and one count of witness tampering. She was sentenced by U.S. District Judge Thomas P. Griesa.
Manhattan U.S. Attorney Preet Bharara said: “Not only did Marina Zaytseva recruit participants into a multi-million dollar fraud scheme against an organization that exists solely for the purpose of aiding victims of Nazi atrocities, but she compounded her shameful conduct by obstructing the investigation into the fraud. She is the latest defendant in this massive scheme to be punished, but she will not be the last.”
According to the Superseding Indictment, the Complaint, and statements made during court proceedings:
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 Claims Conference employees in the Manhattan office who are supposed to confirm that the applicants qualify for payments.
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, including many who were born after World War II, and at least one person who was not Jewish.
ZAYTSEVA, along with other members of the conspiracy, recruited people to provide their identification documents, such as passports and birth certificates, which were then fraudulently altered and submitted to corrupt insiders at the Claims Conference. The corrupt insiders 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 (1) lived in hiding or under a false identity for at least 18 months; (2) lived in a Jewish ghetto for 18 months; or (3) 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.
Witness Tampering
When ZAYTSEVA first learned that the FBI was investigating her involvement in the fraudulent scheme, she instructed other participants in the fraud to lie to the FBI if questioned. Specifically, ZAYTSEVA instructed one witness to claim falsely a lack of memory about the fraud and instructed a second witness to deny having split money with her.
Of the 31 individuals who have been charged with participating in the scheme to defraud the Article 2 Fund and Hardship Fund programs since 2010, 19 defendants, including ZAYTSEVA, have pled guilty, and seven of those defendants have been sentenced. Charges are pending against 12 defendants in the case, and they are presumed innocent unless and until proven guilty.
In addition to her prison term, ZAYTSEVA, 52, of Brooklyn, New York, was sentenced to one year of supervised release. ZAYTSEVA was also ordered to pay $66,597.12 in restitution and to forfeit $6,000.
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. Attorneys Christopher D. Frey and Jonathan Cohen, and Special Assistant U.S. Attorney Rebecca Rohr, are in charge of the prosecution.
Rockland County Accountant Sentenced to Three Years in Prison for $6 Million Ponzi SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York announced today that ALAN RITTER, a self-employed accountant in Rockland County, New York, was sentenced today in Manhattan federal court to three years in prison in connection with his operation of an 11-year, $6 million Ponzi scheme. RITTER pled guilty to three counts of wire fraud in September 2012 before U.S. Magistrate Judge Debra Freeman. U.S. District Judge Paul A. Crotty imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Alan Ritter, like other Ponzi schemers before him, added personal betrayal to his fraud by fleecing unsuspecting victims who were friends and clients. He will now face the penalty for his conduct.”
According to the Information and statements made during the plea proceeding:
RITTER operated his own accounting practice in Rockland County, New York. In 2001, he suffered more than $500,000 in losses from an unrelated business venture. In order to cover those losses, RITTER solicited hundreds of thousands of dollars in loans from friends and clients of his accounting practice, falsely telling them that he intended to use the money to invest in real estate ventures. For the next 11 years, RITTER operated a Ponzi scheme in which he borrowed more and more money for purported business ventures that he used the money to cover the interest payments on the original loans he secured, and to pay for his own personal expenses.
RITTER also embezzled funds entrusted to him by several clients, using their money to cover the interest payments on the Ponzi scheme loans and to pay for his personal expenses. For example, in November 2011, RITTER was given $650,000 on behalf of a family and was instructed to use a portion of it to satisfy several of the family’s outstanding debts. The remainder of the funds was to be held pending further instructions. Instead, RITTER embezzled at least $530,000 of the original $650,000.
In addition to his sentence, Judge Crotty sentenced RITTER, 70, of Monsey, New York, to three years of supervised release and ordered him to pay restitution and forfeiture, which will be determined at a later date.
Mr. Bharara praised the investigative work of the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.
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 Michael A. Levy is in charge of the prosecution.
32 Individuals Charged in Manhattan Federal Court in Connection with Alleged Organized Crime Scheme to Control the Commercial Waste Disposal IndustryRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George C. Venizelos, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and George N. Longworth, the Commissioner of the Westchester County Police Department today announced the unsealing of charges against 32 individuals as part of a multi-year investigation into organized crime’s alleged continuing control of large aspects of the commercial waste-hauling industry in the greater New York City metropolitan area and in parts of New Jersey. The main Indictment charges 12 defendants under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) for conspiring to participate in a racketeering enterprise that asserted illegal and extortionate control over commercial waste-hauling companies, and 17 other defendants with individual acts of extortion, loansharking, and other crimes associated with those activities. The charges are contained in three Indictments, United States v. Franco, et al., United States v. Giustra, et al., and United States v. Lopez.
Thirty of the defendants were arrested this morning in connection with today’s charges, and will be presented and arraigned in Manhattan federal court before U.S. Magistrate Judge Kevin N. Fox later this afternoon. Two defendants, DOMINICK PIETRANICO and PASQUALE P. CARTALEMI, are expected to surrender this week.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, organized crime still wraps its tentacles around industries it has fed off for decades, but law enforcement continues to pry loose its grip. Here, as described in the indictments, organized crime insinuated itself into the waste disposal industry throughout a vast swath of counties in New York and New Jersey, and the tactics they used to exert and maintain their control come right out of the mafia playbook – extortion, intimidation, and threats of violence. And while these accused mobsters may have hidden themselves behind seemingly legitimate owners of waste disposal businesses, law enforcement was able to pierce that veil through its painstaking, multi-year investigation. Organized crime has many victims – in this case small business owners who pay for waste removal, potential competitors, and the communities infected by this corruption and its cost. Organized crime is in a losing battle and we and our law enforcement partners remain committed to its extinction.”
FBI Assistant Director-in-Charge George C. Venizelos said: “The indictments show the ongoing threat posed by mob families and their criminal associates. In addition to the violence that often accompanies their schemes, the economic impact amounts to a mob tax on goods and services. The arrests – the culmination of a long and thorough investigation – also show the ongoing determination of the FBI to diminishing the influence of La Cosa Nostra.”
Westchester County Police Department Commissioner George N. Longworth said: “The long-term partnership between the Westchester County Police and federal law enforcement is an important means of combating organized crime and ensuring that businesses in Westchester are free to operate without fear of extortion or undue influence.”
The following allegations are based on the Indictments unsealed today and statements made in Manhattan federal court:
Twelve of the defendants, who are members and associates of three different Organized Crime Families of La Cosa Nostra (“LCN”) – the Genovese, Gambino and Luchese Crime Families – are charged with participating in a RICO enterprise in which they worked together to control various waste disposal businesses in the New York City metropolitan area and multiple counties in New Jersey (the “Waste Disposal Enterprise,” or “Enterprise”). The Waste Disposal Enterprise was a criminal organization the members of which engaged in crimes including extortion, loansharking, mail and wire fraud, and stolen property offenses. CARMINE FRANCO, ANTHONY PUCCIARELLO, HOWARD ROSS, ANTHONY CARDINALLE, PETER LECONTE, FRANK OLIVER, CHARLES GIUSTRA, DOMINICK PIETRANICO, JOSEPH SARCINELLA, WILLIAM CALI, SCOTT FAPPIANO, and ANTHONY BAZZINI (“Enterprise members”) were leaders and members of the Waste Disposal Enterprise who committed crimes as part of the racketeering conspiracy in order to accomplish the Enterprise’s goals of enhancing its power, financially enriching its members, and keeping its victims - including small business owners and potential competitors – in check by threatening economic and physical harm.
Waste Disposal Enterprise members avoided any official connection to the waste disposal businesses they controlled because they were either officially banned from the waste hauling industry, or unlikely to be granted the necessary licenses required to do business in the waste hauling industry because of their affiliations with organized crime. Accordingly, Enterprise members concealed themselves behind waste disposal businesses that were officially owned and operated by non-Enterprise members (“Controlled Owners”), who were able to obtain the necessary licenses because they had no known affiliations with organized crime. Ultimately, Enterprise members exerted control over these waste disposal businesses by, among other things, dictating which trash pick-up stops that a particular hauling company could use and extorting payments in exchange for protection by individuals associated with organized crime. By asserting and enforcing purported “property rights” over the trash pick-up routes, the Enterprise members excluded any competitor that might offer lower prices or better service, in effect imposing a criminal tax on businesses and communities. Separately, some of the Controlled Owners were also committing crimes, including stealing property of competing waste disposal businesses and defrauding businesses of their customers.
The operation of the Waste Disposal Enterprise was coordinated by and among factions of the LCN families through the use of “sit-downs” to determine which faction would control a particular waste disposal company and established the financial terms upon which control of that company could be transferred from one faction to another in return for payment.
During the time period alleged in the Indictment, Enterprise members extorted a Controlled Owner, who, unknown to them, was a cooperating witness (the “CW”). The CW incorporated a waste removal company (the “CW Company”) that ultimately was controlled by a number of different factions of the Waste Disposal Enterprise.
At various times, the CW Company was under the control of CARMINE FRANCO, a Genovese Crime Family associate who was banned by New Jersey authorities from maintaining any involvement in the waste hauling business in that state due to prior criminal convictions. A Genovese Crime Family crew based principally in Lodi, New Jersey (“Lodi Crew”), which included Genovese Family soldiers ANTHONY PUCCIARELLO and PETER LECONTE, as well as Genovese Family associates ANTHONY CARDINALLE, HOWARD ROSS, and FRANK OLIVER, subsequently wrested control of the CW’s waste company from FRANCO, and further extorted the CW for weekly payments for “protection” from other LCN factions. In addition, at various times, a different faction of the Genovese Crime Family – led by Genovese soldiers DOMINICK “PEPE” PIETRANICO and JOSEPH SARCINELLA – and a Gambino Crime Family crew – including Gambino Family soldier ANTHONY BAZZINI and associate SCOTT FAPPIANO – controlled the CW’s waste hauling company.
In addition to the 12 defendants charged as members of the Waste Disposal Enterprise, 17 of the defendants are charged with carrying out various illegal activities in relation to the waste hauling industry. These illegal activities include: extortion, mail and wire fraud conspiracy, and interstate transportation of stolen property.
Charts identifying each defendant, the charges, and the maximum penalties, as well as the defendants’ ages and residency information are attached to this release. U.S. District Judges P. Kevin Castel, Colleen McMahon, and Laura Taylor Swain have been assigned to this case.
U.S. Attorney Preet Bharara thanked the FBI and the Westchester County Police Department for their work in the four-year investigation, which he noted is ongoing. Mr. Bharara also thanked the New York City Business Integrity Commission, the New York State Police, and the Town of Orangetown Police Department for providing invaluable assistance with the investigation.
The case is being prosecuted by the Office’s Organized Crime Unit. Assistant U.S. Attorneys Arianna R. Berg, Natalie Lamarque and Brian R. Blais are in charge of the prosecution. Assistant U.S. Attorney Martin S. Bell of the Office’s Asset Forfeiture Unit is responsible for the forfeiture of assets.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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U.S. v. Carmine Franco, et al. Indictment
U.S. v. Charles Giustra, et al. Indictment
U.S. v. Kenneth Lopez IndictmentOregon-Based Research Consultant John Kinnucan Sentenced in Manhattan Federal Court to 51 Months in Prison for Insider Trading SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOHN KINNUCAN, the President of Broadband Research, LLC, an investment research firm located in Portland, Oregon, was sentenced today to 51 months in prison for his participation in an insider trading scheme. KINNUCAN obtained material, non-public information (“Inside Information”) about publicly traded companies and sold that information to his clients, including hedge funds and money managers (the “BBR Clients”). KINNUCAN pled guilty in July 2012 to one count of conspiracy to commit securities fraud and two counts of securities fraud before U.S. District Judge Deborah A. Batts, who also imposed today’s sentence.
Manhattan U.S. Attorney Preet Bharara said: “Today’s sentence of John Kinnucan is a fitting conclusion to a criminal odyssey that began with the buying and selling of inside information and evolved into a vile and very public campaign to threaten public servants and obstruct the federal investigation into Kinnucan’s conduct. Mr. Kinnucan will now pay for both crimes with his liberty.”
According to the Indictment, other court documents filed in the case, as well as statements made during the guilty plea and sentencing proceedings:
From 2008 through 2010, KINNUCAN obtained Inside Information about publicly traded companies, including quarterly revenue numbers, and sold that information to BBR Clients. The Inside Information came from co-conspirators who were employed at publicly traded companies (the “Public Company Sources”), such as F5 Networks, Inc. (“F5”), Sandisk Corporation and Flextronics International, Ltd.
In order to develop and maintain his network of Public Company Sources, KINNUCAN befriended public company employees and offered to provide some of them with consulting fees and other non-monetary consideration. Specifically, KINNUCAN paid one of his sources approximately $27,500 for Inside Information, and invested $25,000 in the business of another source.
After he obtained Inside Information from Public Company Sources, KINNUCAN provided it to BBR Clients with the understanding that they would use the information to execute securities transactions. For example, in June 2010 and early July 2010, KINNUCAN repeatedly sought information about F5’s quarterly financial results for the quarter ending on June 30, 2010 from an F5 employee. In a telephone call on the morning of July 2, 2010, KINNUCAN told the F5 employee that the guidance F5 previously provided to the investment community for the quarter that ended June 30, 2012 was $220 million. The F5 employee then informed KINNUCAN that the unadjusted revenue number was actually “$232 million,” confirming that F5 would beat Wall Street’s consensus estimates. Within minutes of the July 2, 2010 conversation with the F5 employee, KINNUCAN called numerous BBR Clients to provide them with the information. After receiving the F5 Inside Information from KINNUCAN, at least two BBR Clients executed securities transactions in F5 based, in whole or in part, on KINNUCAN’s Inside Information, earning profits and avoiding losses of more than $1.5 million.
In order to attract and retain BBR Clients, and in an effort to hide the true identity of his Public Company Sources, KINNUCAN lied to existing and prospective BBR Clients about the sources of his Inside Information, including by falsely stating that none of his sources was employed at public companies, and that he did not pay his sources.
In an effort to obstruct the ongoing federal criminal investigation, from December 2011 through February 2012, KINNUCAN made nearly 25 threatening telephone calls to prosecutors and agents responsible for the investigation of his unlawful activities. In these telephone calls, KINNUCAN made repeated references to genocide, sexual and other forms of violence, and threatened physical harm to one of the prosecutors handling this matter. He also made multiple telephone calls to one cooperating witness, and attempted to contact another in an effort to intimidate and harass them.
In addition to his prison term, KINNUCAN, 55, of Portland, Oregon, was sentenced to three years of supervised release and ordered to pay a $300 special assessment fee. As part of his plea agreement, KINNUNCAN will forfeit $164,000 to the United States.
During the sentencing proceeding, Judge Batts said, “[Kinnucan] lashed out in anger and made a spectacle of himself [by leaving] obscene, hateful, despicable and repetitive” voicemails for prosecutors, and that “…threatening personally government authorities who are doing their jobs by investigating insider trading cannot be tolerated.”
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation. He thanked the U.S. Securities and Exchange Commission for its assistance in this matter.
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 Katherine R. Goldstein, David B. Massey and Christopher L. LaVigne are in charge of the prosecution.
Manhattan U.S. Attorney Announces Arrest of Hong Kong Man for Selling and Smuggling Stolen U.S. Military Equipment into the United StatesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, James T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), and Kenneth Siegler, Resident Agent-in-Charge of the New York Office of the Defense Criminal Investigative Service (“DCIS”), today announced the arrest of KWOK KUEN LEUNG, a resident of Hong Kong, for selling equipment that had been stolen from the United States military and for smuggling that equipment and other items into the United States. LEUNG was arrested last night at the San Francisco International Airport. He was presented earlier today in federal court in the Northern District of California and ordered detained. The case has been assigned to Judge Alvin K. Hellerstein of the U.S. District Court for the Southern District of New York.
Manhattan U.S. Attorney Preet Bharara said: “Today’s indictment reveals an alleged attempt by Kwok Kuen Leung to operate under the radar to import stolen equipment into the United States that could potentially be used as weapons. Our office remains committed to ensuring that devices intended for the military and other law enforcement authorities do not get into the wrong hands.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Kwok Kuen Leung allegedly made false statements to import and sell stolen military grade equipment. This technology is so sensitive that, if in the wrong hands, it can pose a threat to our national security. This case underscores the threat by those who attempt to circumvent U.S. Customs laws. It strengthens our resolve with our federal law enforcement partners to vigorously pursue violators.”
DCIS Resident Agent-in-Charge Kenneth Siegler said: "This investigation demonstrates the Defense Criminal Investigative Service and fellow agencies’ continued commitment to identifying individuals involved in the theft, sale, and smuggling of U.S. military technology. It is imperative that those involved in trafficking stolen Department of Defense equipment be identified and held accountable for their actions.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:
On several occasions from January 2005 through March 2005, LEUNG sold infrared laser aiming devices that were stolen from United States military installations. Infrared laser aiming devices are mounted on weapons, and work by projecting an infrared laser beam on a target that cannot be seen with the naked eye, but can be seen with night-vision equipment. Laser aiming devices are generally manufactured under contract with the U.S. Department of Defense for military use or under contract with law enforcement agencies.
In addition, on multiple occasions from 2005 through 2009, LEUNG smuggled military equipment including the stolen laser aiming devices, night-vision scopes, and other items into the United States by making false and fraudulent statements in customs declaration forms. For example, LEUNG falsely stated that the majority of his shipments contained “distance measuring devices.” He also significantly understated the actual dollar value of the shipments and paid substantially less in customs duties than would have been owed if the true value of the equipment had been declared.
LEUNG, 38, resides in Hong Kong. He is charged with eight counts of falsely classifying goods for entry into the United States, eight counts of importing goods through false and fraudulent statements, eight counts of smuggling, and four counts of selling stolen military equipment. He faces a maximum penalty of 142 years in prison on all counts combined.
Mr. Bharara praised ICE HSI and DCIS for their outstanding work in the investigation.
This prosecution is being handled by the Complex Frauds Unit of the United States Attorney’s Office. Assistant United States Attorney Zachary Feingold 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 Kwok Kuen Leung S1 Indictment
Manhattan U.S. Attorney Announces Charges Against 16 Alleged Members of Bronx Armed Robbery Crew That Impersonated Police OfficersRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Brian R. Crowell, the Special-Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), Raymond W. Kelly, the Commissioner of the New York City Police Department (“NYPD”), and Joseph A. D’Amico, the Superintendent of the New York State Police (“NYSP”), today announced the filing of a Complaint charging 16 alleged members of a Bronx, New York, armed robbery crew who impersonated police officers. The defendants were charged with robbery conspiracy, narcotics conspiracy, and firearms offenses. All 16 of the defendants, who were arrested Wednesday night, were presented yesterday in Manhattan federal court. In connection with the arrests, federal agents seized, among other things, five loaded semi-automatic firearms and a loaded pistol, .45 caliber and .380 caliber ammunition, shirts bearing the word “Police,” tactical gear, and a hydraulic ram similar to those used by law enforcement to break down doors.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, this was a marauding gang of armed and violent thieves in the Bronx who masqueraded as police officers in order to trick their narcotics-dealing targets so they could steal their drugs and their cash. This is the latest in a string of multi-defendant arrests in the Bronx and Manhattan this week that underscore our commitment to making the streets in this district safer for their residents.”
DEA Special-Agent-in-Charge Brian R. Crowell said: “While most New Yorkers were sleeping last night, our Drug Enforcement Task Force arrested and removed alleged members of an extremely violent, armed and sophisticated drug gang. They were the drug world’s version of a James Bond style robbery crew, utilizing fake police equipment, law enforcement badges, replica vehicles complete with emergency lighting and outfitted with complex traps to hide illegal and loaded firearms. As alleged, this crew was comprised of sixteen members who tried to conceal themselves as cops to rob, steal and plunder. This is yet another investigation epitomizing the extreme violence that surrounds drug trafficking and I commend the men and women of our task force from the NYPD, the NYSP, and the DEA for steadfastly wading into harm’s way to protect our citizens.”
NYPD Commissioner Raymond W. Kelly said: “The NYPD and federal partners will continue to crack down on drug dealers and guns in the Bronx and elsewhere, and the NYPD Internal Affairs Bureau will thoroughly investigate any instances of alleged police impersonation. The impersonators will be pursued and prosecuted.”
NYSP Superintendent Joseph A. D’Amico said: “The collaborative efforts of the Drug Enforcement Task Force, including the New York State Police, the Drug Enforcement Administration, and the New York City Police Department, have resulted in the arrests of a number of dangerous individuals. We will not tolerate this type of activity in our state. These individuals allegedly masqueraded as police officers with the intent to commit crimes. Ensuring the public’s continued safety is our ultimate goal. By arresting the alleged members of this dangerous drug gang, our streets are now safer.”
According to the allegations in the Complaint filed yesterday in Manhattan federal court:
On December 17, 2012, JAVION CAMACHO met with a confidential informant (“CI-1”) working at the direction of the DEA. During that meeting, CI-1 told JAVION CAMACHO that a shipment of heroin was going to be arriving in New York City after the holidays, and that he wanted him to use force to steal the shipment. CAMACHO told CI-1 he had a robbery crew of police impersonators who would be able to carry out the robbery for him. During subsequent meetings CAMACHO and his brother JULIO CAMACHO, among others, expressed their interest in robbing the group of drug traffickers and their stash house, which the defendants believed, based on representations made by CI-1, would contain at least 20 kilograms of heroin.
On the evening of January 9, 2013, the defendants – JAVION and JULIO CAMACHO, ALEX CESPEDES, GARY SANCHEZ, MANUEL PIMENTEO, DOMINGO VASQUEZ, BENJAMIN JIMINEZ, RAFAEL HUERTA, OSCAR NORIEGA, VICTOR JOSE GOMEZ, JOSHUA ROMAN, VICTOR E. MORAL, RAMON JIMINEZ, ALI A. HUSAIN, LOUIS BORRERO, and OLIVER F. FLORES – assembled at a location in the Bronx, and then traveled in tandem in five different vehicles to a location identified by CI-1 where they planned to use force in order to rob the purported heroin traffickers.
Upon arriving at the specified location, the defendants were placed under arrest and their vehicles were searched. Two of the vehicles contained secret compartments, or “traps,” designed to conceal contraband. One of the vehicles contained a mechanized device that, when operated by the vehicle’s driver, would cover the vehicle’s license plate with a steel plate. The vehicle searches conducted at the time of arrest resulted in the seizure of six loaded firearms, including a .45 caliber High Point, two .380 caliber semi-automatic firearms for which the make has not been identified, a .9 mm Beretta, a .45 caliber Glock, and a silver pistol. The defendants were also found to be in possession of: shirts bearing the word “Police;” tactical vests similar to those used by law enforcement; a hydraulic ram similar to those used by law enforcement to break down doors; a police scanner; handcuffs; zip-ties similar to those used by law enforcement to handcuff individuals; bolt-cutters; walkie-talkies; a purported law enforcement shield; a baseball bat; a crowbar; ski masks; gloves; GPS units similar to those used by law enforcement to track suspects; and a “rabbit pump” which is a tool used by law enforcement to break down doors.
A chart containing the ages, residency information, and charges against the defendants, as well as the maximum and mandatory minimum penalties that they face, is attached.
Mr. Bharara praised the DEA, the NYPD, and the NYSP for their work in the investigation.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant United States Attorney Rachel Maimin 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.
Click here to view chart(s)U.S. v. Javion Camacho, et al. Complaint
Four Additional Defendants Plead Guilty in Connection with the LIRR Disability Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that MARIA RUSIN, the office manager of Dr. Peter J. Ajemian’s medical practice, GREGORY NOONE, a former Long Island Railroad (“LIRR”) manager of engineering operations, DANIEL DENIS, a former LIRR ticket agent, and REGINA WALSH, a former LIRR director of employee operations, pled guilty to charges related to the allegedly massive fraud scheme in which LIRR workers claimed to be disabled upon early retirement so that they could receive disability benefits to which they were not entitled. RUSIN and WALSH pled guilty today before U.S. Magistrate Judge Henry B. Pitman. NOONE and DENIS pled guilty before Judge Pitman on January 8, 2013 and January 9, 2013, respectively.
According to the Complaint, the Superseding Indictment, the Superseding Informations, and statements made in other public filings and in court:
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.
Rusin’s Obstruction of Justice
In August 2010, RUSIN participated in a voluntary interview with criminal investigators in the Southern District of New York, and falsely denied knowing that almost all of Dr. Peter Ajemian’s patients from the LIRR were retiring at the same time that they were claiming occupational disability from the United States Railroad Retirement Board. RUSIN also falsely claimed that she was never told that an LIRR patient was planning to retire except when the patient was directed to see her to pay for a narrative, and that this usually occurred at the end of the process of seeing Ajemian—about two weeks to one month prior to the worker’s retirement. In addition, RUSIN falsely claimed to have no understanding about how an occupational disability would affect the payout for an LIRR worker who was retiring.
RUSIN, 57, of Farmingdale, New York, and WALSH, 64, of New Hyde Park, New York will be sentenced by U.S. District Judge Victor Marrero on May 13, 2013 and NOONE, 63, of East Islip, New York, will be sentenced by Judge Marrero on July 12, 2013. DENIS, 60, of East Rockaway, will be sentenced by U.S. District Judge Kimba Wood on July 11, 2013. A chart setting forth the counts to which each defendant pled guilty, as well as the maximum penalties, is attached.
Thirty-two people have been charged in connection with the LIRR disability fraud scheme, 16 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 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 Office’s Complex Frauds Unit is handling the case. Assistant U.S. Attorneys Justin Weddle, Daniel Tehrani, Nicole Friedlander, Danya Perry and Amy Garzon are in charge of the prosecution.
Manhhattan U.S. Attorney Announces Arrest of Richard Ammar Chichakli on Money Laundering, Wire Fraud, and Conspiracy ChargesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the United States Drug Enforcement Administration (“DEA”), announced that RICHARD AMMAR CHICHAKLI, an associate of convicted international arms dealer, Viktor Bout, was arrested yesterday in Australia for, among other things, allegedly conspiring with Bout and others to violate the International Emergency Economic Powers Act (“IEEPA”) by attempting to purchase two aircraft from companies located in the U.S., in violation of economic sanctions that prohibited such financial transactions. In addition, CHICHAKLI is also charged with money laundering conspiracy, wire fraud conspiracy, and six separate counts of wire fraud, in connection with the attempted aircraft purchases. CHICHAKLI, a citizen of Syria and the U.S., was arrested by Australian authorities at the request of the U.S.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Richard Ammar Chichakli consorted with the world’s most notorious arms trafficker in the purchase of aircraft that would be used to transport weapons to some of the world’s bloodiest conflict zones, in violation of international sanctions. Thanks to the cooperative efforts of all of our law enforcement partners, both here and abroad, Chichakli has finally been apprehended and will now face justice.”
DEA Administrator Michele M. Leonhart said: “The international law enforcement community has long recognized Richard Chichakli as a key criminal facilitator in Viktor Bout’s global weapons trafficking regime and his arrest means the world is safer and more secure. Bout merged drug cartels with terrorist enablers, and his close associate, Chichakli, worked to ensure they could ship weapons and conduct illicit business around the world. DEA continues to forge strong partnerships worldwide and applauds our Australian police partners.”
According to the Superseding Indictment previously filed in Manhattan federal court and other court documents:
Bout is presently serving a 25-year prison term as a result of his November 2011 conviction in this district for conspiring to sell millions of dollars of weapons to the Fuerzas Armadas Revolucionarias de Colombia (the “FARC”), a designated foreign terrorist organization based in Colombia. Prior to his arrest on those charges in March 2008, in Thailand, and since the 1990s, Bout was an international weapons trafficker. Bout carried out his massive weapons-trafficking business by assembling a fleet of cargo airplanes capable of transporting weapons and military equipment to various parts of the world, including Africa, South America, and the Middle East.
The arms Bout has sold or brokered have fueled conflicts and supported regimes in Afghanistan, Angola, the Democratic Republic of the Congo, Liberia, Rwanda, Sierra Leone and Sudan. CHICHAKLI had been a close associate of Bout’s since at least the mid-1990s, assisting in the operations and financial management of his network of aircraft companies. As a result of Bout’s role in pouring arms into these international conflicts, his relationship with CHICHAKLI, and Bout and CHICHAKLI’s close relationship with former Liberian President Charles Taylor, both Bout and CHICHAKLI have been the subject of United Nations Security Council (“UNSC”) sanctions restricting their travel and their ability to conduct business around the world. In addition, more than 25 companies affiliated with Bout and CHICHAKLI have been listed by the UNSC as subject to similar restrictions concerning their assets and financial transactions.
In 2004, consistent with the sanctions previously adopted by the UNSC concerning Liberia, the President of the United States issued an executive order prohibiting any transactions or dealings within the U.S. by individuals affiliated with former President Taylor. Accordingly, the U.S. Department of Treasury, pursuant to its authority under IEEPA, prohibited Bout from conducting any business in the U.S. In 2005, that prohibition was extended to CHICHAKLI.
The United Nations and IEEPA sanctions encumbered CHICHAKLI’s and Bout’s efforts to conduct business within their existing corporate structures. Accordingly, CHICHAKLI and Bout took steps to form new companies, and to register these companies in the names of other individuals in order to create the false appearance that they had no affiliation with them.
One such company – Samar Airlines – was created in 2004, right after the majority of United Nations and IEEPA sanctions became effective. CHICHAKLI and Bout were personally involved in the operational and business affairs and decisions of Samar Airlines, though they held out other individuals as being the officers of the company. In 2007, in violation of the IEEPA sanctions to which they were subject at the time, CHICHAKLI and Bout, acting through Samar Airlines, contracted to purchase two Boeing aircraft from companies located in the U.S.
In connection with the purchase of these aircraft and related services, CHICHAKLI and Bout electronically transferred more than $1.7 million through banks in New York and into bank accounts located in the U.S. They did so through a number of front companies, the assets of which were also owned and controlled by Bout, in order to evade the UNSC’s sanctions regime and IEEPA prohibitions. Upon the discovery that CHICHAKLI was connected to Samar Airlines, the U.S. Treasury Department blocked the funds that had been transferred into the bank accounts of the U.S. aviation companies.
The Superseding Indictment charges CHICHAKLI with nine separate offenses:
- Count One: Conspiracy to violate the International Emergency Economic Powers Act;
- Count Two: Money laundering conspiracy;
- Count Three: Wire fraud conspiracy; and
- Counts Four through Nine: Wire fraud.
If convicted, CHICHAKLI faces a maximum sentence of 20 years in prison on each of the nine counts. The case is assigned to U.S. District Judge William H. Pauley, III.
Mr. Bharara praised the outstanding investigative efforts of the DEA and thanked the Australian Federal Police, the Victoria State Police, the Australian Attorney General’s Department, the U.S. Department of Justice Office of International Affairs, the U.S. Department of State and Interpol for their assistance in this matter.
The case is being handled by the Terrorism and International Narcotics Unit. Assistant United States Attorneys Anjan Sahni, Brendan R. McGuire, Jenna M. Dabbs and Christian R. Everdell are in charge of the prosecution.
The charges contained in the Indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Richard Ammar Chichakli S2 Indictment