Southern District of New York
Press releases recorded for this federal judicial district.
Manhattan U.S. Attorney Announces Charges Against 17 Individuals in Connection with A Violent Manhattan Drug Trafficking CrewRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), today announced charges against 17 members of a criminal organization based in Harlem, New York for conspiring to distribute cocaine, crack cocaine, and marijuana. The Superseding Indictment also charges seven of the defendants with possessing firearms in connection with, and in furtherance of, the drug distribution conspiracy. One defendant, ROGER KEY, was also charged in the original indictment with orchestrating a murder-for-hire conspiracy of an individual at gunpoint.
Of the 16 new defendants charged, 10 were taken into custody last night and early this morning as part of a coordinated operation involving federal and local law enforcement officers. All the defendants who were arrested last night and this morning will be presented in Manhattan federal court this afternoon before U.S. Magistrate Judge Henry B. Pitman. RUBEN DAVIS and RUBEN FERNANDEZ were previously arrested by the NYPD on related state charges and remain detained. STEVEN HERBERT is currently detained on an unrelated federal charge. GEORGE DAVIS is expected to surrender later to law enforcement today, and KEITH PURVIS and CLAYTON MOLLETTE remain at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, this pack of gun-toting drug dealers wrought havoc, instilled fear, and peddled highly addictive – and sometimes lethal – narcotics in the Harlem neighborhood in which they operated. With today’s indictment, they are now off the streets, but our work is not finished and we remain committed to shutting these violent drug crews down completely. I want to thank New York County District Attorney, Cyrus Vance and his office, who began the investigation into this alleged narcotics crew and shared the fruits of their investigation with our Office, enabling us to build this case. It is another great example of our Offices working together in a way that best serves the case and the interests of the people of Manhattan.”
FBI Assistant Director-in-Charge George Venizelos said: “For the second time in as many days we are announcing charges in a significant drug trafficking case, and again we see the ever-present link between drugs and guns. If your business is peddling illegal drugs, the business almost always entails violence to protect it. The FBI is committed to teaming with the NYPD in vigorous policing of the illegal drug trade in our mutual effort to reduce violent crime.”
NYPD Commissioner Raymond W. Kelly said: “These arrests are another example of police and their federal partners’ unrelenting pursuit of crews who monetize drugs and violence. I commend the NYPD Manhattan North Narcotics detectives who worked to bring these criminals to justice, to restore some measure of safety to Harlem residents. Their work is among the reasons why New York City experienced a record low in shootings and murder last year.”
As alleged in the Superseding Indictment unsealed today and other documents filed in Manhattan federal court:
From at least 2009 through May 2012, members of the crew sold significant street level quantities of cocaine, crack cocaine, and marijuana in Harlem, New York. Members of the crew used firearms, threats of violence and violence to protect their drug business.
Additionally, in November 2011, KEY and others recruited and hired individuals to shoot and kill a victim. During the assassination attempt, one of KEY’s co-conspirators, however, shot and hit an innocent bystander, who was standing near the intended victim’s car. The innocent bystander survived.
A chart containing the ages, residency information, and charges against the defendants, as well as the maximum penalties they face is attached.
Mr. Bharara praised the outstanding investigative work of the FBI and the NYPD. He also thanked the New York County DA’s Office for sharing evidence that ultimately led to today’s charges. He added that the investigation is continuing.
The prosecution of this case is being overseen by the Office's Violent Crimes Unit. Assistant United States Attorneys Abigail Kurland, Adam Fee, and Santosh Aravind are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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U.S. v. Roger Key, et al Superseding Indictment
US v. Roger Key, et al Superseder ChartFormer Hedge Fund Principal Pleads Guilty in Manhattan Federal Court to Stealing over $1 MillionRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that BERTON HOCHFELD, the former Manager of Hochfeld Capital Management, L.L.C. (“Hochfeld Capital”), pled guilty today in Manhattan federal court to securities fraud and wire fraud charges in connection with an investment scheme in which he stole more than $1 million from investors. HOCHFELD pled guilty before U.S. District Judge Paul A. Crotty.
Manhattan U.S. Attorney Preet Bharara said: “Berton Hochfeld may have had all the trappings of being a sophisticated investment adviser in control of a limited liability corporation, a partnership and a hedge fund, but at the end of the day he was simply a thief who stole money from the investors who trusted him. Investment fraud is a serious offense that damages investor confidence and the markets, and we will continue to prosecute it aggressively.”
According to the charging instruments in this case and statements made in open court today at the plea proceeding:
HOCHFELD was the Manager and organizer of Hochfeld Capital, a limited liability company incorporated in Delaware that, at various times, maintained an office in New York, New York. Hochfeld Capital, in turn, served as the General Partner of the Heppelwhite Fund, L.P. (the “Heppelwhite Fund”), a hedge fund that was formed to invest in publicly traded securities, mainly in the technology sector. In connection with the management of the Heppelwhite Fund, HOCHFELD made false representations to investors regarding their investments, and misappropriated their money.
For example, by December 2010, HOCHFELD was aware that Hochfeld Capital’s internal accounting for the Heppelwhite Fund reflected an inflated net asset value (“NAV”), as compared to the value reflected in the books of the prime broker where the fund’s assets were actually located. Despite his knowledge of the disparity, HOCHFELD caused monthly statements to be sent to Heppelwhite Fund investors that reflected the inflated NAV calculated by internal accounting records.
From April 2011 through October 2012, HOCHFELD also withdrew money from the Heppelwhite Fund for his own personal use, ultimately misappropriating more than $1 million. During this period, at HOCHFELD’s direction, monthly account statements were provided to Heppelwhite Fund investors that falsely represented the fund’s value by failing to account for the money that he had withdrawn. At a meeting in October 2012, HOCHFELD admitted to certain investors that he had taken more than $1 million from the Heppelwhite Fund and that he spent portions of that money on antiques and vacations.
HOCHFELD, 66, of Stamford, Connecticut, pled guilty to one count of securities fraud and one count of wire fraud. He faces a maximum sentence of 20 years in prison on each count. The defendant also faces a fine of the greater of $5 million or twice the gross gain or gross loss from the offense on the securities fraud charge, as well as a fine of a lesser amount on the wire fraud charge. In connection with his guilty plea, HOCHFELD agreed to forfeit the illegal proceeds of his crimes and will be ordered to pay restitution to the victims of his offenses.
HOCHFELD is scheduled to be sentenced by Judge Crotty on June 27, 2013, at 3:00 p.m.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission for their assistance.
This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. 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 Jillian Berman is in charge of the prosecution.
Manhattan U.S. Attorney Announces Charges Against Nine Members of Violent Armed Robbery Home Invasion Crew Operating in the BronxRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Joseph Anarumo Jr., the Special-Agent-in-Charge of the New York Field Division of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Raymond W. Kelly, the Police Commissioner of the City of New York (“NYPD”), announced the unsealing of a Superseding Indictment charging nine members of a violent armed robbery crew operating in the Bronx, New York, with robbery conspiracy, robbery, carjacking, and firearms offenses. Two defendants, MICHAEL CAMPBELL and PATRICK LEWIS, are also charged with committing a murder in connection with one of the armed robberies.
Four of the defendants charged in the Superseding Indictment were previously charged in October 2011 and November 2012. Specifically, DARREN MORRIS and CAMPBELL were originally charged with robbery and firearms offenses by indictment in October 2011. LEWIS and RASHID TURNER were also charged with robbery and firearms offenses in two separate complaints, both filed in November 2012. All four defendants were remanded on the original charges and remain in custody. Of the five new defendants charged in the Superseding Indictment, JAMAL FRAZER and ERIC BOOTH were arrested today and will be presented before U.S. District Judge John F. Keenan this afternoon, TYRIEK SKYFIELD and ANTHONY FRANCIS were in state custody on other charges, and one defendant, PRINCE WAREHAM, remains at large.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, this was an armed and violent gang responsible for murder, multiple robberies, carjacking, and packing pistols and other weapons. We are committed to taking these violent crews off our streets so that the neighborhoods of our District can be peacefully enjoyed by their residents, and with the 19 defendants we charged today, we are making good on that commitment in the Bronx.”
ATF Special Agent-in-Charge Joseph Anarumo Jr. said: “This investigation exemplifies the importance of inter-agency cooperation. In combining the investigative resources of ATF, NYPD and prosecutors from the Southern District of New York, we have put a stop to the alleged violence caused by this group of individuals - the allegedly heinous acts perpetrated include discharging a firearm at a pursuing Police Officer, armed robbery, carjacking and home invasion. Today’s indictment sends a strong message – We will not tolerate firearms violence in our communities and those responsible for it will be identified and held accountable.”
NYPD Commissioner Raymond W. Kelly said: “Criminals who think they can subdue the efforts of police to preserve peace and safety for Bronx residents are mistaken. NYPD narcotics investigators and others will endure to eliminate violent robbery crews, as an off-duty officer proved last week when he tackled an armed assailant despite having been seriously wounded. I commend the detectives who brought these subjects to justice, supported by the prosecutorial expertise of federal partners in the U.S. Attorney’s office.”
According to the allegations contained in the Superseding Indictment and other court documents previously filed in Manhattan federal court:
Between approximately 2009 and 2012, members of the robbery crew engaged in a series of armed robberies and attempted robberies throughout the Bronx, New York, one of which led to the December 2010 murder of a marijuana dealer, Patrick Woodburn in the Bronx. CAMPBELL and LEWIS stole approximately ten pounds of marijuana from Woodburn, and shot and killed him.
In another armed robbery on July 28, 2010, three of the crew members – FRAZER, SKYFIELD, and FRANCIS – carried out a carjacking in the Bronx, during which cash, jewelry, and a BMW sedan were taken from the victim at gunpoint.
MORRIS and CAMPBELL were also previously charged with a November 2009 home invasion robbery in the Bronx, which targeted suspected dealers of marijuana and marijuana proceeds. During the robbery, MORRIS struck one of the victims in the head with a gun, causing the gun to discharge one round. While fleeing the scene of the robbery, MORRIS also fired several shots at a police officer who pursued him.
A chart containing the ages, residency information, and charges against the defendants, as well as the maximum penalties that they face, is attached.
Mr. Bharara praised the investigative work of the ATF and the NYPD.
The case is being prosecuted by the Office’s Violent Crimes Unit. Assistant United States Attorneys Christopher J. DiMase and Jessica A. Masella are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Patrick Lewis, et al S4 Indictment
US v. Patrick Lewis et al Superseder ChartManhattan U.S. Attorney Announces Charges Against 10 Members of Violent Bronx Drug Trafficking CrewRead the Press Release
Two Defendants Are Charged with Kidnapping at Gunpoint and Torturing Victim
Preet Bharara, the United States Attorney for the Southern District of New York, George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Raymond W. Kelly, the Commissioner of the New York City Police Department (“NYPD”), today announced charges against 10 members of a criminal organization based on Wyatt Street in the Bronx, New York. Nine of the defendants were charged with conspiracy to distribute crack cocaine and heroin. The crew’s alleged ringleader, ANIBAL RAMOS, and one of its members, ANIBAL SOTO, were charged in the original, July 2012 Indictment with kidnapping, conspiracy to commit kidnapping, and the brandishing of a firearm in connection with, and in furtherance of, the kidnapping. RAMOS and SOTO are alleged to have kidnapped and tortured an individual, including by burning the victim with an iron. The Superseding Indictment adds narcotics charges against RAMOS, and also charges him and three of the new defendants with possessing firearms in connection with, and in furtherance of, the crack cocaine and heroin conspiracy.
All eight of the new defendants charged were taken into custody today as part of a coordinated operation involving federal and local law enforcement officers. RAMOS, who was arrested in August 2012, and SOTO, who was arrested in July 2012, remain detained. All the defendants arrested today will be presented in Manhattan federal court this afternoon.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, for far too long, these defendants were a bloody blight on a Bronx community, contaminating it with poisonous and highly-addictive drugs, and the guns, and brutal violence that are part and parcel of the drug trade. This case demonstrates our commitment to working with our law enforcement partners to identify and prosecute those who engage in this conduct and to expand cases previously charged when we develop new evidence. With the charges we bring today in two separate cases against 19 defendants, the Bronx neighborhoods in which they ran amok are safer places for their residents.”
FBI Assistant Director-in-Charge George Venizelos: “This case highlights once again the dual threat posed to our communities by the illegal drug trade. The drugs themselves are poison, with life-altering and lethal consequences. And violence almost always comes with the territory. We remain committed to restoring our communities to their law-abiding residents.”
NYPD Commissioner Raymond W. Kelly said: “The depraved acts of torture described in the indictment need no further characterization, other than to observe that the nexus between drug trafficking and violence is well-established, and the commitment among police and prosecutors to bring its practitioners to justice is unyielding.”
As alleged in the Superseding Indictment unsealed today and other documents filed in Manhattan federal court:
From at least 2000 through August 31, 2012, RAMOS was the leader of a drug crew that operated on Wyatt Street in the Bronx and sold significant street level quantities of crack cocaine and heroin. In addition, members of the drug trafficking organization used firearms, threats of violence, and violence to secure and enforce their drug territory, including the kidnapping and brutal torture committed by RAMOS and SOTO.
RAMOS, JOEL CABRERA, WILLIAM ZACCHI, CHRISTOPHER HERNANDEZ, MICHAEL AVILES, LATRELL RIDDLES, CHARITZA QUINTANA, YASMINE ZELAYANDIA, and JACQUELINE HERNANDEZ are charged with conspiring to distribute, and possess with the intent to distribute, crack cocaine and heroin.
RAMOS, AVILES, RIDDLES, and ZELAYANDIA are also charged with possessing firearms in connection with, and in furtherance of, the crack cocaine and heroin conspiracy.
A chart containing the ages, residency information, and charges against the defendants, as well as the maximum penalties they face is attached.
Mr. Bharara praised the outstanding investigative work of the FBI and the NYPD. He added that the investigation is continuing.
The prosecution of this case is being overseen by the Office’s Violent Crimes Unit. Assistant United States Attorneys Hadassa Waxman and Timothy D. Sini are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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International Narcotics Trafficker Sentenced in Manhattan Federal Court to 280 Months in PrisonRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that JOSE MOSQUERA-PRADO, a top lieutenant of Colombian drug kingpin Francisco Gonzalez-Uribe, was sentenced today in Manhattan federal court to 280 months in prison for conspiring to import and distribute cocaine and heroin into the United States. MOSQUERA-PRADO was convicted in October 2011 following a two-week jury trial before U.S. District Judge Lewis A. Kaplan, who also presided over the sentencing.
Manhattan U.S. Attorney Preet Bharara said: “Mosquera-Prado, and the Colombian-based narco-trafficking organization in which he was a senior player, were responsible for moving massive quantities of cocaine and heroin from country to country, with the ultimate goal of shipping it to the U.S. Thanks to the outstanding work of, and cooperation between, the DEA and international law enforcement partners, he was thwarted and will now pay with his liberty.”
According to the trial evidence, other documents filed in the case, and statements made during court proceedings:
From 2007 through 2009, MOSQUERA-PRADO was a top lieutenant in Gonzalez-Uribe’s international narcotics-trafficking organization, which shipped tons of cocaine and heroin to various locations in Mexico, the Dominican Republic, Venezuela, and other countries. These narcotics were then transported to the United States and various locations in Europe.
During two undercover operations in early 2009 – with the cooperation and assistance of the governments of Colombia and the Dominican Republic – the U.S. Drug Enforcement Administration (“DEA”) seized large quantities of cocaine and heroin from members of Gonzalez-Uribe’s narco-trafficking organization. MOSQUERA-PRADO was intercepted on recorded telephone calls personally orchestrating the shipment of the cocaine and heroin, which were destined for sale in New York City. The cocaine and heroin that was seized by the DEA during these operations had an estimated wholesale value of approximately $2,000,000.
In numerous additional recorded telephone calls and emails, MOSQUERA-PRADO negotiated and coordinated the shipments of several multi-ton loads of cocaine through South America and the Caribbean to the United States and other countries. MOSQUERA-PRADO also sent two of his criminal associates to the Dominican Republic to examine a remote military landing strip that he intended to use to land aircraft carrying large shipments of cocaine, and sought to use a number of large, private aircraft – including a DC-8, a DC-10, a Grumman 2, and a King Air 300 – to transport massive shipments of cocaine.
In addition to the prison term, Judge Kaplan sentenced MOSQUERA-PRADO, 36, to five years of supervised release, a $25,000 fine, and a $200 special assessment fee.
Gonzalez-Uribe was designated a Consolidated Priority Organization Target (“CPOT”) by the U.S. Department of Justice – a designation that is reserved for federal law enforcement priority drug trafficking targets. Gonzalez-Uribe was arrested in the Dominican Republic in 2009. In 2010, he pled guilty in Manhattan federal court to narcotics importation and distribution conspiracy charges and was subsequently sentenced to 30 years in prison.
Mr. Bharara praised the outstanding efforts of the DEA, and specifically cited the DEA Caribbean Field Division, the DEA Bogotá Country Office, the DEA Cartagena Resident Office, the DEA Santo Domingo Country Office, and the DEA New York Field Division. He also thanked the Office of International Affairs of the Justice Department’s Criminal Division and all other cooperating law enforcement agencies. Mr. Bharara also thanked the Government of the Dominican Republic, the Dominican Direccion Nacional de Control de Drogas, and the Dominican Air Force, and expressed his gratitude to the Government of Colombia and the Colombian Departamento Administrativo de Seguridad for their cooperation and assistance in the investigation and prosecution of Mosquera-Prado.
The case is being handled by the Office's Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Benjamin Naftalis, John P. Cronan, and Randall W. Jackson are in charge of the prosecution.
TweetFormer Consultant Wesley Wang 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 WESLEY WANG, a former consultant with Trellus Management, was sentenced today to two years of probation for his participation in insider trading schemes in which WANG provided material, nonpublic information (“Inside Information”) about various publicly-traded companies to several individuals, including Doug Whitman, the president and founder of Whitman Capital. WANG pled guilty in July 2012 to two counts of 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 WANG’s guilty plea proceeding, WANG’s testimony during the criminal trial of Doug Whitman, and the Government’s sentencing submission in WANG’s case:
From 2005 through 2008, WANG provided Whitman, among others, Inside Information on Cisco with the understanding that Whitman would use the Information to trade securities. In exchange for this Inside Information, Whitman provided WANG with Inside Information on other publicly-traded companies, including Marvell and Polycom, which WANG in turn provided to others. In addition, from 2002 to 2005, WANG was involved in a separate conspiracy, in which he exchanged Inside Information about various publicly traded companies with other individuals, with the expectation the information would be used to trade securities.
In addition to his probation, WANG, 39, was ordered to pay a $200 special assessment fee.
Whitman was convicted in a jury trial on August 20, 2012 of four counts of conspiracy and securities fraud.
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.
Statement of Manhattan U.S. Attorney Preet Bharara on the Sentencing of Former Bronx City Councilman Larry SeabrookRead the Press Release
“Councilman Larry Seabrook sacrificed the public trust on the altar of greed. He was a flagrant and serial abuser of City Council discretionary funds in a far too familiar New York tale of corruption. Today’s sentence finally vindicates the interests of the constituents whose trust he so casually violated by his fraud. We remain committed to making those who are corrupted by power pay the price, and the public can expect more arrests of politicians who have not learned this lesson.”
Former Bronx City Councilman, Larry Seabrook, Sentenced in Manhattan Federal Court to Five Years in Prison for Public Corruption CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that former New York City Council Member LARRY SEABROOK, who represented the 12th Council District in the Bronx, was sentenced today in Manhattan federal court to five years in prison after being convicted on nine counts for public corruption crimes in a July 2012 jury trial. SEABROOK was sentenced by Federal District Judge Deborah A. Batts, who also presided over his trial.
Manhattan U.S. Attorney Preet Bharara stated: “Councilman Larry Seabrook sacrificed the public trust on the altar of greed. He was a flagrant and serial abuser of City Council discretionary funds in a far too familiar New York tale of corruption. Today’s sentence finally vindicates the interests of the constituents whose trust he so casually violated by his fraud. We remain committed to making those who are corrupted by power pay the price, and the public can expect more arrests of politicians who have not learned this lesson.”
According to the Indictment, other court documents, and the evidence presented at trial:
SEABROOK served as a member of the New York City Council (the “Council”) from January 2002 until his July 2012 conviction in this case. In that capacity, his official duties included: voting on legislation, representing and advocating for the interests of his constituents, and allocating New York City funds to non-profit organizations.
The Council Discretionary Funds Scheme
From 2002 through 2009, SEABROOK directed numerous city contracts valued at more than $2 million to purportedly independent non-profit organizations supposedly doing community-benefit work in the north Bronx. In fact, however, SEABROOK controlled these non-profit organizations, negotiating the leasing of their office space, creating their budgets, and making their personnel decisions.
The non-profit organizations SEABROOK controlled were funded exclusively by funds allocated by the Council, primarily at the direction of SEABROOK. Hundreds of thousands of dollars in Council funds received by the non-profit organizations were disbursed among SEABROOK’s girlfriend, brother, two sisters, and nephew.
SEABROOK knew these non-profit organizations were not doing enough legitimate work to justify the funds they were receiving from the Council, so to continue the City’s disbursement of funds, SEABROOK and others made misrepresentations to the City and to the Council. Specifically, they failed to disclose that the non-profit organizations were associated with SEABROOK, that the organizations lacked the ability to perform the contracts being awarded to them, and that the funds allocated to the organizations would benefit SEABROOK’s friends and family. SEABROOK and others also made false and inflated claims to the City and to the Council about the expenses that the non-profit organizations were incurring.
Furthermore, rather than leasing space directly from the landlords of the properties they used, SEABROOK arranged for his non-profit organizations to enter into fraudulent and inflated subleases with another organization he controlled (called the African-American Bronx Unity Day Parade, or the “Unity Day Parade”) which in turn leased the space directly from the actual landlords. Each year, three of SEABROOK’s non-profit organizations paid the Unity Day Parade a substantially greater amount than the rent paid to the actual landlord. In connection with this rent scheme alone, SEABROOK and his co-conspirators defrauded the City of more than $95,000.
The FDNY Diversity Program Scheme
In the summer of 2005, in an effort to increase diversity in the ranks of the New York City Fire Department (the “FDNY”), the Council allocated approximately $1.5 million to, among other things, recruit and train minorities to pass the firefighter examination.
In 2006, SEABROOK recommended to the Council that one of the non-profit organizations he controlled, the North East Bronx Redevelopment Corporation (“NEBRC”), receive approximately $300,000 of funds that the Council had allocated to the FDNY diversity initiative through John Jay College of Criminal Justice (the “College”). The Council allocated $750,000 to the College, and directed the College to subcontract with NEBRC in the amount of $300,000.
SEABROOK made these recommendations even though he knew that the New York Department of Small Business Services (the “NYDSBS”) had audited NEBRC’s contracts to receive Council discretionary funding and found widespread financial mismanagement and accounting improprieties, as well as a failure to achieve the performance goals set by those contracts. Furthermore, SEABROOK and others did not disclose to the Council that the NYDSBS had identified serious problems at NEBRC, that the non-profit was under investigation by the City’s Department of Investigation, or that the funds allocated to NEBRC would benefit individuals close to SEABROOK. Although NEBRC conducted some limited recruitment activity in connection with the FDNY diversity initiative, it did not provide any of the mentoring, training, or physical conditioning that it had represented it would provide. In fact, the Council funds that NEBRC received for the FDNY diversity initiative were disbursed to, among others, SEABROOK’s girlfriend; SEABROOK’s sister, who served as a “consultant” for the initiative and was paid $10,000 to write a six-page report; and SEABROOK’s nephew.
The “Jobs To Build On Program” Scheme
In 2007, the Council allocated millions of dollars to the Jobs To Build On Program (“JTBO”), a job training and employment initiative spearheaded by SEABROOK and others. The Consortium for Worker Education (the “CWE”) was eventually charged with the responsibility of administering JTBO funds.
The CWE sought to identify community-based organizations with which it could partner to more effectively provide employment and training services throughout the City in connection with the JTBO initiative. SEABROOK recommended that the CWE partner with NEBRC, falsely representing that it was an entity with which the CWE could contract to effectively provide recruitment for employment and training services. The CWE entered into a $350,000 contract with NEBRC.
On a number of occasions when a program coordinator for the CWE made an unannounced visit to NEBRC’s office, the office was closed. The CWE also found that NEBRC grossly underperformed the services it was obligated to provide under the contract and provided inadequate or false documentation in support of the services it was allegedly providing and the expenses it was incurring pursuant to its contract. Again, the Council funds that NEBRC received for the JTBO initiative were disbursed to, among others, SEABROOK’s girlfriend and SEABROOK’s nephew.
In addition to his prison term, SEABROOK, 61, of the Bronx, New York, was sentenced to two years of supervised release, and was ordered to pay $619, 715.24 in restitution and to forfeit $418, 252.53, to be returned to the City as part of the restitution. He was also ordered to pay a $100 special assessment fee.
In sentencing SEABROOK, Judge Batts remarked: “[Seabrook] held himself above the law, and betrayed the public trust.”
Mr. Bharara praised the work of the New York City Department of Investigation in this case.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Karl Metzner, Randall Jackson, and Steve Lee are in charge of the prosecution.
Former Head of Major New York Caviar Distributor Sentenced in Manhattan Federal Court and Will Be Deported for Multi-Million Dollar Customs Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York announced that Italian citizen ISIDORO “MARIO” GARBARINO was sentenced today in Manhattan federal court to time served – approximately four months in prison – and will be deported for unlawfully importing more than 100,000 pounds of Russian and Iranian caviar, valued at more than $10 million, into the U.S. between 1984 and 1987. GARBARINO was first arrested on these charges in July 1987, but fled the country in July 1989 while he was free on bail. He remained a fugitive until his arrest by the U.S. Marshals in September 2012, and ultimately pled guilty in November 2012. GARBARINO was sentenced today by U.S. District Judge Kevin Thomas Duffy.
According to the Complaint, the Indictment, GARBARINO’s plea agreement, statements made in court proceedings, and other public documents:
At the time of his arrest in 1987, GARBARINO was the president and owner of the now-defunct Aquamar Gourmet Imports, Inc. (“Aquamar”), a company that supplied luxury food items, including Russian and Iranian caviar, to prominent New York City gourmet stores such as Zabar’s, and to some of the world’s largest air and cruise lines. At that time, certain Russian and Iranian goods that were imported into the U.S., including caviar, were taxed at a high rate—approximately 30 percent.
Between 1984 and 1987, GARBARINO and Aquamar used several schemes to avoid the tariffs, which were administered according to the value of the goods being imported. For example, GARBARINO would significantly understate the weight and value of the caviar he was importing by placing orders for thousands of pounds of caviar—with a wholesale value of hundreds of thousands of dollars—while declaring to the United States Customs Service that he was importing a small fraction of that amount. In another scheme, GARBARINO would arrange for Russian or Iranian caviar to land at John F. Kennedy International Airport in New York, purportedly for immediate exportation to customers overseas. Immediate exports, which were never supposed to leave the airport, were exempt from U.S. tariffs. GARBARINO, however, would secretly substitute much cheaper American caviar for the expensive Russian or Iranian caviar that had just arrived. He would then export the domestic goods, and unlawfully import and sell the foreign caviar to his U.S. customers. In so doing, GARBARINO avoided paying the required tariffs to the United States for the expensive foreign caviar, and defrauded his international customers who were paying full price for the imported caviar, but were instead receiving the cheaper American caviar. Through these schemes, GARBARINO was able to unlawfully import more than 100,000 pounds of Russian and Iranian caviar into the United States with a then-wholesale value in excess of $10 million.
Prior to today’s sentencing and as a condition of his plea agreement with the Government, GARBARINO, 69, paid $3 million in restitution to the U.S. Customs and Border Protection which represents the duties, penalties, and accrued interest owed for the unlawfully imported caviar described above.
Mr. Bharara thanked the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and its predecessor, the U.S. Customs Service, for their assistance in the investigation.
The case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Edward B. Diskant is in charge of the prosecution.
Russian Citizen Sentenced in Manhattan Federal Court to Three Years in Prison for Sophisticated International Cyber CrimesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that VLADIMIR ZDOROVENIN, a Russian national, was sentenced today in Manhattan federal court to three years in prison in connection with a series of sophisticated international cyber crimes. ZDOROVENIN, who was initially charged in January 2012 with his son, Kirill Zdorovenin, pled guilty in February 2012 to one count of conspiracy to commit wire fraud and one count of wire fraud, for his involvement in the schemes. He was sentenced today by U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Preet Bharara said: “From his perch halfway across the globe, Vladimir Zdorovenin engaged in a slew of cyber crimes that left multiple victims in the United States. Cybercrime is particularly insidious because there is no need for geographic proximity between perpetrators and their victims, and Zdorovenin’s sentence today should serve as a reminder to others that law enforcement does not require geographic proximity to prosecute these crimes either.”
According to documents filed in Manhattan federal court and statements made during court proceedings:
While in Russia between 2004 and 2005, ZDOROVENIN engaged in a series of crimes that victimized citizens of the United States through the use of stolen credit card information, multiple phony websites, and bank accounts in Russia and Latvia. Specifically, he conspired to steal victims’ personal identification information, including credit card numbers, through the use of computer programs that were surreptitiously installed on victims’ computers and that recorded the information as it was entered by the victims. He also conspired to purchase stolen credit card numbers from other individuals, and to use the stolen credit card information to make what appeared to be legitimate purchases of goods from various Internet businesses including Sofeco LLC, Pintado LLC, and Tallit LLC. However, the purchases were fraudulent and were used as a means of deceiving banks, credit card service processors, credit card holders, and others. In fact, ZDOROVENIN stole the money directed to the websites through the fraudulent and unauthorized charges he and a co-conspirator caused to be made on the stolen credit cards.
Additionally, ZDOROVENIN conspired to use the Internet to unlawfully access the financial services accounts of victims located in the United States and then transferred or attempted to transfer hundreds of thousands of dollars from those accounts to bank accounts under his and a co-conspirator’s control. Finally, after taking over victims’ online brokerage accounts, ZDOROVENIN and a co-conspirator bought and sold thousands of shares of certain companies’ stock in an effort to manipulate the prices of those stocks. ZDOROVENIN and the co-conspirator realized profits through this scheme by simultaneously purchasing or selling shares of the same stocks through an online brokerage account, maintained in the name of Rim Investment Management, Ltd.
In addition to his prison term, ZDOROVENIN, 55, of Moscow, Russia, was ordered to forfeit up to $1 million, and pay restitution in an amount to be determined within 90 days.
Mr. Bharara praised the outstanding investigative work of the FBI.
This case is being handled by the Office's Complex Frauds Unit. Assistant U.S. Attorneys James J. Pastore, Jr. and Thomas G.A. Brown are in charge of the prosecution.
Kirill Zdorovenin, ZDOROVENIN’s son and co-conspirator, remains at large. The charges against Kirill Zdorovenin are merely accusations, and he is presumed innocent unless and until proven guilty.
Manhattan U.S. Attorney and FBI Assistant Director-In-Charge Announce Arrest of New Jersey Resident for Kidnapping ConspiracyRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced the arrest of MICHAEL VANHISE for conspiracy to commit kidnapping. VANHISE allegedly agreed to pay co-conspirator Gilberto Valle, who was an active-duty New York City Police Officer at the time, to kidnap a woman in New York (the “Victim”), and to bring her to his home in New Jersey, where she would be raped. He also allegedly participated in planning the kidnapping of a female minor. VANHISE was arrested by FBI special agents this morning at his residence in Hamilton, New Jersey, and will be presented later today before U.S. Magistrate Judge Andrew J. Peck in Manhattan federal court.
Manhattan U.S. Attorney Preet Bharara said: “As alleged in the complaint, Michael Vanhise engaged in conduct that reads like a script for a bad horror film, but fortunately, neither he nor his co-conspirators were able to act out the twisted conspiracies described in the complaint in real-life. His arrest today is the second in this bone-chilling case, but we are not finished.”
FBI Assistant Director-in-Charge George Venizelos said “The seriousness of the alleged conspiracy is self-evident. No effort to characterize the defendant’s actions is necessary. The factual allegations more than suffice to convey the depravity of the offense.
According to the allegations in the Complaint filed yesterday in Manhattan federal court, and other public documents:
In a February 2012 email conversation, VANHISE and Valle negotiated and agreed that Valle would kidnap the Victim for $5,000. In those conversations, VANHISE and Valle planned for Valle to render the Victim unconscious, bind her hands and feet, gag her, stuff her into a large suitcase, and deliver her to VANHISE’s home. Valle assured VANHISE that the Victim would be delivered alive, so that he could rape her.
VANHISE also emailed photographs of a female minor, whom VANHISE knew well, to other co-conspirators (“CC-2” and “CC-3”). CC-2 and CC-3 both expressed interest in kidnapping the child, and he provided them with the purported address of the girl, which was in close proximity to the girl’s actual home address.
VANHISE, 22, is charged with one count of conspiracy to commit kidnapping, which carries a maximum sentence of life in prison, and a maximum fine of $250,000 or twice the gross gain or gross loss from the offense.
Valle, 28, of Forest Hills, New York, was charged in October 2012 with one count of kidnapping conspiracy, and one count of intentionally and knowingly accessing a computer without authorization, and exceeding his authorized access, and thereby obtaining information from a department and agency of the United States. His case remains pending.
Mr. Bharara praised the outstanding investigative work of the FBI. He added that the investigation is continuing.
The prosecution of this case is being handled by the Office's Violent Crimes Unit. Assistant United States Attorneys Hadassa Waxman and Randall W. Jackson are in charge of the prosecution.
The charges against VANHISE and Valle are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
U.S. v. Michael Vanhise Complaint
Swiss Bank Pleads Guilty in Manhattan Federal Court to Conspiracy to Evade TaxesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, and Richard Weber, the Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the guilty plea of WEGELIN & CO. (“WEGELIN”), a Swiss private bank, for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret Swiss bank accounts and the income generated in these accounts from the Internal Revenue Service (the “IRS”). One of the managing partners of WEGELIN, Otto Bruderer, appeared on behalf of the bank to enter the guilty plea before U.S. District Judge Jed S. Rakoff. This case represents the first time that a foreign bank has been indicted for facilitating tax evasion by U.S. taxpayers and the first guilty plea by a foreign bank to tax charges.
As part of its guilty plea, WEGELIN agreed to pay approximately $20 million in restitution to the IRS and to pay a $22.05 million fine. In addition, WEGELIN agreed to the civil forfeiture of an additional $15.8 million, representing the gross fees earned by the bank on the undeclared accounts of U.S. taxpayers. Together with the April 2012 forfeiture of over $16.2 million from WEGELIN’s correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million.
Manhattan U.S. Attorney Preet Bharara said: “There is no excuse for wealthy Americans flouting their responsibilities as citizens of this great country to pay their taxes, and there is no excuse for foreign financial institutions helping them to do so. Wegelin became a haven for U.S. taxpayers seeking to circumvent the tax code by hiding their money in secret off-shore accounts, and the bank willfully and aggressively jumped in to fill a void that was left when other Swiss banks abandoned the practice due to pressure from U.S. law enforcement. Today’s guilty plea is a watershed moment in our efforts to hold to account both the individuals and the banks – wherever they may be in the world – who are engaging in unlawful conduct that deprives the U.S. Treasury of billions of dollars of tax revenue. We will continue our efforts until this practice is eliminated in its entirety.”
Assistant Attorney General Keneally said: “Today, Wegelin was held responsible for unlawfully helping U.S. taxpayers who had fled from UBS and other banks hide their income and assets from the IRS. As I have said, it is a high priority of the Department of Justice to find those who continue to shirk their tax obligations, as well as those who would profit by helping them do so. The best deal now for these folks is to come in and “get right” with the I.R.S., before either the I.R.S. or the Justice Department finds them.”
IRS-CI Chief Richard Weber said: “Today, we witnessed another historic event in the enforcement of offshore tax evasion and foreign banks. Wegelin & Co., Switzerland’s oldest bank, pleaded guilty to tax charges. Banks who facilitate tax evasion face serious consequences, including criminal charges, steep fines and restitution. IRS-CI continues to be vigilant in the investigation of offshore tax evasion.”
According to the Superseding Indictment, the February 2012 civil forfeiture Complaint filed against the funds in WEGELIN’s correspondent bank account, and statements made during WEGELIN’s guilty plea today:
Founded in 1741, WEGELIN is Switzerland’s oldest bank. It provided private banking, asset management, and other services to clients around the world, including U.S. taxpayers living in the Southern District of New York. WEGELIN had no branches outside Switzerland, but it directly accessed the U.S. banking system through a correspondent bank account that it held at UBS AG (“UBS”) in Stamford, Connecticut. As of December 2010, WEGELIN had approximately $25 billion in assets under management.
From 2002 through 2011, WEGELIN conspired with various U.S. taxpayers and others, to hide from the IRS the existence of bank accounts held at WEGELIN, and the income generated in those secret accounts. WEGELIN carried out this scheme through among others, client advisers Michael Berlinka (“Berlinka”), Urs Frei (“Frei”), and Roger Keller (“Keller”), who began working at WEGELIN in 2008, 2006, and 2007, respectively.
In 2008 and 2009, WEGELIN opened and serviced dozens of new undeclared accounts for U.S. taxpayers in an effort to capture clients lost by UBS in the wake of widespread news reports that UBS was being investigated by U.S. authorities for helping U.S. taxpayers evade taxes and hide assets in Swiss bank accounts. By mid-2008, UBS had stopped servicing undeclared accounts for U.S. taxpayers.
In the wake of the U.S. investigation of UBS, members of WEGELIN’s senior management decided to take steps to capture the illegal business that UBS had exited. To capitalize on the business opportunity this presented and to increase its assets under management, and the fees earned from managing those assets, WEGELIN employees told various U.S. taxpayer-clients that their undeclared accounts would not be disclosed to the United States authorities because the bank had a long tradition of secrecy. They also persuaded U.S. taxpayer-clients to transfer assets from UBS to WEGELIN by emphasizing that, unlike UBS, WEGELIN did not have offices outside of Switzerland and was therefore less vulnerable to United States law enforcement pressure. Members of WEGELIN’s senior management approved efforts to capture the clients who were leaving UBS and also participated in some meetings with U.S. taxpayer-clients who were fleeing UBS.
In February 2009, UBS entered into a deferred prosecution agreement with the Department of Justice on charges of conspiring to defraud the United States by impeding the IRS. As part of the deferred prosecution agreement, UBS paid $780 million in fines, penalties, interest, and restitution.
To further the goals of the conspiracy from 2002 through 2011, WEGELIN took steps that included the following:
- Opening and servicing undeclared accounts for U.S. taxpayer-clients in the names of sham corporations and foundations formed under the laws of Liechtenstein, Panama, Hong Kong, and other jurisdictions for the purpose of concealing some clients’ identities from the IRS;
- Accepting documents that falsely declared that the sham entities were the beneficial owners of certain accounts, when in fact the accounts were beneficially owned by U.S. taxpayers, and making them part of WEGELIN’s client files;
- Permitting certain U.S. taxpayer-clients to open and maintain undeclared accounts at WEGELIN using code names and numbers to minimize references to the actual names of the U.S. taxpayers on Swiss bank documents;
- Ensuring that account statements and other mail for U.S. taxpayer-clients were not mailed to them in the United States;
- Communicating with some U.S. taxpayer-clients using their personal email accounts to reduce the risk of detection by law enforcement; and
- Issuing checks drawn on, and executing wire transfers through, its U.S. correspondent bank account for the benefit of U.S. taxpayers with undeclared accounts at WEGELIN and at least two other Swiss banks. In so doing, WEGELIN sometimes separated the transactions into batches of checks or multiple wire transfers in amounts that were less than $10,000 to reduce the risk that the IRS would detect the undeclared accounts.
U.S. taxpayers are required to report the existence of any foreign bank account on their federal income tax returns if it holds more than $10,000 at any time during a given year, as well as any income it earns.
By 2010, the collective maximum value of the assets in undeclared accounts beneficially owned by U.S. taxpayer-clients of WEGELIN was more than $1.2 billion, with many accounts holding more than $10,000 in any one year.
The April 2012 forfeiture of approximately $16.2 million from WEGELIN’s correspondent bank account was the result of a civil forfeiture Complaint filed in February 2012. As alleged in the Complaint, WEGELIN used its correspondent bank account at UBS to help U.S. taxpayers with undeclared accounts repatriate money that they had hidden at WEGELIN. This was often done in a manner designed to evade detection by U.S. authorities. For example, U.S. taxpayers routinely asked WEGELIN to issue and send them checks, which were drawn on WEGELIN’S correspondent bank account, and that represented funds held in their secret accounts at the bank. Further, WEGELIN permitted at least two other Swiss banks to issue checks drawn on its correspondent bank account for the benefit of U.S. taxpayers holding undeclared accounts at these other banks. The sheer volume of transactions in WEGELIN’s correspondent bank account served to conceal the repatriation of money from U.S. taxpayers’ undeclared accounts at WEGELIN and the other banks. On April 24, 2012, U.S. District Judge Laura Taylor Swain entered an order forfeiting over $16.2 million seized from the U.S. correspondent account of WEGELIN. As part of its plea agreement, WEGELIN agreed not to contest the April 2012 forfeiture.
By entering its guilty plea in this case, WEGELIN waived any objections to service of the summons and the Superseding Indictment in this case and agreed, as part of its plea agreement, not to contest service of process in this case in the future.
In entering the guilty plea on WEGELIN’s behalf, Bruderer admitted, among other things, that “[f]rom about 2002 through about 2010, Wegelin agreed with certain U.S. taxpayers to evade the U.S. tax obligations of these U.S. taxpayer clients, who, among other things, filed false tax returns with the IRS.” Bruderer also admitted that “[i]n furtherance of its agreement to assist U.S. taxpayers to commit tax evasion in the United States, Wegelin, among other things, opened and maintained accounts at Wegelin in Switzerland for U.S. taxpayers who did not complete W-9 tax disclosure forms.” A W-9 is an IRS form used through which U.S. taxpayers can identify themselves as such to a bank, thereby causing the bank to report income generated in the U.S. taxpayers’ account to the IRS.
Bruderer further admitted that “Wegelin knew that certain U.S. taxpayers were maintaining non-W-9 accounts at Wegelin in order to evade their U.S. tax obligations, in violation of U.S. law, and Wegelin knew of the high probability that other U.S. taxpayers who held non-W-9 accounts at Wegelin also did so for the same unlawful purpose.” Bruderer also admitted that “Wegelin intentionally opened and maintained non W-9 accounts for [certain U.S.] taxpayers with the knowledge that, by doing so, Wegelin was assisting these taxpayers in violating their legal duties” and that “Wegelin was aware that this conduct was wrong.”
WEGELIN is headquartered in St. Gallen, Switzerland, and, in addition to the payment of restitution, faces a fine of up to approximately $40,000,000, representing twice the gross pecuniary loss to the IRS.
Berlinka, 42, Frei, 52, and Keller, 48 – who all reside in Switzerland – were charged in the Indictment in January 2012 and the Superseding Indictment in February 2012. They each face a maximum term of five years in prison, a maximum term of three years of supervised release, and a fine of the greatest of $250,000, or twice the gross pecuniary gain derived from the offense or twice the gross pecuniary loss to the victims. Berlinka, Frei, and Keller have not been arrested.
WEGELIN is scheduled to be sentenced by Judge Rakoff on March 4, 2013, at 4:00 p.m.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation. He also thanked the U.S. Department of Justice’s Tax Division and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Miami Foreign Corruption Investigations Group for their significant assistance in the investigation.
This criminal case is being handled by the Office’s Complex Frauds Unit and the civil forfeiture proceedings are being handled by the Office’s Asset Forfeiture Unit. Assistant U.S. Attorneys David B. Massey, Daniel W. Levy, and Jason H. Cowley are in charge of the prosecution and civil forfeiture proceedings.
The charges and allegations contained in the Indictment and Superseding Indictment as against the remaining defendants – Berlinka, Frei, and Keller – are merely accusations, and those defendants are presumed innocent unless and until proven guilty.
U.S. v. Wegelin & Co. S1 Indictment
Pearl River Man Charged with Illegal Distribution of Oxymorphone Causing the Overdose Death of 21-Year Old ManRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, Brian Crowell, the Special Agent-in-Charge of the New York Field Division of the U.S. Drug Enforcement Administration (“DEA”), George Longworth, the Commissioner of Westchester County Department of Public Safety, Thomas Zugibe, the Rockland County District Attorney, and Kevin Nulty, the Chief of the Orangetown Police Department, announced the arrest this morning of CRAIG OLEKSOWICZ for illegally distributing oxymorphone, a Schedule II controlled substance, the use of which caused the October 2011 death of another individual, a 21-year-old man in Pearl River, New York. OLEKSOWICZ was additionally charged with illegally distributing codeine, methadone, and Valium pills. OLEKSOWICZ was presented today before U.S. Magistrate Judge George A. Yanthis in White Plains federal court.
U.S. Attorney Preet Bharara stated: “As has been reported, prescription drug trafficking and abuse is an exploding epidemic, claiming the lives of almost 15,000 people a year, more than illegal street drugs like heroin and cocaine combined. As alleged, the defendant was essentially an outlaw pharmacy, and worse, a lethal one. The illegal dealers of prescription drugs will not get any easier treatment from this Office simply because what they are selling can be legally used when properly prescribed. We will not relent in combating this new drug scourge. We commend the teamwork and professionalism of our federal and local partners that led to this arrest.”
DEA Special Agent-in-Charge Brian Crowell stated: “There is zero difference between the local street drug dealer selling heroin to that of a person selling illegally obtained prescription pain medication. Some of these diverted pills, like Opana, are known on the streets as ‘Stop Signs’, due to its shape. The misuse of this and other diverted pain medicine can cause people to become addicts leading to tragic overdoses. Diverted pain pills, not prescribed for the right reasons nor by the right doctor, and sold to people on the street, are the leading cause of overdoses and deaths in our region. Many continue to believe the illegal distribution of pain medications is harmless, this charge and arrest should make clear there is no difference between selling pain medication not prescribed by a doctor and supplying heroin.”
Westchester County Department of Public Safety Commissioner George Longworth stated: “This investigation is another example of the tremendous collaboration that exists among federal, county and local law enforcement agencies in the Hudson Valley. The Department of Public Safety is committed to continuing to work with all our law enforcement partners to combat narcotics trafficking in our communities.”
Rockland County District Attorney Thomas Zugibe stated: “This defendant is accused of trafficking in drugs which are extremely potent and sometimes deadly. Rockland County has seen a huge rise in the use and abuse of prescription painkillers, such as Opana. In fact, the White House Office on National Drug Policy says prescription drug abuse is the nation's fastest-growing drug problem, responsible for the deaths of more Americans than heroin and cocaine combined. My thanks to the members of the Rockland County Drug Task Force, the Orangetown Police Department Detective Bureau and the DEA's Diversionary Unit for partnering in this investigation. All levels of law enforcement must continue working together to battle our growing pill epidemic.”
Orangetown Police Department Chief Kevin Nulty stated: “It was sad for me to see a young man from my own neighborhood in Orangetown die as a result of being illegally sold a prescription narcotic substance. The death was very real to me. I greatly commend the work of the investigators from my department and the US Drug Enforcement Administration who worked very hard in identifying the parties responsible for the drug sale of that caused this death. I am very pleased that this case has been brought to a successful closure. Stopping the epidemic of the sale of and illicit use of prescription drugs is a new challenge for law enforcement agencies across the United States. We will continue to work with our local, state and federal partners in our public education, prevention and enforcement efforts.”
According to the Indictment, which was unsealed today in White Plains federal court, and other public documents:
Between at least February 2011 and October 2011, OLEKSOWICZ, 37, of Pearl River, New York, and others regularly distributed OLEKSOWICZ’s prescription oxymorphone pills for profit. Oxymorphone is a powerful painkiller with a high potential for addiction and abuse, and its improper use may be fatal. In October 2011, the use of oxymorphone pills supplied by OLEKSOWICZ caused the overdose death of a young man residing in Pearl River, New York. Following that death, OLEKSOWICZ continued his illegal distribution of pills, selling codeine, methadone, and Valium pills on at least three separate occasions in February 2012.
If convicted, OLEKSOWICZ faces a mandatory minimum penalty of 20 years in prison, a maximum penalty of life in prison, and a maximum fine of $1 million or twice the gain or loss resulting from the crime.
Mr. Bharara praised the investigative efforts of the DEA, the Westchester County Department of Public Safety, the Rockland County Drug Task Force, and the Orangetown Police Department. He also thanked the Rockland County District Attorney’s Office for its assistance in the case.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Christopher J. DiMase and Abigail S. Kurland 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. Craig Oleksowicz Indictment
Manhattan U.S. Attorney Announces Arrest of Business Owner for Failing to Pay More Than $250,000 in Payroll TaxesRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, and Toni Weirauch, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the indictment of TREVOR WHITTINGHAM, an owner of parking lots in Manhattan, for a scheme in which he allegedly failed to pay more than $245,000 in payroll taxes to the IRS. WHITTINGHAM was arrested this morning at his residence in Fort Lee, New Jersey, in connection with today’s charges and will be presented and arraigned before U.S. District Judge Richard J. Sullivan at 3:30 p.m. this afternoon.
According to the allegations contained in the Indictment unsealed today in Manhattan federal court:
WHITTINGHAM owned and controlled two companies, EZ Going Park Here and We Have Cars II, through which he operated parking lots in Harlem and other parts of upper Manhattan, New York. WHITTINGHAM was responsible for collecting, accounting for and paying payroll taxes on behalf of both of these companies. From December 2006 through June 2009, WHITTINGHAM caused EZ Going Park Here and We Have Cars II to deduct and collect payroll taxes from its employees. The majority of those payroll taxes, however, were not paid over to the IRS as required. Instead, WHITTINGHAM used the corporate funds of EZ Going Park Here and We Have Cars II to pay for various personal items and otherwise finance a lavish lifestyle. As a result, from 2005 through 2009 EZ Going Park Here and We Have Cars II accumulated approximately $251,265 in unpaid payroll tax liabilities.
WHITTINGHAM, 63, is charged with 13 counts of failing to pay over payroll taxes to the IRS. He faces a maximum sentence on each count of five years in prison, or a total of 65 years in prison on all counts.
Mr. Bharara praised the efforts of IRS-CI in the investigation. He also thanked the U.S. Department of Justice’s Tax Division for their significant assistance in the investigation.
This case is being handled by the Office’s Complex Frauds Unit. Special Assistant U.S. Attorney Andrew Young is in charge of the prosecution.
The charges and allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. v. Trevor Whittingham Indictment
Former President of International Outdoor Advertising Company Sentenced in Manhattan Federal Court to Four Months in Prison for Orchestrating $19.75 Million Accounting Fraud SchemeRead the Press Release
Preet Bharara, the United States Attorney for the Southern District of New York, announced that TODD HANSEN, the former President of the United States division of an international outdoor advertising company (the “Company”), was sentenced today in Manhattan federal court to four months in prison, in connection with his participation in a five-year, $19.75 million accounting fraud scheme designed to make it appear that the Company was meeting certain performance targets so that he could receive higher salary increases and bonuses. HANSEN pled guilty in June 2012 to one count of conspiracy to commit wire fraud, and one substantive count of wire fraud. He was sentenced by U.S. District Judge Jed S. Rakoff.
According to the Complaint and the Indictment filed in Manhattan federal court:
From 2004 until 2009, HANSEN served as President of the Company, a wholly-owned subsidiary of a United Kingdom corporation, with its common stock listed on the London Stock Exchange. HANSEN, together with Finance Director, James Buckley, directed the Company’s controller (the “Controller”) to make fictitious accounting entries in the Company’s books and records in order to give the appearance that the Company was meeting its monthly performance targets. To create these inflated income figures, HANSEN directed the Controller to record higher monthly revenues from either false client billings or rebates on certain goods and services that the Company was purportedly receiving from some of its vendors.
The false accounting entries resulted in the preparation of financial statements that reflected artificially inflated monthly income amounts for the Company. HANSEN was thereby able to create the misimpression that the Company was meeting its projected financial performance goals. During this five-year period, the fraudulent entries HANSEN requested resulted in a total overstatement of the Company’s net income by approximately $19.75 million. As a result of meeting these fictitious performance goals, HANSEN was paid approximately $1.1 million in salaries and bonuses over the five-year period.
In addition to the accounting fraud scheme, during this same time period, HANSEN misused tens of thousands of dollars of Company funds to pay for expenses and fees that directly benefitted him, his family, and friends, and that were unrelated to the Company’s legitimate business.
In addition to the prison term, Judge Rakoff sentenced HANSEN, 49, of Bakersfield, California, to three years of supervised release. HANSEN was also ordered to pay $231,000 in restitution and forfeit $173,450.90.
James Buckley, 49, of Westwood, New Jersey, was sentenced by Judge Rakoff on October 16, 2012 to time served, followed by one year of supervised release, and ordered to pay $26,872.22 in restitution.
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 U.S. Attorneys Christopher D. Frey and Nicole Friedlander are in charge of the prosecution.
U.S. Attorney’S Office for the Southern District of New York Recovers over $3.5 Billion from Criminal and Civil Cases in FY 2012Read the Press Release
In Largest Single-Year Recovery Since Forfeiture Funds Were Established, Office Collected 68% of the National Total For All Asset Forfeiture Actions
Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the Office collected more than $2.98 billion in forfeiture actions in Fiscal Year (FY) 2012, representing the largest amount collected in a given year by any office since the United States’ asset forfeiture funds were established in the 1980s. The office also collected $526.7 million from civil actions and $76.8 million in restitution, criminal fines, and special assessments in FY 2012.
Manhattan U.S. Attorney Preet Bharara said: “Effective law enforcement punishes those who break laws and sends a message of deterrence whenever possible. As part of that effort, it is critical to strip defendants of their ill-gotten money and property, and where appropriate, impose fines and penalties. Our aim is not only to take the profit out of crime and the profit incentive away from civil offenders, but also to compensate victims and put money back into government. As this year’s record-setting asset forfeiture numbers reflect, our commitment to these law enforcement principles is unrelenting. The assets we collected also fund vital law enforcement programs at both the state and local levels. It is extremely gratifying that our Office, teamed with our agency partners, has been so successful at taking away the proceeds of crime and compensating victims.”
U.S. Attorney’s offices nationwide collected $4.389 billion in asset forfeiture actions in FY 2012. Of that $4.389 billion, 68% was collected by the U.S. Attorney’s Office for the Southern District of New York. Forfeited funds are deposited into the Department of Justice Assets Forfeiture Fund (the “Assets Forfeiture Fund”) and the Department of Treasury Forfeiture Fund. The forfeited funds are used to restore money to crime victims and for a variety of law enforcement purposes. In FY 2012, the U.S. Attorney’s Office for the Southern District of New York returned more than $1.24 billion to crime victims, 79% of the national total.
The $526.7 million collected by the Office’s Civil Frauds Unit came primarily from affirmative civil actions in which the Office collected government money lost due to fraud or other misconduct, or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights, or environmental laws.
Nationwide, the U.S. Attorneys’ offices collected $13.1 billion in criminal and civil actions during FY 2012, more than doubling the $6.5 billion collected in FY 2011. A portion of this amount, $5.3 billion, was collected in shared cases in which one or more U.S. Attorneys’ offices or department litigating divisions were also involved. The $13.1 billion represents more than six times the appropriated budget of the combined 94 offices for FY 2012.
Below are summaries of some of the cases in which the Office obtained substantial forfeitures or provided significant restoration to victims in FY 2012:
Madoff Ponzi Scheme
The Asset Forfeiture Unit has collected approximately $2.35 billion to date in connection with the massive fraud perpetrated through Bernard L. Madoff Investment Securities (BLMIS), and continues to preserve and recover assets that ultimately will be used to compensate victims of the massive fraud. The amount collected in FY 2012 - $2.222 billion - came from two major settlements:
Jeffry Picower
$2.2 billion forfeited
In December 2010, the estate of BLMIS longtime, high-wealth customer Jeffry Picower, agreed to the forfeiture of more than $7.2 billion. The Office agreed to credit to the forfeiture a $5 billion payment to settle claims brought by Securities Investor Protection Corporation (“SIPC”) Trustee Irving Picard. In August 2012, the Court of Appeals issued a mandate rejecting the objections to the Picower settlement, making final the forfeiture of approximately $7,209,742,817 from the Picower Estate and providing for the deposit of more than 2.2 billion in the Assets Forfeiture Fund.
Carl Shapiro
$22 million forfeited
In December 2010, BLMIS longtime, high-wealth customer Carl Shapiro, agreed to the forfeiture of $625 million. The Office agreed to credit to the forfeiture a $550 million payment to settle claims brought by Securities Investor Protection Corporation (“SIPC”) Trustee Irving Picard. Approximately $22 million of the remaining forfeiture obligation was collected by the Office and deposited to the Assets Forfeiture Fund in FY2012, bringing the total forfeited by Shapiro to approximately $60 million.
Monies collected by the Office in connection with the Madoff cases will be distributed to victims in accordance with the Department of Justice remission process. Richard C. Breeden was recently retained to serve as Special Master on behalf of the Department to administer that process and we expect the victim claims process to begin shortly.
CityTime Fraud
500.3 million forfeited; $466 million remitted to the City of New York
In March 2012, as part of a Deferred Prosecution Agreement, Science Applications International Corporation (SAIC), the primary contractor on New York City's “CityTime” payroll project, forfeited $500,392,977 in connection with its role in a fraud and kickback scheme. As compensation for its losses on the CityTime project, $466,093,333.53 was remitted to the City. The mayor’s office stated that this compensation enabled the City to fill more than 2,500 teaching positions that were to be eliminated in the budget for the coming fiscal year, while avoiding tax increases or layoffs of police officers or firefighters.
Adelphia Securities Fraud
More than $728.9 million remitted to victims
In April and May 2012, more than $728.9 million forfeited in connection with the Office’s investigation and prosecution of the Adelphia Communications Corporation securities fraud was distributed to victims who suffered financial losses as a direct result of the fraud. In July
2004, John Rigas, the founder and former Chairman and Chief Executive Officer of Adelphia, and Timothy Rigas, the former Chief Financial Officer, were convicted in Manhattan federal court for their participation in a massive securities fraud scheme to defraud investors, creditors, and the public concerning the financial condition and operating performance of Adelphia. Following the convictions of John and Timothy Rigas, the Office negotiated a settlement that created a fund to compensate defrauded investors. As part of the settlement, the Rigases, as well as other members of the family, agreed to forfeit more than 95% of the family’s assets to the Government. The Adelphia distribution is the largest single distribution of forfeited assets to victims in Department of Justice history.
PokerStars
$158.5 million forfeited
In July 2012, the United States reached an agreement with the two largest online poker companies in the United States, Full Tilt Poker and PokerStars. The United States had brought a civil forfeiture and money laundering action brought by this Office against these companies and their assets. Under the terms of the settlement, Full Tilt forfeited essentially all of its assets to the United States. PokerStars agreed to forfeit $547 Million, to be paid in several installments, and to reimburse the approximately $184 million owed by Full Tilt to foreign players. In order to fully resolve the action, the settlement further provides that PokerStars will acquire the Forfeited Full Tilt Assets from the Government. To date, $158.5 million in funds resulting from the settlement has been received and fully forfeited.
Below are summaries of some of the civil actions in which the Office has obtained substantial recoveries:
Deutsche Bank & MortgageIT Fraud
$202.3 million paid to the United States
In May 2012, the Office reached a settlement with Deutsche Bank and MortgageIt for $202.3 million that resolved a civil fraud Complaint alleging that MortgageIT, and later Deutsche Bank AG, made repeated false certifications to the U.S. Department of Housing and Urban Development (“HUD”) to obtain approval of mortgages that MortgageIT underwriters recklessly endorsed for Federal Housing Administration (“FHA”) insurance. The Complaint also alleged that defendants falsely certified to HUD that MortgageIT maintained a compliant quality control program when it did not. The defendants also admitted, acknowledged, and accepted responsibility for certain misconduct outlined in the Complaint.
CitiMortgage Fraud
$158.3 million paid to the United States
In February 2012, the Office filed, and simultaneously settled, a civil fraud lawsuit for $158.3 million against CitiMortgage, Inc., a subsidiary of CitiBank, N.A., for over six years of misconduct in connection with CitiMortgage’s participation in the FHA’s Direct Endorsement Lender Program. The Complaint alleged that CitiMortgage submitted false certifications stating that certain loans were eligible for FHA mortgage insurance when in fact, they were not. This caused HUD to incur losses when the loans defaulted. In addition, CitiMortgage admitted and accepted responsibility for certain conduct alleged in the Complaint.
City of New York - Personal Care Services Fraud
$70 million paid to the United States
In October 2011, the Office reached a settlement with the City of New York for $70 million in connection with the City’s operation of the Personal Care Services (PCS) program - a Medicaid funded program designed to provide cleaning, shopping, grooming, and basic aid services to eligible Medicaid beneficiaries. The civil health care fraud Complaint alleged that for 10 years, the City improperly overcharged the Medicaid program for the provision of 24-hour personal care services by routinely re-authorizing 24-hour continuous PCS for applicants without the required local medical director assessment; that in some cases, City administrators overruled the findings of the local medical director that PCS services were inappropriate for the patient; and that the City knowingly re-authorized 24-hour care for patients where the nursing and social worker assessments were missing or were not reviewed by the City.
Beth Israel Medical Center Fraud
$13 million paid to the United States
In March 2012, this Office filed, and simultaneously settled, a civil health care fraud lawsuit against Beth Israel Medical Center (“Beth Israel”), recovering $13,031,355 in damages and penalties under the False Claims Act from the hospital. The Complaint alleged that Beth Israel fraudulently inflated its charges to Medicare patients to obtain larger “outlier” reimbursements, which are supplemental reimbursements made in cases where the cost of care is unusually high, from Medicare. In the settlement, Beth Israel admitted, acknowledged, and accepted responsibility for having selectively increased its charges to obtain more outlier payments than it
The Office’s Asset Forfeiture Unit is led by Sharon Cohen Levin and handles all criminal and civil forfeiture actions for the U.S. Attorney’s Office for the Southern District of New York. Civil recoveries are handled by the Office’s Civil Division, which is led by Sara Shudofsky. Criminal and civil collections are handled by the Office’s Financial Litigation Unit, which is led by Kathleen Zebrowski.
For further information, the United States Attorneys’ Annual Statistical Reports can be found online at http://www.justice.gov/usao/resources/reports/.