Southern District of New York

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

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

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

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

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.

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/.