Southern District of New York

The Justice Department announced today that it has obtained a consent decree with the village of Airmont, New York (Airmont), resolving the United States’ lawsuit under the Religious Land Use and Institutionalized Persons Act (RLUIPA). 

The lawsuit alleged that Airmont had revised its zoning code in 2018 to discriminate against Orthodox Jewish residents and make it more difficult for them to worship in their own homes. The consent decree increases the amount of space in private homes that can be used for worship, removes restrictions that limited who residents are allowed to invite into their own homes to pray and eliminates the use of an arbitrary, drawn-out application process designed to delay and effectively deny permits for even minor alterations to private houses. Since 1991, this is the third lawsuit brought by the United States against Airmont for discriminating against the Orthodox Jewish community.

“Zoning laws that intentionally make it more difficult to engage in religious worship and that are designed to impair the rights of obstruct religious communities violate federal law,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This settlement should send a message to officials across the country that we will hold them accountable when they abuse zoning restrictions to stop religious communities from freely exercising their faith. The Justice Department will tirelessly defend the right of all faiths and religions to worship in the manner consistent with their religious beliefs and traditions.”

“When religious intolerance poses a threat to the unity of this nation of many faiths and traditions, it is vital to stand up for the First Amendment right to freedom of worship,” said U.S. Attorney Damian Williams for the Southern District of New York. “While we are pleased that Airmont has agreed to settle this matter, the fact that this is the third time we have sued the Village over similar concerns demonstrates that this office will be ever vigilant in protecting the rights of religious minorities.” 

This consent decree follows the department’s announcement commemorating the 23rd anniversary of the signing of RLUIPA. The department will host a series of outreach events and has released updated informational materials about RLUIPA to provide an overview of the law and the department’s enforcement efforts, as well as information about how to identify and report violations. The department’s first RLUIPA outreach event will take place at Seton Hall Law School in Newark, New Jersey, on Oct. 30. For more information about these events, please see the department’s RLUIPA website. All events will be open to the public.

In June 2018, the Justice Department announced its Place to Worship Initiative, which focuses on RLUIPA’s provisions that protect the rights of houses of worship and other religious institutions to worship on their land. RLUIPA authorizes the department to commence an action against any local government that implements a land use regulation that places a substantial burden on religious exercise, discriminates on the basis of religion, treats religious land uses worse than nonreligious assemblies or totally or unreasonable excludes religious land use. More information is available at www.justice.gov/crt/placetoworship.

Individuals who believe they have been subjected to religious discrimination in land use or zoning decisions may contact the Civil Rights Division’s Housing and Civil Enforcement Section at (833) 591-0291 or may submit a complaint through the complaint portal on the Place to Worship Initiative website. More information about RLUIPA, including questions and answers about the law and other documents, may be found at www.justice.gov/crt/about/hce/rluipaexplain.php.

View the consent decree here.

Damian Williams, the United States Attorney for the Southern District of New York, James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Naomi Gruchacz, the Special Agent in Charge of the New York Regional Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), announced today the unsealing of Superseding Indictments charging BORIS AMINOV, CHRISTY CORVALAN, IRINA POLVANOVA, ROMAN SHAMALOV, JONATHAN GAVRIELOF, ANTONIO PAYANO, DAVID FERNANDEZ, CRYSTAL MEDINA, JUAN HERNANDEZ, a/k/a “Pop,” and ALBERT YAGUDAYEV, a/k/a “Jeff,” in connection with their participation in a years-long scheme to defraud Medicaid, Medicare, and private insurance companies out of at least approximately $20 million.  POLVANOVA, SHAMALOV, and YAGUDAYEV were arrested this morning and GAVRIELOF was arrested yesterday evening.  All four will be presented before Chief U.S. Magistrate Judge James L. Cott today.  AMINOV, CORVALAN, FERNANDEZ, and MEDINA were previously arrested in connection with an earlier indictment in the case, which is assigned to U.S. District Judge Mary Kay Vyskocil.  PAYANO and HERNANDEZ remain at large. 

U.S. Attorney Damian Williams said: “As alleged, the defendants orchestrated a scheme to get rich by lying to Medicaid, Medicare, and private insurance companies and depriving vulnerable HIV patients of legitimate and safe medications.  The defendants allegedly made millions of dollars through submitting fraudulent insurance claims, paying illegal kickbacks, and buying and selling black-market HIV medications.  Today’s charges send a clear message that this Office will be tireless in its pursuit of those who seek to line their pockets by lying to federal agencies and preying on vulnerable members of society.”

FBI Assistant Director in Charge James Smith said: “For more than half a decade, the defendants allegedly operated a health care fraud scheme that defrauded taxpayer-funded medical programs.  Black market medication frauds like this take advantage of vulnerable members of our community, exposing them to unnecessary risks.  The FBI will make sure anyone attempting to illegally benefit from government health care programs is held accountable in the criminal justice system.”

HHS-OIG Special Agent in Charge Naomi Gruchacz said: “Health care fraud schemes that divert HIV medication harm patients who actually need the medication as well as put other patients at risk when black market medications are recirculated and dispensed by pharmacies participating in the scheme.  HHS-OIG will continue to work with our law enforcement partners to hold accountable individuals who exploit federal health care programs for their own greed.”

According to the allegations contained in the Superseding Indictments:[1]

From at least in or about 2017 through at least in or about 2023, AMINOV, CORVALAN, POLVANOVA, SHAMALOV, PAYANO, FERNANDEZ, and MEDINA engaged in a scheme that defrauded Medicaid, Medicare, and private insurance companies out of at least approximately $20 million through trafficking in black-market HIV medication.  In doing so, they exploited at least hundreds of low-income individuals who had been prescribed HIV medication, jeopardizing the health and safety of those vulnerable patients. 

AMINOV and PAYANO distributed black-market HIV medications to pharmacies that were owned and operated by, among others, CORVALAN (the “Corvalan Pharmacies”), POLVANOVA (the “Polvanova Pharmacy”), and SHAMALOV (the “Shamalov Pharmacy”).   

After purchasing black-market medication from AMINOV and PAYANO, CORVALAN, POLVANOVA, and SHAMALOV then dispensed that medication to patients of the Corvalan and Polvanova Pharmacies or otherwise distributed it to other pharmacies.  FERNANDEZ and MEDINA were employees of the Corvalan Pharmacies who participated in the day-to-day operation of the scheme. 

As part of the scheme, CORVALAN, POLVANOVA, FERNANDEZ, MEDINA, HERNANDEZ, and YAGUDAYEV also funded and paid illegal kickbacks to patients in order to recruit patients to their respective pharmacies.  CORVALAN, POLVANOVA, FERNANDEZ, MEDINA, HERNANDEZ, and YAGUDAYEV regularly attempted to recruit new patients to increase the number of prescription medications for which the Pharmacies could fraudulently bill government insurance.  CORVALAN, FERNANDEZ, and MEDINA also paid patients to sell back their HIV medications to the Corvalan Pharmacies, thereby inducing patients to forego using the medications they were prescribed.

From at least in or about 2021 through at least in or about October 2023, SHAMALOV and POLVANOVA engaged in a related scheme where they bought and then re-sold diverted black-market prescription HIV medication through online prescription drug marketplaces to other pharmacies around the country.

In order to further their schemes and conceal their proceeds, CORVALAN, POLVANOVA, and SHAMALOV used bank accounts associated with their respective pharmacies to funnel money to shell companies controlled by AMINOV.

The defendants spent the proceeds of the scheme to purchase luxury cars, including a 2021 Mercedes-Benz Maybach with an estimated fair market value of approximately $245,000; waterfront real-estate, including two properties in the Bronx purchased for a total of approximately $2.4 million; designer clothes; and jewelry and gold. 

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AMINOV, 47, of Brooklyn, New York, is charged with one count of conspiracy to commit wire fraud and health care fraud, which carries a maximum potential sentence of 20 years in prison; one count of conspiracy to commit money laundering, which carries a maximum potential sentence of 20 years in prison; and one count of conspiracy to defraud the United States, which carries a maximum potential sentence of five years in prison.

CORVALAN, 41, of the Bronx, New York, is charged with one count of conspiracy to commit wire fraud and health care fraud, which carries a maximum potential sentence of 20 years in prison; one count of conspiracy to commit money laundering, which carries a maximum potential sentence of 20 years in prison; one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum potential sentence of five years in prison; and one count of conspiracy to defraud the United States, which carries a maximum potential sentence of five years in prison.

POLVANOVA, 47, of Queens, New York, is charged with one count of conspiracy to commit wire fraud and health care fraud, which carries a maximum potential sentence of 20 years in prison; one count of conspiracy to commit money laundering, which carries a maximum potential sentence of 20 years in prison; one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum potential sentence of five years in prison; one count of mail fraud, which carries a maximum potential sentence of 20 years in prison; and one count of conspiracy to defraud the United States, which carries a maximum potential sentence of five years in prison.

SHAMALOV, 47, of Queens, New York, is charged with one count of conspiracy to commit money laundering, which carries a maximum potential sentence of 20 years in prison; one count of mail fraud, which carries a maximum potential sentence of 20 years in prison; and one count of conspiracy to defraud the United States, which carries a maximum potential sentence of five years in prison.

GAVRIELOF, 28, of Woodmere, New York, is charged with one count of conspiracy to defraud the United States, which carries a maximum potential sentence of five years in prison.

PAYANO, 34, of the Bronx, New York, is charged with one count of conspiracy to commit wire fraud and health care fraud, which carries a maximum potential sentence of 20 years in prison, and one count of conspiracy to defraud the United States, which carries a maximum potential sentence of five years in prison.

FERNANDEZ, 24, and MEDINA, 28, both of the Bronx, New York, are charged with one count of conspiracy to commit wire fraud and health care fraud, which carries a maximum potential sentence of 20 years in prison; one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum potential sentence of five years in prison; and one count of conspiracy to defraud the United States, which carries a maximum potential sentence of five years in prison.

HERNANDEZ, 63, of New York, New York, and YAGUDAYEV, 35, of Queens, New York, are charged with one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum potential sentence of five years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Williams praised the outstanding investigative work of the FBI and HHS-OIG.

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Jeffrey W. Coyle and Jackie Delligatti are in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictments and the description of the Indictments set forth herein constitute only allegations, and every fact described herein should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced the guilty plea today of ATUL BHIWAPURKAR in connection with an insider trading scheme to reap illicit profits from inside information about the results of clinical trials of Paxlovid, a medicine used to treat COVID-19.  BHIWAPURKAR was arrested in June 2023 and pled guilty to securities fraud based on insider trading before U.S. Magistrate Judge James L. Cott.

U.S. Attorney Damian Williams said: “Bhiwapurkar admitted in court that he received sensitive, non-public information about a confidential drug trial from his friend, an employee at Pfizer, so he could profit on that information.  The prosecution of those who steal and misuse confidential information to profit at the expense of other market participants continues to be a top priority of our Office, and people who engage in insider trading will be caught and held accountable.”

According to the allegations in the Indictment and statements made during court proceedings:

In November 2021, BHIWAPURKAR participated in an insider trading scheme to reap illicit profits from options trading based on inside information about the results of clinical trials of Paxlovid, a medicine used to treat COVID-19.  BHIWAPURKAR was provided material, non-public information about the Paxlovid trial by an employee of Pfizer who assisted in managing the data analysis in certain clinical drug trials. 

On November 4, 2021, prior to the public announcement that a Pfizer trial of the drug Paxlovid, a medicine designed to treat mild to severe COVID‑19 infection, had produced positive results, BHIWAPURKAR received a tip from a Pfizer insider with confidential information about the positive results and the timing of the upcoming press release.  On that same day, BHIWAPURKAR purchased short-dated, out-of-the-money Pfizer call options that expired days and weeks later.  BHIWAPURKAR also tipped another friend (“Individual-1”), who similarly purchased short-dated, out-of-the-money Pfizer call options that expired approximately three weeks later.

The following day, on November 5, 2021, and before the market opened, Pfizer publicly released results of its Paxlovid study.  That same day, following the publication of the positive results, Pfizer’s stock price increased substantially, opening — and eventually closing — more than 10% higher than the prior day’s closing price.  In the following weeks, BHIWAPURKAR and Individual-1 sold their Pfizer call options at significant profits.

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BHIWAPURKAR, 45, of Milpitas, California, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison.

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  BHIWAPURKAR will be sentenced by U.S. District Judge Andrew Carter.

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation.  Mr. Williams also thanked the U.S. Securities and Exchange Commission, which has filed a parallel civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Alex Rossmiller and Justin Rodriguez are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced that VIRGIL WARDLOW pled guilty today to one count of distributing fentanyl.  In connection with his guilty plea, WARDLOW stipulated that he paid for commercial sex with a minor using fentanyl-laced pills that caused the death of a 19-year-old victim.  WARDLOW pled guilty before U.S. District Judge Mary Kay Vyskocil and is scheduled to be sentenced on March 13, 2024. 

U.S. Attorney Damian Williams said: “The consequences of the defendant’s conduct are heart-wrenching:  The defendant paid for sex with a 16-year-old victim using fentanyl-laced pills, which the victim’s 19-year-old friend then ingested, poisoning her and causing her death.  Today’s guilty plea demonstrates that this Office will seek justice for families facing the horrific tragedy of losing a loved one to fentanyl poisoning and for victims of child sexual exploitation.”

According to court filings and statements made in court proceedings:

WARDLOW engaged in a pattern of paying for commercial sex with black market pills that contained fentanyl.  On or about March 25, 2023, at a hotel room in the Bronx, New York, WARDLOW provided two of those pills to a 16-year-old female (“Victim-1”) in exchange for sex with Victim-1.  After Victim-1 had sex with WARDLOW and WARDLOW left the hotel room, Victim-1 and her 19-year-old female friend (“Victim-2”) ingested the pills provided by WARDLOW.  Thereafter, Victim-1 became ill, and Victim-2 became unconscious and died of a drug poisoning.

Between at least on or about February 8, 2023, and on or about April 7, 2023, WARDLOW exchanged several messages with other individuals in which WARDLOW offered to provide pills in exchange for sex or money.  WARDLOW sent these messages using an anonymized cellphone number that masked his identity from his intended victims.

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WARDLOW, 31, of the Bronx, New York, pled guilty to distribution and possession with intent to distribute mixtures and substances containing a detectable amount of fentanyl and oxycodone, which carries a maximum sentence of 20 years in prison.

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Williams praised the outstanding investigative work of the New York State Police, the New York City Police Department, and Special Agents from the U.S. Attorney’s Office for the Southern District of New York.

This case is being handled by the Office’s General Crimes Unit and Narcotics Unit.  Assistant U.S. Attorney Jeffrey W. Coyle is in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced that WILLIAM JONES, a/k/a “Principe,” was convicted by a jury of racketeering conspiracy, murder in aid of racketeering, and firearms offenses for his role in the murder of Frederick Delacruz on December 28, 2019.  The defendant was found guilty on all counts following an eight-day jury trial before U.S. District Judge Edgardo Ramos.

U.S. Attorney Damian Williams said: “William Jones executed Frederick Delacruz in cold blood because Delacruz had the courage to do the honorable thing and cooperate with law enforcement.  We hope today’s verdict will bring some peace to the victim’s family and sends the message that we will not rest until justice is done.”

According to the allegations contained in the Indictment and the evidence presented at trial:

WILLIAM JONES was a high-ranking member of the Trinitarios, a racketeering enterprise that has engaged in a pattern of murder, attempted murder, drug trafficking, fraud, and witness tampering and retaliation.  On December 28, 2019, JONES and other Trinitarios members lured Frederick Delacruz from the Bronx, New York, to Suffolk County, New York, where JONES shot and killed Delacruz because Delacruz was acting as a confidential informant for law enforcement.

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JONES, 45, of the Bronx, New York, was convicted of racketeering conspiracy, which carries a maximum penalty of life in prison; murder in aid of racketeering, which carries a mandatory minimum sentence of life in prison; a firearms offense, which carries a maximum penalty of life in prison; and murder through the use of a firearm, which carries a maximum penalty of life in prison.

The minimum and maximum potential sentences in this case are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation, the New York City Police Department, and the Suffolk County Police Department.  He also thanked the Suffolk County District Attorney’s Office for their assistance.

The prosecution is being handled by the Office’s Violent & Organized Crime Unit.  Assistant U.S. Attorneys Emily A. Johnson, Justin V. Rodriguez, and Christy Slavik are in charge of the prosecution, with the assistance of Paralegal Specialist Grayson Glogoff. 

Damian Williams, the United States Attorney for the Southern District of New York, and Jocelyn E. Strauber, the Commissioner of the New York City Department of Investigation (“DOI”), announced today the indictment of PETER WEISER and THOMAS BRANSKY for conspiring to defraud the City of New York (the “City”) of millions of dollars through a multifaceted scheme to corruptly profit from the provision of temporary housing and homeless services in New York City.  BRANSKY was the Chief Executive Officer of Childrens Community Services, Inc. (“CCS”), a purported not-for-profit homeless services provider formed and initially funded in part by WEISER.  BRANSKY, in turn, fraudulently steered lucrative service contracts ultimately paid for by the City to a group of entities owned and controlled by WEISER.  WEISER and BRANSKY intentionally concealed WEISER’s involvement in the formation and operation of CCS and his ownership and control of certain entities that contracted with CCS, including by submitting false statements and documents to the City.  WEISER and BRANSKY were arrested earlier today and will be presented before U.S. Magistrate Judge Valerie Figueredo in Manhattan federal court later today.  The case is assigned to U.S. District Judge Vernon Broderick.

U.S. Attorney Damian Williams said: “As alleged, the defendants engaged in a yearslong scheme to pocket millions in taxpayer dollars through the systematic exploitation of City programs intended to meet the basic needs of some of the most vulnerable New Yorkers – homeless men, women, and children.  Worse still, the defendants allegedly perpetrated this massive scheme under the guise of a not-for-profit organization named ‘Childrens Community Services.’  Thanks to the persistent efforts of the New York City Department of Investigation and the Special Agents and career prosecutors of my Office, these two men will face justice for their brazen graft.”

DOI Commissioner Jocelyn E. Strauber said: “These two defendants, as charged, used New York City’s need for providers of homeless services as an opportunity for fraud and personal profit.  Through a nonprofit entity, Childrens Community Services, and related companies, the defendants caused the City to pay over $50 million that the City would not otherwise have paid to these entities, including in inflated prices and unreasonable mark-ups for goods and services, as alleged in the Indictment.  As charged, the defendants concealed their scheme by straw ownership of companies, false statements, and fictitious bids.  I am grateful for the meticulous, exhaustive work of DOI's investigators and of the U.S. Attorney's Office for the Southern District of New York, our partners in the fight to protect critical public resources from wrongdoers, and for the cooperation of the City Department of Social Services.”

According to allegations in the Indictment filed in Manhattan federal court:[1] 

From at least in or about 2014 through at least in or about January 2020, THOMAS BRANSKY, who was the Chief Executive Officer of CCS, and his business partner, PETER WEISER, conspired to defraud the City agencies responsible for the administration of homeless services.  Between in or about November 2014 and in or about February 2020, CCS was awarded 12 contracts with the City worth approximately $913 million.  BRANSKY fraudulently steered lucrative service contracts with CCS — contracts ultimately paid for by the City — to a group of affiliated entities owned and controlled by WEISER (the “Weiser Entities”).  To carry out their scheme, WEISER, BRANSKY, and other individuals who worked with them intentionally concealed WEISER’s involvement in the formation and operation of CCS and his ownership and control of certain of the Weiser Entities from the City, including by submitting false statements and documents to the City.

WEISER and his associates created the Weiser Entities to profit unlawfully from the City’s provision of homeless services by capturing downstream revenues arising from CCS’s massive contracts with the City.  For the most part, the Weiser Entities were created for the sole purpose of providing goods and services to CCS.  WEISER and BRANSKY attempted to disguise the Weiser Entities as legitimate providers of, among other things, IT services and hardware, security services, office and living furniture, and food services.  In reality, and with few exceptions, the Weiser Entities were fly-by-night companies with no or few employees.  In most cases, the Weiser Entities obtained goods and services from legitimate third-party vendors and then re-sold those goods and services to CCS at marked-up and, in some cases, grossly inflated prices.  For example:

• Delta IT Solutions LLC (“Delta”): In or about December 2016, WEISER and his associates created the Weiser Entity Delta to sell IT services and hardware to CCS at inflated prices and in violation of the City’s conflict-of-interest policies.  Internal Delta records reflect significant markups for goods that Delta purchased from vendors (such as Amazon and Staples) and resold to CCS.  For example, an internal Delta pricing list from 2019 shows markups of up to 330% for items such as routers, printer cables, and surge protectors.  Likewise, Delta charged a 331% markup for telecom services that Delta obtained from a third-party provider.  These exorbitant markups were not disclosed to the City.

• AMX Distributors, LLC (“AMX”): WEISER and one of his associates created the Weiser Entity AMX to source and supply various consumer goods, including furniture, to CCS at inflated prices and in violation of the City’s conflict-of-interest policies.  Through AMX, WEISER sold furniture and supplies to CCS, including, among other things, beds, mattresses, sheets, towels, pillows, sofas, cribs, microwaves, refrigerators, chairs, tables, and toiletries.  WEISER sold these goods to CCS at unjustified markups of up to 309%.

• 511 Realty Management, LLC (“511 Realty”): CCS contracted with a Weiser Entity called 511 Realty to lease certain residential and commercial properties.  However, 511 Realty provided no legitimate services.  Instead, 511 Realty made monthly rent payments to third-party landlords on CCS’s behalf.  For this, 511 Realty charged hefty markups to CCS and, as a result, the City.  For example, CCS would make monthly payments to 511 Realty of approximately $24,000 for CCS’s office space in the Rockaway Offices.  511 Realty, in turn, would pay the landlord $17,500 monthly, representing a 37% markup, for essentially doing nothing more than writing a check; the markup increased to 46% by in or around 2019.  

• Pronto Cleaning Services, LLC (“Pronto”): A Weiser Entity called Pronto Cleaning contracted with a legitimate janitorial services company to provide cleaning services at CCS offices and facilities.  Pronto, which had no employees, resold those cleaning services to CCS at an approximately 56% markup, which was paid for by the City. 

WEISER and BRANSKY, along with their coconspirators, attempted to conceal the scheme from the various City agencies and components responsible for the administration of homeless services.  The defendants and their coconspirators solicited straw owners to appear on paper as the owners of the Weiser Entities when, in reality, WEISER owned, financed, and controlled each Weiser Entity.  Moreover, WEISER, BRANSKY, and their coconspirators made and caused to be made false statements to City officials and personnel about, among other things, the ownership of the Weiser Entities, the interconnectedness of the Weiser Entities, the selection process through which CCS awarded contracts to the Weiser Entities, and the ability and experience of the Weiser Entities in providing quality goods and services.

Likewise, to evade and bypass the City’s fraud-detection and cost-saving policies and procedures, WEISER and BRANSKY, along with their coconspirators, caused CCS to award contracts to the Weiser Entities without using a competitive bidding process, conducting proper due diligence, completing necessary documentation, or obtaining requisite approvals.  When questioned by the City, BRANSKY at times made and caused to be made false statements, including that the required documentation had been misplaced when, in fact, it had never been completed.  At other times, WEISER created and/or solicited fictitious competing bids and caused those fictitious bids to be submitted to the City to secure contracts between CCS and the Weiser Entities and to conceal the inflated pricing. 

WEISER, BRANSKY, and their coconspirators caused CCS — and, as a consequence, the City — to pay the Weiser Entities more than $50 million for goods and services.  The City would not have authorized or made these payments had proper and truthful disclosures about the Weiser Entities been made.  The fraudulent scheme harmed the City in numerous ways, including: (i) the City paid inflated prices resulting from the unnecessary insertion of middlemen (the Weiser Entities) between legitimate providers of goods and services and CCS; (ii) the City paid objectively unreasonable markups for certain goods and services; and (iii) CCS’s subversion of the mandatory bidding process and concealment of its conflicts of interest exposed the City to the risk — often realized — that the City would not obtain the best value for its money.

Through the scheme, WEISER collected more than $7 million in illicit profits, and BRANSKY earned more than $1.2 million in salary as the CEO of CCS.

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WEISER, 80, of Lawrence, New York, and BRANSKY, 47, of Woodmere, New York, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud, which each carry a maximum sentence of 20 years in prison, and one count of embezzlement of government funds, which carries a maximum sentence of 10 years in prison.  In addition, WEISER is charged with one count of money laundering, which carries a maximum sentence of 20 years in prison.

The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Williams praised the outstanding investigative work of DOI and the Special Agents of the U.S. Attorney’s Office. 

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Nicholas Chiuchiolo, Jilan Kamal, and Sagar K. Ravi 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.

[1] As the introductory phrase signifies, the entirety of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced today that VITALY FARGESEN and IGOR PALATNIK each pled guilty to one count of conspiring to commit securities fraud and one count of conspiring to commit wire fraud in connection with their fraudulent scheme to defraud investors in CanaFarma Corp. and later CanaFarma Hemp Products Corp. (together “CanaFarma”) by soliciting funds based upon false and misleading representations, failing to invest investors’ funds as promised, and secretly misappropriating millions of dollars of CanaFarma funds.  FARGESEN and PALATNIK pled guilty today before U.S. District Judge Loretta A. Preska.

U.S. Attorney Damian Williams said: “Vitaly Fargesen and Igor Palatnik orchestrated a sophisticated scheme to obtain millions of dollars from investors with the promise that their money would be spent on building a legitimate company.  Instead, they lied about their business, lied to their auditors, and stole millions of dollars of investor funds.  Today’s guilty pleas reflect my Office’s commitment to prosecuting those who greedily lie to investors to line their own pockets.”

According to the allegations contained in the Indictment and statements made in public filings and in public court proceedings:

From in or about March 2019 to in or about March 2020, CanaFarma was a privately held Delaware corporation with offices in New York, New York.  Beginning on or about March 19, 2020, CanaFarma was listed on the Canadian Stock Exchange, and beginning on or about March 23, 2020, CanaFarma was listed on the Frankfurt Stock Exchange.  CanaFarma marketed itself to the investors as a “fully integrated cannabis company addressing the entire cannabis spectrum from seed to delivery of consumer products.”  To the public, FARGESEN was held out as Senior Vice President of Strategic Planning at CanaFarma and PALATNIK was held out as Senior Vice President of Product Acquisition at CanaFarma.  In truth, the two men exercised full control of CanaFarma but hid their control from the investing public by, among things, convincing an experienced businessman to falsely present himself to the market as the CEO of the company.

Using their control of CanaFarma, FARGESEN and PALATNIK devised and carried out a scheme to defraud CanaFarma’s investors by soliciting approximately $14 million in funds, including investments in private shares of CanaFarma, with false and misleading representations concerning the company’s management, products, and financials; failing to invest investors’ funds as promised; and secretly misappropriating at least $4 million of CanaFarma funds for their own benefit.  FARGESEN and PALATNIK effectuated the scheme by, among other things, controlling CanaFarma through a nominal Chief Executive Officer who reported to FARGESEN and PALATNIK, lying to investors regarding CanaFarma’s actual and anticipated operations, attempting to artificially inflate CanaFarma’s reported revenue, making false statements to CanaFarma’s auditors, and misappropriating millions of dollars of investor funds.

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FARGESEN, 54, of Manalapan, New Jersey, and PALATNIK, 49, of Morganville, New Jersey, each pled guilty to one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud, which combined carries a maximum sentence of 10 years in prison.

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  FARGESEN is scheduled to be sentenced by Judge Preska on January 30, 2024, at 10:00 a.m., and PALATNIK is scheduled to be sentenced by Judge Preska on January 11, 2024, at 11:00 a.m.

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation.  Mr. Williams also thanked the U.S. Securities and Exchange Commission, which has filed a parallel civil action.

The case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Margaret Graham, Adam Hobson, Sarah Mortazavi, and Andrew Thomas are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, Patrick J. Freaney, the Special Agent in Charge of the New York Field Office of the United States Secret Service (“USSS”), and Edward A. Caban, the Commissioner of the New York City Police Department (“NYPD”), announced that ISHMAEL BENREUBEN pled guilty today to participating in a conspiracy to deposit approximately $760,000 in fraudulent checks into bank accounts across New York, New Jersey, and Washington, D.C., and to fraudulently withdrawing approximately $115,000 from those accounts.  BENREUBEN pled guilty before U.S. District Judge Jed S. Rakoff.

U.S. Attorney Damian Williams said: “My Office is committed to protecting the integrity of the United States banking system and the United States mail.  The defendant engaged in a scheme to steal three quarters of a million dollars by stealing real checks from the mail, forging the checks, falsifying identities, and taking advantage of multiple financial institutions.  The defendant’s fraudulent scheme affected real people and their businesses.  Today, he has been held accountable for his brazen conduct.”

USSS Special Agent in Charge Patrick J. Freaney said: “The defendant committed malicious fraud for his own personal gain.  With today’s guilty plea, he can no longer endanger the community.  This case should serve as a strong deterrent for criminal actors considering taking part in similar fraud schemes.  The U.S. Secret Service and its law enforcement partners will continue to investigate and pursue prosecution of these crimes in order to safeguard our communities.”

NYPD Commissioner Edward A. Caban said: “The charges Mr. Benreuben pled guilty to today are not victimless crimes.  In addition to compromising the integrity of our nation’s mail system, these offenses harm the people whose mail is stolen and the public at large.  The NYPD will continue to work closely with our law enforcement partners, including the U.S. Secret Service and the U.S. Attorney for the Southern District of New York, to always ensure that anyone who steals checks and commits fraud is held fully accountable.”

According to the filings and statements made in Manhattan federal court:

From approximately September 2021 through March 2022, BENREUBEN and others orchestrated an elaborate forgery and fraud scheme.  In furtherance of the scheme, BENREUBEN stole checks from the mail, forged and altered the stolen checks, deposited the checks into bank accounts across New York, New Jersey, and Washington, D.C. belonging to 26 co-conspirators, and then rapidly withdrew the funds before the banks could void the checks or shut down the accounts.  The checks ranged in amounts from approximately $5,000 to $42,000 and were drawn from the accounts of real businesses and individuals throughout the Northeast.  In total, BENREUBEN and his co-conspirators deposited approximately $760,000 in fraudulent checks and withdrew approximately $115,000 before the banks shut down the affected accounts.

Upon his arrest, BENREUBEN was found hiding under a couch at a co-conspirator’s home and was in possession of numerous images of the personal identifiable information on individuals’ identification cards, debit cards, and social security cards.     

*                *                *

BENREUBEN, 26, of Mount Vernon, New York, pled guilty to one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison; one count of bank fraud, which carries a maximum sentence of 30 years in prison; and one count of aggravated identity theft, which carries a mandatory prison term of two years, which must run consecutively to any other prison term.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as BENREUBEN’s sentence will be determined by Judge Rakoff.  BENREUBEN is scheduled to be sentenced by Judge Rakoff on January 10, 2024, at 4:00 p.m. 

Mr. Williams praised the exceptional investigative work of the USSS and NYPD.

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Amanda C. Weingarten, Diarra M. Guthrie, and Nicholas Folly are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced earlier today that NEIL COLE, the former Chief Executive Officer of Iconix Brand Group, Inc. (“Iconix”), was sentenced today in Manhattan federal court to 18 months in prison for participating in a scheme to fraudulently inflate Iconix’s revenue and earnings per share, making false filings with the U.S. Securities and Exchange Commission (“SEC”), and misleading the conduct of audits.  In November 2022, a jury found COLE guilty following a four-week retrial before U.S. District Judge Edgardo Ramos, who imposed today’s sentence.

According to the allegations contained in the Indictment, the evidence offered at trial, and matters included in public filings:

Iconix, whose shares traded on the NASDAQ, was in the business of acquiring various brands, including clothing and fashion brands, and then licensing those brands to retailers, wholesalers, and suppliers who, in turn, produced and sold clothing and other products bearing the brand names.

Iconix utilized joint ventures (“JVs”) to profit from its brands in foreign markets.  With respect to these JVs, Iconix transferred ownership of a trademark or brand to the JV while maintaining a 50% ownership interest in the JV itself.  The other party involved in the JV purchased a 50% interest in the JV from Iconix.  As part of the JV agreements, each JV partner was generally entitled to 50% of the JV’s licensing revenue.  When it entered into a JV, Iconix recognized as revenue the buy-in purchase price paid by the JV partner, less Iconix’s cost basis in the trademarks.

Among the most critical financial metrics disclosed in Iconix’s public filings with the SEC were Iconix’s quarterly and annual revenue and non-GAAP diluted earnings per share (“EPS”).  Iconix executives, including COLE, publicly identified revenue and EPS as the principal metrics demonstrating Iconix’s growth.  They also touted Iconix’s consistent record of revenue and earnings growth and of meeting or exceeding Wall Street analyst consensus with respect to these metrics.

The Accounting Fraud Scheme

COLE engaged in a scheme to falsely inflate Iconix’s reported revenue and EPS by orchestrating a series of “round trip” transactions in which COLE and a senior Iconix executive induced a JV partner, a Hong Kong-based international apparel licensing company (“Company-1”), to pay artificially inflated buy-in purchase prices for JV interests, with the understanding that Iconix would then reimburse Company-1 for the overpayments.  COLE executed the scheme for the purpose of enabling Iconix to report fraudulently inflated revenue and EPS figures based on the inflated buy-in purchase prices it obtained from Company-1.

COLE arranged for Iconix to enter into at least two JVs with Company-1 that included inflated buy-in purchase prices from Company-1: (i) an amendment to a preexisting Southeast Asia joint venture, which closed on or about June 30, 2014 (“SEA-2”), and (ii) a second amendment to the Southeast Asia joint venture, which closed on or about September 17, 2014 (“SEA-3”).  SEA-2 and SEA-3 involved a fraudulent “round trip” transaction, lacking in economic substance, in which Company-1 paid an artificially inflated buy-in purchase price for its interest in the JV, in exchange for COLE’s agreement that Iconix would give back the inflated portion of the purchase price to Company-1.  COLE and a senior Iconix executive hid from Iconix’s lawyers and outside auditors that COLE had reached an understanding with Company-1 to artificially increase the consideration Company-1 paid Iconix in exchange for COLE’s agreement to round-trip the overpayment back to Company-1.

Through the scheme, COLE caused Iconix to report fraudulently inflated revenue and EPS figures to the investing public.  COLE did so, in part, to ensure that the reported figures met analyst consensus and to fraudulently convey the impression to the investing public that Iconix was growing quarter after quarter, as COLE had touted to the investing public.

*                *                *

In addition to his prison term, COLE, 66, of New York, New York, was sentenced to three years of supervised release and ordered to pay forfeiture in the amount of $790,200.       

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation and the SEC Office of the Inspector General.  Mr. Williams also thanked the SEC Division of Enforcement, which previously brought a separate civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Jared Lenow, Justin V. Rodriguez, and Andrew Thomas are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, Frank A. Tarentino III, the Special Agent in Charge of the New York Field Office of the Drug Enforcement Administration (“DEA”), and Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”),  announced today the filing of a Complaint in Manhattan federal court charging WELLINGTON EUSTATE ESPINAL, a/k/a “Ronny,” CRISTIAN EUSTATE ESPINAL, HERIBERTO EUSTATE ESPINAL, a/k/a “Daulin,” and ROBERTO JOSE VARGAS-PAULINO with conspiracy to distribute narcotics and distribution of narcotics.  The defendants were arrested yesterday afternoon in the Belmont neighborhood of the Bronx.  The defendants were presented today before U.S. Magistrate Judge Stewart D. Aaron. 

U.S. Attorney Damian Williams said: “Last night, while conducting a Court-authorized search of a residence in the Bronx, law enforcement made one of the largest-ever seizures of fentanyl in New York City’s history — apparently more than 50 pounds of the poisonous drug.  And now four defendants are in federal custody for allegedly operating a pill mill.  The thought of the potential damage this stunning amount of fentanyl could have inflicted on New Yorkers is terrifying.  I express deep gratitude to our law enforcement partners and the career prosecutors of this Office for their continued vigilance in keeping fentanyl off of our streets.”    

DEA Special Agent in Charge Frank Tarentino said: “This is one of the largest fentanyl pill mills we have seen in New York City.  The DEA recently announced that 7 out of 10 pills tested by the DEA laboratories across the county contain a lethal dose of fentanyl.  Allegedly, this industrial pill mill, located in the heart of the Bronx, had enough lethal fentanyl to dispense well over a million lethal doses.  Fentanyl pills are being manufactured in these clandestine pill mills right here, in our neighborhoods, and unleashed into our communities.  They are then marketed and sold to many who have no idea the pills — many of which are purposefully made to look like other prescription or party drugs — contain fentanyl.  With the growing increase of fentanyl-related poisonings, this toxic operation is unacceptable and law enforcement, at all levels, is vigilantly tracking down drug trafficking organizations responsible for bringing the most harm to our communities.”   

HSI Special Agent in Charge Ivan J. Arvelo said: “The HSI New York El Dorado Task Force, in conjunction with our dedicated partners, has dismantled yet another clandestine lab, suspected to have operated within a residential building, dangerously close to where families reside and children innocently play.  These areas were designated as 'drug-free zones,' emphasizing the severity of the situation.  In recent months, we have witnessed a devastating pattern, with multiple instances of deadly activities occurring mere feet away from places we entrust our children's safety.  This alarming reality underscores the urgency of our commitment to collaborate with our partners in the relentless fight of safeguarding our communities.  HSI New York remains steadfast in our vow to disrupt and dismantle criminal organizations who seek to poison our communities in the ongoing lethal epidemic of fentanyl poisoning.”

As alleged in the Complaint filed today in Manhattan federal court:[1]

Since at least in or about September 2023, members of law enforcement have been investigating a network of drug traffickers who, among other things, appear to have converted an apartment within a two-family house in a residential neighborhood in the Bronx, New York, to be utilized for the purpose of packaging large quantities of fentanyl into portions for wholesale distribution.  In particular, the traffickers used the apartment (the “Fentanyl Mill”) to store kilogram-quantities of fentanyl, combine the fentanyl with other fillers, use dyes to color the combined powders, and use large industrial-scale pill presses to create hundreds of thousands of deadly fentanyl pills at a time. 

On or about October 5, 2023, members of law enforcement searched the Fentanyl Mill and found all four defendants inside.  During their search, investigators found, among other things, approximately 24 kilograms of suspected fentanyl in powder form — comprised of approximately 14 kilograms of compressed powder in brick-shapes members of law enforcement believe to contain  fentanyl and approximately 10 kilograms of loose powder members of law enforcement believe to contain fentanyl — as well as over 200,000 suspected fentanyl pills already packaged and ready for distribution to other traffickers for further sale.  Some of the pills appear to have been manufactured to mimic prescription drugs, and others were pressed into colorful shapes to resemble party drugs such as ecstasy.  A photograph of narcotics and other items recovered during the search is below:

Members of law enforcement also found three commercial pill presses and another disassembled pill press; one kilogram press; and various manufacturing and distribution paraphernalia including blenders, dyes, and jars of calcium citrate, that are used in connection with pressing narcotics into pill form and packaging narcotics for further distribution, as well as what appear to be industrial-grade protective face masks.  Two of the pill presses found are pictured below. 

Law enforcement further found that the interior of the Fentanyl Mill appeared to have been converted for dedicated use as a fentanyl repackaging and redistribution facility.  For example, in an apparent effort to conceal the narcotics operation occurring in the Fentanyl Mill, the first-floor windows were covered with black trash bags and dark fabric, preventing outside observers from a view of what was occurring inside.  The Fentanyl Mill also had a surveillance system, including a television screen mounted in the basement displaying a live feed of camera footage from outside the Fentanyl Mill.

Although lab testing is pending for the pills and powders discovered during the search, preliminary field tests reveal that the powders have tested positive for fentanyl.

*                *                *

WELLINGTON EUSTATE ESPINAL, 41, of New York, New York; CRISTIAN EUSTATE ESPINAL, 20, of the Bronx, New York; HERIBERTO EUSTATE ESPINAL, 27, of New York, New York; and ROBERTO JOSE VARGAS-PAULINO, 31, of the Bronx, New York, are charged in Count One with conspiracy to distribute narcotics and in Count Two with narcotics distribution.  Both Count One and Count Two carry a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. 

The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. 

Mr. Williams praised the outstanding investigative work of the El Dorado Task Force International Narcotics and Money Laundering Unit, which is comprised of law enforcement officers from the DEA, the Department of Homeland Security, HSI, and the New York City Police Department, as well as the work of the New York State Police and the United States Postal Service.  Mr. Williams also thanked the New York State Police Contaminated Response Team and the DEA Chemist Team for their processing of the scene.

This case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorney Maggie Lynaugh is in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced that MICHAEL ROWE, a/k/a “MJ,” was sentenced today to 22 years in prison for shooting another man over a $150 drug debt on a crowded sidewalk in Hell’s Kitchen on April 29, 2023.  ROWE was sentenced today by U.S. District Judge Denise L. Cote.

U.S. Attorney Damian Williams said: “Michael Rowe resorted to a reckless act of violence when his victim failed to pay him just $150.  Rowe could have taken someone’s life on that crowded sidewalk in Hell’s Kitchen over a trivial drug debt, but fortunately, no bystanders were hurt, and the victim survived his injuries.  Thanks to the quick work of our law enforcement partners and the prosecutors of this Office, Rowe now faces prison time for his dangerous behavior.”

According to the Complaint and Information, as well as statements by the Government and defense in connection with the plea and sentencing proceedings in this case:

On or about April 29, 2023, ROWE got into a disagreement with another individual (the “Victim”) on the sidewalk in the vicinity of 650 Ninth Avenue in Manhattan.  ROWE had given the Victim a quantity of cocaine base to sell, and the Victim had failed to pay ROWE a debt of $150.  After they exchanged words, ROWE brandished a firearm and shot the Victim several times as the Victim stood among other bystanders.  ROWE shot the Victim in the leg, among other places, and the Victim was hospitalized with serious physical injuries.  Video footage from the scene shows ROWE pointing the gun and shooting the Victim, as others in the area fled for safety.

ROWE (in black) and the Victim (in blue) Arguing

ROWE Shooting the Victim

*                *                *

ROWE, 23, of the Bronx, New York, pled guilty to possessing ammunition after sustaining three prior felony convictions for violent felonies and serious drug offenses and to conspiring to distribute cocaine base.  In addition to the prison term, ROWE was sentenced to five years of supervised release.

Mr. Williams praised the outstanding investigative work of the FBI and the NYPD.  Mr. Williams also thanks the Bureau of Alcohol, Tobacco, Firearms, and Explosives for its assistance in this case.

This case is being handled by the Office's Violent and Organized Crime Unit.  Assistant U.S. Attorneys Frank Balsamello, Peter Davis, and Jamie Bagliebter are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced that BILLY ORTEGA, a/k/a “Jason,” was sentenced to 30 years in prison today for running a drug delivery service that distributed dangerous drugs for over seven years, including the fentanyl that killed three New Yorkers on a single day: Julia Ghahramani, Amanda Scher, and Ross Mtangi.  ORTEGA was convicted following a two-week trial in January 2023 before U.S. District Judge Ronnie Abrams, who imposed today’s sentence.

U.S. Attorney Damian Williams said: “Billy Ortega ran a drug delivery service that delivered fentanyl, killing three victims on a single day.  Worse yet, Ortega was fully aware that a customer had previously overdosed from the deadly fentanyl Ortega laced into his product yet continued sending the drugs to his victims.  Even after Ortega learned that his drugs killed three people, he told another drug dealer that they were too strong and to give them to other unsuspecting victims.  Ortega’s callous and remarkably evil conduct rightly deserved a significant sentence.  This sentence sends a message to the fentanyl traffickers causing the fentanyl epidemic in our communities that they will bear the most serious consequences.”

According to court documents and the evidence presented at the trial of ORTEGA:

BILLY ORTEGA was the leader of a major drug trafficking conspiracy, distributing dangerous drugs in New York City via a crew of workers from at least in or about 2015 to in or about February 2022.  ORTEGA used his mother’s apartment in Manhattan as his stash house, employing family members and close friends to manage his drugs and cash and to deliver his drugs to customers.  ORTEGA carried guns, supplied guns to his workers, and stored guns in the stash house to protect his drugs and drug money.  For years, ORTEGA ran his drug delivery service by text message, acting like a dispatcher, coordinating drug deliveries by messaging his couriers and his customers.

In March 2021, ORTEGA mixed fentanyl into a weak batch of cocaine and sold it to at least five customers, who had no idea that they were receiving cocaine mixed with that deadly opioid.  In the course of a single day – March 17, 2021 – ORTEGA delivered, through one of his couriers, fentanyl-laced cocaine to Ghahramani, Mtangi, and Scher at three separate locations in Manhattan.  All three victims died after consuming the drugs distributed by ORTEGA. 

On the day of the three poisonings – and prior to the fentanyl being delivered to any of the three victims – ORTEGA received a text message from a different customer warning ORTEGA that his drugs had almost killed someone else.  Specifically, that other customer sent ORTEGA the following text message: “Hey man. Just on a follow up from yesterday - I gave most of my last bag to my buddy and he just called me this second to say he ended up in hospital last night. [. . .] He had to get a Narcan shot and was released in the early hours.”[1]  ORTEGA read this text message prior to coordinating the three deliveries of the drugs, from the same fentanyl-tainted batch of cocaine, that killed the three victims in this case. 

Later that night on March 17, 2021, after the victims had stopped responding to ORTEGA’s text messages, ORTEGA offered the fentanyl-tainted batch of cocaine to another drug dealer, so he could test it out on “some girls” and see what happens.  Specifically, ORTEGA texted the drug dealer: “If you[’re] going to be around [the] way let me know have some every one is saying it’s to[o] Strong . . . Give it to some girls and you let me know lol bro.”  And when it became clear that ORTEGA had killed his customers, ORTEGA did not change course and stop selling dangerous drugs.  ORTEGA changed his cellphone number and continued selling drugs every day until he was arrested nearly a year later.

*                *                *

BILLY ORTEGA, 37, of West Milford, New Jersey, was convicted of conspiracy to distribute and possess with intent to distribute fentanyl, acetylfentanyl, and cocaine, the use of which caused the deaths of Julia Ghahramani, Amanda Scher, and Ross Mtangi; distribution of fentanyl, acetylfentanyl, and cocaine to Ghahramani, the use of which caused her death; distribution of fentanyl and cocaine to Scher, the use of which caused her death; distribution of fentanyl and cocaine to Mtangi, the use of which caused his death; and carrying, use, and possession of a firearm in connection with, and in furtherance of, the narcotics conspiracy.  In addition to his prison sentence, ORTEGA was sentenced to five years of supervised release. 

Mr. Williams praised the outstanding investigative work of the New York City Police Department (“NYPD”), the Organized Crime Drug Enforcement Task Force (“OCDETF”) New York Strike Force, the SDNY Digital Forensic Unit, and the New York/New Jersey High Intensity Drug Trafficking Area Intelligence Analysts for their support and assistance in this matter. 

The OCDETF New York Strike Force provides for the establishment of permanent multi-agency task force teams that work side-by-side in the same location.  This co-located model enables agents from different agencies to collaborate on intelligence-driven, multi-jurisdictional operations to disrupt and dismantle the most significant drug traffickers, money launderers, gangs, and transnational criminal organizations.  The specific mission of the New York Strike Force is to target, disrupt, and dismantle drug trafficking and money laundering organizations, reduce the illegal drug supply in the United States, and bring criminals to justice.  The Strike Force is affiliated with the Drug Enforcement Administration’s (“DEA”) New York Division and includes agents and officers of the DEA; NYPD; New York State Police; Homeland Security Investigations; U.S. Internal Revenue Service, Criminal Investigation; U.S. Customs and Border Protection; New York National Guard; U.S. Coast Guard; New York State Department of Corrections and Community Supervision; Bergen County Prosecutor’s Office; Fort Lee Police Department; Palisades Interstate Parkway Police; Teaneck Police Department; Hillsdale Police Department; Closter Police Department; Northvale Police Department; River Vale Police Department; Englewood Police Department; Saddle River Police Department; Bergen County Sheriff’s Department; Hawthorne Police Department; and Hackensack Police Department. 

This case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Micah F. Fergenson, Michael R. Herman, and Robert B. Sobelman, with the assistance of Paralegal Specialists Alex Frenchman and Christine Woods, are in charge of the prosecution.

[1] “Narcan” is an opioid antagonist used to counteract the deadly effects of drugs like fentanyl. 

Damian Williams, the United States Attorney for the Southern District of New York, and Daniel B. Brubaker, the Inspector in Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of an Indictment charging ROBERT DIAZ with robbing two United States Postal Service (“USPS”) carriers of postal keys and, along with Matthew Modafferi, the Special Agent in Charge of the Northeast Area Field Office of the USPS, Office of Inspector General (“USPS-OIG”), James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Edward A. Caban, the Commissioner of the New York City Police Department (“NYPD”), also announced that 26 additional defendants have been charged in the past six months with federal crimes targeting the USPS and involving property stolen from the USPS as part of a multi-agency initiative to increase federal enforcement against perpetrators of mail-related robberies, frauds, and thefts.

U.S. Attorney Damian Williams said: “My Office is committed to working with our law enforcement partners to protect the safety of USPS employees and the integrity of the United States mail.  The indictment against Robert Diaz and the many others who have been charged with mail-related crimes over the past several months should send a clear message that criminally targeting the U.S. mail is a serious federal offense and will not be tolerated.”

USPIS Inspector in Charge Daniel B. Brubaker said: “As Postal Inspectors our primary mission is the protection of our people, the postal employees who serve the public dutifully each day.  We will bring a laser-sharp focus to any investigation of violent criminals and individuals who target our employees, and whose members by doing so seek to steal from the public.  The charges against these individuals prove the resolve of Postal Inspectors and our law enforcement partners to pursue these organizations with every resource at our disposal, and to ultimately see that justice is served.”    

USPS-OIG Special Agent in Charge Matthew Modafferi said: “We appreciate the outstanding effort by both our Law Enforcement partners and the Department of Justice.  The vast majority of Postal Service employees are honest, hardworking individuals who would not violate the public’s trust in this manner.  An employee who decides otherwise, however, will be aggressively investigated by OIG Special Agents.  These cases serve as an excellent example of the successful collaboration between the USPS OIG, our federal and state law enforcement partners, and the U.S. Attorney’s Office to pursue and prosecute Postal Service employees and their co-conspirators involved in criminal activity.”

FBI Assistant Director in Charge James Smith said: "The FBI is committed to working with our law enforcement partners to ensure that the United States Postal Service is not targeted for nefarious activity by criminal actors.”

NYPD Commissioner Edward A. Caban said: “The charges announced today allege crimes that targeted and, in some cases, betrayed our mail delivery system to prey on innocent victims.  Fortunately, our NYPD investigators and law enforcement partners worked in tandem to disrupt this conduct and bring these defendants to justice.  We will continue to work hand-in-hand with the U.S. Postal Inspection Service, the USPS Office of Inspector General, the FBI, and the U.S. Attorney for the Southern District of New York to stamp out mail-related crimes and protect the integrity of a service relied upon by millions of New Yorkers.”

According to the allegations in the Indictment, Complaints, and other public filings:[1]

On June 28, 2022, and July 8, 2022, ROBERT DIAZ robbed postal carriers and stole arrow keys belonging to the USPS.  Today, an Indictment was unsealed charging DIAZ with two counts of robbery of a postal carrier and two counts of postal key theft, which carry a total maximum sentence of 40 years in prison.

From January 19, 2022, through April 19, 2023, AUBREY FRAZER, an employee of the USPS, stole mail from a USPS facility in Manhattan.  He was charged on June 6, 2023, with mail theft by a postal service employee, which carries a maximum sentence of five years in prison.

From May through October 2022, ANDY ARIEL SANTANA cashed more than $100,000 of stolen and fraudulently altered postal money orders in the Bronx.  He was charged on August 14, 2023, with money order fraud and receipt of stolen mail, which carry a total maximum sentence of 10 years in prison.

From October 24, 2022, through April 15, 2023, SHERROD MURPHY and RAYSHAWN NIBLACK participated in a mail theft scheme targeting relay and panel boxes in the Bronx.  They were charged on April 24, 2023, with conspiracy to commit mail theft and postal key theft, which carries maximum sentence of five years in prison.

From January through August 2023, ERIC BROWN purchased stolen checks and other items worth more than $200,000 that had been unlawfully removed from the mail by a postal employee.  He was charged on September 28, 2023, with conspiracy to commit mail theft, which carries a maximum sentence of five years in prison. 

On June 15, 2023, KHAYYAM ALEXANDER, SAHEED DUPREE, and DIAMANTE PERRY used a stolen postal key to steal mail from one or more collection boxes in the vicinity of 73rd Street and Madison Avenue in Manhattan.  They were charged that same day with one count of conspiracy to commit mail theft and postal key theft, postal key theft, and mail theft, which carry a total maximum sentence of 20 years in prison.

On June 21, 2023, JOSE MATOS possessed more than $60,000 of checks that were stolen from the United States mail and a distribution quantity of crack cocaine.  He was charged the following day with receipt of stolen mail and possession with intent to distribute narcotics, which carry a total maximum sentence of 25 years in prison.

On June 26, 2023, LYDELL YANCEY possessed stolen mail and a stolen postal key and was apprehended after being near a collection box in the vicinity of 79th Street and Madison Avenue in Manhattan.  He was charged that same day with conspiracy to commit mail theft and postal key theft, postal key theft, and mail theft, which carry a total maximum sentence of 20 years in prison.

On July 6, 2023, DEANDRE JACKSON, QUAMEL PIERCE, and RAHEEM WALLACE possessed stolen mail and a stolen postal key and were apprehended being near a collection box in the vicinity of York Avenue and 72nd Street in Manhattan.  They were charged that same day with conspiracy to commit mail theft and postal key theft, postal key theft, and mail theft, which carry a total maximum sentence of 20 years in prison.

On July 10, 2023, MICHAEL EDWARDS and CARLOS MERCADO used a stolen postal key to steal mail in the vicinity of 74th Street and Lexington Avenue in Manhattan.  They were charged that same day with conspiracy to commit mail theft and postal key theft, postal key theft, and mail theft, which carry a total maximum sentence of 20 years in prison, and MERCADO was also charged with attempted assault of an officer engaged in official duties, which carries a maximum sentence of 20 years in prison.

On July 25, 2023, JONATHAN CARBUCCIA, JUAN CARBUCCIA, and MANUEL PEREZ stole mail from a collection box in the vicinity of 68th Street and Madison Avenue in Manhattan.  They were charged that same day with conspiracy to commit mail theft and postal key theft, postal key theft, and mail theft, which carry a total maximum sentence of 20 years in prison.

On August 1 and 8, 2023, CHRISTIAN CEBOLLERO, an employee of the USPS, stole checks and other items from a USPS facility in Manhattan.  On August 8, 2023, he was charged with two counts of mail theft by a postal service employee, which carry a total maximum sentence of 10 years in prison.

On August 14, 2023, EMMANUEL HERNANDEZ stole mail from a collection box in the vicinity of 79th Street and Madison Avenue in Manhattan.  He was charged that same day with one count of mail theft, which carries a maximum sentence of five years in prison.

On August 18, 2023, JOHN BURBANO used a stolen postal key to steal mail from collection boxes in the vicinity of 68th Street and Madison Avenue in Manhattan.  He was charged that same day with postal key theft and mail theft, which carry a total maximum sentence of 15 years in prison.

On August 23, 2023, JEREMY PINALES DIAZ stole mail from a collection box in the vicinity of 33rd Street and Madison Avenue.  He was charged that same day with mail theft, which carries a maximum sentence of five years in prison.

On September 18, 2023, JAYVAUGN VALENTINE and BRIAN GUTIERREZ used a stolen postal key to steal mail from a collection box in the vicinity of 68th Street and Madison Avenue in Manhattan.  They were charged the same day with conspiracy to commit postal key theft and mail theft, postal key theft, and mail theft, which carry a total maximum sentence of 20 years in prison.

On September 26, 2023, DONTE GOULBOURNE and ARMANDO KENNETH BENIQUEZ were apprehended in the Bronx after they used a stolen postal key to steal mail.  They were charged that same day with conspiracy to commit mail theft and postal key theft, postal key theft, and mail theft, which carry a total maximum sentence of 20 years in prison.

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The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Mr. Williams praised the outstanding investigative work of the USPIS, USPS-OIG, FBI, NYPD, and the Special Agents and Task Force Officers of the U.S. Attorney’s Office for the Southern District of New York. 

The cases are being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Benjamin M. Burkett, Katherine Cheng, Connie Dang, Lisa Daniels, Jackie Delligatti, Jerry J. Fang, Justin Horton, William Kinder, Henry Ross, Chelsea Scism, and Adam Sowlati are in charge of the prosecutions.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaints and Indictment and the description of the Complaints and Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced today the guilty pleas of NERIK ILYAYEV and MUKHIDDIN KADIROV for their respective roles in HIV medication fraud, no-fault automobile insurance fraud, and money laundering schemes totaling over $6 million.  ILYAYEV pled guilty to conspiracy to commit healthcare fraud for using two different pharmacies to defraud Medicare and Medicaid in connection with HIV medication claims and to defraud no-fault automobile insurance providers in connection with other medication claims.  KADIROV laundered several million dollars in fraud proceeds in connection with the HIV fraud scheme.  ILYAYEV and KADIROV pled guilty today before U.S. District Judge Gregory H. Woods.  

U.S. Attorney Damian Williams said: “Nerik Ilyayev brazenly defrauded Medicare and Medicaid and New York’s no-fault automobile insurance providers of over $6 million.  To execute his schemes, Ilyayev sourced pharmaceuticals from illegitimate sources and worked with others to pay kickbacks to low-income individuals.  Mukhiddin Kadirov facilitated the Medicare and Medicaid fraud by laundering millions in crime proceeds through shell companies.  Both Ilyayev and Kadirov went to great lengths to conceal their role in these crimes, including using the identities of other people.  Ilyayev and Kadirov will now pay for their crimes, and this Office will not stop pursuing those who seek to profit by defrauding our healthcare system.”    

According to the Complaint, Information, and statements made in open court:

From approximately February 2021 through March 2022, ILYAYEV owned and operated a pharmacy in Manhattan (“Pharmacy-1”).  ILYAYEV used Pharmacy-1 to pay illegal kickbacks to low-income HIV patients to recruit them to fill prescriptions for expensive HIV medications at Pharmacy-1 and to obtain HIV medications from unlawful sources.  ILYAYEV, on behalf of Pharmacy-1, then submitted fraudulent insurance claims to Medicare and Medicaid to cover the cost of the HIV medications.  In order to conceal his role in the fraud scheme, ILYAYEV used the identity of another person (“Individual-1”) and pretended to be Individual-1 to own and operate Pharmacy-1 using Individual-1’s identity.  Medicare and Medicaid collectively paid approximately $5.2 million in fraudulent claims for HIV medications to Pharmacy-1.      

After shutting down Pharmacy-1, ILYAYEV took control of another pharmacy in Queens, New York (“Pharmacy-2”).  Again, to conceal his role in the fraud, ILYAYEV used the identity of another person (“Individual-3”) and pretended to be Individual-3 to own and operate Pharmacy-2.  Pharmacy-2 submitted fraudulent insurance claims to no-fault automobile insurance providers.  Pharmacy-2 defrauded the no-fault automobile insurance providers of approximately $1.2 million.  In addition, Pharmacy-2 unlawfully sold pharmaceuticals to other pharmacies that ILYAYEV had obtained from illegitimate sources.      

KADIROV participated in a money laundering network that primarily launders healthcare fraud proceeds (the “Money Laundering Network”) that the Federal Bureau of Investigation (“FBI”) has been investigating since approximately 2020.  Members of the Money Laundering Network typically deposit checks from healthcare companies that represent healthcare fraud proceeds into New York-based bank accounts held by shell companies.  The shell companies often purport to be wholesale companies and use terms like “wholesale” in the company name to make the check deposits from the healthcare companies appear less suspicious to banks and law enforcement.  The conspirators controlling the shell companies collect cash typically from U.S.-based individuals who want to remit funds, often to Uzbekistan, through unlicensed channels.  The conspirators controlling the shell companies then provide that cash, minus a fee, to the conspirators providing the healthcare checks.  The conspirators controlling the shell companies next typically wire the check deposit proceeds from the shell companies to Chinese or other foreign companies to purchase goods from those foreign companies.  The foreign companies ship the goods to importers in Uzbekistan.  The importers pay the Uzbekistan-based partners of the conspirators operating the shell companies in U.S. Currency for the goods.  Those Uzbekistan-based partners would then give the U.S. currency to the families and friends of the individuals who had provided the cash to the conspirators controlling the shell companies in New York.

As part of his participation in the Money Laundering Network, KADIROV laundered approximately $4.2 million of Pharmacy-1’s fraud proceeds.  KADIROV used three bank accounts in the name of three shell companies that were purportedly wholesale companies (the “Shell Companies”) to launder Pharmacy-1’s fraud proceeds.  The Shell Company bank accounts were opened in the name of another person (“Individual-2”), although KADIROV controlled the bank accounts.  KADIROV took other steps to conceal his role in the money laundering scheme, including using a burner phone in connection with the Shell Company bank accounts, and he concealed his face when using ATMs to conduct transactions using the Shell Company bank accounts.  Pharmacy-1 deposited approximately $4.2 million in checks with the Shell Companies.  Consistent with the operations of the Money Laundering Network, the Shell Companies wired most of the check deposits to companies abroad, including China, Ukraine, and Russia.

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ILYAYEV, 36, of Queens, New York, pled guilty to one count of conspiracy to commit healthcare fraud, which carries a maximum potential sentence of 10 years in prison.

KADIROV, 44, of Queens, New York, pled guilty to one count of conspiracy to commit money laundering, which carries a maximum potential sentence of 20 years in prison. 

The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendants will be determined by the judge.

Mr. Williams praised the outstanding investigative work of the FBI and the U.S. Department of Health and Human Services, Office of the Inspector General.  Mr. Williams also thanked the National Insurance Crime Bureau and the Investigations Medicare Drug Integrity Contractor for their assistance in the investigation.

The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorney Cecilia E. Vogel is in charge of the prosecution. 

Damian Williams, the United States Attorney for the Southern District of New York, announced that SCOTT HUGHES, CECILIA MILLAN, and KARINA CHAIREZ were sentenced today for their roles in an internationally coordinated fraud and money laundering ring that deceived individuals into investing in AirBit Club, a purported cryptocurrency mining and trading company that was, in reality, a pyramid scheme.  HUGHES, an attorney who laundered approximately $18 million in AirBit Club fraud proceeds, was sentenced to 18 months in prison.  MILLAN, a senior level promoter of AirBit Club, was sentenced to five years in prison.  CHAIREZ, another senior level promoter of AirBit Club, was sentenced to one year and one day in prison.  On September 26, 2023, PABLO RENATO RODRIGUEZ, co-founder of AirBit Club with GUTEMBERG DOS SANTOS, was sentenced to 12 years in prison.  As part of their guilty pleas, the defendants in this case collectively have been ordered to forfeit their fraudulent proceeds of AirBit Club, which include seized or restrained assets consisting of U.S. currency, Bitcoin, and real estate currently valued at approximately $100 million.  U.S. District Judge George B. Daniels imposed the sentences.

U.S. Attorney Damian Williams said: “Hughes, Millan, and Chairez each played a key role in perpetuating the AirBit Club pyramid scheme.  At the top-tier of promoters, Millan and Chairez for years aggressively solicited investments from and misled hardworking and unsophisticated investors to line their own pockets.  Hughes abused his position as an attorney to launder millions in AirBit Club fraud proceeds and to give AirBit Club the false appearance of legality.  Pyramid schemes like AirBit Club would not be possible without facilitators like Hughes, Millan, and Chairez.  Today’s sentences send a message that anyone who facilitates cryptocurrency investment schemes — not only those at the very top of the pyramid — will face serious consequences for such crimes.”

According to public court filings and statements made in Court:

RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, and CHAIREZ participated in a coordinated scheme in which victim-investors (the “Victims”) were induced to invest in AirBit Club based on the false promise of guaranteed profits in exchange for cash investments in club “memberships” (the “AirBit Club Scheme” or the “Scheme”).  Beginning in late 2015, AirBit Club, through its founders, RODRIGUEZ and DOS SANTOS, as well as its promoters (the “Promoters”), including MILLAN and CHAIREZ, marketed AirBit Club as a multilevel marketing club in the cryptocurrency industry.  Promoters falsely promised Victims that AirBit Club earned returns on cryptocurrency mining and trading and that Victims would earn passive, guaranteed daily returns on any membership purchased.

RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, and CHAIREZ traveled throughout the United States and around the world to places in Latin America, Asia, and Eastern Europe, where they hosted lavish expos and small community presentations aimed at convincing Victims to purchase AirBit Club memberships.  In furtherance of the AirBit Club Scheme, the Victims were fraudulently induced to buy memberships in cash, including in the Southern District of New York.  Following a Victim’s investment, a Promoter provided the Victim with access to an online AirBit Club portal to view the purported returns on memberships (the “Online Portal”).  While Victims saw “profits” accumulate on their Online Portal, those representations were false; no Bitcoin mining or trading on behalf of Victims in fact took place.  Instead, RODRIGUEZ, DOS SANTOS, MILLAN, and CHAIREZ enriched themselves and spent Victim money on cars, jewelry, and luxury homes, and financed more extravagant expos to recruit more Victims. 

HUGHES, an attorney licensed to practice law in California, had previously represented RODRIGUEZ and DOS SANTOS in a Securities and Exchange Commission (“SEC”) investigation related to another investment scheme known as Vizinova.  He then aided RODRIGUEZ and DOS SANTOS in perpetrating the AirBit Club Scheme by, among other things, helping to remove negative information about AirBit Club and Vizinova from the internet. 

In many instances, as early as 2016, Victims who attempted to withdraw money from the AirBit Club Online Portal and complained to a Promoter were met with excuses, delays, and hidden fees amounting to more than 50% of the Victim’s requested withdrawal, if they were able to make any withdrawal at all.  In April 2020, another victim received a notice on the AirBit Club Online Portal that his account was closed – and principal investment lost – due to “execution of financial sustainability Reserve, policy #34 of the AirBit Club Terms and Conditions, due to the economic and financial crisis caused by (Covid-19).”

RODRIGUEZ, DOS SANTOS, HUGHES, CHAIREZ, and MILLAN sought to conceal the AirBit Club Scheme, as well as their respective control of the proceeds of that Scheme, by requesting that Victims purchase memberships in cash, using third-party cryptocurrency brokers, and by laundering the Scheme’s proceeds through several domestic and foreign bank accounts, including an attorney trust account managed by HUGHES (the “Hughes Trust Account”).  The Hughes Trust Account was ostensibly intended to maintain custody of HUGHES’s law practice’s client funds.  Instead, the Hughes Trust Account was used by RODRIGUEZ, DOS SANTOS, HUGHES, CHAIREZ, and MILLAN to conceal the nature and origin of the AirBit Club Scheme’s illicit proceeds.  Through that account, HUGHES directed Victim funds to the personal expenses of RODRIGUEZ, DOS SANTOS, CHAIREZ, MILLAN, and himself, and funded promotional events and sponsorships designed to further promote the AirBit Club Scheme. 

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HUGHES, 47, of Newport Beach, California, was also sentenced to three years of supervised release.  MILLAN, 41, of Greensboro, North Carolina, was also sentenced to three years of supervised release.  CHAIREZ, 47, of Modesto, California, was also sentenced to three months of supervised release.     

DOS SANTOS, 48, of Panama City, Panama, has pled guilty to charges including wire fraud conspiracy, which carries a maximum potential sentence of 20 years in prison; money laundering conspiracy, which carries a maximum potential sentence of 20 years in prison; and bank fraud conspiracy, which carries a maximum potential sentence of 30 years in prison. 

The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as the sentencing will be determined by the judge.  DOS SANTOS is scheduled to be sentenced on October 4, 2023, at 11:00 a.m.

Mr. Williams praised the outstanding investigative work of Special Agents from Homeland Security Investigations’ El Dorado Task Force.  Mr. Williams further thanked the New York Waterfront Commission for its assistance in the forfeiture process and the attorneys and investigators at the SEC whose expertise and diligence were integral to the development of this investigation.

If you believe you are a victim of the AirBit Club fraud, updated information regarding the case and victims’ rights, as well as contact information for the victim witness coordinator, is available here.  The U.S. Attorney’s Office will contact victims who have previously contacted the victim witness coordinator regarding the restitution process.

The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Kiersten A. Fletcher, Samuel L. Raymond, and Cecilia E. Vogel are in charge of the prosecution. 

Damian Williams, the United States Attorney for the Southern District of New York, and Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced today the unsealing of a Complaint charging THOMAS ALEXANDER BRANDENSTEIN and JOHN-PHILIPP PIEHL-BRANDENSTEIN with enticing a 15-year-old victim (the “Minor Victim”) to engage in sexual activity and then traveling across state lines in order to engage in illicit sexual activity with the Minor Victim.  BRANDENSTEIN was arrested on September 29, 2023, in Queens, New York, and was presented today in federal court before U.S. Magistrate Judge Stewart D. Aaron.  PIEHL-BRANDENSTEIN remains at large.

U.S. Attorney Damian Williams said: “As alleged, Thomas Alexander Brandenstein and John-Philipp Piehl-Brandenstein preyed upon a 15-year-old victim for sex and then traveled from Germany to the United States, where they met with the victim and engaged in illegal sexual acts at a Manhattan hotel.  My Office is committed to keeping our borders safe from sexual predators, and thanks to the hard work of our law enforcement partners and the career prosecutors of this Office, Brandenstein and Piehl-Brandenstein have now been charged for their egregious conduct.”

HSI Special Agent in Charge Ivan J. Arvelo said: “The defendants are alleged to have traveled thousands of miles to commit unimaginable crimes against an underage victim.  These charges serve as notice to anyone contemplating such heinous acts that we will take every measure necessary to safeguard the children of New York.  HSI New York is proud of the collaboration with our federal partners to charge these predators before they could inflict more trauma on young New Yorkers.”

According to the allegations in the Complaint unsealed today in Manhattan federal court:[1]

From March 2023 through July 2023, BRANDENSTEIN and PIEHL-BRANDENSTEIN, who are German nationals, enticed the Minor Victim, who was 15 years old at the time, to engage in illegal sexual activity.  While in Germany, BRANDENSTEIN used internet-enabled messaging applications to send sexually explicit communications to the Minor Victim, including an image of a naked male in which the male’s penis was exposed.  BRANDENSTEIN also sent sexually explicit videos to the Minor Victim, which depicted BRANDENSTEIN lying in bed, blowing kisses, and exposing his penis and masturbating, among other things.  BRANDENSTEIN further communicated with the Minor Victim over these messaging applications about his plans to travel to New York with PIEHL-BRANDENSTEIN, sending the Minor Victim a video message depicting the two men on an airplane and writing, “next stop, New York.”

In June 2023, BRANDENSTEIN and PIEHL-BRANDENSTEIN traveled from Germany to Florida and then New York, where they met with the Minor Victim to engage in illegal sexual activity at a Manhattan hotel (the “Hotel”).  Between July 5, 2023, and July 13, 2023, BRANDENSTEIN and PIEHL-BRANDENSTEIN reserved a room at the Hotel (the “Room”).  BRANDENSTEIN brought the Minor Victim to the Room and BRANDENSTEIN and PIEHL-BRANDENSTEIN engaged in illegal sexual activity with the Minor Victim.  Some of that illegal sexual activity was video recorded.  On July 13, 2023, BRANDENSTEIN and PIEHL-BRANDENSTEIN departed from New York and returned to Germany. 

There may be more victims of this alleged conduct.  If you have information to report about sexual abuse or sexual assault perpetrated by THOMAS ALEXANDER BRANDENSTEIN or JOHN-PHILIPP PIEHL-BRANDENSTEIN, contact HSI through its toll-free Tip Line at 1-866-DHS-2423 or [email protected] and reference this case.  From outside the U.S. and Canada, callers should dial 802-872-6199.  Hearing-impaired users can call TTY 802-872-6196.

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BRANDENSTEIN, 57, of Berlin, Germany, and PIEHL-BRANDENSTEIN, 38, of Berlin, Germany, are charged with one count of enticing a minor victim to engage in illegal sexual activity, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison, and one count of travel with intent to engage in illicit sexual conduct, which carries a maximum sentence of 30 years in prison. 

The minimum and maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Mr. Williams praised the outstanding investigative efforts of HSI and the New York City Police Department.  He added that the investigation is ongoing.   

The prosecution of this case is being handled by the Office’s Civil Rights Unit in the Criminal Division.  Assistant U.S. Attorney Mitzi S. Steiner is in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced that CHIBUNDU JOSEPH ANUEBUNWA was sentenced today in Manhattan federal court to 66 months in prison for his role in fraudulent business email compromise scams that targeted thousands of victims around the world, including in the United States.  Collectively, the scams attempted to defraud victims of over $3.5 million, resulting in over $2.5 million in actual losses to victims.  On June 29, 2023, ANUEBUNWA pled guilty to participating in a wire fraud conspiracy before U.S. District Judge Paul A. Crotty, who imposed today’s sentence.  In connection with the same conspiracy as ANUEBUNWA, co-defendant DAVID CHUKWUNEKE ADINDU was previously sentenced to 41 months in prison, and co-defendant ONYEKACHI EMMANUEL OPARA was previously extradited from South Africa and sentenced to five years in prison.

U.S. Attorney Damian Williams said: “From halfway around the world, Chibundu Joseph Anuebunwa tried to victimize thousands of people by stealing millions of dollars using fraudulent and deceptive emails that were sent to company employees in the United States and elsewhere.  He will now spend time in prison for these serious crimes.  Today’s sentence should deter scammers outside of the United States who may be tempted to steal money from American victims with cyberattacks and email scams.”

According to publicly filed court documents and statements made at public court proceedings:

Between 2014 and 2016, ANUEBUNWA, OPARA, and ADINDU participated in business email compromise scams (“BEC scams”) targeting thousands of victims around the world, including in the United States.  ANUEBUNWA sent bogus emails to employees of various companies directing that funds be transferred to specified bank accounts.  The emails purported to be from supervisors at those companies or third-party vendors that did business with those companies.  The emails, however, were not legitimate.  Rather, they were either from email accounts with a domain name that was very similar to a legitimate domain name, or the metadata in the emails had been modified so that the emails appeared as if they were from legitimate email addresses.  After victims complied with the fraudulent wiring instructions, the transferred funds were quickly withdrawn or moved into different bank accounts.  In total, the BEC scams attempted to defraud the victims of over $3.5 million, resulting in over $2.5 million in actual losses to victims.

ANUEBUNWA was arrested on March 16, 2021, in the United Kingdom and was extradited to the Southern District of New York on May 20, 2022.

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In addition to the prison term, ANUEBUNWA, 30, of Lagos, Nigeria, was ordered to pay $2.5 million in restitution.

Mr. Williams praised the investigative work of the Federal Bureau of Investigation.  Mr. Williams also thanked United Kingdom authorities and the Yahoo E-Crime Investigations Team for their assistance in the investigation.  The U.S. Department of Justice’s Office of International Affairs provided significant assistance in securing the defendant’s extradition from the United Kingdom.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Andrew K. Chan is in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, Henry C. Leventis, the United States Attorney for the Middle District of Tennessee, and Naomi Gruchacz, the Special Agent in Charge of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), announced today that the United States has settled a civil healthcare fraud lawsuit against THE CIGNA GROUP and its subsidiary Medicare Advantage Organizations (collectively, “CIGNA”).  The $37 million settlement resolves claims that CIGNA submitted to the Government false and invalid patient diagnosis codes to artificially inflate the payments CIGNA received for providing insurance coverage to its Medicare Advantage plan members.  The lawsuit was originally filed by a whistleblower in the U.S. District Court for the Southern District of New York and later transferred to the Middle District of Tennessee.           

The Government’s Complaint alleged that the invalid diagnosis codes were based solely on forms completed by vendors retained and paid by CIGNA to conduct in-home assessments of plan members.  The healthcare providers (typically nurse practitioners) who conducted these home visits did not perform or order the diagnostic testing or imaging that would have been necessary to reliably diagnose the serious, complex conditions reported and were in many cases prohibited by CIGNA from providing any treatment during the home visits for the medical conditions they purportedly found.  The diagnoses at issue were not supported by the information documented on the forms completed by the vendors and were not reported to CIGNA by any other healthcare provider who saw the patient during the year in which the home visits occurred. Nevertheless, CIGNA submitted these diagnoses to the Government to claim increased payments and falsely certified each year that the diagnosis data it submitted was “accurate, complete, and truthful.”

As part of the settlement approved by U.S. District Judge Eli Richardson, CIGNA will pay the United States a total of $37 million.  CIGNA also made extensive factual admissions in the settlement regarding the conduct alleged in the Government’s Complaint.  In connection with this settlement, CIGNA entered into a five-year Corporate Integrity Agreement (“CIA”) with HHS-OIG.  The CIA requires CIGNA to implement numerous accountability and auditing measures.  In particular, CIGNA must conduct annual risk assessments and other monitoring, and an independent review organization will conduct multi-faceted audits focused on risk adjustment data.

U.S. Attorney Damian Williams said: “For years, Cigna submitted to the Government false and invalid diagnosis information for its Medicare Advantage plan members.  The reported diagnoses of serious and complex conditions were based solely on cursory in-home assessments by providers who did not perform necessary diagnostic testing and imaging.  Cigna knew that these diagnoses would increase its Medicare Advantage payments by making its plan members appear sicker.  This Office is committed to holding insurers accountable if they seek to manipulate the Medicare Advantage Program and boost their profits by submitting false information to the Government.”

U.S. Attorney for the Middle District of Tennessee Henry C. Leventis said: “Medicare Advantage relies on the integrity of its insurers and the accuracy of the diagnosis code information they provide, since it has an outsize effect on Medicare payments.  We will continue to vigorously pursue fraud in this increasingly important program.”

HHS-OIG Special Agent in Charge Naomi Gruchacz said: “Managed care plans’ primary responsibility is to ensure the health coordination and appropriate benefits for the beneficiaries they have enrolled, not focus on profits.  HHS-OIG will work with our partners at the U.S. Attorney’s Office to ensure the integrity of federal healthcare program funds and the provision of appropriate, quality services to patients.”

Medicare Advantage, also known as the Medicare Part C program, provides health insurance coverage for tens of millions of Americans who opt out of traditional Medicare.  Under Medicare Part C, Medicare Advantage Organizations (“MAOs”), typically operated by private insurers like CIGNA, provide coverage for Medicare Advantage plan members.  In return, MAOs receive monthly payments from the Centers for Medicare and Medicaid Services (“CMS”) that vary based on each member’s demographic information and medical diagnoses.  MAOs submit diagnoses for their plan members, usually provided by the plan members’ healthcare providers, to CMS.  CMS then uses those diagnoses, along with demographic factors, to calculate a “risk score” for each member and, in turn, the amount of the monthly payment it will pay the MAO for covering that member.  The Medicare Advantage payment model is intended to pay MAOs more to cover healthcare expenses for sicker plan members (who are expected to incur higher healthcare costs) and less for healthier plan members (who are expected to incur lower costs).

As alleged in the Government’s Complaint:

CIGNA, through its subsidiaries and affiliates, owns and operates numerous MAOs that administer Medicare Advantage Plans.  CIGNA contracted with several vendors to conduct home visits of Medicare Advantage plan members across the country as part of its broader so-called “360 comprehensive assessment” program.  The home visits were typically conducted by nurse practitioners and, on occasion, by other non-physician healthcare providers such as registered nurses and physician assistants (the “Vendor HCPs”).  Based on the visit, the Vendor HCPs completed a CIGNA-created form (“360 form”) that included a check-the-box multi-page list of a wide range of medical conditions.  CIGNA had its coding teams identify diagnosis codes that corresponded to the recorded medical conditions and then submitted those to CMS for risk adjustment payment purposes.

CIGNA structured the 360 home visits for the primary purpose of capturing and recording lucrative diagnosis codes that would significantly increase the monthly capitated payments it received from CMS.  The purpose of the visits was not to treat patients’ medical conditions, and CIGNA explicitly prohibited the Vendor HCPs from providing actual patient treatment or care.  As CIGNA acknowledged in an internal document discussing the program, “[t]the primary goal of a 360 visit is administrative code capture and not chronic care or acute care management.”  But this was not disclosed to CIGNA’s plan members when the home visit was scheduled or during the actual visit.  When identifying plan members to receive home visits, CIGNA targeted individuals who were likely to yield the greatest risk score increases and thus the greatest increased payment.  

The Vendor HCPs spent limited time with the patients and did not conduct a comprehensive physical examination.  When completing the assessments and recording the diagnoses, the Vendor HCPs relied largely on the patient’s own self-assessment and their responses to various basic screening questions.  Vendor HCPs did not have access to the patient’s full medical history and typically did not obtain or review relevant records from the patient’s primary care physician in advance of the visit.

CIGNA’s 360 home visit program regularly generated false and invalid diagnosis codes for certain serious, complex conditions that cannot be reliably diagnosed in a home setting and without extensive diagnostic testing or imaging.  In tens of thousands of instances, CIGNA submitted diagnosis codes that represent serious, complex medical conditions that (i) were based only on the home visits conducted by the Vendor HCPs; (ii) required specific testing or imaging to be reliably diagnosed, which was not performed; (iii) were not supported by the information documented on the 360 form completed by the Vendor HCPs; and (iv) were not reported by any other healthcare provider who saw the plan member during the year in which the home visit occurred (the “Invalid Diagnoses”).  The Invalid Diagnoses included, but are not limited to, diagnoses for complex medical conditions such as chronic kidney disease, congestive heart failure, rheumatoid arthritis, and diabetes with renal complications.  According to CIGNA’s own clinical guidelines, accurately diagnosing these conditions requires specialized testing.

CIGNA exerted pressure on Vendor HCPs to record high-value diagnoses that significantly increased risk adjustment payments.  CIGNA management identified at least 12 classes of generic chronic diagnoses that they thought were “often underdiagnosed” among its Plan members and, through trainings and seminars, encouraged the Vendor HCPs to make these diagnoses during the home visits.  CIGNA also closely tracked the volume and nature of the diagnoses generated by each vendor’s home visits, as well as how the diagnoses affected risk-adjusted payments.  CIGNA provided trainings to vendors to improve their “performance” when they failed to deliver the expected level of high-value diagnosis codes.

The Invalid Diagnoses generated by the 360 home visits also did not conform with the International Classification of Diseases (“ICD”) Official Guidelines for Coding and Reporting (the “ICD Guidelines”), as required by applicable federal regulations.  The Invalid Diagnoses did not affect patient care, treatment, or management during the home visit, as required under the ICD Guidelines, and thus were ineligible for risk adjustment.  In addition, the Invalid Diagnoses were not supported by the minimal information recorded on the 360 forms, in violation of the ICD Guidelines’ medical record documentation requirement.  In fact, in some cases, the 360 forms include clinical exam findings that contradict the supposed diagnosis.  For example, one patient received a congestive heart failure diagnosis from a home visit even though the 360 form explicitly noted that physical exam results found her heart to be “regular” and “normal,” and stated, “cardiac reviewed and unremarkable.”

As part of the settlement, CIGNA admitted and accepted responsibility for certain conduct alleged by the Government including the following:

• As part of the 360 Program, CIGNA contracted with vendors who employed nurse practitioners or other licensed healthcare providers to conduct assessments of Part C members in their homes.  The vendor healthcare providers, among other things, performed physical exams and documented diagnostic information on standardized forms provided or approved by CIGNA but in many cases were not permitted to provide treatment or prescriptions for medications. 
• CIGNA’s medical coding team reviewed the completed “360” forms and, based on that review, identified diagnosis codes that corresponded to the medical conditions checked off on the forms, which were then submitted to CMS as part of CIGNA’s risk adjustment data.  The forms utilized by CIGNA’s vendors listed a wide range of diagnoses, including complex medical conditions. 
• CIGNA tracked the volume and nature of the diagnoses generated by vendors’ home visits.  CIGNA also tracked how the diagnoses affected risk-adjusted payments. 
• According to diagnostic criteria disseminated by CIGNA to the vendors, the clinical assessment of some of these diagnoses relies on laboratory evaluation, diagnostic imaging, or other diagnostic testing when making a particular diagnosis for the first time.  In many cases, CIGNA did not require 360 Program vendors conducting in-home assessments to have the equipment available to conduct such laboratory testing, imaging, or other diagnostic testing when diagnosing these conditions. 
• In thousands of instances, the in-home assessments conducted by 360 Program vendors resulted in diagnoses of CIGNA members and the submission to CMS of resulting risk-adjusting diagnosis codes that had not been previously reported to CMS by CIGNA from any other encounter with a healthcare provider during the year in which the home visit occurred.
• Based on the in-home assessments of members completed by vendors pursuant to the 360 Program, in many instances, CIGNA reported to CMS diagnoses for Medicare Advantage Plan members where the 360 forms did not include clinical information that corroborated the diagnoses and did not reflect that the diagnostic testing necessary to make the diagnosis for the first time had been performed.

In separate settlements announced today by the Civil Division of the Department of Justice and the U.S. Attorney’s Office for the Eastern District of Pennsylvania, CIGNA is also agreeing to resolve separate allegations that CIGNA submitted invalid beneficiary diagnoses to inflate Medicare Advantage payments that did not arise from CIGNA’s home visit program.

*                *                *

Mr. Williams thanked HHS-OIG and the U.S. Attorney’s Office for the Middle District of Tennessee for their assistance with this case.

This case is being handled by the Civil Frauds Unit within the U.S. Attorney’s Office for the Southern District of New York.  Assistant U.S. Attorneys Jeffrey Powell, Peter Aronoff, Jean-David Barnea, and Samuel Dolinger are in charge of the case, with the assistance of Assistant U.S. Attorney Ellen Bowden McIntyre of the Middle District of Tennessee.

The Cigna Group, headquartered in Connecticut, has agreed to pay $172,294,350 to resolve allegations that it violated the False Claims Act by submitting and failing to withdraw inaccurate and untruthful diagnosis codes for its Medicare Advantage Plan enrollees in order to increase its payments from Medicare.

Under the Medicare Advantage (MA) Program, also known as Medicare Part C, Medicare beneficiaries have the option of obtaining their Medicare-covered benefits through private insurance plans called MA Plans. The Centers for Medicare and Medicaid Services (CMS) pays the MA Plans a fixed monthly amount for each beneficiary who enrolls. CMS adjusts these monthly payments to account for various “risk” factors that affect expected health expenditures for the beneficiary, to ensure that MA Plans are paid more for those beneficiaries expected to incur higher healthcare costs and less for healthier beneficiaries expected to incur lower costs. To make these adjustments, CMS collects “risk adjustment” data, including medical diagnosis codes, from the MA Plans.

Cigna owns and operates MA Organizations that offer MA Plans to beneficiaries across the country. The United States alleged that Cigna submitted inaccurate and untruthful patient diagnosis data to CMS in order to inflate the payments it received from CMS, failed to withdraw the inaccurate and untruthful diagnosis data and repay CMS, and falsely certified in writing to CMS that the data was accurate and truthful. The settlement announced today resolves these allegations.

“Over half of our nation’s Medicare beneficiaries are now enrolled in Medicare Advantage plans, and the government pays private insurers over $450 billion each year to provide for their care,” said Deputy Assistant Attorney General Michael D. Granston of the Justice Department's Civil Division.  “We will hold accountable those insurers who knowingly seek inflated Medicare payments by manipulating beneficiary diagnoses or any other applicable requirements.”

The United States alleged that, for payment years 2014 to 2019, Cigna operated a “chart review” program, pursuant to which it retrieved medical records (also known as “charts”) from healthcare providers documenting services they had previously rendered to Medicare beneficiaries enrolled in Cigna’s plans. Cigna retained diagnosis coders to review those charts to identify all medical conditions that the charts supported and to assign the beneficiaries diagnosis codes for those conditions. Cigna relied on the results of those chart reviews to submit additional diagnosis codes to CMS that the healthcare providers had not reported for the beneficiaries to obtain additional payments from CMS. However, Cigna’s chart reviews also did not substantiate some diagnosis codes that were reported by providers and previously submitted by Cigna to CMS.  Cigna did not delete or withdraw these inaccurate and untruthful diagnosis codes, however, which would have required Cigna to reimburse CMS.  Thus, the United States alleged that Cigna used the results of its chart reviews to identify instances where Cigna could seek additional payments from CMS, while improperly failing to use those same results when they provided information about instances where Cigna was overpaid.

“Given the growth of Medicare Advantage plans, investigating fraud involving Medicare Part C is more important than ever. My office has prioritized combatting Medicare Advantage fraud, including applying data-driven investigative methods and working extensively with our law enforcement partners across the country,” said U.S. Attorney Jacqueline C. Romero of the Eastern District of Pennsylvania. “We will hold accountable those who report unsupported diagnoses to inflate Medicare Advantage payment, such as unsupported diagnosis codes for morbid obesity.”

The United States further alleged that Cigna reported diagnosis codes to CMS that were based solely on forms completed by vendors retained and paid by Cigna to conduct in-home assessments of plan members. The healthcare providers (typically nurse practitioners) who conducted these home visits did not perform or order the diagnostic testing or imaging that would have been necessary to reliably diagnose the serious, complex conditions reported, and were in many cases prohibited by Cigna from providing any treatment during the home visits for the medical conditions they purportedly found.  The diagnoses at issue were not supported by the information documented on the forms completed by the vendors and were not reported to Cigna by any other healthcare provider who saw the patient during the year in which the home visit occurred. Nevertheless, Cigna submitted these diagnoses to CMS to claim increased payments, and falsely certified each year that the diagnosis data it submitted was “accurate, complete, and truthful.”

“For years, Cigna submitted to the Government false and invalid diagnosis information for its Medicare Advantage plan members. The reported diagnoses of serious and complex conditions were based solely on cursory in-home assessments by providers who did not perform necessary diagnostic testing and imaging. Cigna knew that these diagnoses would increase its Medicare Advantage payments by making its plan members appear sicker,” said Damian Williams, United States Attorney for the Southern District of New York. “This Office is committed to holding insurers accountable if they seek to manipulate the Medicare Advantage Program and boost their profits by submitting false information to the Government.”

“Medicare Advantage relies on the integrity of its insurers and the accuracy of the diagnosis code information they provide, since it has an outsize effect on Medicare payments,” said Henry C. Leventis, United States Attorney for the Middle District of Tennessee. “We will continue to vigorously pursue fraud in this increasingly important program.”

The United States further alleged that, for payment years 2016 to 2021, Cigna knowingly submitted and/or failed to delete or withdraw inaccurate and untruthful diagnosis codes for morbid obesity to increase the payments it received from CMS for numerous beneficiaries enrolled in its MA plans.  The medical records for individuals diagnosed as morbidly obese typically include one or more Body Mass Index (BMI) recordings. Individuals with a BMI below 35 cannot properly be diagnosed as morbidly obese. However, Cigna submitted or failed to delete inaccurate and untruthful diagnosis codes for morbid obesity for individuals lacking a BMI of 35 or above, and these codes increased the payments made by CMS.

In connection with the settlement, Cigna entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). The CIA requires that Cigna implement numerous accountability and auditing provisions. On an annual basis, top executives and members of the Board of Directors must make certifications about Cigna’s compliance measures, Cigna must conduct annual risk assessments and other monitoring, and an independent review organization will conduct multi-faceted audits focused on risk adjustment data.

“Medicare Advantage plans that submit false information to increase payments from CMS show blatant disregard for the integrity of these vital federal health care funds,” stated Christian J. Schrank, Deputy Inspector General for Investigations with HHS-OIG. “Such actions are an affront to the Medicare program and the millions of patients who rely on its services. Working with our law enforcement partners, our agency will continue to prioritize investigating alleged fraud that targets the Medicare Advantage program.”

The civil settlement of the home visit allegations includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Robert A. Cutler, a former part-owner of a vendor retained by Cigna to conduct home visits.  Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery.  The qui tam case is captioned United States ex rel. Cutler v. Cigna Corp., et al., No. 3:21-cv-00748 (M.D. Tenn.). As part of today’s resolution, Mr. Cutler will receive $8,140,000 from the settlement of the home visit allegations.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the United States Attorneys’ Offices for the Eastern District of Pennsylvania, the Southern District of New York and the Middle District of Tennessee, with assistance from HHS-OIG.

The investigation and resolution of this matter illustrate the government’s emphasis on combating healthcare fraud.  One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement, can be reported to the Department of Health and Human Services at www.oig.hhs.gov/fraud/report-fraud/ or 800-HHS-TIPS (800-447-8477).

The matter was handled by Fraud Section Attorneys Carol Wallack and Edward Crooke and Assistant U.S. Attorneys Deborah Frey, Matthew Howatt and Gregory David from the Eastern District of Pennsylvania, Jeffrey Powell, Peter Aronoff, Jean-David Barnea, and Samuel Dolinger from the Southern District of New York, and Ellen Bowden McIntyre from the Middle District of Tennessee.

The claims resolved by the settlement are allegations only and there has been no determination of liability.

Damian Williams, the United States Attorney for the Southern District of New York, and Richard C. Breeden, Special Master of the Madoff Victim Fund (“MVF”), announced today that the United States has filed and settled a civil fraud lawsuit against FULCRUM CAPITAL PARTNERS LLC (“FULCRUM”), an investment firm based in Austin, Texas, alleging that FULCRUM fraudulently obtained payments from the MVF, an entity created by the Department of Justice (“DOJ”) to distribute funds collected by the United States through civil and criminal asset forfeiture to victims of the fraud perpetrated by Bernard L. Madoff.  Specifically, the United States alleges that FULCRUM, in violation of the False Claims Act, purchased recovery rights from various Madoff fraud victims who had submitted claims to the MVF and required the Madoff fraud victims to conceal these transactions from the MVF.  As a result, FULCRUM caused the MVF to make inflated payouts to the victims, which they paid over to FULCRUM.  Under the settlement, submitted today to U.S. District Judge Valerie E. Caproni for review and approval, FULCRUM will pay $2,511,084 to the United States.  FULCRUM also made extensive factual admissions regarding its conduct, including that it caused inaccurate statements to be submitted to the MVF and received amounts from the MVF to which FULCRUM was not entitled.

U.S. Attorney Damian Williams said: “The Madoff Victim Fund was created to compensate victims who suffered unreimbursed losses from the massive fraud perpetrated by Bernard Madoff.  The MVF’s ability to make fair and accurate distributions to Madoff victims depends on claimants’ compliance with MVF reporting requirements, including truthful disclosure of all Madoff-related recoveries received from any other source.  Fulcrum obtained a fraudulent windfall from the MVF by purchasing recovery rights from Madoff fraud victims, then compelling them to conceal the sales proceeds from the MVF and transfer the resulting inflated MVF payments to Fulcrum.  This Office will not tolerate lying to the MVF and will continue to pursue and hold accountable those who would use deceptive practices to obtain MVF funds.” 

MVF Special Master Richard C. Breeden said: “The defendant Fulcrum is a claim buying financial firm that never lost a penny from Madoff’s conduct.  After secretively buying claims from real victims, Fulcrum caused others to conceal information from the Madoff Victim Fund with the objective of gaining greater payments for itself.  The inevitable consequence of orchestrating false reports to MVF was diminishing the help that we could be provided to real fraud victims.  We applaud the SDNY U.S. Attorney’s Office for recovering $2.5 million that the defendants should never have received.  Of equal importance is the message that lying to MVF and concealing recoveries is an illegal act that will be prosecuted vigorously.”

From as early as the 1970s through December 2008, Bernard L. Madoff perpetrated the largest Ponzi scheme in history, defrauding thousands of victims of billions of dollars through Bernard L. Madoff Investment Securities LLC (“Madoff Securities”) (the “Madoff Fraud”).  The U.S. Attorney’s Office for the Southern District of New York has recovered over $9 billion related to the Madoff Fraud through civil and criminal asset forfeitures.  In 2013, the DOJ created the MVF to distribute to victims of the Madoff Fraud certain of the forfeited funds through a process called remission.     

As alleged in the Complaint filed in Manhattan federal court:

From at least October 2016 through October 2022, FULCRUM violated the False Claims Act by causing the submission of false claims and statements to the MVF that failed to disclose payments certain MVF claimants had received from FULCRUM.  As a result of this scheme, FULCRUM fraudulently received payments from the MVF to which it was not entitled. 

FULCRUM is an investment firm that specializes in trading distressed assets, including Madoff Securities feeder fund shares and attendant rights.  One Madoff Securities feeder fund whose underlying investors suffered losses from the Madoff Fraud was the Luxembourg-based Luxalpha SICAV Fund (“Luxalpha”).  From 2014 to 2019, FULCRUM purchased Luxalpha shares and attendant Madoff-related recovery rights from three investor groups: (i) Carac, a public pension fund based in France; (ii) a group of investors in Fondaco Absolute Return, a fund based in Italy (the “Fondaco Investors”); and (iii) a group of related individual investors based in France (the “Planckes”). 

Carac, the Fondaco Investors, and the Planckes (the “Claimants”) had previously filed claims with the MVF seeking remission payments for losses they claimed to have incurred as a result of their investments in Madoff Securities through Luxalpha.  FULCRUM entered into a series of Purchase and Sale Agreements (“PSAs”) with Carac, one of the Fondaco Investors (a foundation called Compagnia di San Paolo (“CSP”)), and the Planckes, pursuant to which FULCRUM bought their rights to receive remission payments from the MVF.  In particular, under the PSAs, Carac, CSP, and the Planckes each agreed to deliver all payments received from the MVF to FULCRUM; permit FULCRUM to act in each of their names, places, and steads with respect to the MVF; and take all actions requested by FULCRUM regarding the MVF. 

FULCRUM was aware that the MVF requires all claimants to disclose collateral recoveries received from any other source, including proceeds from the sale of MVF recovery rights.  The MVF issued multiple Collateral Recovery Update (“CRU”) Notices to each of the Claimants, requiring them to report all collateral recoveries.  FULCRUM instructed Carac, CSP, and the Planckes to fraudulently conceal in their CRU responses the payments they had received from FULCRUM for the sale of their Luxalpha shares and rights to remission payments from the MVF.  The MVF was required to reduce the Claimants’ remission payments by the amount of their collateral recoveries to prevent the Claimants from receiving duplicative recoveries.  As a result of FULCRUM’s fraudulent scheme, the MVF made inflated remission payments to the Claimants.  Carac, CSP, and the Planckes then transferred these amounts to FULCRUM. 

 As part of the settlement, FULCRUM made extensive admissions of conduct alleged in the United States’ Complaint, including the following:

• FULCRUM knew that the MVF remission process was governed by remission regulations and the MVF’s Plan of Distribution, pursuant to which DOJ requires that remission payments be reduced by the victims’ collateral recoveries, including any payments victims received, directly or indirectly, from any source for the victims’ Madoff losses.  Furthermore, FULCRUM knew that the MVF issued multiple CRU Notices to each of the Claimants requiring them to disclose any recoveries they received from any source other than the MVF, including proceeds received from the sale or assignment of Madoff feeder fund shares and rights and from the purported sale or assignment of MVF remission claims.

• Despite the stated requirement that victims disclose all collateral recoveries they received, FULCRUM instructed or otherwise caused the Claimants to submit inaccurate CRU responses to the MVF that failed fully to disclose the amounts the Claimants had received from selling their Luxalpha shares and related rights and remission claims to FULCRUM.

• Under their PSAs with FULCRUM, Carac, CSP, and the Planckes agreed that they would retain no beneficial interest in any distributions they received from the MVF, that they would hold any such distributions as agents of FULCRUM, and that they would deliver any such distributions to FULCRUM within five days of receipt.  Carac, CSP, and the Planckes further agreed to grant FULCRUM irrevocable power of attorney with respect to the remission claims, to deliver all correspondence they received from the MVF to FULCRUM, and take all actions requested by FULCRUM to effectuate the terms of the PSAs. 

• In September 2017 and May 2019, respectively, pursuant to the PSA and at FULCRUM’s behest, Carac submitted two CRU responses to the MVF that inaccurately represented that Carac had received no collateral recoveries, when, in fact, it had received significant sales proceeds from FULCRUM.

• From February 2017 through July 2019, pursuant to the PSA and at FULCRUM’s behest, CSP submitted four CRU responses to the MVF that inaccurately failed to disclose the full amount that CSP had received from FULCRUM for its Luxalpha shares and related rights.  CSP stated that it had sold its remission claim to an unidentified secondary market player for a specified amount, but this amount reflected only the amount CSP received from FULCRUM for the purported sale of its remission rights rather than the total proceeds CSP had received from FULCRUM for the sale of its Luxalpha shares and related rights.  During the same time period, the other Fondaco Investors likewise submitted 28 documents to the MVF that inaccurately represented that these investors had received no collateral recoveries, when, in fact, they had received significant sales proceeds from FULCRUM.

• From August 2019 through October 2020, pursuant to the PSA, and at FULCRUM’s behest, the Planckes submitted 20 CRU responses to the MVF that inaccurately represented that the Planckes had received no collateral recoveries other than those they received from a financial intermediary in connection with a litigation settlement, when in fact they had received significant additional proceeds from FULCRUM for the sale of their Luxalpha shares and related rights.

• As a result of FULCRUM instructing or otherwise causing the Claimants to submit inaccurate collateral recovery information as described above, the MVF distributed remission payments to the Claimants that they were not entitled to receive.  Pursuant to the PSA, Carac, CSP, and the Planckes then transferred the amounts they had improperly received from the MVF to FULCRUM.

FULCRUM will pay $2,511,084 to the United States under the settlement.  In addition, FULCRUM agreed that it and the Claimants are not entitled to receive any amounts from the MVF in the future, and that FULCRUM shall not seek to obtain, on behalf of itself or the Claimants, any further amounts from the MVF.  In connection with the filing of the lawsuit and the settlement, the Government joined a private whistleblower lawsuit that had been filed under seal pursuant to the False Claims Act.

*                *                *

Mr. Williams thanked the Federal Bureau of Investigation and the MVF for their assistance with the case.          

This case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Pierre G. Armand is in charge of the case.                          

Damian Williams, the United States Attorney for the Southern District of New York, Anne Milgram, the Administrator of the Drug Enforcement Administration (“DEA”), and Edward A. Caban, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a criminal Complaint in Manhattan federal court charging FELIX HERRERA GARCIA with conspiracy to distribute narcotics resulting in death in connection with the poisoning of four children under the age of three, one of whom died, at a daycare facility in the Bronx.  HERRERA GARCIA is in custody and will be presented today before U.S. Magistrate Judge Michael S. Berg, in U.S. District Court for the Southern District of California.     

U.S. Attorney Damian Williams said: “Last night, Felix Herrera was arrested for his alleged role in running a fentanyl mill hidden inside a Bronx daycare, which caused the tragic death of a one-year-old boy and seriously injured three other children.  Herrera’s arrest on the other side of the nation reflects our tireless pursuit of Herrera, who fled the daycare even as the children he abandoned inside were suffering from his poisonous trade.  As I vowed in the wake of this horrific crime, Herrera’s arrest demonstrates once again that my Office and our dedicated law enforcement partners will stop at nothing to bring those who contribute to the deadly opioid crisis, which impacts even our most vulnerable community members, to justice.”

DEA Administrator Anne Milgram said: “Let me be clear: when it comes to protecting our communities and seeking justice, there are no boundaries, no safe havens, and no stones left unturned.  This case is a stark reminder of the evil we face.  The DEA will stop at nothing, and we will relentlessly pursue those responsible, no matter where they hide."  

NYPD Police Commissioner Edward A. Caban said: “New York City law enforcement has a very long reach, and anyone who participates in the distribution of fentanyl in our communities will be held fully accountable – no matter where they run and try to hide.  Today's charges reflect abhorrent criminality that will always be intolerable here, and the NYPD and our dedicated state and federal partners vow to investigate and arrest all those responsible for this proliferating threat.”

As alleged in the Complaint:[1] 

From at least in or about July 2023 through at least in or about September 2023, FELIX HERRERA GARCIA and others, including GREI MENDEZ, CARLISTO ACEVEDO BRITO, and RENNY PARRA PAREDES, a/k/a “El Gallo,”[2] conspired to distribute fentanyl, including at a children’s daycare center in the Bronx, New York (the “Daycare”).  There, despite the daily presence of children, including infants, HERRERA GARCIA and his co-conspirators maintained large quantities of narcotics, including a kilogram of fentanyl stored on top of children’s playmats and large quantities of suspected narcotics in hidden compartments known as “traps” located in the floor of the room in which the children played and slept.  Also found in the daycare were materials used to package narcotics, including three “kilo presses.”  One of the traps found in the floor of the Daycare is pictured below:

As a consequence of the drug conspiracy engaged in by HERRERA GARCIA and his co-conspirators, on or about September 15, 2023, four children at the Daycare, who were all under three years of age, appear to have experienced the effects of poisoning from exposure to fentanyl.  Three of the children were hospitalized with serious injuries.  The fourth child, a one-year-old boy, died. 

Immediately prior to calling 911 to report that the children in her care were unresponsive, MENDEZ – HERRERA GARCIA’s wife – called HERRERA GARCIA twice.  The first phone call went unanswered, the second phone call lasted just over 10 seconds.  Then, only minutes before emergency personal arrived at the scene, surveillance footage shows HERRERA GARCIA walking swiftly from the building next door to the Daycare, where he and MENDEZ resided, and into the Daycare.  When HERRERA GARCIA entered the Daycare, he was empty-handed.  Approximately two minutes later, HERRERA GARCIA exited the Daycare again moving swiftly, but carrying what appears to be two shopping bags weighted with contents.  Instead of exiting through the front door, HERRERA GARCIA exited out a back alley.  And instead of following the paved alleyway behind the Daycare’s building, HERRERA GARCIA hurried through overgrown grass and bushes to exit the area.  Photographs of HERRERA GARCIA hurrying out the rear of the Daycare’s building and then moving through the bushes to exit the area are below:   

Furthermore, MENDEZ deleted approximately 21,526 messages from an encrypted messaging application on which she had exchanged messages with HERRERA GARCIA between approximately on or about March 30, 2021, and September 15, 2023.  However, messages that have been recovered reveal that while MENDEZ was with members of law enforcement later on September 15, 2023, following the incident at the Daycare, MENDEZ informed HERRERA GARCIA that law enforcement was asking questions about him, including questions regarding his whereabouts.  HERRERA GARCIA instructed MENDEZ to tell law enforcement, among other things, that he was working.    

HERRERA GARCIA had been at large since he fled out the back alley behind the Daycare on September 15, 2023.  He was apprehended by Mexican authorities working in coordination with U.S. law enforcement and arrested last night upon entry to the United States. 

*                *                *

HERRERA GARCIA, 34, of the Bronx, New York, is charged in Count One with conspiracy to distribute narcotics resulting in death and in Count Two with possession with intent to distribute narcotics resulting in death.  Both Count One and Count Two carry a mandatory minimum sentence of 20 years in prison and a maximum sentence of life in prison. 

The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Williams praised the outstanding investigative work of the DEA, the NYPD, the SDNY Digital Forensic Unit, the Complex Analytical and Social Media Enhancement Team at the New York/New Jersey High Intensity Drug Trafficking Area, and the Organized Crime Drug Enforcement Task Force (“OCDETF”) New York Strike Force.  Mr. Williams also thanked the NY/NJ Regional Fugitive Task Force of the U.S. Marshals Service (“USMS”); the USMS Office of International Operations; the USMS for the Southern District of New York; the USMS for the Southern District of Texas; the USMS for the Southern District of California; the USMS Mexico Field Office; the USMS Investigative Operations Division; the DEA Resident Office in Allentown, Pennsylvania; the DEA District Office in McAllen, Texas; the DEA Country Office in Mexico City, Mexico; the DEA Resident Office in Hermosillo, Mexico; the DEA Resident Office in Monterrey, Mexico; the DEA Special Operations Division; the NYPD 52nd Precinct Detective Squad; the NYPD Bronx Homicide Squad; the U.S. Department of Justice’s Office of International Affairs; the U.S. Attorney’s Office for the Southern District of Texas; the U.S. Department of Homeland Security; and Mexican authorities.

The OCDETF New York Strike Force provides for the establishment of permanent multi-agency task force teams that work side-by-side in the same location.  This co-located model enables agents from different agencies to collaborate on intelligence-driven, multi-jurisdictional operations to disrupt and dismantle the most significant drug traffickers, money launderers, gangs, and transnational criminal organizations.  The specific mission of the New York Strike Force is to target, disrupt, and dismantle drug trafficking and money laundering organizations, reduce the illegal drug supply in the United States, and bring criminals to justice.  The Strike Force is affiliated with the DEA’s New York Division and includes agents and officers of the DEA; NYPD; New York State Police; Homeland Security Investigations; U.S. Internal Revenue Service, Criminal Investigation; U.S. Customs and Border Protection; New York National Guard; U.S. Coast Guard; New York State Department of Corrections and Community Supervision; Bergen County Prosecutor’s Office; Fort Lee Police Department; Palisades Interstate Parkway Police; Teaneck Police Department; Hillsdale Police Department; Closter Police Department; Northvale Police Department; River Vale Police Department; Englewood Police Department; Saddle River Police Department; Bergen County Sheriff’s Department; Hawthorne Police Department; and Hackensack Police Department. 

This case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Brandon C. Thompson and Maggie Lynaugh are in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact descried therein should be treated as an allegation. 

[2] GREI MENDEZ, CARLISTO ACEVEDO BRITO, and RENNY ANTONIO PARRA PAREDES, a/k/a “El Gallo,” have been charged in complaints under docket numbers 23 Mag. 6444 and 23 Mag. 6533. 

Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment charging ANTHONY VIGGIANO and his co-conspirator, STEPHEN FORLANO, Jr., with securities fraud and conspiracy.  VIGGIANO and FORLANO were arrested this morning and will be presented later today.  The case has been assigned to U.S. District Judge Valerie E. Caproni.

Also unsealed is the guilty plea of CHRISTOPHER SALAMONE.  SALAMONE pled guilty before U.S. District Judge Katherine Polk Failla on September 21, 2023, to charges arising from his participation in the insider trading scheme, and he is cooperating with the Government.

U.S. Attorney Damian Williams said: “As alleged, Anthony Viggiano betrayed the trust of his employers by tipping his friends with material non-public information, undermining the integrity of our financial markets in the process.  No matter how evasive insider traders’ conduct, or the lengths gone to hide their offenses, this Office will track down and prosecute those who attempt to cheat the system.”

FBI Assistant Director in Charge James Smith said: “This indictment is yet another example of individuals believing they can get away with benefiting from trading on material non-public information.  As we have shown before, this type of alleged corporate self-dealing will not be tolerated.  The FBI will ensure that those responsible for insider trading face the consequences in the criminal justice system.”

According to the allegations contained in the Indictment unsealed in Manhattan federal court and court filings:[1]

ANTHONY VIGGIANO was employed at two different, leading global financial institutions located in New York, New York, specifically an investment management firm (“Firm-1”) and an investment bank (“Firm-2,” and together with Firm-1, the “Firms”).  VIGGIANO worked as an analyst in Firm-1’s New York, New York, office between in or about April 2021 and in or about October 2021 and then worked at Firm-2 in New York, New York, as an associate in the asset management department.  While working at the Firms, VIGGIANO received confidential internal communications that contained detailed information about non-public potential strategic partnerships involving Firm-1 and acquisitions involving Firm-2. 

VIGGIANO attended college with FORLANO and was a childhood friend of SALAMONE.  In violation of the duties that he owed to each of the Firms, VIGGIANO tipped FORLANO and SALAMONE with material nonpublic information (“MNPI”) relating to the names of potential counterparties for Firm-1’s strategic partnerships and, later, information that VIGGIANO learned during his employment at Firm-2 about companies that were potential acquisition targets.  After VIGGIANO started working at Firm-2, he continued tipping FORLANO with MNPI that VIGGIANO obtained through his employer.  In total, VIGGIANO tipped FORLANO and/or SALAMONE with inside information in advance of at least seven different transactions involving publicly traded companies.

FORLANO and SALAMONE each used MNPI provided by VIGGIANO to purchase shares in companies and to trade call options, including short-dated, out-of-the-money call options.  VIGGIANO and SALAMONE agreed to split the profits from their illegal trading, which yielded total illegal profits of over approximately $300,000.  FORLANO further provided this MNPI to friends and family through, among other means, a video game console’s audio chat function in order to evade detection by law enforcement.  FORLANO himself illegally profited at least approximately $100,000 from the scheme. 

*                *                *

VIGGIANO, 26, of Baldwin, New York, has been charged with eight counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison, and one count of conspiracy, which carries a maximum sentence of five years in prison.

FORLANO, 27, of Tampa, Florida, has been charged with three counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison, and one count of conspiracy, which carries a maximum sentence of five years in prison.

SALAMONE, 35, of Long Beach, New York, has been charged with three counts of securities fraud under Title 15, each of which carries a maximum sentence of 20 years in prison, and one count of conspiracy, which carries a maximum sentence of five years in prison.

Mr. Williams praised the outstanding investigative work of the FBI.  He also expressed appreciation for the work of the U.S. Securities and Exchange Commission, which separately initiated parallel civil proceedings against the defendants today.

This prosecution is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Peter Davis and Jared Lenow 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.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging Victor Bozzo, former Chief Executive Officer and former Chief Commercial Officer of Pareteum Corporation, and EDWARD O’DONNELL, Pareteum’s former Chief Financial Officer, with conspiracy, securities fraud, making false Securities and Exchange Commission (“SEC”) filings, and improperly influencing the conduct of audits for their roles in a scheme to overstate Pareteum’s revenue by tens of millions of dollars.  BOZZO and O’DONNELL were arrested earlier today and will be presented this afternoon before U.S. Magistrate Judge Ona T. Wang.  The case has been assigned to U.S. District Judge Arun Subramanian.

Also unsealed is the guilty plea of STANLEY STEFANSKI, Pareteum’s former Controller.  STEFANSKI pled guilty before U.S. District Judge Andrew L. Carter on September 14, 2023, to charges arising from his participation in the scheme to fraudulently inflate Pareteum’s revenue and related crimes, and he is cooperating with the Government.

U.S. Attorney Damian Williams said: “Victor Bozzo, the former CEO of Pareteum, and Edward O’Donnell, the former CFO, and their co-conspirators allegedly schemed to inflate the company’s revenue, thereby making the company appear more profitable than it was and allowing Bozzo and O’Donnell to obtain performance bonuses they had not earned.  To conceal their alleged fraud, Bozzo and O’Donnell then took steps to mislead the independent certified public accountants engaged to audit Pareteum’s financial statements.  With today’s Indictment, Bozzo and O’Donnell’s alleged deceit comes to an end.”

FBI Assistant Director in Charge James Smith said: “This indictment reflects the serious harm executives caused by deliberately misleading shareholders, auditors, and the general public about the financial strength of a public company.  The FBI remains committed to fighting white-collar crime, protecting investors, and holding fraudsters who degrade the integrity of our markets accountable.”

According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]

The defendants, and other senior executives at the company, engaged in a scheme to improperly and misleadingly recognize revenue at Pareteum, which owned and managed a mobile device network platform.  The defendants and their co-conspirators made the revenue appear to have been earned in its records based on aspirational, non-binding purchase orders that did not impose any obligation on customers to pay Pareteum.  The defendants, and other senior executives at Pareteum, knew that in many cases Pareteum was recognizing revenue before Pareteum had delivered any products or services to its customers.  In order to conceal Pareteum’s fraudulent accounting practices, BOZZO, O’DONNELL, and other senior executives at Pareteum took steps to mislead the independent certified public accountants engaged to audit Pareteum’s financial statements. 

Pareteum’s inflated revenue gave the appearance that Pareteum was meeting aggressive revenue and growth projections, which served the ultimate goal of increasing Pareteum’s share price.  In press releases accompanying Pareteum’s quarterly filings, Pareteum provided guidance on its expected revenue and revenue growth for the year.  During each period, Pareteum touted its quarter-over-quarter revenue and revenue growth.  Pareteum publicly identified revenue as the principal metric demonstrating its growth and touted its consistent record of quarter-over-quarter revenue growth and meeting or exceeding revenue guidance, which itself typically increased quarter-over-quarter.  However, this ostensible pace of revenue growth was only possible because of the fraud orchestrated by the defendants.

In order to carry out the fraud, the defendants and their co-conspirators improperly recognized revenue from customers based on non-binding contracts.  Specifically, Pareteum’s customers were cellular providers that paid to use Pareteum’s platform to monitor, meter, and bill their own individual customers, who were individual cellphone or connected device end users.  Typically, before a customer could use Pareteum’s platform, the customer and Pareteum would sign a Master Services Agreement, which set forth Pareteum’s obligations to provide the customer with SIM cards that provided cellphone users, who obtained cellphone service through Pareteum’s customer, access to Pareteum’s mobile network.  At this stage, the customer did not owe Pareteum any money and no revenue had been earned by Pareteum; instead, Pareteum had first to develop and implement a platform for the customer and ensure that it functioned such that the customer could go “live” on the Pareteum network.  Once the Pareteum customer was live on the network and sold a SIM card to an actual cellphone user, that user could put the SIM card into his or her phone and begin making calls or consuming mobile data.  It was only at that point that Pareteum’s customer would be required to pay Pareteum for the data usage. 

BOZZO and O’DONNELL understood that purchase orders were not sales contracts because, as they and others at Pareteum well knew, and Paretuem’s customers understood, the purchase orders did not reflect binding commitments.  Instead, purchase orders typically reflected anticipated future sales.  Purchase orders typically set forth the customer’s intention to purchase SIM cards from Pareteum and to generate usage fees if and when the customer was able to sell the SIMs to end users who then activated the SIM cards and used Pareteum’s platform.

However, in violation of Generally Accepted Accounting Principles, Pareteum executives, including VICTOR BOZZO and EDWARD O’DONNELL, caused Pareteum at times to recognize revenue at the time a purchase order was signed for the full projected value of the purchase order, even though they were aware that typically the relevant counterparties were obligated to pay that amount only if and when in the future all SIM cards in the purchase order had been shipped, were activated by Pareteum’s customers, and were used for one month on Pareteum’s network.  As BOZZO and O’DONNELL were also aware, in many cases, pervasive technical and operational issues meant that Pareteum was actually incapable of satisfying its performance obligations under the terms of its agreements with customers. 

As a result of this fraudulent revenue recognition practice, from at least in or about 2018 through the first half of 2019, Pareteum improperly recognized and reported to the investing public more than $40 million of revenue that it should not have. 

As to one customer, referred to in the Indictment as Customer-4, Pareteum recognized revenue totaling $4.4 million based on an unsigned, draft purchase order for €6.3 million, which Customer-4 had not accepted.  Instead, Customer-4 had signed a purchase order, which itself did not reflect a binding commitment but merely reflected anticipated future sales, for only €630,000 – in other words, one tenth of the draft €6.3 million purchase order and far less than the revenue Pareteum recognized.  Pareteum nonetheless recognized $4.4 million in revenue for Customer-4 in three tranches, and at the time it recognized each of those tranches, Customer-4’s platform was not yet live and so it could not yet use Pareteum’s services.

*                *                *

BOZZO, 54, of Ringoes, New Jersey, and O’DONNELL, 58, of East Atlantic Beach, New York, are each charged with one count of conspiracy to commit securities fraud, make false SEC filings, and improperly influence the conduct of audits, which carries a maximum penalty of five years in prison; one count of securities fraud under Title 15, which carries a maximum penalty of 20 years in prison; one count of false SEC filings, which carries a maximum sentence of 20 years in prison; and one count of improperly influencing the conduct of audits, which carries a maximum penalty of 20 years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Mr. Williams praised the outstanding work of the FBI.  Mr. Williams further thanked the SEC, which today filed a parallel civil action against BOZZO and O’DONNELL and also announced settled charges against STEFANSKI.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Kiersten A. Fletcher, Margaret Graham, and Allison Nichols 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.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced that ULADZIMIR DANSKOI, the CEO of an immigration services firm, was sentenced today by U.S. District Judge J. Paul Oetken to 10 months in prison for conspiracy to defraud the United States and conspiracy to commit immigration fraud.  

U.S. Attorney Damian Williams said: “Uladzimir Danskoi, an experienced immigration practitioner who ran an immigration services firm’s Brooklyn office, disregarded the law and helped make a mockery of the U.S. immigration system by conspiring to defraud the United States and commit asylum and visa fraud.  Asylum is meant to help vulnerable people who justifiably fear imprisonment, assault, torture, or death, because of their religion, nationality, ethnicity, political views, gender, or sexual orientation.  Danskoi and his codefendants exploited the immigration system for financial gain by knowingly peddling false claims and coaching clients to lie under oath.  They now face time in prison for these crimes.”

According to the allegations in the Indictment and evidence presented at trial:

A New York City immigration services firm, “Russian America,” worked with clients – primarily aliens from Russia and the Commonwealth of Independent States – seeking visas, asylum, citizenship, and other forms of legal status in the United States.  Among other things, Russian America advised certain of their clients in the manner in which they were most likely to obtain asylum in this country, fully understanding that those clients did not legitimately qualify for asylum.  The firm also prepared and submitted to U.S. Citizenship and Immigration Services (“USCIS”) clients’ fraudulent Form I-589 asylum applications, as well as asylum affidavits – statements of an asylum applicant’s personal history and claimed basis for asylum, often including allegations of past persecution – and related supporting documentation.  Members and associates of each firm also coached certain clients to lie under oath during interviews conducted by USCIS Asylum Officers and provided legal representation to their clients during various immigration proceedings.

ULADZIMIR DANSKOI and previously convicted codefendant YURY MOSHA operated and maintained Russian America’s Brooklyn and Manhattan offices, respectively.  Each advised and aided their clients to seek asylum under fraudulent pretenses.  Among other things, DANSKOI advised a client, a confidential Federal Bureau of Investigation (“FBI”) source (the “Source”), to seek asylum on the fraudulent basis that the client was persecuted in Ukraine for being a gay male, when in fact DANSKOI fully understood that the Source was a heterosexual male who suffered no such persecution.  DANSKOI also advised the Source on how to most effectively advance this fraudulent claim; connected the Source with previously convicted codefendant KATERYNA LYSYUCHENKO, who helped the Source prepare a fraudulent personal history (or “Affidavit”); and personally submitted the Source’s fraudulent asylum application and Affidavit, filed under penalty of perjury, to USCIS.

Meanwhile, MOSHA encouraged a second client, a Government cooperating witness posing as a person seeking asylum (the “Client”), to establish and maintain online blogs that were critical of the Client’s home country as a way to generate a claim that, based on the Client’s invented political opinion, it was unsafe for him to return to his native country.  MOSHA did so understanding that the Client’s decision to blog was prompted not by his own idea or initiative, but by MOSHA’s instruction, and that the Client’s motive for blogging was to contrive a basis for asylum rather than to publicly express a sincerely held opinion.  MOSHA also understood that the Client lacked the desire, topical knowledge, journalistic ability, and technical expertise to write blogposts and maintain these blogs.  Accordingly, Mosha connected the Client with unapprehended codefendant TYMUR SHCHERBYNA, a Ukraine-based purported journalist, with the understanding that, in exchange for a fee, SHCHERBYNA would and did maintain and ghost-write the Client’s blog.  MOSHA also personally prepared and submitted the Client’s asylum application, Affidavit, and related paperwork under penalty of perjury, knowing that these documents contained material falsehoods. 

When the Source and Client needed to prepare for an interview, conducted under oath by a USCIS asylum officer, DANSKOI and MOSHA connected each to previously convicted codefendant JULIA GREENBERG, a New York immigration attorney, who coached both clients to lie to Asylum Officers and provided legal representation to these clients during immigration proceedings.  For example, GREENBERG, understanding that the Source was a heterosexual male who did not suffer persecution in his home country, prepared the Source for questioning by an Asylum Officer, advised the Source how to falsely answer certain anticipated questions from the Asylum Officer, and instructed the Source to dress and change the Source’s appearance in a manner that comported with GREENBERG’s vision of a gay male.

DANSKOI and MOSHA also agreed to help certain Russian America clients obtain L1 employment visas by creating fake leases and staging offices to create the impression to USCIS that these clients had legitimate jobs waiting for them in the United States.

A similar investigation into another Brooklyn-based firm engaged in asylum fraud on behalf of clients from Russia and the Commonwealth of Independent States resulted in the convictions of three additional individuals: attorneys ILONA DZHAMGAROVA and ARTHUR ARCADIAN, and IGOR REZNIK.

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DANSKOI, 56, of Staten Island, New York, was previously convicted of one count of conspiring to defraud the United States and conspiring to commit immigration fraud following a two-week trial before Judge Oetken.

DANSKOI is the seventh defendant to have been sentenced in two immigration fraud cases pending before Judge Oetken and U.S. District Judge Mary Kay Vyskocil.  The six other defendants who have been sentenced by Judges Oetken or Vyskocil are:

• ILONA DZHAMGAROVA, 46, of Brooklyn, New York, who was sentenced to two years in prison;
• YURY MOSHA, 47, of Staten Island, New York, who was sentenced to 10 months in prison;
• IGOR REZNIK, 40, now of Pennsylvania, who was sentenced to 10 months in prison;
• ARTHUR ARCADIAN, 44, of Brooklyn, New York, who was sentenced to 6 months in prison;
• JULIA GREENBERG, 43, of Staten Island, New York, who was sentenced to 3 months in prison; and
• KATERYNA LYSYUCHENKO, of Milan, Italy, who was sentenced to time-served (approximately 2 months in prison).

Mr. Williams praised the outstanding investigative work of the FBI’s New York Eurasian Organized Crime Task Force, Homeland Security Investigations, and USCIS’s New York Asylum Office and Fraud Detection and National Security Unit, and he thanked U.S. Customs and Border Protection for its assistance.

This case is being prosecuted by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys David R. Felton and Jonathan E. Rebold are in charge of the prosecution. 

Damian Williams, the United States Attorney for the Southern District of New York, announced today that JONATHAN GHERTLER was sentenced by U.S. District Judge Edgardo Ramos to six years in prison in connection with his scheme to impersonate senior leaders of two Manhattan-based investment firms, resulting in over $1 million in losses to their portfolio companies, and to impersonating a partner of a global law firm on telephone calls with federal law enforcement agents who were investigating the scheme.  GHERTLER previously pled guilty to one count of wire fraud and one count of making false statements.

U.S. Attorney Damian Williams said: “Jonathan Ghertler orchestrated a sophisticated impersonation scheme by posing as prominent financiers and lawyers.  He duped companies out of over $1 million.  He also obstructed justice by brazenly impersonating a partner of a global law firm and urging federal agents to drop their investigation.  But he did not get away with it.  As today’s sentence demonstrates, serial fraudsters like Ghertler will be caught and held to account for their crimes.”

According to the Indictment and other filings and statements made in court:

From at least in or about December 2021, up to and including at least June 2022, GHERTLER impersonated the General Counsel of a global private equity firm (the “Private Equity Firm”).  In doing so, GHERTLER fraudulently caused the Private Equity Firm’s portfolio companies to pay at least $200,000 to fund a non-existent internal investigation into alleged links between senior employees of the Private Equity Firm and Jeffrey Epstein, the deceased financier who, before he died on or about August 10, 2019, had been charged in the Southern District of New York with sex trafficking of minors and conspiring to commit sex trafficking of minors. 

In addition, from at least May 2021, up to and including February 2023, GHERTLER impersonated the founder of an investment firm (the “Investment Firm”), directing the Chief Executive Officer (the “CEO”) of one of the Investment Firm’s portfolio companies (the “IF Portfolio Company”) to make at least $865,000 in payments to fund a non-existent internal investigation related to the founder’s alleged relationship with Epstein.  Shortly before the fraud unraveled, GHERTLER, posing as the founder of the Investment Firm, had discussed with the CEO the possibility of making a large investment into a restaurant chain owned by another investment firm.

On or about February 7, 2023, after learning from the CEO that federal investigators were investigating a potentially fraudulent payment made by the Investment Firm, GHERTLER, posing as a partner (the “Partner”) at a global law firm, spoke on the phone with Special Agents with the Federal Bureau of Investigation (“FBI”).  GHERTLER told the federal agents that the IF Portfolio Company had chosen not to report the fraud because it had been “made whole” by the fraudster. 

On or about February 10, 2023, GHERTLER, impersonating the Partner, spoke again with federal agents.  GHERTLER said, after “consult[ing]” with “associates and lower-level partners” at the Global Law Firm who “used to work” at the U.S. Attorney’s Office for the Southern District of New York, “our position is that, uh, the law states that, umm, you know, if the money was paid back prior to, uh, the crime being, uh, discovered, uh, it’s not a crime.”  GHERTLER added that his “client [i.e., the founder of the Investment Firm] has a lot of other issues he is dealing with right now, so this is one he really doesn’t need to deal with.”

This case resulted in GHERTLER’s 16th conviction — his prior convictions include fraud, theft, larceny, burglary, and forgery.  In 2001, he was convicted of wire fraud in the Southern District of New York, and, in 2007, he was convicted of wire fraud in the Middle District of Florida.  As here, in both the prior federal cases, GHERTLER was charged with impersonating prominent lawyers and business leaders and persuading companies to fraudulently transfer large sums of money to accounts under his control.

*                *                *

In addition to his prison term, GHERTLER, 61, of Orlando, Florida, was sentenced to three years of supervised release and ordered to pay restitution in the amount of $1,065,000 and forfeit the same amount.

Mr. Williams praised the outstanding investigative work of the FBI.

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Adam Sowlati is in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced that TIMY HAKIM was sentenced to two years in prison and an additional six months in home detention for his participation in a conspiracy to defraud at least 15 victims of romance schemes, lottery scams, and business email compromise schemes.  HAKIM was sentenced today by U.S. District Judge Lewis J. Liman.

U.S. Attorney Damian Williams said: “Hakim and his co-conspirators devastated elderly and vulnerable victims, including recent widowers.  Several of the victims lost their entire life savings and one victim reported becoming suicidal.  A U.S. citizen, Hakim provided co-conspirators in South Africa with U.S. phones used to contact and deceive victims and opened and operated bank accounts that laundered the victims’ money.  He will now spend time in prison and be compelled to make restitution to the victims of the schemes.”

 According to Count One of the Information to which HAKIM pled guilty and other statements and submissions made in Court:         

From at least in or about 2015 up to and including November 2019, HAKIM participated in an international wire fraud conspiracy that left at least 15 people and entities with over $1.4 million in losses.  HAKIM facilitated the laundering of proceeds of three types of fraud schemes, a “Romance Scheme,” a “Lottery Scheme,” and a “BEC Fraud Scheme.”  Through the Romance Scheme, a vulnerable individual was led to believe she or he was in a romantic online relationship with a perpetrator of the Scheme, when in fact, the perpetrator merely used this as a mechanism to build the victim’s trust and solicit the victim’s money.  Through the Lottery Scheme, the scheme participants informed certain victims that they had won a cash prize but first needed to make certain payments to access the funds.  Through the BEC Fraud Scheme, the scheme participants induced a corporate victim located in Manhattan to release company funds under fraudulent pretenses by impersonating the founder of the company.

HAKIM controlled multiple U.S. and foreign bank accounts that received funds from victims targeted by these schemes.  HAKIM also obtained and provided his foreign co-conspirators in South Africa with cell phones with American numbers subscribed to his plan, which were used to contact and defraud victims.  And on at least one occasion, HAKIM personally contacted a victim pretending to be a government official involved in detaining the victim’s partner to induce the victim to send money. 

At least 15 individual and corporate victims lost money as part of HAKIM and his co-conspirators’ schemes.  They include vulnerable, isolated, and elderly victims, who entered into relationships after the deaths of their spouses and, over a period of several years, were induced to drain their entire retirement savings and take out loans from family and friends.  Many victims experienced severe emotional harm, including a woman who reported becoming suicidal after losing her retirement savings to this scheme.

*                *                *

In addition to his prison term, HAKIM, 47, was sentenced to three years of supervised release, including six months to be spent in home detention, and was ordered to pay $1,414,043 in restitution and to forfeit $671,452.

Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation.

The criminal case is being prosecuted by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorney Vladislav Vainberg is in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced today the guilty plea of MARCO RUIZ OCHOA for his role in promoting a large-scale cryptocurrency Ponzi scheme known as IcomTech.  OCHOA pled guilty today before U.S. District Judge Jennifer L. Rochon to one count of conspiracy to commit wire fraud.  

U.S. Attorney Damian Williams said: “Again and again, we see perpetrators taking advantage of the hype around cryptocurrency to con unsuspecting victims into investing in pyramid schemes.  IcomTech was one of these large-scale copycat cryptocurrency scams and Ochoa, as the purported CEO, played an important role taking IcomTech to scale and ultimately harming more victims.  Today’s guilty plea sends a clear message that we are coming after all of those who seek to exploit cryptocurrency to commit fraud.”

According to the Indictment and statements made in court:

DAVID CARMONA started IcomTech in 2018, and OCHOA was represented to be IcomTech’s CEO until 2019, when a new CEO replaced him.  IcomTech was a purported cryptocurrency mining and trading company that promised to earn its victim-investors (“Victims”) profits in exchange for their purchase of purported cryptocurrency-related investment products.  OCHOA and the other promoters of IcomTech, including his co-defendants CARMONA, JUAN ARELLANO, MOSES VALDEZ, and DAVID BREND, falsely promised their respective Victims, among other things, that profits from the companies’ cryptocurrency trading and mining would result in guaranteed daily returns on Victims’ investments.  In reality, IcomTech did not engage in cryptocurrency trading or mining for its Investors, and OCHOA and IcomTech’s other promoters used Victim funds to pay other Victims to further promote the schemes and to enrich themselves.

IcomTech promoters, including OCHOA, traveled throughout the United States and internationally, where they hosted lavish expos and small community presentations aimed at luring Victims to invest in the schemes, including in the Southern District of New York.  During larger-scale events, IcomTech promoters presented on purported investment products and the compensation plan, encouraged Victims to invest as a means of achieving financial freedom, and boasted about the amount of money they were earning.  IcomTech promoters often showed up at larger-scale events in expensive cars and wearing luxury clothing as a way of exhibiting their purportedly legitimate success from IcomTech.  The atmosphere of these events was festive and designed to generate excitement about the schemes.

Victims invested in IcomTech by purchasing investment products from promoters using cash, checks, wire transfers, and actual cryptocurrency.  Following a Victim’s investment, a Victim would be provided with access to an online portal where the Victim could monitor the purported returns.  While Victims saw “profits” accumulate on the online portal, most Victims were unable to withdraw any of these so-called profits and ultimately lost their entire investments.  By contrast, IcomTech’s promoters, including OCHOA, siphoned off, in some cases, hundreds of thousands of dollars in Victim funds, which they withdrew as cash, spent on IcomTech promotional expenses, and used for personal expenditures such as luxury goods and real estate.

At least as early as August 2018, Victims who attempted to withdraw money from their online portal accounts had difficulty doing so and, when they complained to promoters, they were met with excuses, delays, and hidden fees, if they were able to make any withdrawals at all.  Despite these complaints, IcomTech promoters, including OCHOA, continued to promote IcomTech and accept Victims’ investments.  As complaints mounted, IcomTech began offering proprietary crypto tokens for sale as a means of injecting liquidity into IcomTech.  Promoters of the schemes claimed that these tokens, known as “Icoms,” would eventually be worth a significant amount of money when they were accepted by companies for payment for goods and services.  This was false.  In reality, “Icoms” were essentially worthless and resulted in further financial loss to Victims.  By in or about the end of 2019, IcomTech stopped making payments to Victims and IcomTech collapsed.

*                *                *

OCHOA, 35, of Nashua, New Hampshire, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum term of 20 years in prison.

The maximum potential penalty is prescribed by Congress and is provided here for informational purposes only, as the sentencing of the defendant will be determined by the judge.

Mr. Williams praised the outstanding investigative work of Special Agents from Homeland Security Investigations’ El Dorado Task Force.  Mr. Williams also thanked the Securities and Exchange Commission and the Commodity Futures Trading Commission for their assistance.

If you believe you are a victim of the IcomTech fraud, updated information regarding the case and victims’ rights, as well as contact information for the victim witness coordinator is available here.

The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Benjamin A. Gianforti, Michael Maimin, and Cecilia E. Vogel are in charge of the prosecution. 

Damian Williams, the United States Attorney for the Southern District of New York, announced today that PABLO RENATO RODRIGUEZ, the co-founder of AirBit Club with GUTEMBERG DOS SANTOS, was sentenced to 12 years in prison for orchestrating the massive global AirBit Club pyramid scheme.  RODRIGUEZ and his co-conspirators deceived individuals into investing in AirBit Club, a purported cryptocurrency mining and trading company, and executed a sophisticated money laundering operation to hide their illegal profits pilfered from AirBit Club.  RODRIGUEZ’s co-defendants, DOS SANTOS, SCOTT HUGHES, CECILIA MILLAN, and KARINA CHAIREZ have pled guilty and are awaiting sentencing.  RODRIGUEZ and his co-defendants collectively have been ordered to forfeit their fraudulent proceeds of AirBit Club, which include seized or restrained assets consisting of U.S. currency, Bitcoin, and real estate currently valued at approximately $100 million.  U.S. District Judge George B. Daniels imposed today’s sentence.

U.S. Attorney Damian Williams said: “Rodriguez co-founded and led an international multimillion-dollar pyramid scheme that preyed on mostly unsophisticated investors with false promises that their money was being invested in cryptocurrency trading and mining.  Instead of investing on behalf of investors, Rodriguez hid victims’ money in a complex laundering scheme using Bitcoin, an attorney trust account, and international front and shell companies and used victims’ money to line his own pockets.  Rodriguez is one of many recent examples of individuals exploiting cryptocurrency to commit fraud, and today’s sentence should deter anyone who may be tempted to defraud others with false promises of cryptocurrency investments.”   

According to public court filings and statements made in Court:

RODRIGUEZ and DOS SANTOS co-founded AirBit Club in 2015.  They coordinated a scheme in which victim-investors (the “Victims”) were induced to invest in AirBit Club based on the false promise of guaranteed profits in exchange for cash investments in club “memberships” (the “AirBit Club Scheme” or the “Scheme”).  AirBit Club, through its founders, RODRIGUEZ and DOS SANTOS, as well as its promoters (the “Promoters”), including MILLAN and CHAIREZ, marketed AirBit Club as a multilevel marketing club in the cryptocurrency industry.  Promoters falsely promised Victims that AirBit Club earned returns on cryptocurrency mining and trading and that Victims would earn passive, guaranteed daily returns on any membership purchased.

RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, and CHAIREZ traveled throughout the United States and around the world to places in Latin America, Asia, and Eastern Europe, where they hosted lavish expos and small community presentations aimed at convincing Victims to purchase AirBit Club memberships.  In furtherance of the AirBit Club Scheme, the Victims were fraudulently induced to buy memberships in cash, including in the Southern District of New York.  Following a Victim’s investment, a Promoter provided the Victim with access to an online AirBit Club portal to view the purported returns on memberships (the “Online Portal”).  While Victims saw “profits” accumulate on their Online Portal, those representations were false; no Bitcoin mining or trading on behalf of Victims in fact took place.  Instead, RODRIGUEZ and his co-conspirators enriched themselves and spent Victim money on cars, jewelry, and luxury homes, and financed more extravagant expos to recruit more Victims. 

In many instances, as early as 2016, Victims who attempted to withdraw money from the AirBit Club Online Portal and complained to a Promoter were met with excuses, delays, and hidden fees amounting to more than 50% of the Victim’s requested withdrawal, if they were able to make any withdrawal at all.  In April 2020, another victim received a notice on the AirBit Club Online Portal that his account was closed – and principal investment lost – due to “execution of financial sustainability Reserve, policy #34 of the AirBit Club Terms and Conditions, due to the economic and financial crisis caused by (COVID-19).”  This excuse regarding the COVID-19 pandemic was false.

RODRIGUEZ, DOS SANTOS, HUGHES, CHAIREZ, and MILLAN sought to conceal the AirBit Club Scheme, as well as their respective control of the proceeds of that Scheme, by requesting that Victims purchase memberships in cash, using third-party cryptocurrency brokers, and by laundering the Scheme’s proceeds through several domestic and foreign bank accounts, including an attorney trust account managed by HUGHES (the “Hughes Trust Account”).  The Hughes Trust Account was ostensibly intended to maintain custody of HUGHES’s law practice’s client funds.  Instead, the Hughes Trust Account was used by RODRIGUEZ, DOS SANTOS, HUGHES, CHAIREZ, and MILLAN to conceal the nature and origin of the AirBit Club Scheme’s illicit proceeds.  Through that account, HUGHES directed Victim funds to the personal expenses of RODRIGUEZ, DOS SANTOS, CHAIREZ, MILLAN, and himself, and funded promotional events and sponsorships designed to further promote the AirBit Club Scheme. 

Before AirBit Club, RODRIGUEZ and DOS SANTOS were sued by the Securities and Exchange Commission (“SEC”) for perpetrating another pyramid investment scheme known as Vizinova and paid $1.7 million in disgorgement and fines.  HUGHES, an attorney licensed to practice law in California, represented RODRIGUEZ and DOS SANTOS in the Vizinova SEC action.  HUGHES then aided RODRIGUEZ and DOS SANTOS in perpetrating the AirBit Club Scheme by, among other things, helping to remove negative information about AirBit Club and Vizinova from the internet. 

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RODRIGUEZ, 40, of Irvine, California, was also sentenced to three years of supervised release.  RODRIGUEZ was further ordered to pay a forfeiture of $65 million and to forfeit various items of property, including: (i) $999,936.22 formerly held in escrow by Insured International Aircraft Title Service LLC for the Gulfstream Jet with Tail Number N370Z and Serial Number 2082; (ii) 1,322.98963846 in BTC seized from various Bitcoin wallets; (iii) $896,483.00 in United States currency seized from RODRIGUEZ’s California residence; (iv) RODRIGUEZ’s residence located at 117 Amber Sky in the City of Irvine, California 92618; (v) various watches and jewelry seized from RODRIGUEZ’s California residence; and (vi) 2,499.997 in BTC seized from various Bitcoin wallets.

DOS SANTOS, 48, of Panama City, Panama, MILLAN, 41, of Greensboro, North Carolina, CHAIREZ, 47, of Modesto, California, and HUGHES, 47, of Newport Beach, California, have pled guilty to charges including wire fraud conspiracy, which carries a maximum potential sentence of 20 years in prison; money laundering conspiracy, which carries a maximum potential sentence of 20 years in prison; and bank fraud conspiracy, which carries a maximum potential sentence of 30 years in prison.  MILLAN, CHAIREZ, and HUGHES are scheduled to be sentenced on October 3, 2023.  DOS SANTOS is scheduled to be sentenced on October 4, 2023.  

Mr. Williams praised the outstanding investigative work of Special Agents from Homeland Security Investigations’ El Dorado Task Force.  Mr. Williams further thanked the New York Waterfront Commission for its assistance in the forfeiture process and the attorneys and investigators at the SEC whose expertise and diligence were integral to the development of this investigation.

If you believe you are a victim of the AirBit Club fraud, updated information regarding the case and victims’ rights, as well as contact information for the victim witness coordinator, is available here.

The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Kiersten A. Fletcher, Samuel L. Raymond, and Cecilia E. Vogel are in charge of the prosecution. 

Damian Williams, the United States Attorney for the Southern District of New York, Frank A. Tarentino III, the Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), and Edward A. Caban, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a criminal Complaint in Manhattan federal court charging RENNY ANTONIO PARRA PAREDES, a/k/a “El Gallo,” with conspiracy to distribute narcotics resulting in death in connection with the poisoning of four children under the age of three, one of whom died, at a daycare facility in the Bronx.  PAREDES is in custody and was presented today before U.S. Magistrate Judge Ona T. Wang.    

U.S. Attorney Damian Williams said: “I promised last week that we would continue to work to bring those involved in the child poisonings at Divino Niño daycare to justice.  Since then, this Office and our law enforcement partners have worked around the clock to identify and apprehend additional individuals who are responsible.  Today’s arrest is one more step toward obtaining justice for the child-victims of this heinous offense and their families.”        

DEA Special Agent in Charge Frank A. Tarentino III said: “As alleged, Paredes had an instrumental role in this conspiracy and is charged with narcotics distribution and death in connection with the poisoning of four children.  The alleged drugs and materials seized in the trap are indicative of a prolific drug packaging operation.  Traffickers often hide contraband in inconspicuous or unsuspecting locations with no regard for the safety of others.  In this case, the Daycare’s floorboards were used as concealment, putting children’s lives at risk who innocently sat on the floor to play.  I reiterate that DEA and our law enforcement partners will continue to pursue justice for all members of this trafficking ring.”      

NYPD Police Commissioner Edward A. Caban said: “The truly disgraceful allegations in this case continue to shock the senses.  This latest charge proves that our determination to eradicate the threat of illicit fentanyl and save lives cannot – and will not – stop.  The NYPD and our law enforcement partners remain committed to investigating and holding fully accountable anyone who puts the lives of our children in danger.  New Yorkers’ families, and our communities, depend on it.” 

As alleged in the Complaint:[1] 

From at least in or about July 2023 through at least in or about September 2023, RENNY ANTONIO PARRA PAREDES and others, including GREI MENDEZ and CARLISTO ACEVEDO BRITO,[2] conspired to distribute fentanyl, including at a children’s daycare center in the Bronx, New York (the “Daycare”).  There, despite the daily presence of children, including infants, PAREDES and his co-conspirators maintained large quantities of narcotics, including a kilogram of fentanyl stored on top of children’s playmats, and large quantities of suspected narcotics in hidden compartments known as “traps” located in the floor of the room in which the children played and slept.  In addition, law enforcement found in the traps materials to package narcotics, such as glassine envelopes used for retail distribution of drugs, which had been stamped in red with “RED DAWN.”  One of the traps found in the floor of the Daycare is pictured below:

As a consequence of the drug conspiracy engaged in by PAREDES, MENDEZ, ACEVEDO BRITO, and others, on or about September 15, 2023, four children at the Daycare, who were all under three years of age, appear to have experienced the effects of poisoning from exposure to fentanyl.  Three of the children were hospitalized with serious injuries.  The fourth child, a one-year-old boy, died. 

Following the arrest of PAREDES, law enforcement officers searched the apartment in which PAREDES had been staying.  During the course of that search, law enforcement officers found shopping bags containing tools and instruments that are used to prepare and distribute narcotics, including strainers, tape, a grinder, plastic bags, and digital scales.  Law enforcement officers also found what appears to be two clear Ziplock bags filled with a greyish powder and a rectangular, brick-shaped package, both of which appear to contain narcotics. 

Law enforcement officials further found in the apartment in which PAREDES was staying glassine envelopes that bore the same red stamp with the name “RED DAWN” as the above-described glassine envelopes found at the Daycare.  The first photo below depicts the glassines found in the trap in the Daycare, and the second photo below depicts the glassines found in the apartment in which PAREDES was staying. 

Law enforcement officers also found the “RED DAWN” stamp itself in the apartment in which PAREDES was staying. 

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PAREDES, 38, of the Bronx, New York, is charged in Count One with conspiracy to distribute narcotics resulting in death, which carries a mandatory minimum sentence of 20 years in prison and a maximum sentence of life in prison.    

The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Williams praised the outstanding investigative work of the DEA, the NYPD, the SDNY Digital Forensic Unit, the Complex Analytical and Social Media Enhancement Team at the New York/New Jersey High Intensity Drug Trafficking Area, and the Organized Crime Drug Enforcement Task Force (“OCDETF”) New York Strike Force.

The OCDETF New York Strike Force provides for the establishment of permanent multi-agency task force teams that work side-by-side in the same location.  This co-located model enables agents from different agencies to collaborate on intelligence-driven, multi-jurisdictional operations to disrupt and dismantle the most significant drug traffickers, money launderers, gangs, and transnational criminal organizations.  The specific mission of the New York Strike Force is to target, disrupt, and dismantle drug trafficking and money laundering organizations, reduce the illegal drug supply in the United States, and bring criminals to justice.  The Strike Force is affiliated with the DEA’s New York Division and includes agents and officers of the DEA; NYPD; New York State Police; Homeland Security Investigations; U.S. Internal Revenue Service, Criminal Investigation; U.S. Customs and Border Protection; New York National Guard; U.S. Coast Guard; New York State Department of Corrections and Community Supervision; Bergen County Prosecutor’s Office; Fort Lee Police Department; Palisades Interstate Parkway Police; Teaneck Police Department; Hillsdale Police Department; Closter Police Department; Northvale Police Department; River Vale Police Department; Englewood Police Department; Saddle River Police Department; Bergen County Sheriff’s Department; Hawthorne Police Department; and Hackensack Police Department. 

This case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Maggie Lynaugh and Brandon C. Thompson are in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact descried therein should be treated as an allegation. 

[2] GREI MENDEZ and CARLISTO ACEVEDO BRITO have been charged in a separate complaint under docket number 23 Mag. 6444. 

Robert Menendez Allegedly Agreed to Use His Official Position to Benefit Wael Hana, Jose Uribe, Fred Daibes, and the Government of Egypt in Exchange for Hundreds of Thousands of Dollars of Bribes to Menendez and His Wife Nadine Menendez, Which Included Gold Bars, Cash, and a Luxury Convertible  

Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that an Indictment was unsealed this morning charging U.S. Senator ROBERT MENENDEZ, his wife NADINE MENENDEZ, a/k/a “Nadine Arslanian,” and three New Jersey businessmen, WAEL HANA, a/k/a “Will Hana,” JOSE URIBE, and FRED DAIBES, with participating in a years-long bribery scheme.  The Indictment alleges that MENENDEZ and his wife, NADINE MENENDEZ, accepted hundreds of thousands of dollars of bribes from HANA, URIBE, and DAIBES in exchange for MENENDEZ’s agreement to use his official position to protect and enrich them and to benefit the Government of Egypt.  Among other things, MENENDEZ agreed and sought to pressure a senior official at the U.S. Department of Agriculture in an effort to protect a business monopoly granted to HANA by Egypt, disrupt a criminal case undertaken by the New Jersey Attorney General’s Office related to associates of URIBE, and disrupt a federal criminal prosecution brought by the U.S. Attorney’s Office for the District of New Jersey against DAIBES.  MENENDEZ, NADINE MENENDEZ, HANA, URIBE, and DAIBES are expected to appear in federal court in Manhattan on Wednesday, September 27, 2023, at 10:30 a.m.  The case is assigned to U.S. District Judge Sidney H. Stein. 

U.S. Attorney Damian Williams said: “As the grand jury charged, between 2018 and 2022, Senator Menendez and his wife engaged in a corrupt relationship with Wael Hana, Jose Uribe, and Fred Daibes – three New Jersey businessmen who collectively paid hundreds of thousands of dollars of bribes, including cash, gold, a Mercedes Benz, and other things of value – in exchange for Senator Menendez agreeing to use his power and influence to protect and enrich those businessmen and to benefit the Government of Egypt.  My Office is firmly committed to rooting out corruption, without fear or favor, and without any regard to partisan politics.  We will continue to do so.”

FBI Assistant Director in Charge James Smith said: “The FBI has made investigating public corruption a top priority since our founding — nothing has changed.  The alleged conduct in this conspiracy damages the public’s faith in our system of government and brings undue scorn to the honest and dedicated public servants who carry out their duties on a daily basis.  To those inclined to use the status of their public office for personal benefit, or those willing to provide bribes in an attempt to gain influence from a public official, the FBI will ensure that you face the consequences in the criminal justice system for your underhanded dealings.”

According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]

ROBERT MENENDEZ is the senior U.S. Senator from New Jersey and currently the Chairman of the Senate Foreign Relations Committee (“SFRC”).  NADINE MENENDEZ began dating MENENDEZ in February 2018, they became engaged in October 2019, and they married in October 2020.  Shortly after they began dating in 2018, NADINE MENENDEZ introduced MENENDEZ to her long-time friend WAEL HANA, who is originally from Egypt, lived in New Jersey, and maintained close connections with Egyptian officials.  HANA was also business associates with FRED DAIBES, a New Jersey real estate developer and long-time donor to MENENDEZ, and JOSE URIBE, who worked in the New Jersey insurance and trucking business.

Between 2018 and 2022, MENENDEZ and NADINE MENENDEZ agreed to and did accept hundreds of thousands of dollars’ worth of bribes from HANA, DAIBES, and URIBE.  These bribes included gold, cash, a luxury convertible, payments toward NADINE MENENDEZ’s home mortgage, compensation for a low-or-no-show job for NADINE MENENDEZ, home furnishings, and other things of value.  In June 2022, the FBI executed a search warrant at the New Jersey home of MENENDEZ and NADINE MENENDEZ.  During that search, the FBI found many of the fruits of this bribery scheme, including cash, gold, the luxury convertible, and home furnishings.  Over $480,000 in cash — much of it stuffed into envelopes and hidden in clothing, closets, and a safe — was discovered in the home, as well as over $70,000 in cash in NADINE MENENDEZ’s safe deposit box, which was also searched pursuant to a separate search warrant.  Some of the envelopes contained the fingerprints and/or DNA of DAIBES or his driver.  Other of the envelopes were found inside jackets bearing MENENDEZ’s name and hanging in his closet, as depicted below.       

During this same search, agents also found home furnishings provided by HANA and DAIBES, the luxury vehicle paid for by URIBE parked in the garage, as well as over one hundred thousand dollars’ worth of gold bars in the home, which were provided by either HANA or DAIBES.  Two of the gold bars DAIBES provided are depicted in the photographs below.

In exchange for these and other things of value, MENENDEZ agreed to use his power and influence as a Senator to seek to protect HANA, URIBE, and DAIBES’s interests and to benefit the Government of Egypt.  Through this corrupt relationship, MENENDEZ agreed to take a series of official acts and breaches of his official duty.  First, MENENDEZ took actions to benefit the Government of Egypt and HANA, including by improperly pressuring an official at the U.S. Department of Agriculture (“USDA”) to seek to protect a business monopoly granted to HANA by Egypt.  Second, MENENDEZ took actions seeking to disrupt a criminal investigation undertaken by the Office of the New Jersey Attorney General (“NJAG”) related to URIBE and his associates.  Third, MENENDEZ recommended that the President nominate a U.S. Attorney who MENENDEZ believed he could influence with respect to DAIBES and sought to disrupt a federal criminal prosecution undertaken by the U.S. Attorney’s Office for the District of New Jersey (“USAO-DNJ”) of DAIBES.

Promised Actions to Benefit Egypt and Pressure the USDA

Shortly after she began dating MENENDEZ in 2018, NADINE MENENDEZ worked with HANA to introduce Egyptian intelligence and military officials to MENENDEZ.  Those introductions helped establish a corrupt agreement in which HANA, with assistance from DAIBES and URIBE, provided bribes to MENENDEZ and NADINE MENENDEZ in exchange for MENENDEZ’s actions to benefit Egypt and HANA, among others. 

As part of the scheme, MENENDEZ provided sensitive, non-public U.S. government information to Egyptian officials and otherwise took steps to secretly aid the Government of Egypt.  For example, in or about May 2018, MENENDEZ provided Egyptian officials with non-public information regarding the number and nationality of persons serving at the U.S. Embassy in Cairo, Egypt.  Although this information was not classified, it was deemed highly sensitive because it could pose significant operational security concerns if disclosed to a foreign government or made public.  Without telling his professional staff or the State Department that he was doing so, on or about May 7, 2018, MENENDEZ texted that sensitive, non-public embassy information to his then-girlfriend NADINE MENENDEZ, who forwarded the message to HANA, who forwarded it to an Egyptian government official.  Later that same month, MENENDEZ ghost-wrote a letter on behalf of Egypt to other U.S. Senators advocating for them to release a hold on $300 million in aid to Egypt.  MENENDEZ sent this ghost-written letter to NADINE MENENDEZ, who forwarded it to HANA, who sent it to Egyptian officials. 

At various times between 2018 and 2022, MENENDEZ also conveyed to Egyptian officials, through NADINE MENENDEZ, HANA, and/or DAIBES, that he would approve or remove holds on foreign military financing and sales of military equipment to Egypt in connection with his leadership role on the SFRC.  For example, in or about July 2018, following meetings between MENENDEZ and Egyptian officials, which were arranged and attended by NADINE MENENDEZ and HANA, MENENDEZ texted NADINE MENENDEZ that she should tell HANA that MENENDEZ was going to sign off on a multimillion-dollar weapons sale to Egypt.  NADINE MENENDEZ forwarded this text to HANA, who forwarded it to two Egyptian officials, one of whom replied with a “thumbs up” emoji.  MENENDEZ made similar communications over the ensuing years.  For example, in January 2022, MENENDEZ sent NADINE MENENDEZ a link to a news article reporting on two pending foreign military sales to Egypt totaling approximately $2.5 billion.  NADINE MENENDEZ forwarded this link to HANA, writing, “Bob had to sign off on this.”

In exchange for MENENDEZ’s agreement to take these and other actions, HANA promised NADINE MENENDEZ payments, including from IS EG Halal Certified, Inc. (“IS EG Halal”), a New Jersey company that HANA operated with financial support and backing from DAIBES.  However, IS EG Halal had little to no revenue until the spring of 2019, when the Government of Egypt granted IS EG Halal a monopoly on the certification of U.S. food exports to Egypt as compliant with halal standards, despite the fact that neither HANA nor his company had experience with halal certification.  The monopoly generated revenue for HANA, through which he paid NADINE MENENDEZ as promised.   

Because the monopoly resulted in increased costs for U.S. meat suppliers, in or about April and May 2019, the USDA contacted the Government of Egypt and sought reconsideration of its grant of monopoly rights to IS EG Halal.  After being briefed on the USDA’s objections to IS EG Halal’s monopoly by HANA and NADINE MENENDEZ, on May 23, 2019, MENENDEZ called a high-level USDA official (“Official-1”) and insisted that the USDA stop opposing IS EG Halal’s status as sole halal certifier.  When Official-1 attempted to explain why the monopoly was detrimental to U.S. interests, MENENDEZ reiterated his demand that the USDA stop interfering with IS EG Halal’s monopoly.  Official-1 did not accede to MENENDEZ’s demand, but IS EG Halal nevertheless kept its monopoly.

After financially benefitting from IS EG Halal’s monopoly, HANA, at times with the assistance of DAIBES and URIBE, provided payments and other things of value in furtherance of the scheme.  For example, in or about July 2019, after the mortgage company for the residence of NADINE MENENDEZ initiated foreclosure proceedings, HANA caused IS EG Halal to pay approximately $23,000 to bring the mortgage current.  HANA did so after a series of discussions with NADINE MENENDEZ, as well as URIBE and DAIBES, about various options for bringing the mortgage current.  Later in 2019, HANA and DAIBES caused IS EG Halal to issue three $10,000 checks to NADINE MENENDEZ for a low-or-no-show job.  As the scheme continued, including through the additional actions described below, MENENDEZ and NADINE MENENDEZ received additional bribes, including gold and cash.

Promised Actions Seeking to Disrupt the NJAG Criminal Case

Also in 2019, HANA and URIBE offered to help buy a new Mercedes-Benz C-300 convertible worth more than $60,000 for MENENDEZ and NADINE MENENDEZ.  In exchange, MENENDEZ agreed and sought to interfere in the NJAG’s criminal insurance fraud prosecution of an associate of URIBE and a related investigation involving an employee of URIBE.  On multiple occasions in 2019, URIBE, HANA, and/or NADINE MENENDEZ briefed MENENDEZ regarding the NJAG’s insurance fraud prosecution and investigation.  Following those briefings, and in exchange for the promise of the luxury convertible, MENENDEZ contacted a senior state prosecutor at the NJAG’s Office who supervised the prosecution and investigation (“Official-2”) at least twice.  During those communications, MENENDEZ attempted to pressure Official-2 to resolve the prosecution more favorably to the defendant.  Official-2 considered MENENDEZ’s actions inappropriate and did not agree to intervene.  Nevertheless, the prosecution was ultimately resolved with a plea allowing for no jail time and the investigation never resulted in any charges against URIBE’s employee. 

In exchange for MENENDEZ’s actions, URIBE provided NADINE MENENDEZ with $15,000 cash for the down payment on the luxury convertible in April 2019.  After the purchase was complete, NADINE MENENDEZ messaged MENENDEZ, “Congratulations mon amour de la vie, we are the proud owners of a 2019 Mercedes.❤️” and texted MENENDEZ the below photograph of the convertible:

Thereafter, URIBE made monthly payments to Mercedes-Benz for the convertible between 2019 and June 2022.  URIBE only stopped making those monthly payments after the FBI approached MENENDEZ, NADINE MENENDEZ, and URIBE in connection with this investigation.

Promised Actions Seeking to Disrupt the USAO-DNJ Criminal Case

In October 2018, the USAO-DNJ charged DAIBES with federal criminal charges for obtaining loans under false pretenses from a New Jersey-based bank he founded.  Between December 2020 and 2022, MENENDEZ agreed to attempt to influence the pending federal prosecution of DAIBES in exchange for cash, furniture, and gold bars that DAIBES provided to MENENDEZ and NADINE MENDENDEZ.  In furtherance of this aspect of the scheme, MENENDEZ recommended that the President nominate an individual (“Official-3”) as U.S. Attorney for the District of New Jersey who MENENDEZ believed he could influence with respect to DAIBES’s case.  MENENDEZ also had direct and indirect contact with both Official-3 and another high-ranking official at the USAO-DNJ (“Official-4”) in an attempt to influence the outcome of DAIBES’s case.

Official-3 and Official-4 did not pass on to the USAO-DNJ prosecution team handling the DAIBES prosecution the fact that MENENDEZ had contacted them, and they did not treat the case any differently as a result of MENENDEZ’s actions.  DAIBES’s case was ultimately resolved with a plea agreement that provided for a probationary sentence.  In exchange for MENENDEZ’s participation in the bribery scheme, DAIBES provided MENENDEZ and NADINE MENENDEZ with multiple things of value, including the two one-kilogram gold bars pictured below.

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ROBERT MENENDEZ, 69, of Englewood Cliffs, New Jersey, is charged with one count of conspiracy to commit bribery, which carries a maximum sentence of five years in prison; one count of conspiracy to commit honest services fraud, which carries a maximum sentence of 20 years in prison; and one count of conspiracy to commit extortion under color of official right, which carries a maximum sentence of 20 years in prison.

NADINE MENENDEZ, 56, of Englewood Cliffs, New Jersey, is charged with one count of conspiracy to commit bribery, which carries a maximum sentence of five years in prison; one count of conspiracy to commit honest services fraud, which carries a maximum sentence of 20 years in prison; and one count of conspiracy to commit extortion under color of official right, which carries a maximum sentence of 20 years in prison.

WAEL HANA, 40, formerly of Edgewater, New Jersey, and originally of Egypt, JOSE URIBE, 56, of Clifton, New Jersey, and FRED DAIBES, 66, of Edgewater, New Jersey, are all charged with one count of conspiracy to commit bribery, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit honest services fraud, which carries a maximum sentence of 20 years in prison.

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by a judge.

Mr. Williams praised the outstanding investigative work of the FBI.  Mr. Williams thanked the Internal Revenue Service-Criminal Investigation for its invaluable assistance on the investigation.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Eli J. Mark, Paul Monteleoni, Lara Pomerantz, and Daniel C. Richenthal 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.

This investigation remains ongoing.  If you have information regarding the charges or defendants in the Indictment, please contact the FBI at 1-800-CALL-FBI and reference this case.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced today that ROBERT NEWLAND, the business partner of convicted art dealer INIGO PHILBRICK, was sentenced today to 20 months in prison in connection with a multi-year scheme to defraud various individuals and entities in order to finance PHILBRICK’s art business.  U.S. District Judge Sydney H. Stein imposed today’s sentence.

U.S. Attorney Damian Williams said: “Robert Newland helped Inigo Philbrick commit one of the largest fraud schemes ever perpetrated in the art market.  By taking advantage of the lack of transparency in the art market, Philbrick and Newland defrauded art collectors, investors, and lenders by lying about the true ownership interests of artworks and selling or pledging as collateral over 100% of numerous artworks.  As the financial adviser, Newland appeared to give legitimacy to Philbrick’s art business, but in reality, he perpetuated the fraud.  Today’s sentence sends a message to anyone who facilitates fraud in the art market that they will face serious consequences.”      

According to the allegations in the Complaint, Indictment, and statements made in court:

From approximately 2016 through 2019, to finance his art business, PHILBRICK engaged in a scheme to defraud multiple individuals and entities in the art market located in the New York metropolitan area and abroad (the “Fraud Scheme”).  NEWLAND was PHILBRICK’s business partner and financial adviser and conspired with PHILBRICK to perpetrate the Fraud Scheme.  NEWLAND and PHILBRICK made material misrepresentations and omissions to art collectors, investors, and lenders to access valuable art and obtain sales proceeds, funding, and loans.  NEWLAND and PHILBRICK knowingly misrepresented the ownership of certain artworks, for example, by selling a total of more than 100% ownership in an artwork to multiple individuals and entities without their knowledge and by selling artworks and/or using artworks as collateral on loans without the knowledge of co-owners and without disclosing the ownership interests of third parties to buyers and lenders.

Over the years, PHILBRICK obtained over $86 million in loans and sale proceeds in connection with the Fraud Scheme.  NEWLAND and PHILBRICK made fraudulent misrepresentations about artworks including, among others, a 1982 painting by the artist Jean-Michel Basquiat titled “Humidity,” a 2010 untitled painting by the artist Christopher Wool, and an untitled 2012 painting by the artist Rudolf Stingel depicting the artist Pablo Picasso.  

In the fall of 2019, NEWLAND and PHILBRICK’s Fraud Scheme collapsed as various investors and lenders learned about the material misrepresentations and omissions PHILBRICK and NEWLAND had made.

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In addition to the prison term, NEWLAND, 46, of the United Kingdom, was sentenced to two years of supervised release, during which time he must complete 200 hours of community service per year.  NEWLAND was further ordered to pay a forfeiture of $76,000 and the following property: (i) Personal Distance A, painting by Carroll Dunham, 96.5 x 124.5 cm (49 x 38 in.); (ii) Untitled 2016 painting, oil and etching on paper, by Christopher Wool, image size 19 x 15 cm (7.5 x 6 in), paper size 41.3 x 35.6 cm. (16.24 x 14 in.); (iii) Untitled 2007 print, Epson UltraChrome inkjet on linen, by Wade Guyton, 213.36 x 175.26 cm. (83.21 x 68.35 in.); and (iv) a Jean Prouvé desk H 72 x L 160 x P 71.5 cm.  In addition, NEWLAND was ordered to pay restitution to victims in the amount of $67,489,808.  

PHILBRICK, 35, a U.S. citizen formerly residing in the United Kingdom, pled guilty to one count of wire fraud on November 18, 2021.  On May 23, 2022, U.S. District Judge Sidney L. Stein sentenced PHILBRICK to seven years in prison and two years of supervised release.  PHILBRICK was further ordered to pay forfeiture of $86,672,790 and restitution of $82,592,367.

Mr. Williams praised the investigative work of the Federal Bureau of Investigation’s Art Crime Team.

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Jessica K. Feinstein and Cecilia E. Vogel are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced today that EDWIN CORTORREAL, a/k/a “Crazy Ed,” was sentenced by U.S. District Judge Valerie E. Caproni to life in prison for his participation in a violent robbery crew known as the “Hot Boys” and the murder of Kelly Diaz in 2006 in the Washington Heights neighborhood of Manhattan.  CORTORREAL was convicted following a five-day trial before Judge Caproni on April 26, 2023.

U.S. Attorney Damian Williams said: “Edwin Cortorreal was a member of a violent robbery crew that terrorized the Washington Heights neighborhood in Manhattan.  But simply robbing his victims was not enough for Cortorreal.  He was willing to kill them to make sure he got away with his crimes.  To that end, in 2006, Cortorreal executed Kelly Diaz in front of Diaz’s wife.  But thanks to the hard work of our law enforcement partners and the prosecutors of this Office, Cortorreal did not get away with this crime.”

According to the evidence presented in court during the trial:

From at least 2006 to in or about 2013, a violent robbery crew known as the “Hot Boys” committed countless burglaries and robberies and sold narcotics in the Washington Heights area.  EDWIN CORTORREAL was a trusted associate of the Hot Boys.  In 2006, CORTORREAL and four other members and associates of the Hot Boys broke into Kelly Diaz’s apartment in the middle of the night.  During the course of the robbery, CORTORREAL and his co-conspirators duct-taped Diaz to a chair and threw his wife to the ground.  As they were leaving, CORTORREAL came back and shot Diaz point-blank in the head, killing him instantly as his wife looked on.  Less than a year later, CORTORREAL planned to commit another armed robbery, during which he plotted to kill the victims to avoid leaving behind any witnesses. 

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CORTORREAL, 36, of the Dominican Republic, was found guilty of one count of conspiracy to commit racketeering, one count of murder in aid of racketeering, and one count of the use of firearm resulting in death.           

Mr. Williams thanked the New York Healthcare Fraud Unit of the Federal Bureau of Investigation, the New York City Police Department (“NYPD”), and NYPD Task force officers assigned to the U.S. Attorney’s Office for their work on the investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Mathew Andrews, David Denton, Courtney Heavey, Adam Hobson, Emily Johnson, Ni Qian, Justin Rodriguez, and Hagan Scotten are in charge of the prosecution, with the assistance of paralegal specialist Mia Vuckovich.

Damian Williams, the United States Attorney for the Southern District of New York, announced today that a jury returned a guilty verdict against YELTSIN BELTRAN, a/k/a “Yells,” on three counts in a Superseding Indictment, including charges of racketeering conspiracy, narcotics conspiracy, and a firearms offense.  BELTRAN will be sentenced at a later date by U.S. District Judge Katherine Polk Failla, who presided over the eight-day trial. 

U.S. Attorney Damian Williams said: “Yeltsin Beltran lived a dangerous lifestyle as a member of the YBMG street gang.  Beltran trafficked dangerous drugs and was involved in reckless gunplay in connection with his membership in the gang.  Today’s conviction reaffirms this Office’s commitment to prosecute those who choose to participate in gangs that threaten the wellbeing and safety of our community.”

According to the Superseding Indictment and the evidence at trial:

Between in or about 2006 and in or about 2021, BELTRAN was a member of the Young Bronx Money Getters (“YBMG”), an armed gang that trafficked large quantities of heroin throughout the Northeast including in the Bronx, Long Island, upstate New York, and Connecticut.  BELTRAN also used, carried, and possessed firearms, at least one of which was discharged in connection with the narcotics conspiracy, including during an April 24, 2017, shooting at an after-hours club, in which BELTRAN shot at another person and struck a bystander, and in an April 19, 2019, incident in which BELTRAN shot himself in the foot while inside a crowded nightclub.   

*                *                *

BELTRAN, 31, of the Bronx, New York, was convicted on three counts: (i) conspiring to participate in the YBMG racketeering enterprise, which carries a maximum term of life in prison; (ii) conspiring to distribute and possess with intent to distribute heroin, cocaine, and marijuana, which carries a mandatory minimum term of 10 years in prison and a maximum term of life in prison; and (iii) using and carrying firearms during, and possessing firearms in furtherance of, the narcotics conspiracy, which carries a mandatory consecutive term of 10 years in prison and a maximum term of life in prison.  BELTRAN was acquitted of a December 24, 2017, shooting in connection with the racketeering enterprise and a related firearms count.

The statutory minimum and maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation and the Drug Enforcement Administration’s ("DEA") New York Drug Enforcement Task Force that comprises agents and officers of the DEA, New York City Police Department, and the New York State Police.

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Frank Balsamello, Christopher Brumwell, Brandon Harper, Benjamin Gianforti, and Mathew Andrews, with the assistance of Paralegal Specialists Chanel-Ashley Foster and William Coleman, are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, and Lisa F. Garcia, the Regional Administrator for Region 2 of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States and the State of New York have entered into a civil Consent Decree with the CITY OF MOUNT VERNON, New York, to resolve ongoing litigation regarding MOUNT VERNON’s non-compliance with Clean Water Act requirements for municipal storm sewers, which has caused raw sewage to be discharged into the Bronx and Hutchinson Rivers.  

U.S. Attorney Damian Williams said: “This important settlement provides a path forward for the City of Mount Vernon to comply with the Clean Water Act, protect water quality, and address the needs of its residents who are living with the unlawful discharge of sewage and illicit pollutants.  My Office remains committed to protecting human health and the environment in overburdened and underserved communities such as Mount Vernon, and beyond.”

EPA Regional Administrator Lisa F. Garcia said: “The people of Mount Vernon deserve a safe and functioning sewage system.  By engaging the city and state we have come up with an enforceable agreement that sets a schedule to reduce pollution and protect public health.  This settlement embodies EPA’s commitment to environmental equity and working with communities to tackle the long-standing challenge of aging water infrastructure.”

The Clean Water Act generally prohibits discharges of pollutants into navigable waters, unless in compliance with a permit.  Many municipalities, like MOUNT VERNON, operate “municipal separate storm sewer systems” (or “MS4s”) that carry storm water and discharge it without treatment into nearby waters.  Because separate storm sewer systems do not treat the water they discharge, a municipality is required by its MS4 permit to maintain a program for identifying and eliminating any sewage or other illicit pollutants flowing into the storm sewers.  

According to the allegations in the June 28, 2018, Complaint, the Consent Decree filed today, and other court records:

In June 2018, the United States sued MOUNT VERNON, alleging that since at least January 2012, MOUNT VERNON had failed to comply with these permit obligations and, as a result, had allowed raw sewage to flow into its storm sewer system and then to be discharged into the Hutchinson and Bronx Rivers.  The Complaint also alleged that MOUNT VERNON had failed to comply with two EPA Administrative Orders issued to compel MOUNT VERNON’s adherence to these requirements.  New York State joined the United States as co-plaintiff in this lawsuit.

In September 2020, the District Court granted the governments’ motion for summary judgment and entered an order requiring MOUNT VERNON to take various steps to come into compliance with Clean Water Act MS4 requirements.  However, after the court order was entered, Mount Vernon repeatedly missed deadlines and reporting obligations, forcing the governments to obtain multiple subsequent court orders compelling compliance and imposing financial sanctions against MOUNT VERNON. 

Despite this need for enforcement efforts, as reflected in the Consent Decree, MOUNT VERNON has made progress on its compliance obligations.  Much work, however, remains to be done.  New York State has provided or committed to provide significant financial assistance to MOUNT VERNON to fund repairs to the City’s sewers.

The Consent Decree, filed with the Court today, provides a path forward for compliance in light of these developments, including by requiring MOUNT VERNON to perform sewer system repairs that MOUNT VERNON estimates will cost in excess of $100 million.  Among other requirements, the Consent Decree provides the following:

• MOUNT VERNON must construct two pump stations designed to eliminate identified sources of potential infiltration to the MS4. 

• MOUNT VERNON must either eliminate all other sources of illicit discharges within 30 days of identifying them or submit a binding plan for EPA’s and New York State’s approval for addressing specific sources that require a longer period to eliminate.

• Immediately upon identifying sanitary sewer overflows that could cause illicit discharges into the MS4, MOUNT VERNON must take steps to mitigate those overflows.

• MOUNT VERNON must complete a Sewer System Evaluation Survey and submit for EPA’s and New York State’s approval a Sewer System Corrective Action Plan (“SSCAP”) “that addresses structural, operational, and maintenance issues for each of the conditions identified in the Sewer System Evaluation Survey.”  The SSCAP will be binding and enforceable under the Consent Decree.

• MOUNT VERNON must implement its updated Stormwater Management Program Plan for its MS4 and its Capacity, Management, Operation, and Maintenance program for its sanitary sewers. 

• MOUNT VERNON must keep its mapping of sewer system outfalls current. 

• MOUNT VERNON must continue to engage engineering and financial experts to help manage its sewer system compliance. 

• MOUNT VERNON must undertake transparency and environmental justice measures, including by “evaluat[ing] any potential adverse impacts of construction, repairs, and other actions undertaken pursuant to [the Consent Decree] on overburdened and underserved populations” and “mitigat[ing] any such potential adverse impacts of construction, repairs, and other actions . . . to the maximum extent possible consistent with such work.”

The Consent Decree also provides for a $200,000 civil penalty to resolve the governments’ claims for civil penalties for the violations alleged in the Complaint.  Of that, $100,000 will be paid to the United States.  $100,000 will be owed to New York State with payment suspended unless MOUNT VERNON fails to comply with the Consent Decree.

In the Consent Decree, MOUNT VERNON also admits, acknowledges, and accepts responsibility for certain conduct, including the following:

• Since at least 2013, MOUNT VERNON has not been in compliance with the permit applicable to its MS4 because it has not fully implemented and enforced an Illicit Discharge Detection and Elimination Program.  Among other things:
  • MOUNT VERNON has not provided funding, equipment, and staffing levels necessary to implement and enforce an Illicit Discharge Detection and Elimination Program.
  • MOUNT VERNON did not complete an outfall reconnaissance inventory for all MS4 outfalls until 2022.
  • MOUNT VERNON submitted annual reports month later than the deadlines in June 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, and 2022.
  • MOUNT VERNON did not submit accurate information in its 2017 and 2018 Annual Reports regarding its completions of the Outfall Reconnaissance Inventory.
• Moreover, at least up to and including the time the Complaint was filed, MOUNT VERNON also failed to meet the following permit requirements:
  • MOUNT VERNON did not maintain a map showing all outfall locations, all surface waters receiving outfall discharges, and all storm sewersheds.
  • MOUNT VERNON did not adopt measurable goals for the detection, elimination, and reduction of illicit discharges.
  • MOUNT VERNON did not adequately inform the public about the hazards of illegal discharges.
  • MOUNT VERNON did not select and implement measures to reduce the amount of pollutants of concern in storm water discharges.
• The Mount Vernon MS4 has discharged and at times continues to discharge untreated sewage into the Bronx and Hutchinson Rivers.

• MOUNT VERNON did not comply with two administrative orders issued by EPA to compel MOUNT VERNON’s compliance with the General Permit and the Clean Water Act.

*                *                *

To provide public notice and afford members of the public the opportunity to comment on the Consent Decree, the Consent Decree will be lodged with the District Court for a period of at least 30 days before it is submitted for the Court’s approval.

Mr. Williams thanked the attorneys and enforcement staff at EPA Region 2 for their critical work on this matter and also thanked the attorneys and staff at the New York Attorney General’s Office and New York State Department of Environmental Conservation.

This case is being handled by the Environmental Protection Unit of the Office’s Civil Division.  Assistant U.S. Attorney Robert William Yalen is in charge of the case.

Damian Williams, the United States Attorney for the Southern District of New York, announced today that, on September 15, 2023, JOSEPH DUPONT pled guilty to one count of securities fraud, and earlier today, SLAVA KAPLAN, a/k/a “Stanley Kaplan,” pled guilty to one count of securities fraud, both in connection with their participation in an insider trading scheme surrounding the announcement of Alexion Pharmaceuticals, Inc.’s acquisition of Portola Pharmaceuticals, Inc.  DUPONT and KAPLAN were arrested in June of this year and pled guilty before U.S. District Judge Gregory H. Woods.

U.S. Attorney Damian Williams said: “Dupont admitted in court that he gave his friend sensitive information that Dupont had misappropriated from his employer at the time so that his friend could profit.  And Kaplan admitted in court both that he made profitable trades based on information that he knew was provided to him for an illegitimate purpose, and that he passed that information along to others.  These convictions reflect my Office’s ongoing commitment to ensuring fairness in the stock market.”

According to the allegations in the Indictment and statements made in public court proceedings:

In 2020, DUPONT, KAPLAN, and others engaged in an insider trading scheme surrounding the announcement of Alexion’s acquisition of Portola.  DUPONT was a vice president at Alexion and, on January 31, 2020, was informed of Alexion’s upcoming acquisition of Portola.  Before that acquisition was publicly announced, in April 2020, DUPONT provided material nonpublic information (“MNPI”) that he misappropriated from Alexion about the acquisition to a friend so that the friend could use the information to trade profitably in securities.

In turn, DUPONT’s friend provided KAPLAN, who was also known to DUPONT, the MNPI about Portola’s pending acquisition, both so that KAPLAN could trade in advance of the acquisition and so that KAPLAN would assist DUPONT’s friend in formulating trading strategies to maximize DUPONT’s friend’s own trading profits.  KAPLAN further shared MNPI about the upcoming acquisition with a family member and a friend and colleague.  After Alexion’s acquisition of Portola was publicly announced on the morning of May 5, 2020, causing Portola’s stock price to increase significantly, KAPLAN and others who had purchased shares and options based on DUPONT’s inside information sold their shares of Portola and call options for Portola stock, reaping millions of dollars of illegally obtained trading profits.

*                *                *

DUPONT, 44, of Rehoboth, Massachusetts, and KAPLAN, 45, of Hopewell Junction, New York, each pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison.  

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  DUPONT and KAPLAN are scheduled to be sentenced by Judge Woods on January 5, 2024, at 1:00 p.m. and 3:00 p.m., respectively.

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation.  Mr. Williams also thanked the U.S. Securities and Exchange Commission, which has filed a parallel civil action.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Margaret Graham, Sarah Mortazavi, and Samuel P. Rothschild are in charge of the prosecution.

A criminal complaint was unsealed today in Manhattan, New York, federal court charging Grei Mendez, 36, and Carlisto Acevedo Brito, 41, both of the Bronx, New York, with narcotics possession with intent to distribute resulting in death and conspiracy to distribute narcotics resulting in death in connection with the poisoning of four children under the age of three, one of whom died, at a daycare facility in the Bronx. Mendez and Acevedo Brito are both in custody and will be presented today before U.S. Magistrate Judge Jennifer E. Willis.   

“The charges announced today are the tragic result of fentanyl poisoning more innocent Americans, this time young children,” said Deputy Attorney General Lisa O. Monaco. “The Department of Justice will continue to hold accountable anyone who plays a part in the supply-and-delivery chain that is flooding fentanyl into our communities. We will not rest in our efforts to protect the vulnerable.”

“Parents entrusted Grei Mendez with the care of their children,” said U.S. Attorney Damian Williams for the Southern District of New York. “As alleged, instead of diligently safeguarding the well-being of those children, she and her co-conspirators put them directly in harm’s way, running a narcotics operation and storing deadly fentanyl out of the very space in which the children ate, slept, and played. The disregard shown by Mendez and her co-conspirators for the lives of the children under her care is simply staggering.” 

“Tragedy doesn’t begin to describe the events that took place at Divino Niño Daycare,” said Special Agent in Charge Frank A. Tarentino III of the Drug Enforcement Administration (DEA)’s New York Field Division. “This death and drug poisonings are every parent’s worst nightmare and clearly define the danger fentanyl poses to every New Yorker. Fentanyl kills indiscriminately, and the defendants’ callous and irresponsible disregard to safety led to two of the most heinous acts imaginable, causing the death of a child and poisoning three other children. These crimes are unacceptable. I commend the work of the investigators from the DEA and NYPD and our partners at the Southern District of New York who work tirelessly every single day to stop drug poisonings from taking too many lives too soon.”

“This case reflects every parent’s worst nightmare,” said Police Commissioner Edward A. Caban of the New York Police Department (NYPD). “These alleged drug traffickers brazenly went about their illicit business in one of the most ill-conceived locations imaginable, but they will be held accountable. I thank the dedicated investigators of the NYPD and the DEA, and everyone involved at the U.S. Attorney’s Office for the Southern District of New York and the Bronx District Attorney’s Office, for their efforts to secure justice for the most vulnerable New Yorkers among us – our children.” 

As alleged in the complaint, from at least in or about July 2023 through at least in or about September 2023, Mendez and Acevedo Brito and others conspired to distribute fentanyl, including at a children’s daycare center in the Bronx (the Daycare). There, despite the daily presence of young children, the defendants maintained large quantities of fentanyl, including a kilogram of fentanyl stored on top of children’s playmats. In addition, the defendants maintained in the Daycare items purpose-built for the distribution of large quantities of narcotics, including three so-called “kilo presses,” which are designed for the recompression of drugs in powder form commonly used by narcotics traffickers at “mills” or other locations where narcotic drugs are broken down, combined with fillers, and portioned for sale. The narcotics and one of the kilo presses recovered are pictured below.

As a consequence of the defendants’ drug conspiracy, on or about Sept. 15, at the Daycare, four children, who were all under three years of age, appear to have experienced the effects of poisoning from exposure to fentanyl.

Prior to the arrival of emergency personnel at the Daycare on that date, Mendez, in concert with an unnamed co-conspirator (CC-1) removed evidence from the Daycare. In particular, immediately before Mendez called 911 to summon medical assistance for the children, she called CC-1. CC-1 then arrived at the Daycare, stayed for approximately two minutes, and then exited out a back alleyway carrying two full shopping bags – all while the children were unresponsive and awaiting medical assistance. Three of the children were hospitalized with serious injuries. The fourth child, a one-year-old boy, died.

Acevedo Brito resided in a bedroom located within the Daycare and is the cousin of CC-1. One of the kilo presses found at the Daycare was located in the closet inside Acevedo Brito’s bedroom. Additionally, a search of Acevedo Brito’s phone revealed numerous messages suggestive of his involvement in narcotics trafficking.

Mendez and Acevedo Brito are each charged in count one with conspiracy to distribute narcotics resulting in death and in count two with narcotics distribution resulting in death. Both count one and count two carry a minimum penalty of 20 years in prison and a maximum penalty of life in prison. A federal district judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The DEA, the NYPD, the Organized Crime Drug Enforcement Task Force (OCDETF) New York Strike Force, the U.S. Attorney’s Office for the Southern District of New York’s Digital Forensic Unit, and the Complex Analytical and Social Media Enhancement Team at the New York/New Jersey High Intensity Drug Trafficking Area investigated the case, in coordination with the Bronx County District Attorney’s Office. 

The U.S. Attorney’s Office for Southern District of New York’s Narcotics Unit is prosecuting the case. Assistant U.S. Attorneys Brandon C. Thompson and Maggie Lynaugh for Southern District of New York are in charge of the prosecution.

The OCDETF New York Strike Force is a crime-fighting unit comprising federal, state, and local law enforcement agencies supported by OCDETF and the New York/New Jersey High Intensity Drug Trafficking Area. The Strike Force is affiliated with the DEA’s New York Division and includes agents and officers of the DEA; NYPD; New York State Police; Homeland Security Investigations; IRS-Criminal Investigation; U.S. Customs and Border Protection; New York National Guard; U.S. Coast Guard; New York State Department of Corrections and Community Supervision; Bergen County Prosecutor’s Office; Fort Lee Police Department; Palisades Interstate Parkway Police; Teaneck Police Department; Hillsdale Police Department; Closter Police Department; Northvale Police Department; River Vale Police Department; Englewood Police Department; Saddle River Police Department; Bergen County Sheriff’s Department; Hawthorne Police Department; and Hackensack Police Department. 

A complaint is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Damian Williams, the United States Attorney for the Southern District of New York, Lisa O. Monaco, the Deputy Attorney General of the United States, Frank A. Tarentino III, the Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), and Edward A. Caban, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a criminal Complaint in Manhattan federal court charging GREI MENDEZ and CARLISTO ACEVEDO BRITO with narcotics possession with intent to distribute resulting in death and conspiracy to distribute narcotics resulting in death in connection with the poisoning of four children under the age of three, one of whom died, at a daycare facility in the Bronx.  MENDEZ and ACEVEDO BRITO are both in custody and will be presented today before U.S. Magistrate Judge Jennifer E. Willis.   

U.S. Attorney Damian Williams said: “Parents entrusted Grei Mendez with the care of their children.  As alleged, instead of diligently safeguarding the well-being of those children, she and her co-conspirators put them directly in harm’s way, running a narcotics operation and storing deadly fentanyl out of the very space in which the children ate, slept, and played.  The disregard shown by Mendez and her co-conspirators for the lives of the children under her care is simply staggering.” 

Deputy Attorney General Lisa O. Monaco said: “The charges announced today are the tragic result of fentanyl poisoning more innocent Americans, this time young children.  The Department of Justice will continue to hold accountable anyone who plays a part in the supply-and-delivery chain that is flooding fentanyl into our communities.  We will not rest in our efforts to protect the vulnerable.”

DEA Special Agent in Charge Frank A. Tarentino III said: “Tragedy doesn’t begin to describe the events that took place at Divino Niño Daycare.  This death and drug poisonings are every parent’s worst nightmare and clearly define the danger fentanyl poses to every New Yorker.  Fentanyl kills indiscriminately, and the defendants’ callous and irresponsible disregard to safety led to two of the most heinous acts imaginable, causing the death of a child and poisoning three other children.  These crimes are unacceptable.  I commend the work of the investigators from the DEA and NYPD and our partners at the Southern District of New York who work tirelessly every single day to stop drug poisonings from taking too many lives too soon.” 

NYPD Police Commissioner Edward A. Caban said: “This case reflects every parent’s worst nightmare.  These alleged drug traffickers brazenly went about their illicit business in one of the most ill-conceived locations imaginable, but they will be held accountable.  I thank the dedicated investigators of the NYPD and the DEA, and everyone involved at the U.S. Attorney’s Office for the Southern District of New York and the Bronx District Attorney’s Office, for their efforts to secure justice for the most vulnerable New Yorkers among us – our children.” 

As alleged in the Complaint:[1]

From at least in or about July 2023 through at least in or about September 2023, GREI MENDEZ and CARLISTO ACEVEDO BRITO and others conspired to distribute fentanyl, including at a children’s daycare center in the Bronx (the “Daycare”).  There, despite the daily presence of young children, the defendants maintained large quantities of fentanyl, including a kilogram of fentanyl stored on top of children’s playmats.  In addition, the defendants maintained in the Daycare items purpose-built for the distribution of large quantities of narcotics, including three so-called “kilo presses,” which are designed for the recompression of drugs in powder form commonly used by narcotics traffickers at “mills” or other locations where narcotic drugs are broken down, combined with fillers, and portioned for sale.  The narcotics and one of the kilo presses recovered are pictured below.     

As a consequence of the defendants’ drug conspiracy, on or about September 15, 2023, at the Daycare, four children, who were all under three years of age, appear to have experienced the effects of poisoning from exposure to fentanyl. 

Prior to the arrival of emergency personnel at the Daycare on that date, MENDEZ, in concert with an unnamed co-conspirator (“CC-1”) removed evidence from the Daycare.  In particular, immediately before MENDEZ called 911 to summon medical assistance for the children, she called CC-1.  CC-1 then arrived at the Daycare, stayed for approximately two minutes, and then exited out a back alleyway carrying two full shopping bags — all while the children were unresponsive and awaiting medical assistance.  Three of the children were hospitalized with serious injuries.  The fourth child, a one-year-old boy, died.

ACEVEDO BRITO resided in a bedroom located within the Daycare and is the cousin of CC-1.  One of the kilo presses found at the Daycare was located in the closet inside ACEVEDO BRITO’s bedroom.  Additionally, a search of ACEVEDO BRITO’s phone revealed numerous messages suggestive of his involvement in narcotics trafficking.

*                *                * 

MENDEZ, 36, and ACEVEDO BRITO, 41, both of the Bronx, New York, are each charged in Count One with conspiracy to distribute narcotics resulting in death and in Count Two with narcotics distribution resulting in death.  Both Count One and Count Two carry a mandatory minimum sentence of 20 years in prison and a maximum sentence of life in prison.    

The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. 

Mr. Williams praised the outstanding investigative work of the DEA, the NYPD, the Organized Crime Drug Enforcement Task Force (“OCDETF”) New York Strike Force, the SDNY Digital Forensic Unit, and the Complex Analytical and Social Media Enhancement Team at the New York/New Jersey High Intensity Drug Trafficking Area.  Mr. Williams also thanked the Bronx County District Attorney’s Office for its coordination on this case. 

The OCDETF New York Strike Force is a crime-fighting unit comprising federal, state, and local law enforcement agencies supported by OCDETF and the New York/New Jersey High Intensity Drug Trafficking Area.  The Strike Force is affiliated with the DEA’s New York Division and includes agents and officers of the DEA; NYPD; New York State Police; Homeland Security Investigations; U.S. Internal Revenue Service, Criminal Investigation; U.S. Customs and Border Protection; New York National Guard; U.S. Coast Guard; New York State Department of Corrections and Community Supervision; Bergen County Prosecutor’s Office; Fort Lee Police Department; Palisades Interstate Parkway Police; Teaneck Police Department; Hillsdale Police Department; Closter Police Department; Northvale Police Department; River Vale Police Department; Englewood Police Department; Saddle River Police Department; Bergen County Sheriff’s Department; Hawthorne Police Department; and Hackensack Police Department. 

This case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Brandon C. Thompson and Maggie Lynaugh are in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact descried therein should be treated as an allegation. 

Damian Williams, the United States Attorney for the Southern District of New York, announced today that TEO BOON CHING, a/k/a “Zhang,” a/k/a “Dato Sri,” a/k/a “Godfather,” was sentenced to 18 months in prison for conspiring to traffic hundreds of kilograms of rhinoceros horns worth millions of dollars that involved the illegal poaching of numerous rhinoceros, an endangered wildlife species.  The sentence was imposed earlier today by U.S. District Judge Paul A. Crotty.

CHING, who was extradited from Thailand, is the sixth large-scale wildlife trafficker sentenced in cases recently brought by this Office, which also involved the extradition of multiple individuals from several countries in Africa.  CHING and his associated entities were previously sanctioned by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) pursuant to E.O. 13581, as amended.

U.S. Attorney Damian Williams said: “Wildlife trafficking is a serious threat to the natural resources and the ecological heritage shared by communities across the globe, enriching poachers responsible for the senseless illegal slaughter of numerous endangered rhinoceros and furthering the market for these illicit products.  The substantial sentence shows the resolve of this Office to use every tool at our disposal to ensure the protection of endangered species.”

According to the charging and other documents filed in the case, as well as statements made in court proceedings:

CHING was a member of a transnational criminal conspiracy engaged in the large-scale international trafficking and smuggling of rhinoceros horns to sell to foreign buyers, including buyers represented to be in Manhattan.  Trade involving endangered or threatened species violates several U.S. laws as well as international treaties implemented by certain U.S. laws.  During the course of the conspiracy and related conduct, CHING conspired to transport, distribute, sell, and smuggle at least approximately 219 kilograms of rhinoceros horns resulting from the poaching of numerous rhinoceros and having an estimated value of at least approximately $2.1 million.

On a number of occasions, CHING met with a confidential source to negotiate the sale of rhinoceros horns.  For example, on July 17 and 18, 2019, the confidential source met with CHING in Malaysia.  During those meetings, CHING stated that he served as a “middleman” — one who acquires rhinoceros horns poached by co-conspirators in Africa and ships them to customers around the world for a per-kilogram fee.  He also promised the confidential source “as long as you have cash, I can give you the goods in 1-2 days.”  During their communications, CHING sent the confidential source numerous photographs of rhinoceros horns that CHING had available for sale and shipment, including the following: 

July 28, 2019, Communications

August 19-20, 2019, Communications

In August 2019, the confidential source, at the direction of law enforcement, purchased 12 rhinoceros horns from CHING with money that CHING believed were the proceeds of other illegal wildlife trafficking and was in bank accounts in New York.  These horns were delivered in a suitcase in Thailand by those working for the wildlife trafficking organization.  A U.S. Fish and Wildlife Service forensics laboratory examined the rhinoceros horns and concluded that two horn pieces were black rhinoceros horns, and the other 10 pieces were white rhinoceros horns.  Pictures of white and black rhinoceros are depicted below: 

 White Rhinoceros

Black Rhinoceros

A picture of the 12 rhinoceros horns that CHING arranged to be sold to law enforcement through the confidential source and had delivered are depicted below:

CHING was arrested in Thailand on June 29, 2022, at the request of the United States pursuant to a bilateral extradition treaty and was extradited to the United States on October 7, 2022.

*                *                *

CHING, 58, of Malaysia, pled guilty to one count of conspiracy to commit wildlife trafficking. 

Mr. Williams praised the outstanding work of the U.S. Fish and Wildlife Service.  In addition, Mr. Williams thanked the Royal Thai Government for its assistance in the extradition of CHING to the United States and commended law enforcement authorities and conservation partners in Thailand, including the Office of the Attorney General and the Royal Thai Police, Natural Resources and Environmental Crime Suppression Division.  Mr. Williams also thanked the Embassy of the United States in Bangkok and the U.S. Department of Justice’s Office of International Affairs for providing substantial assistance in securing the arrest and extradition of CHING.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Michael R. Herman and Danielle Kudla are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, and Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced the unsealing of an Indictment charging XULIANG HOU and YUNA LIN with conspiring to commit wire fraud.  HOU and LIN were arrested yesterday and will be presented today before U.S. Magistrate Judge Jennifer E. Willis.  The case has been assigned to U.S. District Judge Richard M. Berman.

U.S. Attorney Damian Williams said: “For nearly two years, Xuliang Hou, Yuna Lin, and their co‑conspirators allegedly engaged in a brazen scheme to obtain gift card information from their victims through lies.  As alleged, they used those gift cards to purchase millions of dollars’ worth of products, including electronic devices.  Thanks to the skillful investigative work of HSI and the dedication of the prosecutors of this Office, the defendants’ alleged scheme will be put to an end.”

HSI Special Agent in Charge Ivan J. Arvelo said: “The defendants, along with their co-conspirators, stand accused of swindling victims out of millions of dollars across multiple states over the course of several years.  HSI New York remains steadfast in our commitment to thwart criminal organizations seeking to undermine the integrity of American businesses and the stability of our financial system.”

According to the allegations in the Indictment:[1]

From July 2020 through at least May 2022, XULIANG HOU and YUNA LIN carried out a scheme in which victims were induced, under false pretenses, to purchase gift cards redeemable at certain stores.  The scheme’s perpetrators used those cards to purchase millions of dollars’ worth of various products, including electronic devices.

*                *                *

HOU, 32, and LIN, 30, both of Philadelphia, Pennsylvania, are each charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge. 

Mr. Williams praised the outstanding investigative work of HSI.

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Jeffrey W. Coyle and Benjamin M. Burkett 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.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced that STEPHEN BUYER, a former Indiana Congressman, was sentenced today to 22 months in prison by U.S. District Judge Richard M. Berman.  BUYER was previously convicted following trial of four counts of securities fraud for engaging in two insider trading schemes.

U.S. Attorney Damian Williams said: “Stephen Buyer was convicted by a jury of twice engaging in insider trading.  He abused positions of trust for illicit personal gain, and today he faced justice for those acts.  No insider trader is above the law, and we will continue to bring those who undermine the fairness and integrity of our markets to justice.”

According to the Indictment, evidence presented during trial, court documents, and statements made in open court:

In 2018 and 2019, BUYER engaged in two separate, but interrelated insider trading schemes to steal material non-public information that he obtained through consulting work and to place timely, profitable securities trades based on that stolen information.  First, in or about March and April 2018, BUYER purchased shares of Sprint Corporation (“Sprint”) ahead of the April 29, 2018, public announcement that T-Mobile US, Inc. (“T-Mobile”) and Sprint would merge in a deal valued at $26.5 billion.  Prior to the public announcement of the transaction by T-Mobile, executives at T-Mobile told a small, trusted group of consultants that they had retained to work on the deal, including BUYER, about the merger and directed them to keep the information confidential.  BUYER breached his duty of confidentiality to T-Mobile and misappropriated that information by purchasing shares of Sprint across several brokerage accounts, including his own accounts, an account held jointly with his cousin, and an account in the name of a close, personal friend.  Across these accounts, BUYER made more than $126,000 from the purchase and subsequent sale of Sprint stock after the merger was publicly announced. 

In or about June through August 2019, BUYER again engaged in insider trading, this time trading in shares of Navigant Consulting, Inc. (“Navigant”) ahead of Navigant’s acquisition by consulting and advisory firm Guidehouse.  As with his purchase of Sprint shares, BUYER learned through his consulting work for Guidehouse that Guidehouse intended to acquire Navigant and misappropriated that information by purchasing Navigant shares ahead of the public announcement of the acquisition.  BUYER purchased Navigant shares across several brokerage accounts, including accounts in his own name, joint accounts held with family members, and the account of the same close, personal friend whose account he used to trade Sprint shares.  In total, Buyer made more than $223,000 from his illegal Navigant trades.

BUYER testified at his March 2023 trial and provided false explanations for his Sprint and Navigant trading, which Judge Berman found at sentencing to constitute obstruction of justice.

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In addition to his prison sentence, BUYER, 64, of Noblesville, Indiana, was ordered to pay more than $350,000 in forfeiture and restitution in an amount to be determined. 

Mr. Williams praised the outstanding work of the Federal Bureau of Investigation and also thanked the Securities and Exchange Commission for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Kiersten A. Fletcher and Margaret Graham are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced that MUSTAPHA RAJI was sentenced today by U.S. District Judge Jesse M. Furman to three years in prison for his participation in a $1.7 million business email compromise and money laundering scheme that targeted a Manhattan hedge fund.  RAJI was previously convicted after a one-week jury trial of conspiracy to commit wire fraud, wire fraud, receipt of stolen property, and conspiracy to commit money laundering.

U.S. Attorney Damian Williams said: “Today’s sentencing of Mustapha Raji should send a clear message that email scams targeting businesses in this District will not be tolerated.  Together with our law enforcement partners, we will continue to zealously prosecute online scammers abroad, and the U.S.-based money launderers they work with, to protect American businesses.”

As reflected in the Indictment, public filings, and the evidence presented at trial:

RAJI participated in an international fraud ring that conducted phishing and other email fraud campaigns. 

In April 2017, a company RAJI controlled received over $100,000 in two transfers from another corporate entity, which had itself just received nearly $2 million in stolen money from a public university in Oregon.  The university had been conned into sending the payment to an account controlled by one of RAJI’s co-conspirators instead of the bank account of the legitimate vendor it intended to pay. 

In July 2018, RAJI was involved in the compromise of the business email account of a hedge fund founder in New York.  That compromise resulted in the fraudulent diversion of a $1.7 million wire transfer from the hedge fund to a corporate bank account used to facilitate the scheme.  RAJI was a registered officer of the company that received the stolen funds, he fabricated documents to cover up the fraudulent transfer of funds from the hedge fund, and he directed a co-conspirator to launder the stolen funds to other co-conspirators domestically and overseas.  RAJI took a $50,000 cut for his participation in the scheme.

Similarly, in May 2018, a hospital system in Missouri fell victim to a business email compromise scheme.  As part of that scheme, unauthorized emails were sent from the email account for the hospital’s chief financial officer that purported to direct payments to be issued for false invoices issued by RAJI’s company, causing over $250,000 to be sent directly by the victim to a bank account RAJI controlled. 

In September 2018, RAJI learned that a co-conspirator with whom he had worked closely in the scheme had been arrested.  Nonetheless, when a cooperating witness approached RAJI in 2019 about a new fraud — a supposed insider job to steal $2.3 million — RAJI agreed to participate and sent the cooperating witness wire instructions for an account to receive the stolen money.

*                *                *

In addition to his prison term, RAJI, 53, of Hollywood, Florida, was sentenced to three years of supervised release and was ordered to pay restitution in the amount of $711,557.54 and forfeit the same amount.

Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation. 

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Catherine Ghosh, Jilan Kamal, Dina McLeod, and Robert B. Sobelman are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, announced today that JOSHUA RODRIGUEZ, a/k/a “Suave,” was sentenced by U.S. District Judge Jed S. Rakoff to 38 years in prison for the fatal shooting of Jaquan Millien on October 23, 2018.  RODRIGUEZ shot and killed Millien in the Butler Houses in the Bronx, New York, in connection with a drug dispute.  During the shooting, RODRIGUEZ shot Millien’s five-year-old son, who was with his father at the time.  Thankfully, Millien’s son survived.  RODRIGUEZ was convicted following a five-day trial before Judge Rakoff on June 6, 2023.

U.S. Attorney Damian Williams said: “Inside of a residential building in the Bronx, Joshua Rodriguez targeted, ambushed, and callously murdered Jaquan Millien over a drug dispute.  Worse still, Rodriguez shot and wounded Millien’s five-year-old son who was standing next to his father.  Millien’s son’s gunshot wound has healed, but the scars from witnessing the brutal murder of his father will last a lifetime.  Today’s lengthy sentence is yet another example of this Office’s promise to remain relentless in its prosecution of violent drug dealers.”

According to the evidence presented in court during the trial:

Between in or about 2012 and in or about 2018, JOSHUA RODRIGUEZ conspired with others to sell marijuana in an apartment building located at 1408 Webster Avenue (the “Apartment Building”).  In connection with his narcotics dealing, on or about October 23, 2018, RODRIGUEZ followed Jaquan Millien and his son into the Apartment Building after Millien picked up his son from school.  RODRIGUEZ cornered Millien and his son in the stairwell and fired multiple shots, killing Millien and hitting Millien’s son in the arm.

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In addition to his prison term, RODRIGUEZ, 31, of the Bronx, New York, was sentenced to five years of supervised release.

Mr. Williams thanked the Federal Bureau of Investigation and the New York City Police Department for their outstanding work on the investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Mathew Andrews, Courtney Heavey, and Jim Ligtenberg are in charge of the prosecution, with the assistance of Paralegal Specialist William Coleman.

Damian Williams, the United States Attorney for the Southern District of New York, and Naomi Gruchacz, the Special Agent in Charge of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), announced today that the United States has filed and settled a civil fraud lawsuit against KLAUS PETER RENTROP and his medical practice GRAMERCY CARDIAC DIAGNOSTIC SERVICES P.C. (“GRAMERCY CARDIAC”) for paying millions of dollars in kickbacks to physicians and their practices for patient referrals.  The kickbacks took the form of inflated office “rental payments” and fees paid to contracted cardiologists.  Specifically, the Complaint alleges that, from 2010 to 2021, RENTROP and Gramercy Cardiac entered into office space rental agreements, often in excess of fair market value, with primary care and other physicians (or their medical practices) in order to induce these physicians to refer patients to GRAMERCY CARDIAC-contracted cardiologists who saw patients at the rented office space.  These cardiologists then regularly ordered diagnostic tests and procedures that were performed at GRAMERCY CARDIAC locations and were paid a flat fee for each referral.  GRAMERCY CARDIAC provides cardiac diagnostic imaging services, including PET and SPECT scans, and previously operated four offices in New York City.  RENTROP founded and owns GRAMERCY CARDIAC and serves as its President.

Under the settlement approved today by U.S. District Judge Jesse M. Furman, RENTROP and GRAMERCY CARDIAC will pay $4,510,678 to the United States and have admitted and accepted responsibility for conduct alleged in the Complaint as further described below.  RENTROP and GRAMERCY CARDIAC have also agreed to pay $1,989,362 to the State of New York to resolve the State’s claims, for a total recovery of $6.5 million.  The settlement amount is based on the Office’s assessment of RENTROP’s and GRAMERCY CARDIAC’s ability to pay based on the financial information they provided.  The parties have also executed a Consent Judgment in the amount of $64,416,515, which may be enforced if Defendants do not make the payments required under the settlement agreement.  In addition, RENTROP has agreed to relinquish his ownership and control over GRAMERCY CARDIAC by the end of the calendar year and will pay a portion of the proceeds of any sale of the practice to the United States.  Further, RENTROP is indefinitely barred from working for any entity that bills federal healthcare programs.  He also entered into a Voluntary Exclusion Agreement with HHS-OIG, which prohibits him from, among other things, participating in Medicare, Medicaid, or other federal healthcare programs for five years. 

U.S. Attorney Damian Williams said: “Over more than a decade, Klaus Peter Rentrop and Gramercy Cardiac paid millions of dollars to doctors and their medical practices in exchange for patient referrals for cardiac testing and procedures.  The Anti-Kickback Statute is meant to ensure that when making medical decisions, a doctor considers only the patient’s best interests — not the doctor’s or others’ financial interests.  The defendants violated those doctor-patient relationships through their kickback arrangements, and now they are being held to account.”

HHS-OIG Special Agent in Charge Naomi Gruchacz said: “Individuals and entities that participate in the federal healthcare system are required to obey the laws meant to preserve the integrity of program funds and the provision of appropriate, quality services to patients.  Certain violations of the Anti-Kickback Statute can induce medically unnecessary testing and influence physicians’ decision-making inappropriately.”

According to the Complaint, from 2010 through 2021:

RENTROP and GRAMERCY CARDIAC offered and paid physicians and their practices millions of dollars in kickbacks in the form of inflated “rental payments” and referral fees to induce them to refer patients to Gramercy-contracted cardiologists and to Gramercy Cardiac for diagnostic tests and procedures, in violation of the Anti-Kickback Statute and the Stark Law. 

RENTROP and GRAMERCY CARDIAC’s scheme worked as follows.  RENTROP and GRAMERCY CARDIAC entered into office space rental agreements, often in excess of fair market value, with primary care and other physicians or their medical practices (the “Rental Practices”).  These agreements typically provided for the use of an exam room once or twice a month, as well as for the use of basic equipment (e.g., a telephone and a computer) and front desk staff to assist with scheduling.  The defendants often agreed to pay thousands of dollars each month in rent.  RENTROP and GRAMERCY CARDIAC also entered into independent contractor agreements with dozens of cardiologists (the “Gramercy-Contracted Cardiologists”) who were sent to see patients at the Rental Practices.  In exchange for the purported “rental payments,” the Rental Practices referred patients to the Gramercy-Contracted Cardiologists, who in turn referred many of these patients to a GRAMERCY CARDIAC office to undergo cardiac diagnostic tests and procedures.  RENTROP and GRAMERCY CARDIAC paid the Gramercy-Contracted Cardiologists a flat fee for each test or procedure performed on referred patients at a Gramercy Cardiac location, with larger fees paid for tests and procedures for which GRAMERCY CARDIAC received a greater reimbursement.  These per-procedure fees were the only compensation paid to some Gramercy-Contracted Cardiologists.

To ensure the kickbacks paid to the Rental Practices were working, RENTROP directed his staff to calculate GRAMERCY CARDIAC’s return on investment from the “rental payments” paid to each Rental Practice.  RENTROP insisted on a minimum return on investment of at least 300% from the kickbacks. 

These Rental Practices referred tens of thousands of patients to the Gramercy-Contracted Cardiologists, who in turn referred more than 23,000 patients for PET and SPECT scans at GRAMERCY CARDIAC.  A significant proportion of these patients were Medicare or Medicaid beneficiaries: GRAMERCY CARDIAC billed Medicare or Medicaid for tests or procedures provided to tens of thousands of Medicare or Medicaid beneficiaries who were referred by the Rental Practices, including for PET and SPECT scans for many thousands of these beneficiaries.  As a result, the claims submitted for payment for these tests and procedures were false and violated the federal False Claims Act. 

As part of the settlement, RENTROP and GRAMERCY CARDIAC each admits, acknowledges, and accepts responsibility for the following conduct:

• From 2010 through 2021, GRAMERCY CARDIAC, at RENTROP’s direction, entered into rental agreements (the “Rental Agreements”) with more than 130 physicians and medical practices (the “Rental Practices”) under which GRAMERCY CARDIAC leased a portion of the practice’s office space, usually one or two exam rooms for certain days or hours each month.  RENTROP took part in the negotiation of the Rental Agreements and signed them on behalf of GRAMERCY CARDIAC.  GRAMERCY CARDIAC paid a total of more than $11 million to the Rental Practices pursuant to the Rental Agreements. 

• From 2010 through 2021, GRAMERCY CARDIAC, at RENTROP’s direction, entered into independent contractor agreements (the “Independent Contractor Agreements”) with more than 50 cardiologists (the “Gramercy-Contracted Cardiologists”) or their medical practices.  RENTROP took part in the negotiation of the Independent Contractor Agreements and signed them on behalf of GRAMERCY CARDIAC. 

• GRAMERCY CARDIAC sent the Gramercy-Contracted Cardiologists to the rented office space one or more times each month to see patients who were referred for an assessment by the healthcare providers at the Rental Practice.  The Gramercy-Contracted Cardiologists in turn referred these patients to GRAMERCY CARDIAC to undergo diagnostic tests and procedures, such as PET and SPECT scans.

• GRAMERCY CARDIAC paid many of the Gramercy-Contracted Cardiologists a flat fee for each diagnostic test or procedure which the cardiologist referred to GRAMERCY CARDIAC provided that the patient received the test or procedure at a GRAMERCY CARDIAC location.  These “per procedure” fees were the only compensation GRAMERCY CARDIAC provided to the Gramercy-Contracted Cardiologists.

• Certain versions of Independent Contractor Agreements stated that the Gramercy-Contracted Cardiologist was to be paid not for the referrals to GRAMERCY CARDIAC, but rather for the “[a]dministration and supervision” of the PET and SPECT scans to be performed at GRAMERCY CARDIAC.  However, in many cases, the Gramercy-Contracted Cardiologists did not, in fact, administer and supervise the PET and SPECT scans and were nonetheless paid by GRAMERCY CARDIAC based solely on the number of tests and procedures referred.

• At the time the Rental Agreements were executed, it was understood that the Rental Practices would refer their patients to the Gramercy-Contracted Cardiologists.  Indeed, GRAMERCY CARDIAC calculated the number of hours per month that GRAMERCY CARDIAC leased the office space based on the volume of expected patient referrals.

• GRAMERCY CARDIAC calculated its return on investment from its Rental Agreements — which it internally referred to as the “efficiency” of the Rental Agreements — by comparing the revenue GRAMERCY CARDIAC generated from the patient referrals to the payments it made to the Rental Practice.  

• When a Rental Agreement’s return on investment fell below the minimum threshold, GRAMERCY CARDIAC, at RENTROP’s direction, would often refuse to pay the Rental Practice the amounts due under the Rental Agreement.  In addition, at RENTROP’s direction, GRAMERCY CARDIAC Physician Liaisons advised Rental Practice physicians that if the volume of referrals to Gramercy-Contracted Cardiologists did not increase, rent would be decreased, or the Rental Agreement would be terminated.  GRAMERCY CARDIAC terminated a number of Rental Agreements because the return on investment through patient referrals was too low.

• When negotiating or re-negotiating the monthly rental payment to be made under a Rental Agreement, GRAMERCY CARDIAC took into account the expected or historic return on investment based on the volume of patient referrals generated from the Rental Practice.

• The rental fees paid by GRAMERCY CARDIAC under the Rental Agreements were in excess of fair market value for at least some Rental Agreements.

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had been filed under seal pursuant to the False Claims Act.

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Mr. Williams praised the outstanding investigative work of HHS-OIG, and he thanked the Medicaid Fraud Control Unit at the New York State Attorney General’s Office for its extensive collaboration in the investigation.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Jacob Lillywhite is in charge of the case.

Damian Williams, the United States Attorney for the Southern District of New York, Matthew G. Olsen, the Assistant Attorney General of the Justice Department’s National Security Division, David Lim, Co-Director of Task Force KleptoCapture, James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Matthew S. Axelrod, the Assistant Secretary of Commerce for Export Enforcement, announced the unsealing of a Complaint charging MAXIM MARCHENKO with conspiring to defraud the United States and with smuggling, wire fraud, and money laundering offenses based on MARCHENKO’s alleged participation in a scheme to unlawfully procure U.S.-sourced, dual-use microelectronics with military applications on behalf of end users in Russia.  MARCHENKO was presented before U.S. Magistrate Judge Andrew E. Krause in White Plains federal court earlier today and ordered detained.

U.S. Attorney Damian Williams said: “As alleged, Maxim Marchenko participated in an illicit procurement network that provided military grade microelectronics to end users in Russia.  Following Russia’s unjust invasion of Ukraine, Marchenko and his co-conspirators are alleged to have used shell companies and other deceptive measures in order to secure U.S.-manufactured microelectronics, with applications including in rifle scopes, night-vision goggles, thermal optics, and weapon systems, for use by Russians.  This Office will relentlessly pursue those who seek to flout U.S. law in order to supply Russia with military technology.”

Assistant Attorney General Matthew G. Olsen said: “According to the complaint, Marchenko employed a web of shell companies as part of an overseas smuggling ring to ship dual-use U.S. technology with military applications to Russia in contravention of U.S. law.  Today’s action reinforces the Department’s commitment to protect U.S. security and counter Russian aggression in Ukraine through the vigorous enforcement of our export control laws.”

Co-Director of Task Force KleptoCapture David Lim said: “Disrupting the efforts of facilitators and procurement agents like Marchenko, who use their skills and connections to advance the agenda of the Russian war machine, is one of the most important priorities of this Task Force.  Today’s arrest should serve as another reminder that we will leverage and deploy every tool to bring these criminals to justice.”

FBI Assistant Director in Charge James Smith said: “Attempts by individuals to circumvent U.S. law through money laundering and other forms of deception undermine foreign policy established to keep the United States and our allies safe.  Marchenko allegedly defied U.S. law by procuring sensitive American-made electronics on behalf of the Russian end users, directly endangering citizens in both Ukraine and the United States.  The FBI will not yield in its efforts to stop those who deceive the U.S. government and directly jeopardize our national security.”

Assistant Secretary of Commerce for Export Enforcement Matthew S. Axelrod said: “We are laser-focused on rooting out the procurement networks fueling the Russian war machine.  Working hand-in-hand with our federal law enforcement partners, we will continue to identify and disrupt Russia’s use of front companies in the People’s Republic of China and elsewhere to evade our controls.”

According to the allegations contained in the Complaint unsealed today in White Plains federal court:[1]

MAXIM MARCHENKO is a Russian national who resides in Hong Kong and operates several Hong Kong-based shell companies, including Alice Components Co. Ltd. (“Alice Components”), Neway Technologies Limited (“Neway”), and RG Solutions Limited (“RG Solutions”).  MARCHENKO and two co-conspirators (“CC-1” and “CC-2”), who are also Russian nationals, operate an illicit procurement network in Russia, Hong Kong, and elsewhere overseas.  This procurement network has fraudulently obtained from U.S. distributors large quantities of dual-use, military grade microelectronics, specifically OLED micro-displays, on behalf of Russia-based end users.  To carry out this scheme, MARCHENKO, CC-1, and CC-2 used shell companies based in Hong Kong and other deceptive means to conceal from U.S. Government agencies and U.S. distributors that the OLED micro-displays were destined for Russia.  The technology that MARCHENKO and his co-conspirators fraudulently procured have significant military applications, such as in rifle scopes, night-vision googles, thermal optics, and other weapon systems.

To perpetrate the scheme, MARCHENKO and other members of the conspiracy acquired the dual-use OLED micro-displays from U.S.-based distributors using MARCHENKO’s Hong Kong-based shell companies, including Alice Components, Neway, and RG Solutions.  Members of the conspiracy, including MARCHENKO, procured these sensitive microelectronics by falsely representing to the U.S. distributors (who, in turn, are required to report to U.S. agencies) that Alice Components was sending the shipments to end users located in China, Hong Kong, and other countries outside of Russia for use in electron microscopes for medical research.  In reality, the OLED micro-displays were destined for end users in Russia.  MARCHENKO and other members of the conspiracy concealed the true final destination (Russia) from U.S. distributors for the purpose of causing false statements to the U.S. agencies.

To conceal the fact that these OLED micro-displays were destined for Russia, MARCHENKO and other members of the conspiracy worked together to transship the illicitly procured OLED micro-displays by using pass-through entities principally operated by MARCHENKO in third countries, such as Hong Kong.  MARCHENKO then caused the OLED micro-displays to be shipped to the ultimate destination in Russia using, among other entities, a freight forwarder known to provide freight forwarding services to Russia.  In addition, MARCHENKO and other members of the conspiracy used Hong Kong-based shell companies, principally operated by MARCHENKO, to conceal the fact that payments for the OLED micro-displays were coming from Russia.  In total, between in or about May 2022 and in or about August 2023, MARCHENKO’s shell companies funneled a total of more than $1.6 million to the United States in support of the procurement network’s efforts to smuggle the OLED micro-displays to Russia.

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MARCHENKO, 51, a Russian citizen who has resided in Hong Kong, is charged with conspiracy to defraud the United States, which carries a maximum sentence of five years in prison; conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison; conspiracy to smuggle goods from the United States, which carries a maximum sentence of five years in prison; money laundering, which carries a maximum sentence of 20 years in prison; smuggling goods from the United States, which carries a maximum sentence of 10 years in prison; conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and wire fraud, which carries a maximum sentence of 20 years in prison.

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by a judge.

Mr. Williams praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division and the New York Field Office of the Bureau of Industry and Security of the Department of Commerce.  Mr. Williams also thanked the FBI’s Legal Attaché office in Australia; the U.S. Department of State’s Diplomatic Security Service; the Department of Justice’s National Security Division, Counterintelligence and Export Control Section; and the Office of International Affairs of the Department of Justice’s Criminal Division for their assistance.

This case is being handled by the Office’s White Plains Division and Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Jennifer N. Ong and Shiva H. Logarajah are in charge of the prosecution, with assistance from Trial Attorney Garrett Coyle of the Counterintelligence and Export Control Section.

Today’s actions were coordinated through the Justice Department’s Task Force KleptoCapture.  Task Force KleptoCapture is an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with its allies and partners, in response to Russia’s unprovoked military invasion of Ukraine. 

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, and James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that ROBERT WISNICKI pled guilty today to participating in a $18.8 million Ponzi scheme designed to lure investors to purchase real estate through his New York-based law firms, Wisnicki & Associates LLP and Wisnicki Neuhauser LLP (the “Wisnicki Firms”).  WISNICKI also pled guilty to a separate conspiracy to commit money laundering using his law firm trust accounts to conceal the proceeds of healthcare fraud, during which WISNICKI obstructed justice and committed perjury while testifying before a grand jury.

U.S. Attorney Damian Williams said: “As he has now admitted, Robert Wisnicki committed a wide array of criminal acts as part of multiple schemes designed to line his own pockets and cover his tracks.  As a practicing attorney, Wisnicki knew better, but he flouted the law anyway, even going so far as to obstruct justice and commit perjury while testifying before a grand jury.  Wisnicki now potentially faces years in prison and will pay millions in forfeiture and restitution to atone for his crimes.”      

FBI Assistant Director in Charge James Smith said: “Illegal activity involving the investment industry, especially Ponzi schemes, has unfortunately brought financial ruin to many Americans.  While Wisnicki’s actions are unacceptable, they are even more egregious considering his position of trust as an attorney.  The FBI will continue to work closely with our partners to pursue and prosecute individuals who offer victims false promises and take advantage for their own personal benefit.”

If you believe you are a victim of these crimes, please contact the FBI at 1-800-CALL-FBI and reference this case.

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

The Ponzi Scheme

The Wisnicki Firms specialized in real estate transactional work — namely, assisting clients with purchasing and selling property.  In or about 2007, WISNICKI began a real estate investment business using the Wisnicki Firms.  Existing clients of the Wisnicki Firms (“Investor Clients”) asked WISNICKI to identify potential real estate investment opportunities for them.  The Investor Clients then either transferred funds to WISNICKI or asked him to retain their funds that were already held in the Wisnicki Firms’ Interest Only Lawyers Accounts (“IOLA”) accounts.  WISNICKI then identified real estate investment opportunities for the Investor Clients, and the Wisnicki Firms represented the Investor Clients in the resulting investment transactions.

The Investor Clients began suffering losses in the investments that WISNICKI had arranged.  Rather than notify the Investor Clients of their losses, WISNICKI used funds from the Wisnicki Firms’ clients who did not participate in the real estate investments, which were held in trust in the Firms’ IOLA accounts, and transferred those funds to the Investor Clients to mask their losses.  WISNICKI falsely represented to these other clients that their funds were still held in the Wisnicki Firms’ IOLA accounts, when in fact he had transferred those funds to his Investor Clients.

WISNICKI also used funds from new Investor Clients to cover up losses suffered by prior Investor Clients.  WISNICKI falsely told the new Investor Clients that their funds would be invested in real estate, when in fact he used those funds to repay his prior Investor Clients.

WISNICKI continued the above-described fraud through at least in or about 2022.  WISNICKI owes approximately $18.8 million to certain Investor Clients, which includes approximately $6.3 million to members of his family and approximately $12.5 million to non-family members.  He is also owed approximately $6.7 million by various former clients. 

The Money Laundering, Obstruction, and Perjury Scheme

New York and New Jersey no-fault insurance laws require a driver’s automobile insurance company to pay automobile insurance claims automatically for certain types of motor vehicle accidents, provided that the claim is legitimate and is below a particular monetary threshold (the “No-Fault Laws”).  Pursuant to these requirements, insurance companies will often pay medical service providers directly for the treatment they provide to automobile accident victims without the need to bill the victims themselves.  This process resolves automobile claims without apportioning blame or fault for the accident, thereby avoiding protracted disputes and the costs associated with an extended investigation of the accident. 

Beginning in or about 2014, a criminal organization (the “Gulkarov Conspiracy” or the “Gulkarov Conspirators”) began a scheme to exploit the No-Fault Laws.  As part of the scheme, the Gulkarov Conspirators fraudulently owned and controlled more than a dozen medical professional corporations – including medical, acupuncture, and chiropractic practices – by paying licensed medical professionals to use their licenses to incorporate the professional corporations (collectively, the “Gulkarov Clinics”).  The Gulkarov Conspirators further defrauded automobile insurance companies by billing insurance companies for unnecessary, harmful, and excessive medical treatments and lying under oath to insurance company representatives.

The Gulkarov Conspirators laundered the proceeds of the healthcare fraud through, among other ways, the Wisnicki Firms.  In or about 2016 and 2017, one of the Gulkarov Conspirators (“CC-1”), using checks, transferred funds from the Gulkarov Clinics to the Wisnicki Firms.  WISNICKI deposited the checks into one of his IOLA accounts, despite the fact that the Wisnicki Firms did not represent the Gulkarov Clinics and had no attorney-client relationship with the Gulkarov Conspirators.  The Gulkarov Conspirators then arranged for the Wisnicki Firms to use the healthcare fraud proceeds to pay for real estate on behalf of the leaders of the Gulkarov Conspiracy.

In or about April 2021, the Wisnicki Firms were served with a subpoena from a grand jury sitting in the Southern District of New York (the “Subpoena”).  Among other things, the Subpoena required the Wisnicki Firms to produce documentation concerning the checks from the Gulkarov Clinics.  WISNICKI then communicated with CC-1 and learned that the proceeds of the checks were the proceeds of unlawful activity.

WISNICKI, CC-1, and a second member of the Gulkarov Conspiracy (“CC-2”) agreed to respond to the Subpoena by submitting fabricated documents to the grand jury, lying in communications with the U.S. Attorney’s Office for the Southern District of New York, and committing perjury before the grand jury. 

WISNICKI, CC-1, and CC-2 further agreed to re-launder the proceeds of the checks from the Gulkarov Clinics in response to the Subpoena.  At the direction of CC-1, WISNICKI wrote checks, drawn on his IOLA, purporting to return the monies that had been previously paid to his firm.  The checks were made payable to physicians who purported to be owners of the Gulkarov Clinics and to family members of the Gulkarov Conspirators (together, the “Payees”).  WISNICKI wrote the checks under the false pretense that the Payees were clients of the Wisnicki Firms who had previously paid money to the Wisnicki Firms for legal services.  WISNICKI and others agreed that the checks to the Payees would be deposited, and the funds would then be withdrawn and returned to the Wisnicki Firms.  WISNICKI delivered the checks to CC-1 for this purpose.

Thereafter, on or about April 19, 2021, WISNICKI submitted to the grand jury over a dozen fabricated retainer agreements.  The same day, WISNICKI falsely stated to the U.S. Attorney’s Office that the funds paid to the Wisnicki Firms “were originally supposed to be used for a [sic] retainer fees, which is why the agreements were originally prepared,” but that the clients ultimately “instead asked us to hold the funds to be used for future investments.”  WISNICKI further represented that the Wisnicki Firms decided to return the retainer fees after receiving the Subpoena.

On or about July 6, 2021, WISNICKI was called to appear before the grand jury as custodian of records for the Wisnicki Firms.  WISNICKI falsely testified to the grand jury, among other things, that payments to the Wisnicki Firms had been made for the purpose of opening a “lending platform” that was never completed, and that WISNICKI had not spoken to anyone outside of the Wisnicki Firms about the Subpoena.   

*                *                *

ROBERT WISNICKI, 44, of Forest Hills, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit money laundering, which carries a maximum sentence of five years in prison.  As part of his plea agreement, WISNICKI agreed to pay forfeiture of $19,010,548.06 and restitution of $18,800,000.

The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendant will be determined by a judge.

Mr. Williams praised the work of the FBI. 

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit and the White Plains Division.  Assistant U.S. Attorneys Mathew Andrews, Timothy Capozzi, and Ryan Allison are in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, and Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced that KOSTAS FEKKAS, a/k/a “Constantine Fekkas,” a/k/a “C.J. Justice,” was arrested on September 14, 2023, and charged via a criminal Complaint filed in White Plains federal court with possession of child pornography, receipt of child pornography, and attempted transfer of obscene material.  FEKKAS was presented in White Plains federal court yesterday before U.S. Magistrate Judge Judith C. McCarthy, who ordered that FEKKAS be detained.

U.S. Attorney Damian Williams said: “Kostas Fekkas’s alleged conduct is despicable.  As a teacher, Fekkas was entrusted with the care and well-being of children, who he in turn allegedly sought to victimize.  I’m grateful to our diligent law enforcement partners and the dedicated prosecutors of this Office for bringing charges in this important case, and I encourage anyone who believes they may have information regarding Fekkas’s alleged conduct to report this information at 1-866-DHS-2423 or www.ice.gov/webform/ice-tip-form.”

HSI Special Agent in Charge Ivan J. Arvelo said: “As parents, we entrust our children's safety to the school each day, believing they are in safe hands.  The accused stands charged with heinous crimes against an individual he believed to be a child, unaware that it was an undercover agent.  It brings me a sense of relief to know this individual has been removed from both the streets and the classroom.”

As alleged in the Complaint filed yesterday:[1]

In December 2022, an undercover agent posing as a 13-year-old girl named “Riley” had a conversation on Kik (a mobile messaging application) with someone with the username “C.J.Justice” (“C.J.”).  C.J.’s Kik account was registered to the email address [email protected].  Among other things, C.J. introduced himself as a 30-year-old male from New York who teaches high school physics; sent multiple photographs of himself to Riley that resembled a photograph of FEKKAS that had been posted on a public charter school’s website; repeatedly asked Riley for photographs, including photographs of her “body”; sent a video of someone masturbating and several photographs of an erect penis, including one from inside a classroom, to Riley; described the various kinds of sexual acts he wanted to engage in with Riley; and told Riley that he had sex “with a 10th grader once” and had “been searching ever since” to have sex with a minor again.

In March 2023, law enforcement seized FEKKAS’s cellphone and executed a search warrant to review the data extracted from the cellphone.  They discovered that FEKKAS used a mobile application called HideU to hide, among other things, (i) a sexually explicit video in which a young female (“Victim-1”) was rubbing and inserting her fingers into her vagina; (ii) a photograph of the same female with her pink sweatshirt pulled up to expose her breasts; and (iii) a photograph of the same female naked from the head down to her knees.  In the video and the photographs, she was wearing a bracelet that spelled out an abbreviated version of her first name.  The name on the bracelet matched the name of a Snapchat user who had a chat conversation with “Lysol1834,” the Snapchat account username on FEKKAS’s cellphone.  After comparing Snapchat records with passport information, law enforcement confirmed that Victim-1 was a girl who was 12 years old at the time the photographs and sexually explicit video was taken.

Prior to his arrest, FEKKAS was a teacher at a public charter high school located in upper Manhattan, New York.  It also appears that FEKKAS previously worked at several other schools in the Bronx and Westchester counties.

There may be more victims of this alleged conduct.  If you have information to report, contact HSI through its toll-free Tip Line at 1-866-DHS-2423 or by completing its online tip form.  Both are staffed around the clock by investigators.  From outside the U.S. and Canada, callers should dial 802-872-6199.  Hearing-impaired users can call TTY 802-872-6196.

*                *                *

FEKKAS, 34, of Hartsdale, New York, is charged with attempted transfer of obscene material, which carries a maximum sentence of 10 years in prison; possession of child pornography, which carries a maximum sentence of 10 years in prison; and receipt of child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison.  

The minimum and maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Williams praised the outstanding investigative efforts of HSI and the Rockland County District Attorney’s Office.  He added that the investigation is ongoing.

The case is being handled by the Office’s White Plains Division.  Assistant U.S. Attorney Timothy Ly is in charge of the prosecution.

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

[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the descriptions of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, announced today that PABLO ARMANDO VALENZUELA was sentenced by U.S. District Judge Victor Marrero to 70 months in prison for committing an armed robbery of a jewelry store in the Bronx, New York.  VALENZUELA previously pled guilty to one count of Hobbs Act robbery.

U.S. Attorney Damian Williams said: “The defendant committed a violent armed robbery of a Bronx jewelry store and injured innocent employees and bystanders by spraying a can of extremely hazardous bear spray directly into their faces.  Violent criminals who commit firearms offenses and terrorize hardworking New Yorkers will be prosecuted to the full extent of the law.”

According to the allegations contained in the Complaint and court filings:

On August 10, 2022, VALENZUELA, along with at least five other co-conspirators, committed an armed robbery of a jewelry store in the Bronx, New York, using a firearm, bear spray, and hammers.  On the evening of August 10, VALENZUELA entered the jewelry store wearing a ski mask and sprayed a can of bear spray into the eyes of jewelry store employees, temporarily blinding them.  As customers, including young children, attempted to flee the jewelry store, five other masked robbers entered the store and used hammers to destroy glass display cases.  At least one robber brandished a firearm.  VALENZUELA and the other robbers then stole hundreds of thousands of dollars’ worth of jewelry.  VALENZUELA fled the jewelry store and sprayed bear spray into the eyes of bystanders, many of whom were then rushed to the hospital.  The robbers then fled in various directions on foot, in cars, and on the backs of mopeds driven by co-conspirators who stood nearby as lookout and getaway drivers.

Photographs of VALENZUELA committing the offense are below:

*                *                *

In addition to his prison term, VALENZUELA, 33, of the Bronx, New York, was sentenced to three years of supervised release.

VALENZUELA’s co-defendant, AARON MILLER, pled guilty to one count of Hobbs Act robbery and will be sentenced on December 1, 2023.

Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department.

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Amanda C. Weingarten is in charge of the prosecution.

Damian Williams, the United States Attorney for the Southern District of New York, James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Kevin McConville, the Sheriff of the Putnam County Sheriff’s Office, announced today the unsealing of an Indictment charging HONG RU LIN, a/k/a “Bruce,” and KENA ZHAO, a/k/a “Angela,” with violating the Travel Act and conspiring to do so in connection with their use of facilities of interstate commerce to operate a prostitution business at multiple massage parlors in Putnam, Westchester, New York, and Queens County.  LIN and ZHAO were arrested this morning and will be presented before U.S. Magistrate Judge Judith C. McCarthy.

U.S. Attorney Damian Williams said: “As alleged, Hong Ru Lin and Kena Zhao operated an extensive prostitution business, using massage parlors as cover for their illegal activities.  Today’s Indictment makes clear that my Office will continue to pursue those who operate illicit businesses, especially when they do so behind the closed doors of supposedly legitimate establishments.” 

FBI Assistant Director in Charge James Smith said: “This indictment puts an end to an alleged extensive commercial sex enterprise that exploited countless women and repeatedly violated U.S. laws.  Let these charges be a message to anyone who seeks to exploit women for monetary gain, the FBI is committed to protecting victims, and will always bring their predators to justice.”

Putnam County Sheriff Kevin McConville said: “We will continue to work with our federal and local law enforcement partners to keep these types of crime out of Putnam County.”

According to the allegations in the Indictment unsealed today in White Plains federal court:[1]

Between at least September 2020 and the present, LIN and ZHAO operated a prostitution business out of multiple massage parlors that they owned in Putnam, Westchester, New York, and Queens County.  LIN and ZHAO managed a roster of women who worked at the massage parlors and performed sexual acts for the customers of LIN and ZHAO.  LIN and ZHAO communicated by cellphone and private chatroom to manage and operate their prostitution business.  Among other things, LIN and ZHAO used cellphones to communicate with potential customers, assign particular employees to customers, monitor the income of their prostitution business, and set performance goals for the women who worked in the massage parlors.  In addition, on at least one occasion, ZHAO personally participated in a massage during which a sexual act was offered to a customer.

*                *                *

HONG RU LIN, 50, and KENA ZHAO, 45, both of Putnam Valley, New York, are charged with violating the Travel Act and conspiring to violate the Travel Act.  Each of these counts carries a maximum sentence of five years in prison. 

The statutory maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Mr. Williams praised the outstanding work of the FBI’s Westchester County Safe Streets Task Force and the Putnam County Sheriff’s Office.  Mr. Williams also thanked the Town of Carmel Police Department, the Westchester County Police Department, and the Yonkers Police Department for their assistance in this matter. 

Mr. Williams noted that the investigation is ongoing.  If you feel you may be a victim of or have information related to the conduct in this case, please contact the FBI Tip Line at 1-800-CALL-FBI or at tips.fbi.gov.

The case is being prosecuted by the Office’s Civil Rights Unit in the Criminal Division and the White Plains Division.  Assistant U.S. Attorneys Lindsey Keenan and Ryan W. Allison 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.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Ivan J. Arvelo, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), Daniel B. Brubaker, the Inspector in Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), and Edward A. Caban, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment charging KAYSHAWN MASSOP, a/k/a “topski.bz,” a/k/a “Bz,” a/k/a “KB,” a/k/a “Kay Ski,” GREG BROWN, a/k/a “ballout.gg,” a/k/a “GG,” CARL HENRY, a/k/a “Big Ski,” a/k/a “Biggs,” and AMARI JACKSON, a/k/a “Justo,” with racketeering conspiracy, firearms offenses, and other crimes related to their membership in the “Ski-Ball Gang,” a street gang based in the Bronx, New York.  MASSOP, BROWN, HENRY, and JACKSON are also charged with attempted murder and assault with a deadly weapon in aid of racketeering in connection with their participation in multiple shootings.  MASSOP, BROWN, HENRY, and JACKSON are all in custody, and JACKSON was presented today before U.S. Magistrate Judge Judith C. McCarthy.  

U.S. Attorney Damian Williams said: “Keeping our community safe from violent crime is a paramount priority of this Office.  As alleged, members of the Ski-Ball Gang engaged in brazen acts of violence across this District, including multiple shootings at rival gang members.  Thanks to the extraordinary work of our law enforcement partners and the career prosecutors of this Office, the defendants, who include senior members of the gang, now face a slew of federal charges for their crimes.”

FBI Assistant Director in Charge James Smith said: “As alleged, the defendants conspired to not only attempt to increase their standing within a violent street gang through a series of senseless shootings, but also to engage in both bank and wire fraud.  We will not allow gang members to engage in reckless violence that endangers innocent lives.  The New York FBI’s Westchester County Safe Streets Task Force is committed, through collaboration with our law enforcement partners, to ensuring that brazen gang violence has no place in our communities.”

HSI Special Agent in Charge Ivan J. Arvelo said: "The defendants stand accused of endangering the streets of New York City with violence and defrauding both taxpayers and small business owners in their unlawful pursuit of wealth and influence.  HSI NY is proud to work alongside our dedicated law enforcement partners in preventing these criminals from causing further harm.  HSI NY remains steadfast in its mission to apprehend violent gang members and disrupt their criminal enterprises."

USPIS Inspector in Charge Daniel B. Brubaker said: “These gang members allegedly led a criminal enterprise, financially exploiting their victims to fund their gang activities and live a lavish lifestyle.  This RICO indictment and investigation uncovered the despicable nature in which these gangs operate, highlighting their ruthless behavior and disrespectful attitude for the communities where they commit their crimes.  Postal Inspectors and their law enforcement partners will spare no resource to bring these individuals to justice, ensuring they pay for their crimes, while keeping the streets of New York safe from these criminal acts.”

NYPD Commissioner Edward A. Caban said: “Targeting and dismantling gangs, and preventing the crime and violence so often associated with their illegal activities, continue to be among the highest priorities for the NYPD and our law enforcement partners.  And we will remain relentless in our efforts to identify and arrest anyone who involves themselves in such senseless acts in our city.  I commend and thank everyone involved from USPIS, HSI, FBI, and the office of the U.S. Attorney for the Southern District of New York for their dedication and effort on this important case.”

As alleged in the Indictment unsealed today in White Plains federal court:[1]

KAYSHAWN MASSOP, GREG BROWN, CARL HENRY, and AMARI JACKSON are members of a racketeering conspiracy known as the Ski-Ball Gang. 

On January 31, 2020, HENRY, for the purpose of maintaining and increasing his position in the Ski-Ball Gang enterprise, participated in and facilitated the attempted murder of a rival gang member in the Bronx, New York.

On August 23, 2020, HENRY and JACKSON, for the purpose of maintaining and increasing their position in the Ski-Ball Gang enterprise, participated in and facilitated the attempted murder of a rival gang member in the Bronx, New York.

On August 27, 2020, BROWN, for the purpose of maintaining and increasing his position in the Ski-Ball Gang enterprise, participated in and facilitated the attempted murder of rival gang members in the Bronx, New York.

On August 27, 2020, MASSOP, for the purpose of maintaining and increasing his position in the Ski-Ball Gang enterprise, participated in and facilitated the assault of rival gang members in the Bronx, New York.

On June 25, 2021, MASSOP and BROWN, for the purpose of maintaining and increasing their position in the Ski-Ball Gang enterprise, participated in and facilitated the attempted murder of rival gang members in the Bronx, New York.

On January 13, 2022, BROWN, for the purpose of maintaining and increasing his position in the Ski-Ball Gang enterprise, participated in and facilitated a gunpoint robbery in Yonkers, New York.

From at least in or about 2019 through at least in or about 2022, MASSOP, BROWN, HENRY, and JACKSON participated in a bank and wire fraud conspiracy, which included the misuses of others’ means of identification.

*                *                *

A chart containing the names, charges, and minimum and maximum penalties for the defendants is set forth below.  The minimum and maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Williams praised the outstanding investigative work of the FBI’s Westchester County Safe Streets Task Force, HSI, USPIS, and the NYPD.  Mr. Williams also thanked the U.S. Secret Service and the Department of Labor for their assistance in the investigation.

The case is being prosecuted by the Office’s White Plains Division and Violent and Organized Crime Unit.  Assistant U.S. Attorneys Benjamin Klein, Andrew Chan, Christy Slavik, and Ben Arad 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.

COUNT

DEFENDANT(S)

MIN. AND MAX. PENALTIES

Count One: Conspiracy to Commit Racketeering

KAYSHAWN MASSOP

GREG BROWN

CARL HENRY

AMARI JACKSON

20 years in prison

Count Two: Attempted Murder, Assault, and Attempted Assault with a Dangerous Weapon in Aid of Racketeering

CARL HENRY

20 years in prison

Count Three: Possession and Discharge of a Firearm in Furtherance of a Crime of Violence

CARL HENRY

Life in prison; Mandatory minimum of 10 years in prison to run consecutive to any other sentence imposed

Count Four: Attempted Murder, Assault, and Attempted Assault with a Dangerous Weapon in Aid of Racketeering

GREG BROWN

20 years in prison

Count Five: Possession and Discharge of a Firearm in Furtherance of a Crime of Violence

GREG BROWN

Life in prison; Mandatory minimum of 10 years in prison to run consecutive to any other sentence imposed

Count Six: Assault and Attempted Assault with a Dangerous Weapon in Aid of Racketeering

KAYSHAWN MASSOP

20 years in prison

Count Seven: Possession and Discharge of a Firearm in Furtherance of a Crime of Violence

KAYSHAWN MASSOP

Life in prison; Mandatory minimum of 10 years in prison to run consecutive to any other sentence imposed

Count Eight: Attempted Murder and Assault with a Dangerous Weapon in Aid of Racketeering

CARL HENRY

AMARI JACKSON

20 years in prison

Count Nine: Possession and Discharge of a Firearm in Furtherance of a Crime of Violence

CARL HENRY

AMARI JACKSON

Life in prison; Mandatory minimum of 10 years in prison to run consecutive to any other sentence imposed

Count 10: Attempted Murder and Assault with a Dangerous Weapon in Aid of Racketeering

KAYSHAWN MASSOP

GREG BROWN

20 years in prison

Count 11: Possession and Discharge of a Firearm in Furtherance of a Crime of Violence

KAYSHAWN MASSOP

GREG BROWN

Life in prison; Mandatory minimum of 10 years in prison to run consecutive to any other sentence imposed

Count 12: Conspiracy to Commit Hobbs Act Robbery

GREG BROWN

20 years in prison

Count 13: Hobbs Act Robbery

GREG BROWN

20 years in prison

Count 14: Possession and Brandishing of a Firearm in Furtherance of a Drug Trafficking Crime

GREG BROWN

Life in prison; Mandatory minimum of seven years in prison to run consecutive to any other sentence imposed

Count 15: Conspiracy to Commit Bank Fraud

KAYSHAWN MASSOP

GREG BROWN

CARL HENRY

AMARI JACKSON

30 years in prison

Count 16: Conspiracy to Commit Wire Fraud

KAYSHAWN MASSOP

GREG BROWN

CARL HENRY

AMARI JACKSON

20 years in prison

Count 17: Aggravated Identity Theft

KAYSHAWN MASSOP

GREG BROWN

CARL HENRY

AMARI JACKSON

Mandatory minimum of two years in prison to run consecutive to any other sentence imposed

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described therein should be treated as an allegation.

Damian Williams, the United States Attorney for the Southern District of New York, and Naomi Gruchacz, the Special Agent in Charge of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), announced the unsealing today of a Superseding Indictment charging acupuncturists JUNYI LIU, a/k/a “Jenny,” and HONGXING WANG, as well as physical therapists JONATHAN LAQUI and MITZY BALDOVINO and insurance company employee VICTOR MAN, a/k/a “Mr. Wen,” with operating an over $20 million health care fraud scheme at medical offices in Manhattan, Brooklyn, and Queens (the “Offices”).  As part of the fraud scheme, MAN referred patients to the Offices in exchange for kickbacks and also assisted in paying kickbacks to the patients (the “Paid Patients”), who were insured by Medicare and/or other insurance providers (collectively, the “Insurance Providers”).  The defendants and their co-conspirators then billed the Insurance Providers for physical therapy and acupuncture services that were unnecessary or never performed.  LIU was additionally charged with unlawfully enriching herself and a family member through a COVID-19 unemployment benefit scheme.

LIU and WANG were previously indicted and arrested on these charges in September 2021.  LAQUI, BALDOVINO, and MAN were arrested earlier today and presented and arraigned this afternoon before U.S. Magistrate Judge Sarah L. Cave.  The case is assigned to U.S. District Judge Laura Taylor Swain.

U.S. Attorney Damian Williams said: “The defendants allegedly perpetrated a lucrative scheme in which they fraudulently billed for physical therapy and acupuncture services that were never rendered.  Thanks to our law enforcement partners and the dedicated work of the prosecutors of this Office, the defendants are now facing an array of serious charges in federal court.”

HHS-OIG Special Agent in Charge Naomi Gruchacz said: “Health care providers who submit fraudulent claims to federally funded insurance plans and bribe patients to participate in kickback schemes put health care benefits for older people and vulnerable populations at risk.  HHS-OIG will continue to hold accountable individuals who exploit federal health care programs for their own greed.”

As alleged in the Indictment unsealed today in Manhattan federal court:[1]

Between 2018 and 2021, JUNYI LIU, a licensed acupuncturist, operated the Offices from which LIU and her partners fraudulently billed the Insurance Providers for physical therapy and acupuncture services that were not rendered in the manner represented or not rendered at all.  LIU partnered with other licensed medical professionals, including JONATHAN LAQUI and MITZY BALDOVINO, both of whom were licensed physical therapists, and HONGXING WANG, who was a licensed acupuncturist (collectively, the “Partners”).  The Partners’ roles in the scheme typically included: (i) allowing the Offices to use their enrollments with the Insurance Providers to submit to the Insurance Providers materially false and fraudulent claims for reimbursement for physical therapy and acupuncture services; (ii) creating materially false medical documentation, which stated that certain physical therapy and acupuncture services had been rendered, when such services in fact were not rendered in the manner represented or were not rendered at all; and (iii) contributing financing for the Offices, including for the payment of cash kickbacks to the Paid Patients to induce those patients to provide their insurance information and receive medically unnecessary and/or non-existent services at the Offices. 

In furtherance of the scheme, LIU paid cash kickbacks to MAN and others in exchange for recruiting and referring the Paid Patients, all beneficiaries of the Insurance Providers, to the Offices.  The beneficiaries also received cash kickbacks, paid by MAN and others, in exchange for their insurance information and their signatures on sign-in sheets and other documents.  In some instances, these Paid Patients visited the Offices, signed in, and received unnecessary physical therapy and acupuncture services.  In other instances, the Paid Patients visited the Offices, signed a sign-in sheet and other documents, and then left without receiving any services at all.  In yet other instances, the Paid Patients did not visit the Offices at all and instead signed sign-in sheets and other documents brought to them elsewhere by MAN and others.  Regardless of whether the Paid Patients received any services or even visited the Offices at all, LIU and her co-conspirators used the Paid Patients’ insurance information to fraudulently bill the Insurance Providers for unnecessary and/or never rendered services.  

While LIU and her co-conspirators were defrauding the Insurance Providers of millions of dollars, from April 2020 through September 2021, LIU also engaged in a scheme to obtain COVID-19 unemployment benefits for herself and a family member (the “Family Member”) by fraudulently submitting and causing to be submitted to the New York Department of Labor materially false online applications and certifications for COVID-19 benefits.  Among other things, the applications and/or certifications represented that LIU was unemployed when, in fact, she continued to operate the Offices for all or nearly all of this period, and the applications and/or certifications represented that the Family Member was unable to work because of COVID-19 during a five-month period when the Family Member was in China. 

*                *                *

JUNYI LIU, 69, of Great Neck, New York, JONATHAN LAQUI, 46, of Rahway, New Jersey, MITZY BALDOVINO, 46, of the Bronx, New York, HONGXING WANG, 63, of Brooklyn, New York, and VICTOR MAN, 60, of Queens, New York, are all charged with conspiring to commit health care fraud, which carries a maximum sentence of 20 years in prison, and conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison.  LIU, LAQUI, WANG, and MAN are also charged with conspiring to violate the Anti-Kickback Statute, which has a maximum penalty of five years in prison.  LIU is additionally charged with wire fraud, which has a maximum penalty of 20 years in prison, and theft of Government funds, which has a maximum penalty of 10 years in prison.  MAN is further charged with violating the Anti-Kickback Statute, which has a maximum penalty of 10 years in prison.   

The statutory maximum sentences are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.

Mr. Williams praised the outstanding investigative work of HHS-OIG’s New York Office and the New York Field Office of the Internal Revenue Service, Criminal Investigation.  Mr. Williams also thanked the New York State Attorney General’s Medicaid Fraud Control Unit and the U.S. Department of Labor, Office of Inspector General for their assistance.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Timothy V. Capozzi is 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.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment constitutes only allegations, and every fact described herein should be treated as an allegation.