Southern District of New York
Press releases recorded for this federal judicial district.
Joseph Meli Sentenced to 37 Months in Prison for Participating in Broadway Ticket Resale Investment Fraud SchemeRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that JOSEPH MELI was sentenced today to 37 months in prison in connection with MELI’s participation in a fraudulent Broadway ticket investment scheme wherein MELI purported to use investor funds to purchase tickets to Broadway shows for resale on the secondary market, but instead misappropriated those funds for his personal use. MELI previously pled guilty before U.S. District Judge Ronnie Abrams, who imposed today’s sentence.
U.S. Attorney Audrey Strauss said: “Joseph Meli, a recidivist fraudster, spun the web of lies that buttressed this scheme while on pretrial release in a prior theatre ticket investment fraud case in this District. With today’s sentencing, the curtain has come down on Joseph Meli’s act.”
According to the Complaint, the Indictment, and other court documents, as well as statements made in public court proceedings:
Beginning in at least March 2017 through in or about June 2018, MELI falsely represented to partners in a business entity, Indio Entertainment, LLC (“Indio”), that MELI owned a large number of tickets to live events, or intended to purchase a large number of tickets to live events. MELI further falsely represented that he would sell those tickets to Indio in exchange for investor money that Indio had solicited for the purpose of reselling the tickets on the secondary market for profit. MELI, in turn, caused Indio principals to represent to investors that investor funds would be used to purchase bulk tickets to live shows without disclosing MELI’s involvement, and promised investors a share of these profits. In fact, MELI failed to invest the investor monies as promised, and failed to supply Indio with bulk tickets, but rather diverted investor monies to his own personal use, including sending $455,000 to a close relative of MELI’s in part to pay off credit card debt incurred by MELI, $500,000 to an individual completely unrelated to the entertainment or ticket industry, and $220,000 to a residential management company that managed an apartment MELI was leasing.
This was not MELI’s first involvement in such a scheme. MELI is currently serving a 78-month sentence imposed by U.S. District Judge Kimba M. Wood in September 2018, resulting from MELI’s involvement in a similar Broadway ticket investment scheme. Indeed, MELI participated in the present scheme while on pretrial release in the case in front of Judge Wood.
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MELI, 46, of New York, New York, will serve 25 of the 37 months of the prison sentence concurrently with the prison sentence he is already serving. In addition to his prison sentence, MELI was sentenced to three years of supervised release, two years of which will run concurrently with the term of supervised release previously imposed by Judge Wood. MELI was also ordered to pay a forfeiture penalty of $2,082,425 and restitution in the amount of $1,909,146.
Ms. Strauss praised the work of the Special Agents from the U.S. Attorney’s Office for the Southern District of New York and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Sarah Mortazavi and Micah Fergenson are in charge of the prosecution.
Manhattan U.S. Attorney Announces Securities and Wire Fraud Charges Against Founder and Manager of Mutual FundRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today that OFER ABARBANEL was arrested this morning in Los Angeles, California, and charged with securities fraud and wire fraud in connection with ABARBANEL’s scheme to defraud investors in a mutual fund he founded and controlled.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Ofer Abarbanel conducted a bait-and-switch, promising investors safe and liquid investments but instead transferring their money to risky counterparties to trade for his own benefit and that of his confederates. His alleged scheme has now been uncovered and he will have to answer for his alleged lies.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Postal Inspectors remind investors to thoroughly review all lucrative offers as well as their fund managers. In this case, as alleged, Mr. Abarbanel devised a scheme to defraud investors with bogus claims of liquidity and collateral, when in fact he did not use investors’ funds as promised and did not acquire the promised collateral. Our advice is to trust your gut, and remember that where there is high reward, there is high risk.”
According to the Complaint[1] unsealed today Manhattan federal court:
From at least in or about 2018 through the present, ABARBANEL engaged in a scheme to defraud investors in a mutual fund he founded and controlled (the “Fund”). ABARBANEL falsely represented to an investment adviser to a group of investors (the “Investor Group”) that investments in the Fund would be placed “primarily” in short-term United States Treasury Securities having maturities less than or equal to three months. Contrary to these representations, the vast majority of the investors’ funds were not invested in short-term treasuries. Instead, immediately after the Investor Group’s investment was received by the Fund, ABARBANEL and his confederates transferred the investor funds to counterparties controlled by or otherwise closely associated with ABARBANEL, for use, among other things, in trading not authorized by the Fund’s offering documents and for the benefit of ABARBANEL and the counterparties.
ABARBANEL further represented that, in order to enhance income, the Fund intended to invest in securities lending transactions as well as repurchase and reverse repurchase agreements. ABARBANEL represented, as to these transactions, that the Fund would receive, in its possession and control, safe and secure collateral, in the form of treasury securities that could be quickly liquidated in the event a counterparty defaulted on its obligations. ABARBANEL, however, failed to obtain for the Fund the promised collateral to secure the investments. Nonetheless, ABARBANEL repeatedly represented, in substance, that the Fund had possession of the collateral.
In or about May and June 2021, ABARBANEL failed to honor a redemption request by the Investor Group for all of its outstanding investment, totaling more than $100 million, instead placing conditions on the redemption that were contrary to the Fund’s offering document and to the Fund’s practices with respect to prior redemptions. On or about June 16, 2021, the Fund transferred more than $10 million in investor funds from the Fund to a personal brokerage account of an attorney working with the Fund.
ABARBANEL will be presented later today in federal court in Los Angeles.
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ABARBANEL, 46, a dual U.S.-Israeli citizen who resides in Woodland Hills, California, is charged with one count of securities fraud and one count of wire fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the investigative work of the USPIS and thanked the SEC, which has filed civil charges against ABARBANEL in a separate action. She added that the criminal investigation is ongoing.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Elisha J. Kobre is in charge of the prosecution.
The allegations 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 description of the Complaint set forth herein constitute only allegations and every fact described should be treated as an allegation.
Hubert Dupigny Sentenced to 25 Years in Prison for Sex Trafficking MinorsRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that HUBERT DUPIGNY, a/k/a “Fox,” was sentenced to 300 months in prison for sex trafficking of minors and conspiracy to commit sex trafficking of minors. DUPIGNY was previously convicted of those offenses, following an eight-day jury trial, on January 24, 2020, before U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Audrey Strauss said: “Hubert Dupigny trafficked minor victims who were runaways from the foster care system – victims who were half his age and did not have permanent homes or families to take care of them. Dupigny victimized, and violently abused, some of the most vulnerable members of our society for his own financial gain. His predatory conduct irreparably damaged the lives of his victims. Today, Hubert Dupigny was justly sentenced to 25 years in prison for his callous exploitation of those minor victims.”
According to the allegations contained in the Indictment and evidence presented during the trial in Manhattan federal court:
From at least in or about August 2016 through in or about May 2017, HUBERT DUPIGNY, a/k/a “Fox,” the defendant, engaged in a conspiracy to commit sex trafficking of minors. The defendant recruited two minor victims (“Victim-1” and “Victim-2”) to engage in commercial sex acts when they were living in foster care facilities or homes in New York City. The defendant took photographs of Victim-1 and Victim-2 in lewd positions, used Backpage.com to post advertisements of them for commercial sex, and then directed Victim-1 and Victim-2 to meet customers to engage in commercial sex out of an abandoned home in Brooklyn, New York. Victim-1 and Victim-2 saw as many as ten to fifteen customers each day. The defendant took all of the proceeds from their commercial sex acts, forcing Victim-1 and Victim-2 to be reliant on him for food and clothing.
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In addition to today’s prison sentence, DUPIGNY, 38, of Brooklyn, New York, was sentenced to 10 years of supervised release.
Ms. Strauss thanked the FBI and the New York City Police Department for their outstanding work in this matter, particularly the FBI-NYPD New York Child Exploitation and Human Trafficking Task Force.
Any individuals who believe they have information that may be relevant to this investigation should contact the Federal Bureau of Investigation at (212) 384-1000 or https://tips.fbi.gov/.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Mollie Bracewell, Elinor Tarlow, Jacob Gutwillig, and Michael Herman are in charge of the prosecution.
Founder of Non-Profit to End Sexual Violence Against Youth Sentenced to Thirteen Years in Prison for Child Pornography, Enticing A Minor to Have SexRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that JOEL DAVIS was sentenced to 156 months in prison for enticing a child to engage in illegal sexual activity, 60 months for possession of child pornography, and 60 months for distribution and receipt of child pornography, all to be served concurrently. DAVIS previously pled guilty on January 16, 2020, before United States District Judge George B. Daniels, who also imposed the sentence.
U.S. Attorney Audrey Strauss said: “As he previously admitted, Joel Davis, founder of a non-profit called ‘Youth to End Sexual Violence,’ admitted to engaging in the very abhorrent behavior he had publicly pledged to fight. Davis, who also claims to be a Nobel Prize nominee for his work with his organization, engaged in sex acts with a minor, recording them, and distributing that recording to others – including an undercover FBI agent. Sex with minors is obviously never permissible, acceptable, or justifiable, and by virtue of his non-profit work, Joel Davis was acutely aware of the irreparable harm these crimes inflict on victims. Davis will now serve a lengthy time in federal prison, where he can no longer victimize minors.”
According to the Information and other documents filed in the case to which DAVIS pled, as well as statements made during the plea proceeding:
In or about June 2018, DAVIS used a dating application on his iPhone to entice a fifteen-year-old boy (the “Victim”) to engage in sexual activity with him. On June 13, 2018, DAVIS invited the Victim to his apartment building in Manhattan and engaged in sexual activity with the Victim, despite knowing that the Victim was a minor. DAVIS used his smartphone to film a portion of that conduct and sent the video to at least two others, including an undercover FBI agent.
In addition, between at least in or about May 2018 and June 2018, DAVIS possessed more than 3,700 images and more than 330 videos of child pornography, including numerous images of prepubescent minors who had not attained 12 years of age, and received and distributed material containing child pornography using a cellphone. DAVIS was arrested on June 26, 2018.
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In addition to today’s prison sentence, DAVIS, 25, of New York, New York, was sentenced to five years of supervised release.
Ms. Strauss praised the outstanding investigative work of the FBI in this investigation.
Any individuals who believe they have information concerning the exploitation of children may contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Matthew J.C. Hellman and Juliana N. Murray are in charge of the prosecution.
Former New York DEA Investigator Convicted of Enticing A Minor to Have Sex and Child Pornography ChargesRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced today the conviction in Manhattan federal court of FREDERICK L. SCHEININ for attempted production of child pornography, attempted receipt of child pornography, and attempted enticement of a minor. The jury convicted SCHEININ today following a five-day trial before U.S. District Judge Jed S. Rakoff.
U.S. Attorney Audrey Strauss said: “As a DEA investigator, Frederick Scheinin was tasked with the important job of protecting the public from the illegal diversion and abuse of prescription drugs, but he betrayed the public trust by spending months trying to prey on a minor for his sexual pleasure. Scheinin now stands convicted of these heinous crimes. This office and our law enforcement partners will continue to work tirelessly to detect and apprehend those who pose a threat to children.”
Up until the time of his arrest, SCHEININ was an investigator in the New York Field Office of the Drug Enforcement Administration (“DEA”). According to the Indictment, documents previously filed in the case, and evidence introduced at trial:
Between October 2019 and January 2020, SCHEININ communicated with an undercover law enforcement officer (“UC‑1”) who was posing as a 14-year-old boy. During the course of hundreds of graphic text communications and multiple real-time conversations, SCHEININ repeatedly sent sexually explicit images and videos to UC-1 in an attempt to persuade UC-1 to transmit sexually explicit images, photos, and live visual depictions of UC-1 to SCHEININ. In particular, SCHEININ repeatedly asked UC-1 to transmit images and videos of UC-1’s penis and anus. SCHEININ also attempted to arrange a meeting with UC-1 at which SCHEININ planned to have sex with UC-1. Law enforcement arrested SCHEININ on January 16, 2020, in New York, New York, at the location where SCHEININ said he would meet UC-1. SCHEININ was in possession of a condom and lubricant at the time of his arrest.
SCHEININ, 33, was remanded to the custody of the U.S. Marshals following the return of the verdict. Attempted production of child pornography carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison; attempted receipt of child pornography carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison; and attempted enticement of a minor carries a mandatory minimum sentence of 10 years in prison and maximum sentence of life in prison. SCHEININ is scheduled to be sentenced on September 23, 2021, at 4:00 p.m.
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Ms. Strauss praised the outstanding investigative work of the New York City Police Department and the Cyber Investigations Office of the United States Department of Justice Office of the Inspector General. Ms. Strauss also thanked the New York Office of the DEA and the DEA Office of Professional Responsibility for their assistance in the matter.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Nicholas W. Chiuchiolo and Daniel G. Nessim are in charge of the prosecution.
Two Architects of Fraudulent Scheme Sentenced for Processing over $150 Million Through U.S. Financial InstitutionsRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that HAMID AKHAVAN, aka “Ray Akhavan,” was sentenced on Friday to 30 months in prison, and codefendant RUBEN WEIGAND was sentenced to 15 months in prison, for participating in a scheme to deceive U.S. issuing banks and credit unions into effectuating more than $150 million of credit and debit card purchases of marijuana by disguising those transactions as purchases of other kinds of goods, such as face creams and dog products. AKHAVAN and WEIGAND were found guilty of bank fraud in March 2021, following a four-week jury trial before U.S. District Court Judge Jed. S. Rakoff, who imposed Friday’s sentence.
Manhattan U.S. Attorney Audrey Strauss said: “Ray Akhavan and Ruben Weigand orchestrated an elaborate web of lies to deceive U.S. banks and credit card companies into processing more than $150 million in marijuana transactions, in violation of those institutions’ strict policies against such payments. This massive fraud undermined the fundamental integrity of the U.S. financial system, which relies on banks’ ability to identify the nature of the transactions they process. Now Akhavan and Weigand have rightly been sentenced to prison for their crimes.”
According to the evidence presented at trial:
AKHAVAN and WEIGAND, working with others, including principals from one of the leading on-demand marijuana delivery companies in the United States (the “Company”), planned and executed a scheme to deceive United States banks and other financial institutions into processing over $150 million in credit and debit card payments for the purchase and delivery of marijuana products (the “Scheme”).
The Scheme involved the deception of virtually all of the participants in the payment processing network, including issuing banks in the United States (the “Issuing Banks”) and Visa and MasterCard. The primary method used by AKHAVAN, WEIGAND, and other co-conspirators to deceive the Issuing Banks involved the purchase and use of shell companies that were used to disguise the marijuana transactions through the use of phony merchants (the “Phony Merchants”). The shell companies were used to open offshore bank accounts with merchant acquiring banks and to initiate credit card charges for marijuana purchases made through the Company. AKHAVAN and WEIGAND worked with other co-conspirators to create these phony merchant accounts – including phony online merchants purportedly selling dog products, diving gear, carbonated drinks, green tea, and face creams – and established Visa and MasterCard merchant processing accounts with one or more offshore acquiring banks. They then arranged for more than a dozen Phony Merchants to be used by the Company to process debit and credit card purchases of marijuana products. Many of the Phony Merchants purported to be based in the United Kingdom, but, despite being based outside the United States, claimed to maintain U.S.-based customer service numbers.
To facilitate the Scheme, webpages were created and deployed to lend legitimacy to the Phony Merchants. The Phony Merchants typically had web pages suggesting that they were involved in selling legitimate goods, such as carbonated drinks, face cream, dog products, and diving gear. Yet these companies were actually being used to facilitate the approval and processing of marijuana transactions. The defendants’ scheme even involved fake visits to those websites to make it appear as though the websites had real customers and were operating legitimate online businesses.
The defendants’ scheme also involved the use of online tracking pixels. Because the descriptors listed on Company customers’ credit card statements often were the URLs for the Phony Merchant websites, Company customers were sometimes confused and did not recognize the transactions on their credit card statements. The defendants and their co-conspirators were concerned that confused customers would call their Issuing Banks and inadvertently reveal the Scheme by indicating that they had purchased marijuana products and/or that they had made a purchase through the Company. To lessen the risk that customers would be confused, the defendants used a number of techniques, including online tracking pixels to track which users had visited the Company’s website. If a Company customer had visited the Company’s website and went to the URL listed on the customer’s credit card statement, the customer would automatically be re-routed to a webpage connected to the Company so that the customer would understand what the real purchase had been for (i.e., from the Company). However, in order to hide the Scheme, the defendants ensured that if a third-party such as a bank or credit card company investigator visited a URL for a Phony Merchant, they would not be re-routed, and would therefore be unable to discern any connection between the Phony Merchant website and the Company and/or the sale of marijuana products.
Over $150 million in marijuana credit and debit card transactions were processed using the Phony Merchants. Some of the merchant websites listed for those transactions included: diverkingdom.com, desirescent.com, outdoormaxx.com, and happypuppybox.com. Moreover, none of the Phony Merchant website names listed for those transactions referred to the Company or to marijuana. AKHAVAN, WEIGAND, and others also worked with and directed others to apply incorrect merchant category codes (“MCCs”) to the marijuana transactions in order to disguise the nature of those transactions and create the false appearance that the transactions were completely unrelated to marijuana. Some of the MCCs/categories listed for the transactions included freight carrier, trucking; clock, jewelry, watch, and silverware; stenographic services; department stores; music stores/pianos; and cosmetic stores.
AKHAVAN was the leader of the transaction laundering scheme and WEIGAND was responsible for interfacing with the acquiring banks regarding the offshore bank accounts used by the Phony Merchants.
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In addition to the prison term, AKHAVAN, 43, of, California, was sentenced to three years of supervised release, and ordered to pay a fine of $100,000 and forfeiture in the amount of $17,183,114.57.
WEIGAND, 38, of Germany, was also sentenced to three years of supervised release, and ordered to pay a fine of $50,000 and forfeiture in the amount of $384,000.
Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and the Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Nicholas Folly, Tara La Morte, and Emily Deininger are in charge of the prosecution.
Senior Nasa Scientist Sentenced to Prison for Making False Statements Related to Chinese Thousand Talents Program Participation and ProfessorshipRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York (“USAO”), announced that MEYYA MEYYAPPAN, a senior National Aeronautics and Space Administration (“NASA”) scientist, was sentenced today to 30 days in prison for making false statements to the Federal Bureau of Investigation (“FBI”), NASA’s Office of Inspector General (“NASA OIG”), and the USAO. MEYYAPPAN pled guilty on January 13, 2021, before U.S. District Judge P. Kevin Castel, who also imposed today’s sentence.
U.S. Attorney Audrey Strauss said: “As a senior NASA scientist with access to sensitive and confidential U.S. government technologies and intellectual property, Meyya Meyyappan was understandably subject to restrictions regarding outside employment and compensation. When questioned by the FBI and NASA, Meyyappan gave false statements regarding his employment by a Chinese government-funded program that recruited individuals with access to foreign technologies and intellectual property. The privilege of access to cutting edge U.S. technologies and intellectual property comes with the critical responsibility of protecting their secrecy. Meyyappan betrayed that trust, by failing to disclose his foreign activities and then compounding his mistakes by lying to the FBI and NASA. He has now been sentenced to time in federal prison for his unlawful conduct.”
According to the allegations in the Information and other proceedings in this case:
From in or about 1996 through in or about 2021, MEYYAPPAN was employed by NASA, an independent U.S. government agency responsible for the civilian space program, as well as aeronautics and aerospace research. Beginning in or about 2006, MEYYAPPAN was the Chief Scientist, Exploration Technology at the Center for Nanotechnology, at NASA’s Ames Research Center at Moffett Field in Silicon Valley, California.
In his position at NASA, MEYYAPPAN was subject to certain statutory, regulatory, and agency restrictions and reporting requirements regarding, among other things, outside employment, travel, and compensation. Notwithstanding these prohibitions, MEYYAPPAN participated in China’s Thousand Talents Program, a program established by the Chinese government to recruit individuals with access to or knowledge of foreign technology or intellectual property, and held professorships at universities in China, South Korea, and Japan, and failed to disclose these associations and positions to NASA and the U.S. Office of Government Ethics.
On or about October 27, 2020, MEYYAPPAN was interviewed by the FBI, NASA OIG, and the USAO, in New York, New York. During that proffer session, MEYYAPPAN falsely stated, among other things, that he was not a member of the Thousand Talents Program and that he did not hold a professorship at a Chinese university. In truth and in fact, MEYYAPPAN was a member of the Thousand Talents Program and held a professorship at a Chinese university, funded by the Chinese government.
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MEYYAPPAN, 66, of Pacifica, California was also ordered to pay a fine of $ 100,000.
Ms. Strauss praised the outstanding work of the FBI and NASA OIG.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Joshua A. Naftalis is in charge of the prosecution.
Manhattan Doctor Sentenced to Nearly 5 Years in Prison for Accepting Bribes and Kickbacks in Exchange for Prescribing Fentanyl DrugRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that JEFFREY GOLDSTEIN, a doctor who practiced in New York, New York, was sentenced today in Manhattan federal court to 57 months in prison for conspiring to violate the Anti-Kickback Statute, in connection with a scheme to prescribe Subsys, a potent fentanyl-based spray, in exchange for bribes and kickbacks from Subsys’s manufacturer, Insys Therapeutics. GOLDSTEIN previously pled guilty, on August 16, 2019, before U.S. Magistrate Judge Henry B. Pitman, and was sentenced today by U.S. District Judge Kimba M. Wood.
U.S. Attorney Audrey Strauss said: “Jeffrey Goldstein, an Upper East Side Manhattan doctor, prescribed Subsys, a powerful fentanyl opioid, in return for nearly $200,000 in bribes from the drug’s manufacturer, Insys Therapeutics. Goldstein put his own patients at risk in order to satisfy his own greed, and will now spend time in federal prison for recklessly prescribing this highly addictive and powerful opioid. This sentence sends a loud and clear signal to the medical community that if you take bribes in return for prescribing, you will be prosecuted to the full extent of the law and risk significant prison time.”
According to the allegations contained in the Indictment against GOLDSTEIN and filings in related proceedings:
The Insys Speakers Bureau
Subsys, which is manufactured by Insys, is a powerful painkiller approximately 50 to 100 times more potent than morphine. The FDA approved Subsys only for the management of breakthrough pain in cancer patients. Prescriptions of Subsys typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by GOLDSTEIN.
In or about August 2012, Insys launched a “Speakers Bureau,” a roster of doctors who would conduct programs (“Speaker Programs”) purportedly aimed at educating other practitioners about Subsys. In reality, Insys used its Speakers Bureau to induce the doctors who served as speakers to prescribe large volumes of Subsys by paying them Speaker Program fees. Speakers were supposed to conduct an educational slide presentation for other health care practitioners at each Speaker Program. In reality, many of the Speaker Programs were predominantly social affairs where no educational presentation about Subsys occurred. Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of health care practitioners who had not actually been present.
Goldstein’s Participation in the Scheme
GOLDSTEIN was a doctor of osteopathic medicine who owned a private medical office on the Upper East Side. GOLDSTEIN received approximately $196,000 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys. After GOLDSTEIN began prescribing a competitor painkiller, Insys pressured him to stop doing so and switch patients back to Subsys, which GOLDSTEIN did.
GOLDSTEIN also received other items of value from Insys in order to induce him to prescribe. For example, Insys employees took GOLDSTEIN and Todd Schlifstein, who co-owned a private medical office with GOLDSTEIN, to a Manhattan strip club where Insys spent approximately $4,100 on a private room, alcoholic drinks, and “lap dances” for GOLDSTEIN and Schlifstein. GOLDSTEIN also arranged for Insys to pay for the annual holiday party for his private medical office.
In 2014, GOLDSTEIN was approximately the fifth-highest-paid Insys Speaker nationally. He was the sixth-highest prescriber of Subsys in the last quarter of 2014, accounting for approximately $809,275 in overall net sales of Subsys in that quarter.
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In addition to the prison sentence, GOLDSTEIN, 51, of New Rochelle, New York, was sentenced to two years of supervised release and ordered to forfeit $196,600.
GOLDSTEIN was one of five Manhattan doctors convicted for participating in the Subsys bribery conspiracy. Todd Schlifstein was convicted upon a guilty plea and sentenced by Judge Wood on October 28, 2019, principally to a term of two years in prison. Alexandru Burducea was convicted upon a guilty plea and sentenced by Judge Wood on January 27, 2020, principally to a term of 57 months in prison. Dialecti Voudouris was convicted upon a guilty plea and sentenced by Judge Wood on March 5, 2020, principally to time served. Gordon Freedman was convicted following a jury trial in December 2019 and is scheduled to be sentenced before Judge Wood on July 8, 2021.
Ms. Strauss praised the investigative work of the Federal Bureau of Investigation, and thanked the U.S. Department of Health and Human Services, Office of the Inspector General, for its participation in the investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Noah Solowiejczyk, David Abramowicz, and Katherine Reilly are in charge of the prosecution.
Las Vegas Woman Pleads Guilty to $10 Million Tech Support Fraud Scheme That Exploited the ElderlyRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that ROMANA LEYVA pled guilty today to participating in a conspiracy that for several years exploited elderly victims by remotely accessing their computers and convincing victims to pay for computer support services they did not need, and which were never actually provided. In total, the conspiracy generated more than $10 million in proceeds from at least approximately 7,500 victims. LEYVA pled guilty to conspiracy to commit wire fraud and conspiracy to intentionally damage victims’ computers, before U.S. District Judge Paul A. Crotty, to whom her case is assigned.
U.S. Attorney Audrey Strauss said: “As she admitted today, Romana Leyva was a leader of a conspiracy that caused pop-up windows to appear on victims’ computers – pop-up windows that claimed, falsely, that a virus had infected the victims’ computers. Through this and other misrepresentations, this fraud scheme deceived thousands of victims, including some of society’s most vulnerable members, into paying a total of more than $10 million. Leyva now awaits sentencing for her crimes.”
According to the allegations contained in the Superseding Information, court filings, and statements made during plea proceedings:
From approximately February 2015 through December 2018, LEYVA was a member of a criminal fraud ring (the “Fraud Ring”) based in the United States and India that committed a technical support fraud scheme that exploited elderly victims located across the United States and Canada, including in the Southern District of New York. The Fraud Ring’s primary objective was to trick victims into believing that their computers were infected with malware, in order to deceive them into paying hundreds or thousands of dollars for phony computer repair services. Over the course of the conspiracy, the Fraud Ring generated more than $10 million in proceeds from at least 7,500 victims.
The scheme generally worked as follows: First, the Fraud Ring caused pop-up windows to appear on victims’ computers. The pop-up windows claimed, falsely, that a virus had infected the victim’s computer. The pop-up window directed the victim to call a particular telephone number to obtain technical support. In at least some instances, the pop-up window threatened victims that, if they restarted or shut down their computer, it could “cause serious damage to the system,” including “complete data loss.” In an attempt to give the false appearance of legitimacy, in some instances the pop-up window included, without authorization, the corporate logo of a well-known, legitimate technology company. In fact, no virus had infected victims’ computers, and the technical support phone numbers were not associated with the legitimate technology company. Rather, these representations were false and were designed to trick victims into paying the Fraud Ring to “fix” a problem that did not exist. And while the purported “virus” was a hoax, the pop-up window itself did cause various victims’ computers to completely “freeze,” thereby preventing these victims from accessing the data and files in their computer – which caused some victims to call the phone number listed on the pop-up window. In exchange for victims’ payment of several hundreds or thousands of dollars (depending on the precise “service” victims purchased), the purported technician remotely accessed the victim’s computer and ran an anti-virus tool, which is free and available on the Internet. The Fraud Ring also re-victimized various victims, after they had made payments to purportedly “fix” their tech problems.
LEYVA’s roles in the scheme included (1) creating several fraudulent corporate entities that were used to receive fraud proceeds from victims, (2) recruiting others (including through misrepresentations) to register fraudulent corporate entities that became part of and facilitated the activities of the Fraud Ring, and (3) assisting others in setting up fraudulent corporate entities and bank accounts, including coaching them to make misrepresentations to bank employees where necessary. As she acknowledged as part of her guilty plea, LEYVA was a leader or organizer in this conspiracy.
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LEYVA, 37, of Las Vegas, Nevada, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum penalty of five years in prison; and one count of conspiracy to intentionally damage a protected computer, which carries a maximum penalty of five years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as LEYVA’s sentence will be determined by the judge. LEYVA’s sentencing is scheduled for September 15, 2021, at 12:00 p.m.
Ms. Strauss praised the New York Office of Homeland Security Investigations’ (“HSI”) El Dorado Task Force, Cyber Intrusion/Cyber Fraud Group, for its outstanding work on the investigation. Ms. Strauss also thanked the New York City Police Department for its assistance on this case.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Michael D. Neff is in charge of the prosecution.
Real Estate Developer Sentenced to over Five Years in Prison for Conspiring to Commit ArsonRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, John B. DeVito, the Special Agent in Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), and Daniel A. Nigro, Commissioner of the New York City Fire Department (“FDNY”), announced that DANIEL MELAMED, a/k/a “Danny,” a real estate developer in New York City, was sentenced to 66 months in federal prison for participating in a conspiracy to commit arson in which he directed that multiple fires be set at residential buildings whose occupants he wished to vacate in order to develop the premises. MELAMED previously pled guilty to participating in a conspiracy to commit arson, before United States District Judge Lewis A. Kaplan who imposed today’s sentence.
U.S. Attorney Audrey Strauss said: “Almost a decade ago, Daniel Melamed decided that he could use his power and influence as a real estate developer to burn families out of their homes, homes that he wanted to develop and flip at a profit. As he learned when he was first arrested almost two years ago and was reminded again today, we will fight fire with fire and together with our partners in the ATF, the NYPD, and the FDNY bring to justice anyone who seeks to terrorize the members of this community through arson. And if you are a real estate developer in this city and think that you are above the law, then think again, unless you want to see your own plans go up in smoke.”
ATF Special Agent in Charge John B. DeVito said: “Arson is inherently dangerous, and we simply cannot allow it. I hope this sentencing acts as a significant deterrent for others who may consider committing this heinous crime. We are thankful that Melamed’s criminal actions did not cost anyone their life and that justice can be served in this case. ATF will continue to work with our law enforcement partners at the federal, state, and local levels to investigate and prosecute individuals who show a callous disregard for the safety of our community.”
FDNY Commissioner Daniel A. Nigro said: “Setting fires in residential buildings while occupants are sleeping is a truly despicable crime. These fires endangered the lives of the innocent residents and the Firefighters who bravely responded to save them. I applaud our Fire Marshals, members of the NYPD and ATF, and the U.S. Attorney’s office for their efforts to bring this individual to justice.”
According to the allegations contained in the Superseding Indictment, other court filings, publicly-available information, and statements made in public court proceedings:
Between 2011 and 2013, MELAMED directed his co-defendant and co-conspirator, Curtis Williams, to set multiple fires at residential buildings that MELAMED wished to develop and was planning to acquire or had recently acquired. The purpose of the fires was to terrorize and thereby drive out the occupants of these residential buildings, whose lawful removal achieved through eviction or voluntary buyout payments proved too burdensome for MELAMED, either because of the time or cost involved to achieve a vacant premises otherwise deemed ripe for development. MELAMED paid Williams to set the fires, and in turn, Williams retained another individual to set the fires, which were uniformly set at night when the occupants of the targeted properties were asleep. Ultimately, the investigation into these fires determined that MELAMED had directed Williams to use fire to vacate at least three occupied residential buildings at which a total of five separate fires were set. Although no person was physically harmed as a result of these fires, certain of the fires resulted in substantial damage, particularly in the case of a single-family home in Albertson, New York, which was largely incinerated and from which the members of the family who lived there escaped with their lives but not any of their multiple pets, who were burned alive, or their belongings, which were largely destroyed. As late as 2019, in video-recorded meetings between MELAMED and Williams, MELAMED discussed with Williams vacating another occupied residential building, which MELAMED owned, by either illegally cutting its utility lines or setting fire to it, the latter option being discussed using the term “milk” or the phrase “pour milk,” which was MELAMED’s coded terminology for using fire to vacate the occupants of a building. Following these meetings, MELAMED was arrested and ordered detained in November 2019.
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In addition to his prison term, MELAMED, 43, of Great Neck, New York, was sentenced to 3 years of supervised release and was ordered to forfeit $500,000 and pay a further fine of $50,000.
Curtis Williams, 52, pled guilty to participating in a conspiracy to commit arson, and multiple counts of arson, on April 14, 2021. A sentencing date has not yet been set.
Ms. Strauss praised the dogged and outstanding investigative work of the New York City Arson Explosives Task Force. The New York City Arson Explosives Task Force comprises Special Agents and Task Force Officers from multiple federal, state, and local law-enforcement agencies, including the ATF, NYPD, and FDNY. Ms. Strauss also thanked the Kings County District Attorney’s Office for its substantial contributions and ongoing assistance to the investigation culminating in MELAMED’s conviction and sentence.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Kyle Wirshba and Thomas John Wright are in charge of the prosecution.
Former Construction Executive Sentenced to 46 Months in Prison for Tax Evasion and Bribery SchemeRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that RONALD OLSON, a former vice president and deputy operation manager at Turner Construction Company (“Turner”), was sentenced today in Manhattan federal court to 46 months in prison for evading taxes on more than $1.5 million in bribes he received from building sub-contractors, in connection with a number of building projects undertaken for Bloomberg LP (“Bloomberg”). OLSON previously pled guilty before U.S. District Judge P. Kevin Castel, who imposed sentenced today.
In related proceedings, co-conspirator Anthony Guzzone, a former director of global construction at Bloomberg, was sentenced on January 19, 2021, by the Honorable Lewis J. Liman to 38 months in prison, for evading taxes on more than $1.45 million in the same scheme; Michael Campana, a subordinate construction manager at Bloomberg, was sentenced on July 24, 2020, by the Honorable Denise L. Cote to 24 months in prison, for evading taxes on more than $420,000. In addition, Vito Nigro, a construction manager at Turner, has pled guilty to evading taxes on more than $1.8 million in bribes that he received in the same scheme, and is scheduled to be sentenced on July 1, 2021, before U.S. District Judge Analisa Torres.[1]
U.S. Attorney Audrey Strauss said: “Bribery and tax evasion impose hidden, unfair costs on law-abiding customers, employers, and taxpayers. The type of criminality uncovered in this case undermines a just society. Appropriately, Ronald Olson has been sentenced to prison for his crime.”
According to the four criminal Informations filed in these federal cases, as well as other public documents and recent court proceedings:
Between 2011 and 2017, OLSON was vice president and deputy operations manager at Turner, a construction firm that performed various building projects in New York City and elsewhere for Bloomberg, a global financial firm. Throughout those years, Guzzone oversaw such building projects at Bloomberg, while Nigro worked at Turner as a subordinate to OLSON. Beginning in 2013, Campana was also a construction manager at Bloomberg, and a subordinate to Guzzone. Each of the defendants participated in a scheme to obtain bribes from construction sub-contractors, who paid kickbacks to the defendants in exchange for being awarded various construction contracts and sub-contracts performed for Bloomberg.
In all, the defendants have pled guilty to failing to pay taxes, between 2010 and 2017, on bribes exceeding $5.1 million. The defendants received such bribes in various forms, including millions of dollars in cash, as well as construction projects on their individual homes and properties, and the direct payment of personal expenses. For OLSON, such personal expenses included hundreds of thousands of dollars’ worth of repeated renovations and improvement projects at OLSON’s home on Long Island and his beach house on Long Beach Island, New Jersey, which were fraudulently documented through a series of false invoices. Projects included home improvements, the cutting and installation of marble, gardening, and the repaving of OLSON’s driveway. OLSON also used a sham lease for his beach house, through which he falsely characterized $20,000 per month in bribe payments as rent. Other payments included Guzzone’s receipts of several sets of Super Bowl tickets, worth approximately $8,000 per ticket; and Campana’s receipt of charges related to his 2017 wedding, such as approximately $40,000 paid by sub-contractors to a catering hall in New Jersey, over $13,000 to a photography studio, and over $23,000 to a travel agent for airline tickets purchased in connection with Campana’s honeymoon. Each of the defendants evaded federal income tax on this bribery income, by failing to declare it on income tax returns for various years between 2010 and 2017.
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OLSON, 54, of Massapequa, New York, pled guilty on July 29, 2020, to a single count of tax evasion for the tax years 2011 through 2017. In addition to the prison term, OLSON was sentenced today to three years of supervised release, and ordered to pay restitution of $661,519.57 in unpaid taxes and interest.
Guzzone, 52, of Middletown, New Jersey, pled guilty on September 29, 2020, to a single count of tax evasion for the tax years 2010 through 2017. He was sentenced on January 19, 2021, to 38 months in prison, three years of supervised release, and restitution of $574,005.33 in unpaid taxes and interest.
Campana, 35, of Tuckahoe, New York, pled guilty to a tax evasion charge on November 26, 2019, for the tax years 2014 thought 2017, and was sentenced on July 24, 2020, to 24 months in prison, three years of supervised release, restitution of $155,000 in unpaid taxes, and a fine of $10,000.
Nigro, 60, of Middletown, New Jersey, pled guilty on October 28, 2020, to a single count of tax evasion for the tax years 2011 through 2017. He is scheduled to be sentenced on July 1, 2021. The charges against Nigro carry a maximum sentence of five years in prison, a maximum fine of $250,000 or twice the gross gain or loss from the offense, and an order of restitution.
Ms. Strauss praised the excellent work of the Internal Revenue Service.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney David Raymond Lewis, and Stanley J. Okula, Senior Litigation Counsel of the Tax Division of the Department of Justice, are in charge of the prosecution.
[1] In addition, all four defendants have pled guilty in New York State Supreme Court, Indictment No. 04038-2018, to participating in the underlying bribery scheme, and are awaiting sentencing.
Chinese National Pleads Guilty to $20 Million COVID-19 Pandemic Loan Fraud SchemeRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that MUGE MA, a/k/a “Hummer Mars,” a Chinese national who resided in New York, New York, pled guilty today in connection with a fraudulent scheme to obtain over $20 million in Government-guaranteed loans designed to provide relief to small businesses during the novel coronavirus/COVID-19 pandemic. In connection with loan applications for relief available from the Paycheck Protection Program (“PPP”) and the Economic Injury Disaster Loan (“EIDL”) Program, MA falsely represented to the U.S. Small Business Administration (“SBA”) and at least five financial institutions that his companies, New York International Capital LLC (“NYIC”) and Hurley Human Resources LLC (“Hurley”), had hundreds of employees and paid millions of dollars in wages to those employees, when, in fact, MA appears to have been the only employee of his companies. MA was previously arrested on May 21, 2020, and has been detained since his arrest. He pled guilty today before U.S. District Judge Richard M. Berman and is scheduled to be sentenced on September 22, 2021, at 11:00 a.m.
Manhattan U.S. Attorney Audrey Strauss said: “As he admitted in court today, Muge Ma attempted to secure over $20 million in Government-guaranteed loans intended for businesses devastated by the coronavirus/COVID-19 pandemic. In furtherance of the scheme, Ma falsely represented to banks and the SBA that he owned two companies with hundreds of employees to whom he paid millions in wages. In truth, Ma appears to be the only employee of either company and he had no legitimate claim to the funds for which he applied. Small businesses are facing uncertainty and unprecedented challenges, the least of which should be opportunists attempting to loot the federal funds meant to assist them. Now Muge Ma awaits sentencing for his admitted criminal skulduggery.”
According to the allegations contained in public filings in Manhattan federal court:
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of hundreds of billions of dollars in forgivable loans to small businesses for job retention and certain other expenses through the SBA’s PPP. Pursuant to the CARES Act, the amount of PPP funds a business is eligible to receive is determined by the number of employees employed by the business and their average payroll costs. Businesses applying for a PPP loan must provide documentation to confirm that they have previously paid employees the compensation represented in the loan application. The CARES Act also expanded the separate EIDL Program, which provided small businesses with low-interest loans of up to $2 million that can provide vital economic support to help overcome the temporary loss of revenue they are experiencing due to COVID-19.
From at least in or about March 2020 through at least on or about May 15, 2020, MA applied to the SBA and at least five banks for a total of over $20 million in Government-guaranteed loans for his companies NYIC and Hurley (together, the “Ma Companies”) through the SBA’s PPP and EIDL Program. In connection with these loan applications, MA represented, among other things, that he was the sole owner and executive director of the Ma Companies, that the Ma Companies were located on the sixth floor of his luxury condominium building in New York, New York, and that NYIC and Hurley together had hundreds of employees and paid millions of dollars in wages to those employees on a monthly basis. In fact, however, MA appears to have been the only employee of NYIC since at least in or about 2019, and Hurley does not appear to have any employees. In order to support the false representations made by MA in the loan applications about the number of employees at, and the wages paid by, the Ma Companies, MA submitted fraudulent and doctored bank records, tax records, insurance records, payroll records, and/or audited financial statements to five different banks, and also provided links to the Ma Companies’ websites, which describe them as purportedly “global” companies. In the course of these loan applications, MA also misrepresented that he was a United States citizen, when, in fact, he is a Chinese national with lawful permanent resident status in the United States. MA also used the name and identity of another person in connection with the submission of a fraudulent loan application and supporting documentation to at least one financial institution.
Before the discovery of the fraudulent conduct by MA, the SBA approved a $500,000 EIDL Program loan for NYIC and a $150,000 EIDL Program loan for Hurley, and at least a $10,000 loan advance was provided to NYIC. In addition, a bank approved and disbursed over approximately $800,000 in PPP loan funds for Hurley, which were frozen in connection with this investigation. As a result, MA sought to withdraw his loan applications from the banks and return the funds.
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MA, 37 of New York, New York, pled guilty to 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 minimum sentence of two years to be run consecutively to any other sentence imposed. The maximum potential 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.
Ms. Strauss praised the investigative work of the FBI’s Financial Cybercrimes Task Force, SBA-OIG, and IRS-CI. Ms. Strauss also thanked the New York City Police Department, the Office of the New York State Comptroller, and the New York State Department of Labor for their assistance with the investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
Suffolk County Man Convicted in Manhattan Federal Court of Sex Trafficking ConspiracyRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that JUSTIN RIVERA, a/k/a “Denzel Rivera,” a/k/a “Bangout,” a/k/a “Jackie Chan,” was found guilty of conspiracy to commit sex trafficking on Friday, June 11, 2021, following an eight-day jury trial before U.S. District Judge Paul A. Engelmayer. RIVERA is scheduled to appear for sentencing before Judge Engelmayer on November 9, 2021, at 10:00 a.m.
U.S. Attorney Audrey Strauss said: “As a unanimous jury swiftly determined, Justin Rivera conspired to force vulnerable victims into prostitution using cruel physical violence, threats of violence, the ruse of romantic relationships, and the exploitation of a victim’s severe heroin addiction. Rivera now faces life in prison for his reprehensible conduct.”
As reflected in the Indictment, public filings, and the evidence presented at trial:
In or about 2015, RIVERA and his co-conspirators used an abandoned house in Bohemia, New York (the “Bohemia House”), as a base of operations for sex trafficking of at least two adult victims. RIVERA and his co-conspirators recruited the victims through, among other means, false promises of romance, and forced the victims into continued prostitution by creating a climate of fear through violent beatings, sexual assaults, and multiple threats of gun violence directed at the victims and their family members.
On one instance, for example, RIVERA threatened with a gun the mother of a victim (“Victim-1”) who came to the Bohemia House in an attempt to rescue her daughter.
RIVERA also coerced a second victim (“Victim-2”), who was addicted to heroin, to engage in commercial sex acts on his behalf by manipulating Victim-2’s access to heroin. At times, for example, RIVERA provided Victim-2 with heroin to reward her for engaging in commercial sex acts for his benefit; at other times, RIVERA withheld heroin from Victim-2 as punishment unless she engaged in commercial sex acts at his direction and for his profit.
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RIVERA, age 31, of Amityville, New York, was convicted of one count of conspiracy to commit sex trafficking, which carries a maximum sentence of life in prison.
Ms. Strauss praised the outstanding work of the Suffolk County Police Department, the FBI’s New York Child Exploitation and Human Trafficking Task Force, and the Special Agents from the U.S. Attorney’s Office for the Southern District of New York.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Daniel H. Wolf, Thomas S. Burnett, and Negar Tekeei are in charge of the prosecution.
Executive of Venture Capital Funds Sentenced in Manhattan Federal Court to over Four Years in Federal Prison for Securities and Wire FraudRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that MARC LAWRENCE was sentenced in Manhattan federal court to 55 months in prison for securities fraud and wire fraud in connection with his participation in a scheme to perpetrate a Ponzi-like investment scheme through a number of corporate entities (collectively referred to as “Downing”). LAWRENCE, the President of Downing entities, and his co-defendant DAVID WAGNER, the Chairman and CEO of Downing entities, solicited almost $10 million from approximately 40 Downing investors through materially false and misleading statements. LAWRENCE previously pled guilty to these charges, and was sentenced today before U.S. District Judge Alvin K. Hellerstein. WAGNER was previously sentenced by Judge Hellerstein to 72 months in prison.
Manhattan U.S. Attorney Audrey Strauss said: “ Marc Lawrence and his co-defendant fraudulently induced employee-investors to invest over $8 million in return for sales, operations, and management expertise in profitable business operations. Unfortunately for their investors, Downing generated virtually no returns, and was little more than a vehicle for Lawrence and Wagner to syphon employee-investor funds to pay Wagner’s personal expenses or pay off other investors in Ponzi-like fashion. Lawrence’s sentence of over four years in federal prison signifies the seriousness of his conduct and the consequence that assuredly awaits those who commit Ponzi-like frauds.”
According to the Indictment filed in Manhattan federal court:
From at least in or about December 2013 through at least in or about 2017, WAGNER, the Chief Executive Officer of Downing, and MARC LAWRENCE, the President of several Downing entities, solicited investments in Downing, a purported venture capital firm that would invest in healthcare start-ups referred to as “portfolio companies” and provide sales, operations, and management expertise to the portfolio companies in order to bring their products to market and generate returns for Downing investors, who also worked for Downing (the “employee-investors”). WAGNER and LAWRENCE, and others acting at their direction, solicited almost $10 million in investments in Downing from employee-investors located across the United States, including in the Southern District of New York, as a requirement of employment with Downing.
After making the required investment of between $150,000 and $250,000 in Downing and starting their employment at Downing, employee-investors soon learned, among other things, that contrary to representations made by WAGNER and LAWRENCE, and others acting at their direction, Downing did not have access to millions of dollars in funding, often could not make payroll, had virtually no products to sell, and that employee-investments were the overwhelming source of funding. Employee-investors also learned that WAGNER and LAWRENCE had misrepresented the companies in Downing’s portfolio, their product readiness, and ability to generate revenue. While the particular formulation of these misrepresentations shifted over time, WAGNER and LAWRENCE systematically sought and obtained employee-investor money through materially false and misleading statements.
Beginning in or about May 2016, after several employee-investors had brought lawsuits against WAGNER and LAWRENCE, and several Downing entities, alleging claims based on, among other things, fraud, WAGNER and LAWRENCE continued the scheme by recruiting employee-investors into a new company called Cliniflow Technologies, LLC (“Cliniflow”), through materially false and misleading statements about Cliniflow’s cash reserves, portfolio companies, and exposure to litigation. In fact, Cliniflow purportedly held majority ownership in the same primary portfolio company as other Downing entities and was simply a new name used by WAGNER and LAWRENCE to solicit investments from new employee-investors that was not tainted by the lawsuits filed against Downing entities. A majority of the over $1.5 million raised by WAGNER and LAWRENCE through Cliniflow was transferred to other Downing entities and used to pay for, among other things, WAGNER’s personal expenses and the repayment of prior investors.
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LAWRENCE, 54, of Clearwater, Florida, pled guilty to two counts of securities fraud and one count of wire fraud, which each carry a maximum sentence of 20 years in prison. In addition to the prison term, Judge Hellerstein ordered LAWRENCE to serve 3 years of supervised release, and to pay forfeiture in the amount of $150,000 and restitution in the amount of $4,450,000 to victims of his criminal conduct.
Ms. Strauss praised the work of the FBI, and thanked the United States Securities and Exchange Commission and the Enforcement Section of the Massachusetts Securities Division for their assistance.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jilan J. Kamal and Sagar K. Ravi are in charge of the prosecution.
Defendant Arrested in Texas for Multimillion-Dollar Wire Fraud and Money Laundering SchemeRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, the Special Agent-in-Charge of Homeland Security Investigations (“HSI”) in New York, announced today that GUILLERMO PEREZ was arrested this morning for defrauding businesses and individuals of more than $2.2 million through business email compromise and bank fraud schemes. PEREZ will be presented tomorrow in the United States District Court for the Southern District of Texas.
According to the allegations contained in the Indictment[1] unsealed today:
From at least in or about October 2018 through at least in or about October 2019, GUILLERMO PEREZ participated in a scheme to defraud businesses by impersonating individuals and businesses in the course of otherwise ordinary financial transactions, thereby fraudulently inducing counterparties to those transactions to transfer funds to bank accounts controlled by PEREZ and his co-conspirators (the “Business Email Compromise Scheme”). To facilitate this scheme, PEREZ conspired to deceive federally insured banks into opening business bank accounts (the “Fraudulent Bank Accounts”) by providing the banks with false and misleading information regarding PEREZ’s co-conspirators’ affiliations.
In reliance on the foregoing false and misleading misrepresentations, the victims of the Business Email Compromise Scheme wired more than $2.2 million into the Fraudulent Bank Accounts. PEREZ and his co-conspirators, knowing the money represented fraud proceeds, transferred those fraud proceeds out of the Fraudulent Bank Accounts in transactions designed to conceal and disguise their source, ownership, and control.
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GUILLERMO PEREZ, 26, of Houston, Texas, is charged with (1) conspiracy to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison, and (2) conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in these cases are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Ms. Strauss praised the investigative work of HSI. The prosecution of this case is being handled by the Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Emily Deininger and Tara La Morte are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[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.
Pennsylvania Man Charged with Using Identities of Then-President’s Family Members to Perpetrate Online Fraud SchemeRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of a Complaint charging JOSHUA HALL with fraud and identity theft offenses for impersonating family members of the then-President of the United States on social media to fraudulently raise funds for a fictitious political organization.
HALL was arrested this morning and will be presented later today in Harrisburg federal court before United States Magistrate Judge Susan E. Schwab.
Manhattan U.S. Attorney Audrey Strauss said: “Joshua Hall allegedly impersonated family members of the then-President of the United States on social media to fraudulently induce hundreds of victims to donate to a political organization that did not exist, and then pocketed those funds for his own use. We thank the FBI for their partnership in the investigation of this case, and we remain dedicated to rooting out and prosecuting fraud wherever we find it.”
FBI Assistant Director-in-Charge William F. Sweeney, Jr., said: “Hall led hundreds of people to believe they were donating to an organization that didn’t exist by pretending to be someone he wasn’t, as alleged. As we continue to investigate fraud in all its many forms, we urge the public to remain aware of the prevalence of online scams and exercise due diligence when making donations online.”
According to the allegations in the Complaint[1]:
HALL defrauded hundreds of victims by making false representations in the course of raising funds for a purported political affinity organization (“the Fictitious Political Organization”), for the ostensible purpose of supporting the reelection of the individual who was at that time serving as President of the United States (“the President”). However, the Fictitious Political Organization did not exist and HALL used the funds for his own personal living expenses.
Central to the scheme was the impersonation by HALL of members of the President’s family, including the President’s minor child, among others, through his creation and use of social media accounts bearing those family members’ names and photographs. HALL used those accounts to amass more than 100,000 followers on social media and obtain media coverage, a public platform he then exploited to confer on himself and the Fictitious Political Organization a false imprimatur of close ties with the President’s family and to encourage victims to make monetary contributions to the Fictitious Political Organization.
In total, the scheme devised and executed by HALL yielded thousands of dollars from hundreds of victims located throughout the United States, including in the Southern District of New York.
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HALL, 22, of Mechanicsburg, Pennsylvania, is charged with wire fraud, which carries a maximum sentence of 20 years of imprisonment, and aggravated identity theft, which carries a mandatory consecutive sentence of 2 years of imprisonment. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Robert B. Sobelman is in charge of the prosecution.
The charge contained in the Complaint is merely an accusation, 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.
Former Olympic Figure Skater Arrested for Role in Defrauding U.S. Small Business Administration of over $1.5 MillionRead the Press Release
Audrey Strauss, United States Attorney for the Southern District of New York, and William F. Sweeney, the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation, announced today the unsealing of a complaint charging LUKA KLASINC, a former Olympic ice skater, with bank fraud and aggravated identity theft in connection with his use of falsified documents during his attempts to gain access to over $1.5 million in funds disbursed pursuant to fraudulent U.S. Small Business Administration (“SBA”) Economic Injury Disaster Loans. KLASINC, a Slovenian national, was arrested Monday afternoon in Manhattan, and will be presented today before Judge Kevin Nathaniel Fox.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, at a time when U.S. small businesses were struggling because of the COVID-19 pandemic, Klasinc thought he could scam his way to easy money. As alleged, Klasinc used false documents to try and obtain over a million dollars in funds intended to help hard working Americans but, thanks to the diligence of the FBI, his plans have been put on ice. He will now be held accountable for his alleged brazen lies.”
FBI Assistant Director-in-Charge William F. Sweeney, Jr., said: “Loans issued on behalf of the SBA were intended to provide relief for businesses struggling during the pandemic. Time and again we see instances of fraud and abuse of this program. We will investigate all instances of alleged SBA loan fraud and hold accountable those who take advantage of this program for personal gain.”
According to the allegations in the Complaint[1]:
KLASINC is the sole owner of a company named BOB77, LLC. KLASINC claimed that BOB77, LLC (“BOB77”) is an event management company that, in conjunction with its global partners, stages major ice-themed amusement park style events around the world. Beginning in or around 2019, BOB77 opened three business bank accounts (the “BOB77 Accounts”) with an international financial institution (“Bank-1”). Between July 2020 and September 2020, the BOB77 Accounts received a total of $1,595,800 from the SBA, pursuant to eleven Economic Injury Disaster Loans. In the same period, there were numerous wire transfers from the BOB77 Accounts to international beneficiaries. In late September 2020, after identifying potential fraud, Bank-1 froze all funds in the BOB77 Accounts and contacted KLASINC for additional information regarding the account activity. In response, KLASINC provided documentation — including a falsified document purporting to be a letter from the U.S. Small Business Administration — intended to legitimize the SBA deposits and persuade Bank-1 to release the funds. In or around June 2021, KLASINC traveled to the United States and appeared at in person at a New York branch of Bank-1, where he again attempted to persuade Bank-1 to release the funds by claiming that the SBA deposits were “investments” and not associated with a loan.
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KLASINC, 48, of Slovenia, is charged with one count of bank fraud, which carries a maximum sentence of 30 years in prison, and with one count of aggravated identity theft, which carries a mandatory two-year prison term. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Ashley C. Nicolas is in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth in this release constitute only allegations, and every fact described should be treated as an allegation.
Australian National Pleads Guilty to Multimillion-Dollar Text-Messaging Consumer Fraud SchemeRead the Press Release
Audrey Strauss, United States Attorney for the Southern District of New York, announced that MICHAEL PEARSE, an Australian national who was extradited to the United States from Australia in January 2021, pled guilty today to conspiracy to commit wire fraud stemming from his participation in a fraudulent scheme to charge hundreds of thousands of mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages about topics such as horoscopes, celebrity gossip, and trivia facts, without the customers’ knowledge or consent – a practice to which the conspirators referred as “auto-subscribing.” PEARSE played a key role in the scheme as CEO of a company that created the computer program that was used to enroll victims into the text message services without their knowledge or consent. PEARSE pled guilty before United States District Judge Analisa Torres.
U.S. Attorney Audrey Strauss said: “As he admitted in court today, Michael Pearse played a vital role in an international consumer fraud conspiracy that swindled hundreds of thousands of mobile phone customers out of more than $50 million. Thanks to IRS Criminal Investigation and the FBI, as well as our international partners, Pearse now awaits sentencing for his crime.”
According to the allegations contained in the Indictment, evidence presented at the trial of co-conspirator Darcy Wedd, court filings, and statements made during plea proceedings:
From in or about 2011 through in or about 2013, PEARSE and his co-conspirators engaged in a multimillion-dollar scheme to defraud consumers by placing unauthorized charges for premium text messaging services on consumers’ cellular phone bills. To carry out the scheme, PEARSE and others caused unsolicited and recurring text messages to be sent to mobile phone users containing content such as horoscopes, celebrity gossip, or trivia facts. The victims of the fraud scheme never ordered these services, which were known in the industry as premium text messaging (“PSMS”) services, but were fraudulently “auto-subscribed” and billed for them at a rate of $9.99 per month. The $9.99 charge recurred each month unless and until consumers noticed the charges and took action to unsubscribe. Even then, consumers’ attempts to dispute the charges and obtain refunds were often unsuccessful.
During the relevant period, co-conspirator Lin Miao operated a company called Tatto Inc., a/k/a “Tatto Media” (“Tatto”), which offered PSMS services to mobile phone customers. PEARSE was the CEO of a company called Bullroarer, which was affiliated with Tatto. To enable Tatto to auto-subscribe consumers to unwanted PSMS services, PEARSE and co-defendant Yongchao Liu, a/k/a “Kevin Liu,” who worked as a Java Development Engineer for Bullroarer, agreed to build a computer program that could spoof the required consumer authorizations – i.e., a program that could generate the text message correspondence that one would ordinarily see with genuine PSMS subscriptions. PEARSE and Liu agreed to build the program (the “Auto-Subscription Platform”), which was operational by in or about the middle of 2011. PEARSE, Liu, and Miao then used the Auto-Subscription Platform to fraudulently auto-subscribe hundreds of thousands of mobile phone customers, using phone numbers provided by co-conspirators at Mobile Messenger, a U.S. aggregation company operated by Darcy Wedd that served as a middleman between content providers such as Tatto and mobile phone carriers. Through their successful orchestration of the fraudulent scheme, PEARSE and his co-conspirators generated more than $50 million in fraud proceeds for themselves.
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PEARSE, 52, of Australia, pled guilty to one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, which carries a maximum penalty of 20 years in prison. As part of his plea agreement, PEARSE agreed to forfeit $10,162,937.96, as well as his interest in three real properties in Australia and other assets, representing proceeds traceable to the fraud that PEARSE personally obtained.
The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentence of PEARSE will be determined by the Court.
To date, nine defendants, Liu, Miao, Andrew Bachman, Michael Pajaczkowski, Erdolo Eromo, Jonathan Murad, Francis Assifuah, Jason Lee, and Christopher Goff have pled guilty in connection with their participation in the fraud. Two additional defendants, Darcy Wedd and Fraser Thompson, were convicted in 2017 following jury trials.
Ms. Strauss praised the outstanding investigative work of the Internal Revenue Service, Criminal Investigation and the Federal Bureau of Investigation. In addition, Ms. Strauss thanked law enforcement partners in Australia, as well as the U.S. Department of Justice’s Office of International Affairs, for their support and assistance with the extradition of PEARSE and co-defendant Liu.
This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jilan Kamal and Olga I. Zverovich are in charge of the prosecution.
Tax Preparer and His Company Permanently Barred from Preparing Federal Tax Returns for Others; Defendants to Pay Disgorgement to the United StatesRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that U.S. District Judge Jed S. Rakoff entered an order today permanently barring RAFAEL ALVAREZ (“ALVAREZ”) and ATAX New York LLC (“ATAX NEW YORK”) from, among other things, preparing federal tax returns for others. In its civil complaint, the United States alleged that ALVAREZ and ATAX NEW YORK had prepared and filed fraudulent tax returns on behalf of their customers in which they falsely reduced their customers’ tax liabilities and generated tax refunds to which those customers were not entitled. According to the complaint, ATAX NEW YORK filed over 36,000 tax returns on behalf of its customers from 2016 to 2019.
Manhattan U.S. Attorney Audrey Strauss said: “This Office will take appropriate actions to shut down tax preparation businesses that prepare and file fraudulent returns and unfairly shift the tax burden to honest American taxpayers.”
After the Government filed its complaint, ALVAREZ and ATAX NEW YORK consented to the entry of a permanent injunction and admitted, among other things, that:
- Between 2016 and 2019, they prepared and filed many federal income tax returns for ATAX NEW YORK’s customers that included claims of expenses, losses, or “head of household” status that lacked adequate supporting information or documentation.
- These unsupported entries caused the customers’ tax liabilities to be substantially understated.
- They had no adequate basis for including these entries on their customers’ returns.
The Government’s complaint also asked the Court to order disgorgement of the net profits that ALVAREZ and ATAX NEW YORK earned for preparing federal tax returns in which they made reckless or fraudulent claims with respect to their customers’ federal income tax liability. As part of today’s court-ordered resolution, ALVAREZ and ATAX NEW YORK agreed to pay $159,600 to the United States in disgorgement.
Ms. Strauss thanked the Internal Revenue Service’s Small Business/Self-Employed Division for its invaluable assistance in this matter.
The case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant United States Attorneys Charles S. Jacob and Ilan Stein are in charge of the case.
- Between 2016 and 2019, they prepared and filed many federal income tax returns for ATAX NEW YORK’s customers that included claims of expenses, losses, or “head of household” status that lacked adequate supporting information or documentation.
Bronx Gang Member Sentenced to Life in Prison for 2011 Murder of Bolivia BeckRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that KAREEM DAVIS, a/k/a “Reem,” was sentenced today to life in prison for the April 18, 2011, murder of Bolivia Beck. Ms. Beck, 20, was killed by a bullet while standing next to her boyfriend in the Mill Brook Houses in the Bronx, New York. DAVIS was aiming for Beck’s boyfriend, a rival gang member, but struck Beck instead. On December 17, 2019, DAVIS was convicted of conspiring to commit racketeering, murder in aid of racketeering, and murder through the use of a firearm after a one-week trial before U.S. District Judge Lorna G. Schofield.
U.S. Attorney Audrey Strauss said: “On April 18, 2011, Bolivia Beck was murdered while meeting her boyfriend’s grandparents on a sidewalk in the Mill Brook Houses. What should have been a happy moment ended in tragedy, when she was shot by Kareem Davis. For his role in this horrific and senseless act of violence, Davis will now spend the rest of his life in a federal prison. We extend our deepest condolences to the members of Bolivia’s family. We thank our partners at the NYPD, who worked to achieve this measure of justice for Bolivia and her family. This Office remains committed to investigating and prosecuting gang violence and seeking justice for all victims of violent crime.”
According to the allegations in the Indictment and the evidence at trial:
On April 18, 2011, Bolivia Beck was struck and killed by a bullet while standing next to her boyfriend in the Mill Brook Houses, where she lived at the time. KAREEM DAVIS was a member of Killbrook, a violent street gang based in the “Down the Block” section of the Mill Brook Houses. Since at least 2007, Killbrook had been engaged in a violent rivalry with “MBG,” a gang based in the “Up the Block” section of Mill Brook.
On the night of April 18, 2011, DAVIS and his brother planned to kill a rival MBG member as part of the broader gang rivalry. DAVIS and his brother, each armed with a gun, walked “Up the Block” in Mill Brook looking for their target, who was standing next to Beck and introducing her to his grandparents. At that point, DAVIS and his brother started shooting, firing at least 12 shots from their guns. Tragically, Beck was struck by one of the bullets and killed.
DAVIS also committed other crimes in connection with his membership in Killbrook, including drug dealing and robbery.
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In addition to his prison term, KAREEM DAVIS, 32, of the Bronx, New York, was sentenced to five years of supervised release.
Ms. Strauss praised the outstanding investigative work of the New York City Police Department.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Christopher Clore, Jordan Estes, and Alexandra Rothman are in charge of the prosecution.
26-Year-Old Florida Man Charged with Coercion and Enticement of A MinorRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, Miriam E. Rocah, Westchester County District Attorney, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of CHRISTOPHER NUNEZ for persuading, inducing, enticing, and coercing a 15-year-old minor to engage in sexual activity. NUNEZ was arrested yesterday in Miami, Florida, and will be presented today in Miami federal court.
Manhattan U.S. Attorney Audrey Strauss said: “This case underlines the urgent need for law enforcement to continue its efforts to protect children from those who prey on them. As today’s arrest shows, we will use every tool available to law enforcement to investigate and prosecute those alleged to have sexually exploited children.”
Westchester County District Attorney Miriam E. Rocah said: “This case highlights the dangers present online that can turn very real for minors in Westchester and elsewhere. We will work together with our law enforcement partners at every level in every jurisdiction to protect our children. I am grateful for the partnership of the SDNY and the FBI in this investigation, which will help identify perpetrators and victims around the country.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, we believe Mr. Nunez has chatted and possibly had contact with other victims. We’re asking for everyone to take note of his social media username ‘PLMV23’ and call 1-800-CALL-FBI or go to tips.fbi.gov if you recognize it. Parents and guardians are the first line of defense in keeping sexual predators from getting access to children, so please pay attention to what your children are doing online. Ask questions about with whom they’re chatting, and make sure you know how to use the security features on all their devices. A conversation with a child today may protect them from a trauma which will last a lifetime.”
According to the Complaint[1] filed on June 1, 2021, in White Plains federal court and unsealed today:
Between in or about early March 2021 up to and including on or about May 1, 2021, NUNEZ communicated online with a 15-year-old minor (“Victim-1”) and persuaded Victim-1 to meet NUNEZ in person to engage in sexual activities with him. NUNEZ used various social media platforms to communicate with Victim-1, including Discord and Snapchat. In his communications with Victim-1 on Discord, NUNEZ used the social media user name, “PLMV23.”
On or about April 30, 2021, and May 1, 2021, NUNEZ travelled to New York from Miami, Florida, to meet with Victim-1 in person in Westchester County, New York, to engage in sexual activity with her.
On or about May 2, 2021, CHRISTOPHER NUNEZ was charged in the Town of North Salem, New York, with Rape in the Third Degree and Endangering the Welfare of a Child. The Westchester County District Attorney’s Office will be prosecuting these charges.
Anyone who may have encountered CHRISTOPHER NUNEZ (who may have been using the social media user name “PLMV23”), or whose child may have had any communications with NUNEZ, is asked to contact the FBI at 1-800-CALL-FBI (225-5324).
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NUNEZ, 26, of Miami, Florida, is charged with one count of coercion and enticement, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. The statutory maximum 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.
Ms. Strauss praised the efforts of the FBI, the Westchester County District Attorney’s Office, and the New York State Police in connection with this investigation. She added that the investigation is ongoing.
This case began as an investigation in the Special Prosecutions Division Child Abuse Bureau of the Westchester County District Attorney’s Office by Assistant District Attorney Charlotte Gudis, working jointly with the New York State Police. The federal prosecution is being handled by the White Plains Division of the U.S. Attorney’s Office. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
[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.
Former Senior FinCEN Employee Sentenced to Six Months in Prison for Unlawfully Disclosing Suspicious Activity ReportsRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that NATALIE MAYFLOWER SOURS EDWARDS, a/k/a “Natalie Sours,” a/k/a “Natalie May Edwards,” a/k/a “May Edwards,” a former Senior Advisor at the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), was sentenced to six months in federal prison for unlawfully disclosing Suspicious Activity Reports (“SARs”) and other sensitive information. EDWARDS previously pled guilty to participating in a conspiracy to disclose SARs before United States District Judge Gregory H. Woods, who imposed today’s sentence.
U.S. Attorney Audrey Strauss said: “Today’s sentence demonstrates that public servants who abuse the power entrusted to them will face steep consequences for their actions. Maintaining the confidentiality of SARs, which are filed by banks and other financial institutions to alert law enforcement to potentially illegal transactions, is critical to preserve the integrity of myriad investigations, and the financial privacy of individuals. Government employees entrusted with such highly sensitive information owe a duty to safeguard that information. The defendant abused that trust to serve her own purposes, broke the law, and now faces time in a federal prison for her actions.”
According to the allegations contained in the Complaint, Information, other court filings, publicly-available information, and statements made in public court proceedings:
The mission of FinCEN is to “safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”[2] Among other things, FinCEN manages the collection and maintenance of SARs regarding potentially suspicious financial transactions, which, under the Bank Secrecy Act (“BSA”), U.S. financial institutions and other parties are required by law to generate and deliver to FinCEN. Under the BSA and its implementing regulations, willful disclosure of a SAR or its contents by government employees or agents except as necessary to fulfill official duties is a felony.
Beginning in approximately October 2017, and lasting until her arrest in October 2018, EDWARDS agreed to and did unlawfully disclose numerous SARs to a reporter (“Reporter-1”), the substance of which were published over the course of approximately 12 articles by a news organization for which Reporter-1 worked. The illegally disclosed SARs pertained to, among other things, Paul Manafort, Richard Gates, the Russian Embassy, Maria Butina, and Prevezon Alexander. EDWARDS had access to each of the pertinent SARs and saved them—along with thousands of other files containing sensitive government information—to a flash drive provided to her by FinCEN. She transmitted the SARs to Reporter-1 by means that included taking photographs or images of them and texting the photographs or images to Reporter-1 over an encrypted application. In addition to disseminating SARs to Reporter-1, EDWARDS sent or described to Reporter-1 internal FinCEN emails or correspondence appearing to relate to SARs or other information protected by the BSA, and FinCEN non-public memoranda, including Investigative Memos and Intelligence Assessments published by the FinCEN Intelligence Division, which contained confidential personal information, business information, and/or security threat assessments.
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In addition to her prison term, EDWARDS, 43, of Quinton, Virginia, was sentenced to three years of supervised release.
Ms. Strauss praised the outstanding investigative work of the Treasury Department’s Office of Inspector General and the Federal Bureau of Investigation.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Kimberly J. Ravener and Daniel C. Richenthal are in charge of the prosecution.
[2] www.fincen.gov/about/mission
Father-And-Son Owners of Orange County Car Dealership Convicted of Multiple Fraud OffensesRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that SAAED MOSLEM and his father, MEHDI MOSLEM, were found guilty in White Plains federal court today of conspiring to commit bank fraud and to defraud the Internal Revenue Service (“IRS”) in connection with their operation of Exclusive Motor Sports, a used car dealership in Central Valley, New York. SAAED MOSLEM was also found guilty of aggravated identity theft, bankruptcy fraud, and additional bank fraud charges. The jury returned its verdict after a two-week trial before U.S. District Judge Cathy Seibel.
U.S. Attorney Audrey Strauss said: “Mehdi and Saaed Moslem for years provided false financial information and fabricated tax returns to their lenders, while at the same time cheating on their taxes. Saaed Moslem also hid assets from his creditors and stole a customer’s identity. Now the wheels have come off the father-son fraud business, and they await sentencing for their multiple crimes.”
According to the Indictment and the evidence presented at trial:
From 2009 through 2018, MEHDI MOSLEM and SAAED MOSLEM conspired to defraud the United States by concealing profits relating to their car dealership, Exclusive Motor Sports, from the IRS. To falsely lower their business income, MEHDI MOSLEM and SAAED MOSLEM caused their accountant to prepare partnership tax returns that significantly understated Exclusive Motor Sports’ inventory. The fraudulent business income figures passed through to MEHDI MOSLEM’s and SAAED MOSLEM’s personal tax returns, resulting in a substantial underreporting of the amount of tax due.
From 2011 through 2019, MEHDI MOSLEM and SAAED MOSLEM also conspired to commit bank fraud by providing falsely inflated net worth statements and fabricated tax returns in connection with loan applications, including for a $1.5 million mortgage on the Exclusive Motor Sports property in Central Valley, New York. SAAED MOSLEM then made numerous false statements to conceal his assets from financial institutions and other creditors when he filed for bankruptcy in 2015. In 2019, SAAED MOSLEM committed aggravated identity theft by using a customer’s personal identifying information in connection with a fraudulent car loan application.
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MEHDI MOSLEM, 72, and SAAED MOSLEM, 37, both of Central Valley, New York, were each convicted of one count of bank fraud conspiracy, which carries a maximum sentence of 30 years in prison, and one count of conspiracy to defraud the United States and the IRS, which carries a maximum sentence of five years in prison. SAAED MOSLEM was also convicted of one count of bank fraud and one count of making a false statement to a lender, each of which carries a maximum sentence of 30 years in prison, one count of bankruptcy fraud, which carries a maximum sentence of five years in prison, and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison that must run consecutively to any other sentence of imprisonment. 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.
SAAED MOSLEM and MEHDI MOSLEM are scheduled to be sentenced by Judge Seibel on October 1, 2021, at 10:00 a.m.
Ms. Strauss praised the outstanding investigative work of the IRS-Criminal Investigation, and the Federal Bureau of Investigation. She also thanked the Orange County District Attorney’s Office for its assistance.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Daniel M. Loss, Nicholas S. Bradley, and James McMahon are in charge of the prosecution.
Nigerian National Arrested for Scheme to Conduct Cyber Intrusions to Steal Payroll DepositsRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Jonathan D. Larsen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the arrest of CHARLES ONUS for charges in connection with a scheme to conduct cyber intrusions of multiple user accounts maintained by a company that provides human resources and payroll services to employers across the United States, in order to steal payroll deposits. ONUS was previously arrested on April 14, 2021, in San Francisco and detained, and he will be presented later today in Manhattan federal court before Magistrate Judge Sarah L. Cave. The case is assigned to U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Audrey Strauss said: “Charles Onus allegedly participated in a scheme that stole nearly $1 million by hacking into a payroll processing company’s system to access user accounts and divert payroll to prepaid debit cards he controlled. As alleged, Onus did this as effectively as someone who commits bank burglary, but with no need for a blowtorch or bolt-cutters. Thanks to the FBI and IRS-CI, Onus is in custody and facing serious federal charges.”
FBI Assistant Director William F. Sweeney Jr. said: “Cyber intrusions ripple through everything our society relies upon – this one impacted people’s paychecks. The FBI’s goal is to prevent cyber criminals from causing harm and holding them accountable, but we can’t do it alone. Companies need to continuously improve their cyber hygiene and awareness. Taking steps like training the workforce to protect and frequently change passwords, and to use different login credentials across platforms, can have an impact. Each one of us, from the individual citizen to the biggest corporation, plays a critical role in defending the nation from cyberattacks.”
IRS-CI Special Agent in Charge Jonathan D. Larsen said: “IRS Criminal Investigation will always work with our law enforcement partners to track down those who try to breach our country’s tax and financial infrastructure. We will continually endeavor to bring to justice criminals who think they can comfortably steal from victims in America while hiding behind their computer screens.”
According to allegations in the Indictment filed in federal court[1]:
From at least in or about July 2017 through at least in or about 2018, ONUS participated in a scheme to conduct cyber intrusions of multiple user accounts maintained by a company that provides human resources and payroll services to employers across the United States (the “Company”), in order to steal payroll deposits processed by the Company.
During the course of the scheme, unauthorized access was obtained to over 5,500 Company user accounts through a cyber intrusion technique referred to as “credential stuffing.” During a credential stuffing attack, a cyber threat actor collects stolen credentials, or username and password pairs, obtained from other large-scale data breaches of other companies. The threat actor then systematically attempts to use those stolen credentials to obtain unauthorized access to accounts held by the same user with other companies and providers, to compromise accounts where the user has maintained the same password.
After ONUS successfully gained unauthorized access to a Company user account, he changed the bank account information designated by the user of the account so that ONUS would receive the user’s payroll to a prepaid debit card that was under ONUS’s control.
From at least in or about July 2017 through at least in or about 2018, at least approximately 5,500 Company user accounts were compromised and more than approximately $800,000 in payroll funds were fraudulently diverted to prepaid debit cards, including those under the control of ONUS. The compromised Company user accounts were associated with employers whose payroll was processed by the Company, including employers located in the Southern District of New York.
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ONUS, 34, a resident and national of the Federal Republic of Nigeria, was charged with one count of computer fraud for causing damage to a protected computer, which carries a maximum sentence of 10 years in prison; one count of computer fraud for unauthorized access to a protected computer to further intended fraud, and one count of receipt of stolen money, each of which carries a maximum sentence of five years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison to be served consecutively to any other sentence imposed.
The maximum potential 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.
Ms. Strauss praised the outstanding investigative work of the FBI and IRS-CI. Ms. Strauss also thanked the New York City Police Department, the FBI New York Cyber Task Force, U.S. Customs and Border Protection, and the FBI Field Office in San Francisco for their assistance in the investigation of this case.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
[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.
Manhattan U.S. Attorney Files Suit Against Eleven Skilled Nursing Facilities and Their Management Company, Owner, and A Senior Employee for Fraudulently Billing Medicare for Unnecessary ServicesRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge of the New York Regional Office of the U.S. Department of Health and Human Services, Office of the Inspector General (“HHS-OIG”), announced today that the United States has filed a civil healthcare fraud lawsuit against ISSAC LAUFER, TAMI WHITNEY, MONTCLAIR CARE CENTER, INC., EAST ROCKAWAY CENTER LLC, EXCEL AT WOODBURY FOR REHABILITATION AND NURSING, LLC, LONG ISLAND CARE CENTER INC., TREETOPS REHABILITATION & CARE CENTER LLC, SUTTON PARK CENTER FOR NURSING & REHABILITATION, LLC, SUFFOLK RESTORATIVE THERAPY & NURSING, LLC, OASIS REHABILITATION AND NURSING, LLC, FOREST MANOR CARE CENTER, INC., SURGE REHABILITATION & NURSING LLC, QUANTUM REHABILITATION & NURSING LLC, and PARAGON MANAGEMENT SNF LLC (collectively the “Defendants”). The lawsuit seeks damages and civil penalties under the False Claims Act for fraudulently billing Medicare for unreasonable and unnecessary services provided to patients at eleven skilled nursing facilities located in New York (the “Facilities”).
The complaint alleges that, during the period from at least January 2010 through September 2019, Defendants systematically kept patients at the Facilities longer than necessary in order to maximize the amount billed to Medicare for the patients’ stays. During those stays, the Facilities systematically put patients on higher levels of rehabilitation therapy than necessary based on their actual clinical needs in order to bill Medicare at the highest rate. ISSAC LAUFER, who is a part owner of ten of the eleven Facilities and operates all eleven Facilities through PARAGON MANAGEMENT SNF LLC, and TAMI WHITNEY, the Coordinator of Rehabilitation Services for the Facilities, instructed and pressured staff to engage in these fraudulent practices. As a result, according to the complaint, the Facilities submitted, or caused to be submitted, false claims for payment for rehabilitation services that were unreasonable and unnecessary, or in some cases, did not even involve the provision of skilled therapy.
U.S. Attorney Audrey Strauss said: “As alleged, ISSAC LAUFER, TAMI WHITNEY and the skilled nursing facilities ISSAC LAUFER owns and/or operates prioritized profits above their obligation to focus on their patients’ actual medical needs. In clear violation of the governing regulations, the Defendants fraudulently inflated their Medicare reimbursements by unnecessarily prolonging patient stays and billing for therapy that offered little or no clinical benefit. This Office will continue vigorously to pursue companies and individuals who engage in these practices at the expense of the public fisc.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “The Medicare program is designed to protect both beneficiaries and taxpayers. When medical providers bill for unnecessary or improper services, patient care is put at risk and the financial integrity of our federal health care system is compromised. Working with our law enforcement partners, we will continue to ensure that medical providers are held accountable for their billing practices and the services they provide.”
The following allegations are based on the Complaint that was filed in White Plains federal court today:
The eleven facility defendants are skilled nursing facilities located in the New York metropolitan area. LAUFER is a part owner of ten of the eleven Facilities and operates all eleven Facilities through PARAGON MANAGEMENT SNF LLC. WHITNEY is the Coordinator of Rehabilitation Services for the Facilities and as such is involved in decisions regarding the provision of, and billing for, rehabilitation services.
From at least January 2010 through September 2019, the Defendants systematically kept Medicare patients at the Facilities longer than reasonable or necessary, and put those patients on higher levels of rehabilitation therapy than reasonable or necessary. These practices were designed to increase the amounts billed to Medicare beyond what was justified based on patients’ clinical needs. In some instances, the Facilities went so far as to intentionally limit patients’ progress in order to create the appearance of a continued need for services. In one instance, WHITNEY reported to LAUFER that the Facilities should not allow patients to go to the bathroom by themselves because they would then “think they are ready to go home.”
LAUFER and WHITNEY directed the Facilities to engage in this conduct. Specifically, WHITNEY carefully tracked the length of stay for each Medicare patient and expected staff at the Facilities to justify discharges scheduled to take place before the patient’s stay approached 100 days—the maximum compensable by Medicare. Together with management at the Facilities, WHITNEY devised strategies for extending patient stays, including giving patients unnecessary tests to gauge their balance proficiency at the point they were ready for discharge to create a pretext for extending their stays. WHITNEY reported on the success of these “discharge prevention” measures to Laufer, noting both areas where these measures succeeded and those where the Facilities had to work harder to prolong patient stays—such as for patients who were “younger and smarter” or “high level.” LAUFER, in turn, received daily updates from the Facilities reporting the number of Medicare patients who had been discharged, and, on a number of occasions, instructed WHITNEY to curb discharges. LAUFER gave these instructions without any information about the patients’ clinical needs and made explicit that they were designed to increase revenue.
WHITNEY, with LAUFER’S knowledge, also instructed the Facilities to provide virtually all Medicare patients with therapy at the “Ultra High”—i.e., highest billing—level, without regard to the patients’ needs or whether, due to their conditions, they could benefit from this intense therapy. To qualify for the Ultra High level, a patient must receive at least 720 minutes of skilled therapy services (i.e., physical, occupational or speech therapy requiring the services of a trained therapist) per week. Employees understood that there was virtually no wiggle room when it came to determining how much rehabilitation therapy a patient would receive. The pressure to provide this level of therapy in turn led the Facilities to bill for services that did not actually qualify as skilled therapy and thus were not eligible for Medicare reimbursement (such as simply moving the limbs of patients with severe cognitive impairments or assisting with routine self-care tasks).
LAUFER and WHITNEY’S efforts to keep Medicare patients at the Facilities for as close as possible to 100 days and to provide almost all patients, without regard to need, with therapy at the Ultra High level succeeded. During the relevant period, the Facilities were significant outliers, compared to other skilled nursing facilities, with respect to Medicare patients’ average length of stay and levels of rehabilitation therapy.
These practices resulted in the Facilities submitting claims to Medicare for rehabilitation therapy that was not reasonable or necessary, was billed at a higher rate than appropriate, or did not involve the provision of skilled services and, accordingly, were ineligible for payment. In addition, the Facilities made or used false statements and records that were material to false claims submitted to Medicare for payment for rehabilitation therapy that was unreasonable, unnecessary, or unskilled.
The Government intervened in a private whistleblower lawsuit before the Honorable Cathy Seibel that had previously been filed under seal pursuant to the False Claims Act.
Ms. Strauss thanked HHS-OIG for its assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Jacob Bergman and Rachael Doud are in charge of the case.
Manhattan U.S. Attorney Announces $692,000 Settlement Resolving Fraud Claims Against Contractor and Its Owners for Failing to Comply with DBE Rules on the Tappan Zee Bridge Replacement ProjectRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and Brian C. Gallagher, Acting Special Agent in Charge of the U.S. Department of Transportation Office of Inspector General Northeastern Region (“DOT-OIG”), announced today that the United States filed and settled a civil fraud lawsuit against NAUGHTON ENERGY CORPORATION (“NAUGHTON ENERGY”) and two of its owners, its president, MARIETTE NAUGHTON, and her husband, JOSEPH NAUGHTON (collectively, “Defendants”). NAUGHTON ENERGY, a Pennsylvania-based fuel distributor, supplied diesel fuel to vehicles and equipment used in connection with the federally funded New NY Bridge Project (the “NNYB Project”), a construction project to replace New York’s Governor Malcolm Wilson Tappan Zee Bridge. The settlement resolves the United States’ allegations in a False Claims Act lawsuit that Defendants fraudulently caused the submission of false claims by causing the prime contractor on the NNYB Project (the “Prime Contractor”) to misrepresent compliance with Disadvantaged Business Enterprise (“DBE”) rules, which require participation of businesses owned by women and minorities. Specifically, the United States alleged that NAUGHTON ENERGY, MARIETTE NAUGHTON, and JOSEPH NAUGHTON misrepresented to the Prime Contractor that NAUGHTON ENERGY was solely performing millions of dollars of work on the NNYB Project when in fact much of that work was performed by a non-DBE subcontractor. As part of the settlement approved yesterday by U.S. District Judge Valerie E. Caproni, NAUGHTON ENERGY, MARIETTE NAUGHTON, and JOSEPH NAUGHTON admit and accept responsibility for conduct alleged in the Government’s complaint and, pursuant to the terms of a settlement based on their ability to pay, have agreed to pay $692,000 over the next five years to the United States.
Manhattan U.S. Attorney Audrey Strauss said: “DBE participation goals create opportunities for DBEs to work on federally funded construction projects. When DBEs fail to disclose the involvement of non-DBEs in their work, they effectively divert resources to ineligible firms and undermine the DBE program’s goal of creating an environment in which businesses owned by women and minorities can compete fairly for United States Department of Transportation-assisted contracts.”
USDOT-OIG Acting Special Agent in Charge Brian C. Gallagher, said: “The settlement reached today only strengthens our resolve in pursuing those whose spurious actions prevent the legitimate participation of disadvantaged enterprises (DBE) in federally funded transportation projects. While the integrity of DOT’s DBE program was compromised in this instance, we remain steadfast working alongside our law enforcement and prosecutorial partners to ensure funds designated to support disadvantaged small businesses are used for their intended benefit and purpose.”
As alleged in the Complaint, from August 1, 2013, through January 16, 2020, Defendants caused the submission of false claims for payment to the United States Department of Transportation (the “DOT”). Specifically, Defendants represented that NAUGHTON ENERGY, a certified DBE, provided fuel, trucking, and manpower services without assistance from a subcontractor. The Complaint alleges that, from the outset of their involvement on the NNYB Project, Defendants represented that they could deliver diesel fuel to the work site wholly independently. However, Defendants lacked both a fuel truck with sufficient capacity and employees with the necessary union affiliation to effectively make these deliveries. Defendants, therefore, arranged for a non-DBE subcontractor (“Subcontractor Y”) to supply the required fuel delivery truck (the “Project Truck”) and union personnel. In exchange, Defendants shared half of their profits from the NNYB Project with Subcontractor Y. Defendants never disclosed this arrangement to the Prime Contractor, and instead, made concerted efforts to give the false appearance that NAUGHTON ENERGY performed the work unassisted. These efforts included: (1) arranging a sham transaction wherein Subcontractor Y transferred ownership of the Project Truck, worth over $10,000, to NAUGHTON ENERGY for a mere $1; and (2) placing the owner of Subcontractor Y on NAUGHTON ENERGY’s payroll, to give the false impression that NAUGHTON ENERGY employees performed all of the services at issue. Even after the Prime Contractor’s DBE program manager directly inquired as to Subcontractor Y’s involvement, Defendants continued to falsely state that NAUGHTON ENERGY performed its work without any subcontractor involvement.
As part of the settlement, Defendants admitted conduct alleged in the Complaint, including that:
* Prior to beginning work on the project, Defendants contacted a non-DBE company, Subcontractor Y, to assist NAUGHTON ENERGY with providing diesel fuel services to the Prime Contractor.
* NAUGHTON ENERGY used Subcontractor Y to provide diesel fuel services on the project because: (1) absent an agreement with Subcontractor Y regarding the use of its truck, NAUGHTON ENERGY did not have a fuel delivery truck with sufficient capacity to effectively provide diesel fuel services for the project; and (2) NAUGHTON ENERGY lacked the affiliation with the requisite union necessary to have its own staff work on the project
* Defendants did not disclose this arrangement to the Prime Contractor. Instead, Defendants took the following actions that made it appear that no subcontractor was involved in providing NAUGHTON ENERGY’s services: (1) Defendants negotiated with Subcontractor Y to transfer title of the Project Truck to NAUGHTON ENERGY for $1; and (2) Defendants placed an owner of Subcontractor Y on NAUGHTON ENERGY’s payroll.
* Defendants failed to disclose Subcontractor Y’s involvement in the work performed on the project.
Ms. Strauss praised the outstanding investigative work of DOT-OIG. She also thanked the New York State Office of the Inspector General for its assistance. This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jessica Jean Hu is in charge of the case.
6 Defendants Charged with Laundering Millions of Dollars in Proceeds Derived from Romance ScamsRead the Press Release
Audrey Strauss, United States Attorney for the Southern District of New York, Patrick J. Freaney, Deputy Special Agent in Charge of the New York Field Office of the United States Secret Service (“USSS”), and Jonathan D. Larsen, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of a complaint charging ABUCHI SHEDRACH FELIX, NADINE JAZMINE WADE, OLUWATOMIWA AKINTOLA, GREGORY OCHIAGHA, HABIBA FAGGE, and OLANREWAYU AJIBOLA with conspiracy to commit money laundering, in connection with their involvement in laundering millions of dollars in proceeds derived from romance fraud schemes.
FELIX, AKINTOLA, and AJIBOLA were arrested last night at Newark Liberty International Airport in Newark, New Jersey. OCHIAGHA was arrested earlier today in the Bronx. WADE and FAGGE are currently fugitives. FELIX, AKINTOLA, AJIBOLA, and OCHIAGHA will be presented in Manhattan federal court later today before U.S. Magistrate Judge Sarah L. Cave.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, the conspirators preyed on the emotions of their numerous online romance fraud victims to fleece the victims out of millions of dollars. Thanks to the Secret Service and IRS Criminal, the defendants have dates in court to face federal charges.”
USSS Deputy Special Agent-in-Charge Patrick J. Freaney said: “Cyber enabled romance schemes continue to harm innocent and unsuspecting people, and the U.S. Secret Service remains committed to investigating those who perpetuate these acts. In this instance, the conspirators allegedly utilized online aliases and created shell companies in furtherance of their scheme to defraud. Through a collaborative investigative effort by the Secret Service, the Internal Revenue Service, and the New York City Police Department Financial Crimes Task Force, the accused will answer the charges brought against them in the Southern District of New York. For further information on ways to better avoid romance scams, please visit www.secretservice.gov/romancescams.”
IRS-CI Special Agent in Charge Jonathan D. Larsen said: “The arrests of the alleged perpetrators of this $3.5 million scheme deal a death blow to the vast criminal activity in which the defendants were allegedly engaged. IRS Criminal Investigation will continue to aggressively pursue those who profit from illegal activity and ensure they are brought to justice.”
According to the allegations in the Complaint:[1]
Using online aliases, the defendants’ co-conspirators contacted victims on various dating sites, and convinced those victims, under false pretenses, to transfer funds to the defendants and others. One online alias used in the schemes frequently employed the names “Diego Francisco,” “Richard Francisco,” or “Tom Francisco” (the “Francisco Alias”). The conspirators used online photos of a male model when providing victims with photos of the Francisco Alias. After engaging in conversation with the victims via phone, text, and email, the conspirators, posing as the Francisco Alias, would ask victims for money. The reason offered for why the Francisco Alias needed money could vary. In one version of the scheme, the Francisco Alias was supposedly an architect who had traveled to Dubai and needed funds in order to receive several million dollars in payment. In another version of the scheme, the Francisco Alias supposedly worked on an oil rig and needed funds to repair the rig. The Francisco Alias would then instruct the victims to transfer funds to bank accounts controlled by the defendants. The means of transfer varied. For example, in some cases, the Francisco Alias instructed victims to obtain cashier’s checks or money orders made payable to one of the defendants’ companies and then either mail the check to the conspirators – at addresses that included one in the Bronx – or to deposit the cashier’s check directly into a bank account held in the name of one of the defendants’ companies. The Francisco Alias would instruct the victims to send him photographs of any cashier’s checks and any mailing labels.
Each of the defendants created a shell company and opened bank accounts in the name of his or her respective shell company (the “Shell Company Accounts”). The Shell Company Accounts received funds from victims of the romance fraud scheme described above and rapidly depleted those funds through cash withdrawals, cashier’s checks, and the purchase of vehicles, among other means. The Shell Company Accounts received over $4.5 million between in or about 2018 and 2020, over $3.5 million of which came from victims of the romance fraud scheme.
* * *
ABUCHI SHEDRACH FELIX, 29, of Newark, New Jersey, NADINE JAZMINE WADE, 28, of the Bronx, New York, OLUWATOMIWA AKINTOLA, 27, of Brooklyn, New York, GREGORY OCHIAGHA, 55, of the Bronx, New York, HABIBA FAGGE, 24, of Towson, Maryland, and OLANREWAYU AJIBOLA, 36, of Newark, New Jersey, were each charged with one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), 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 would be determined by a judge.
Ms. Strauss praised the outstanding investigative work of USSS and IRS-CI.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Micah F. Fergenson and Matthew J. King are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth in this release constitute only allegations, and every fact described should be treated as an allegation.
Construction Company President Charged with Defrauding the State Department in Multimillion-Dollar Fraud SchemesRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and Michael Speckhardt, the Special Agent in Charge of the U.S. Department of State, Office of Inspector General, announced the arrest today of SINA MOAYEDI, the owner of a construction company, on charges including bribery and fraud. MOAYEDI was arrested in Castleton, Virginia, and will be presented later today in the Western District of Virginia before U.S. Magistrate Judge Joel C. Hoppe.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Sina Moayedi made misrepresentations about his employees’ qualifications and his company’s ownership in order to induce the State Department into awarding approximately $100 million in lucrative construction contracts to Moayedi’s company, Montage, Inc. Moayedi also allegedly cultivated a State Department insider, and paid the insider lucrative bribes in exchange for confidential State Department bidding information. Moayedi must now be held accountable for his alleged brazen fraud on the government.”
Special Agent in Charge Michael Speckhardt said: “As alleged, the defendant’s scheme to undermine the Department’s procurement process for personal gain caught up with him today and he will now be held accountable. His alleged actions not only hurt other legitimate businesses competing for awards, but also damage the public’s trust in the effective and efficient utilization of taxpayer money.”
According to allegations in the Complaint[1]:
Montage, Inc. (“Montage”) is a U.S.-based business that is primarily involved in worldwide Government construction projects, including embassies, military posts, consulates, and similar overseas properties owned and operated by the United States Government. Montage has performed over $220 million in contracting work for the U.S. Government, including for the Department of Defense, the Department of Justice/Federal Bureau of Investigation, the State Department, the Department of the Interior, the Department of Agriculture, the National Aeronautics and Space Administration (“NASA”), the Equal Employment Opportunity Commission (“EEOC”), and the Department of Veterans Affairs. Since 2014, Montage appears to have focused primarily on competing for and obtaining contracts with the State Department. During that period, the State Department has awarded Montage approximately six overseas U.S. Embassy/Consulate construction project contracts totaling $100 million, in locales such as Ecuador, Spain, Sudan, the Czech Republic, and Bermuda. The founder of Montage is SINA MOAYEDI.
Montage engaged in at least two fraud schemes. The first scheme alleges that, from approximately 2014 to September 2020, MOAYEDI and Montage lied that it was a female-owned business in order to secure unmerited advantages in the bidding process. By way of context, it is advantageous to a company, when bidding for federal government contracts, to be majority-owned by an individual from a socially or economically disadvantaged community. In fact, certain contracts (or portions of contracts) are “set aside” for – i.e., only available to – such companies. MOAYEDI and Montage repeatedly represented falsely in submissions to the State Department that Montage was female-owned, or female-owned and minority-owned, in order falsely to induce the State Department to award Montage lucrative construction contracts. In actuality, MOAYEDI repeatedly lied about Montage being a female-owned business, and indeed, MOAYEDI controls Montage and makes all material decisions on Montage’s behalf. As MOAYEDI revealed to a bank that inquired about Montage’s ownership status, “I am the sole owner and president of Montage and have always been.” Montage and MOAYEDI also repeatedly misrepresented, and significantly overstated, the qualifications of Montage employees. MOAYEDI made these misrepresentations in order to, among other things, meet State Department and contractual requirements for minimum experience in certain key positions.
The second scheme charged in the Complaint is a bribery scheme during at least 2016 and 2017. Insider-1 is employed in the State Department’s Overseas Building Operations (“OBO”), which, according to OBO’s website, “directs the worldwide overseas building program for the Department of State and the U.S. Government community serving abroad.” Specifically, Insider-1 works for the State Department’s OBO Project Development and Coordination Division, European division. In connection with overseas construction projects, the State Department has a Technical Evaluation Panel (TEP) that considers all aspects of an offeror’s plan to execute the project. The TEP has the power to disqualify an offeror. Insider-1 oversaw the TEP for the Hamilton, Bermuda, project – a project that was awarded to Montage. In at least 2016 and 2017, MOAYEDI paid cash bribes to Insider-1 in exchange for confidential State Department bidding information relating to a particular multimillion-dollar contract in Bermuda, for which Montage was then bidding. In connection with the bidding process for the Bermuda project, Insider-1 informed MOAYEDI, in sum and substance, that: His bid was low; Montage could raise its bid by $300,000 and would still be the low bidder; and he should kick back 20 percent, or $60,000, to Insider-1 in return for this information. Shortly thereafter, Montage increased its bid by nearly $1 million. In a letter accompanying the revised bid, MOAYEDI falsely represented to the State Department that Montage’s revised bid was attributable to “an arithmetic error in our estimate worksheets.” MOAYEDI then paid Insider-1 $60,000 in cash, in three separate payments, using two men as intermediaries.
* * *
MOAYEDI, 66, of Chevy Chase, Maryland, is charged with one count of wire fraud, and one count of conspiracy to commit wire fraud, each of which carries a maximum potential prison sentence of 20 years, and one count of bribery of a public official, which carries a maximum potential prison sentence of 15 years.
The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only; any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the State Department, Office of Inspector General, Special Agents from the United States Attorney’s Office for the Southern District of New York, and the Internal Revenue Service. She also thanked Special Agents from the United States Attorney’s Office for the District of Columbia and the Montgomery County, Maryland, Police Department.
The Office’s Complex Frauds and Cybercrime Unit is handling this criminal case. Assistant U.S. Attorneys Michael D. Neff and Louis A. Pellegrino are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Rockland County Man Convicted for Running Multimillion-Dollar Ponzi and Embezzlement SchemesRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that RULESS PIERRE was convicted in Manhattan federal court today of securities fraud, wire fraud, and structuring charges. PIERRE was convicted after a trial before Judge Sidney Stein.
U.S. Attorney Audrey Strauss said: “Today, Ruless Pierre was brought to justice for callously lying to investors. Pierre told investors their investment returns were excellent, when in fact he failed to invest investor funds as promised, generated losses when he did invest, and diverted much of investor funds to his personal use and to repay investors in a Ponzi-like fashion. We will continue aggressively to pursue frauds like this one in order to protect investors.”
According to the allegations contained in the Complaint, Indictment, and the evidence presented at trial:
Investment Promissory Fraud
From at least November 2016 through October 2019, PIERRE solicited money from investors of Ruless Pierre Consulting Group (“RPCG”) by falsely promising them that he would earn a 20 percent return on their initial investment every 60 days through stock trading (hereinafter, the “Promissory Note Fraud”). The investments were memorialized in documents known as “Investment Promissory Notes.” These investment contracts generally promised that the investor would be paid 20 percent interest every 60 days and that the investor could withdraw all funds from the investment with 30 days’ notice. Based on these documents and the false representations of PIERRE, the investors understood that their principal and interest were guaranteed.
During the course of the investment fraud scheme, PIERRE fraudulently obtained over $2 million from nearly 100 investors. After receiving money from investors, PIERRE deposited the money into one of his personal bank accounts or bank accounts of RPCG. PIERRE then transferred the money to trading accounts, where he engaged in unprofitable day trading. Despite his trading losses, PIERRE repeatedly and falsely represented to investors, including in investment statements containing fictitious balances, that the trading was profitable and that their investments were growing as promised. In addition to losing their money, PIERRE also used investors’ funds to pay for personal expenses, including luxury vehicles. Additionally, PIERRE further concealed the truth from investors by using money obtained from new investors to make redemption payments to previous investors, in Ponzi-like fashion.
The Franchise Investment Fraud
Beginning in or about November 2018, PIERRE began to offer investors, including some individuals who invested in his Promissory Note Fraud, the opportunity to purchase partnership interests in a partnership that would run three fast-food franchise locations (hereinafter, the “Franchise Investment Fraud”). At the time, PIERRE did not own any of the fast-food franchises, but he was in discussions regarding purchasing them. Each investment was memorialized in a document entitled “Silent Partnership Agreement.”
The Silent Partnership Agreements promised the investors a 5 percent monthly return on the investment, in addition to a 40 percent pro rata share of the quarterly gross operating profit. The minimum investment was $5,000.
The Silent Partnership Agreements further provided that RULESS PIERRE was the General Partner, and that he was responsible “for the complete management, control, and policies related to the operation and conduct of the business.”
PIERRE received financial statements for the franchise locations, which showed minimal profits. Nonetheless, PIERRE promised investors an unrealistic 5 percent monthly return on their investment.
In or about April 2019, PIERRE purchased one fast food franchise for approximately $50,000. PIERRE did not purchase the other franchises.
PIERRE deposited the fast-food franchise investors’ money in various bank accounts, which commingled the funds from the Franchise Investment Fraud with the Promissory Note Fraud. In Ponzi-like fashion, PIERRE fraudulently misappropriated some of the fast-food franchise investors’ money to pay back investors in the Promissory Note Fraud.
In total, PIERRE raised at least $200,000 by selling the Silent Partnership Agreements to at least 18 investors. Some of the investors were paid their 5 percent monthly distribution, but the vast majority of the investors were not made whole. The fast-food franchise went out of business in December 2019.
The Embezzlement Fraud Scheme
In another scheme, PIERRE embezzled money from his former employers. From approximately 2007 until February 2016, PIERRE was the director of finance for two different hotels, which were owned by the same company (“Company-1”). One hotel was located in the Palisades, New York (“Hotel-1”), while the other was located in Armonk, New York (“Hotel-2”) (collectively, “the Hotels”). As the director of finance, PIERRE was the signatory on several bank accounts held in the name of the management companies that managed the Hotels (“Management Companies”).
After August 2018, PIERRE no longer worked at either Hotel-1 or Hotel-2, but he regularly wrote himself checks payable to cash from the Management Companies’ bank accounts. Specifically, from September 2018 through March 2019, PIERRE wrote over 70 checks to “cash” or “petty cash” from one of the bank accounts for Hotel-1, for over $300,000.
In addition, from March 2017 through 2019, PIERRE deposited large amounts of cash into his personal bank accounts in amounts that were generally less than $10,000. The deposits were conducted at various bank locations and typically took place on the same day, consecutive days, or within a short period of time. For example, in just seven months, from June 2018 through December 2018, PIERRE deposited approximately $225,612, through 138 cash deposits all under $10,000, into a bank account in the name of RPCG.
* * *
PIERRE, 51, of Nanuet, New York, was convicted of two counts of securities fraud, each of which carries a maximum sentence of 20 years in prison, one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of structuring, which carries a maximum 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 defendant will be determined by the judge.
PIERRE is scheduled to be sentenced on September 9, 2021, at 2:30 p.m.
Ms. Strauss praised the investigative work of Homeland Security Investigations. Ms. Strauss also thanked the United States Postal Inspection Service, the United States Internal Revenue Service, the New York City Police Department, and the New York City Sherriff’s Office, which assisted in the investigation. Ms. Strauss also thanked the Securities and Exchange Commission, which has brought and filed a civil enforcement action against the defendant.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Robert L. Boone and Drew Skinner are in charge of the prosecution.
9 Department of Correction Officers and Employees Charged with Taking Bribes to Smuggle Contraband to Inmates at New York City JailsRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Margaret Garnett, Commissioner of the New York City Department of Investigation (“DOI”), announced the unsealing of indictments charging nine current and former employees and officers of the New York City Department of Correction with taking cash bribes in return for smuggling contraband such as scalpels, razor blades, drugs, alcohol, and cellphones to inmates in New York City area jails. Nine defendants were arrested today and will be presented before United States Magistrate Judges. Seven defendants were arrested in New York, one defendant in Pennsylvania, and one defendant in Virginia.
U.S. Attorney Audrey Strauss said: “These defendants were responsible for maintaining a safe and orderly environment in New York City’s jails. Instead, as alleged, they abused their positions to enrich themselves by smuggling weapons, drugs, and other dangerous contraband in return for thousands of dollars of cash bribes. This alleged activity violated the defendants’ duties, and endangered the inmates they were charged to supervise and guard.”
FBI Assistant Director William F. Sweeney Jr. said: “The nine defendants charged today risked the safety and security of their colleagues and others within the New York City Department of Correction when they carelessly decided to smuggle contraband into our jails, as we allege today. We shouldn’t have to remind public servants that accepting bribes while conducting illegal activity could constitute a federal crime, but when necessary, that’s exactly what we’ll do.”
DOI Commissioner Margaret Garnett said: “These charged crimes involving contraband smuggling and bribery by City Correction officers and employees reflect the pernicious and damaging impact of corruption. Correction officers and staff should protect the integrity of the jails, not promote lawlessness and violence by accepting bribes in return for trafficking drugs, scalpels, razor blades, cell phones, and other contraband – all highly valued, illegal items that undermine order in the jails and compromise the safety of other correction officers and inmates. DOI thanks the FBI and the U.S. Attorney’s Office for the Southern District of New York for their partnership on these significant investigations.”
According to the allegations in the Indictments[1] unsealed today:
MIGUEL COMPRES, 35, of New York, New York, abused his position as a correction officer to smuggle scalpels, smokable synthetic cannabinoids, often referred to as “K2” or “Spice,” cellphones, and large quantities of cigarettes into the Manhattan Detention Complex in downtown Manhattan, in return for over $6,000 in bribes, from at least in or about November 2019 up through and including in or about August 2020. He is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of federal program bribery, which carries a maximum sentence of 10 years in prison, and one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison.
TAMEKA LEWIS, 41, of Brooklyn, New York, abused her position as a counselor with the Department of Correction to smuggle K2 and other contraband into the Otis Bantum Correctional Center on Rikers Island, in return for over $40,000 in bribes, from at least in or about June 2019 up through and including in or about September 2020. She is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of federal program bribery, which carries a maximum sentence of 10 years in prison, one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison, and one count of distribution of a controlled substances analogue, which carries a maximum sentence of 20 years in prison.
DARIEL DIAZ, 33, of Reading, Pennsylvania, abused his position as a correction officer to smuggle K2, a cellphone, and large quantities of cigarettes into the George R. Vierno Center on Rikers Island, in return for over $8,000 in bribes, from at least in or about March 2020 up through and including in or about September 2020. He is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of federal program bribery, which carries a maximum sentence of 10 years in prison, and one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison.
JASMINE REED, 34, of Norfolk, Virginia, abused her position as an exterminator with the Department of Correction to smuggle a razor, K2, marijuana, cigarettes, a cellphone, and other contraband into the Manhattan Detention Complex in downtown Manhattan in return for cash bribes, from at least in or about September 2019 up through and including in or about December 2019. She is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison, and one count of distribution of a controlled substance, which carries a maximum sentence of 20 years in prison.
TEMAINE PELZER, 45, of Brooklyn, New York, abused his position as a correction officer to smuggle cigarettes and other contraband into the Manhattan Detention Complex, in return for over $8,000 in bribes, from at least in or about August 2019 up through and including in or about February 2020. He is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of federal program bribery, which carries a maximum sentence of 10 years in prison, and one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison.
BRIAN HARRELL, 60, of Pelham, New York, abused his position as a correction officer to smuggle K2, alcohol, cigarettes, and other contraband into the Manhattan Detention Complex, in return for over $6,500 in bribes, from at least in or about May 2020 up through and including in or about June 2020. He is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of federal program bribery, which carries a maximum sentence of 10 years in prison, one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison, and one count of distribution of a controlled substances analogue, which carries a maximum sentence of 20 years in prison.
RASHAWN ASSANAH, 25, of Queens, New York, abused his position as a correction officer to smuggle a cellphone, a large quantity of cigarettes, and other contraband into the Robert N. Davoren Center on Rikers Island, in return for over $7,500 in bribes, from at least in or about November 2020 up through and including in or about February 2021. He is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of federal program bribery, which carries a maximum sentence of 10 years in prison, and one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison.
ROBERT BALDUCCI, 33, of the Bronx, New York, abused his position as a correction officer to smuggle razor blades, marijuana, and other contraband into the Otis Bantum Correctional Center on Rikers Island, in return for at least $5,000 in bribes, in or about October 2020. He is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of federal program bribery, which carries a maximum sentence of 10 years in prison, and one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison.
JOHNATHAN GARRETT, 32, of Brooklyn, New York, abused his position as a correction officer to smuggle methamphetamine, K2, and other contraband into the Anna M. Kross Center on Rikers Island, in return for at least $5,000 in bribes, from at least in or about September 2020 up through and including in or about October 2020. He is charged with one count of conspiracy to commit federal crimes, which carries a maximum sentence of five years in prison, one count of federal program bribery, which carries a maximum sentence of 10 years in prison, and one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in these cases are prescribed by Congress and are provided here for informational purposes only, as any sentencing of each defendant will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI and DOI.
These cases are being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Marguerite Colson, Jarrod L. Schaeffer, and Hagan Scotten are in charge of the prosecutions.
The charges 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 Indictments and the description of the Indictments set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Narcotics Dealer Charged in Manhattan Federal Court with Causing Overdose Death from FentanylRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of an Indictment today charging MICHAEL KELLEHER with distributing fentanyl that resulted in the death of a victim (the “Victim”) on May 19, 2020, in the Bronx, New York. KELLEHER and his codefendant MARK GONZALEZ are also charged with participating in a conspiracy to distribute and possess with intent to distribute fentanyl, and using and carrying a firearm in connection with a drug trafficking offense. KELLEHER was previously charged by a criminal complaint and arrested on March 5, 2021. GONZALEZ was arrested this morning and will be presented before United States Magistrate Judge Robert W. Lehrburger tomorrow. The case is assigned to United States District Judge Victor Marrero.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Michael Kelleher and Mark Gonzalez peddled lethal fentanyl, and Kelleher sold the dose that caused the death of a victim. Working with the NYPD we will continue to combat the epidemic of lethal opioids.”
NYPD Commissioner Dermot Shea said: “Opioids have a well-known history of causing overdoses, destroying lives, and devastating communities. That’s why the NYPD and its law enforcement partners work tirelessly to rid our city of these and other deadly drugs and work tirelessly to prosecute those who sell them. I want to thank the investigators and prosecutors who worked on this investigation. It is their work that brings some measure of justice to this family who lost their loved one to a senseless overdose.”
According to the allegations in the Indictment, the underlying complaint for KELLEHER, and information in the public record[1]:
On May 19, 2020, the Victim was found dead in his home in the Bronx, New York. Following an investigation by the NYPD, law enforcement agents identified KELLEHER as the dealer who sold the Victim pure fentanyl, which resulted in his death. Following the Victim’s death, law enforcement officers acting in an undercover capacity purchased additional quantities of fentanyl from KELLEHER, and his supplier, GONZALEZ, which were packaged exactly like those found in the Victim’s residence on the day of his death. KELLEHER and GONZALEZ also sold a firearm with a defaced serial number to an undercover law enforcement agent.
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KELLEHER, 35, and GONZALEZ, 43, both of the Bronx, New York, are each charged with conspiracy to distribute and possess with intent to distribute 400 grams and more of mixtures and substances containing a detectable amount of fentanyl, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years, and with use, carrying, and possession of a firearm in connection with a drug trafficking offense, which carries a mandatory minimum consecutive sentence of five years. KELLEHER is also charged with narcotics distribution resulting in the death of the Victim, which carries a maximum sentence of life in prison and a mandatory minimum 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 will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the NYPD. This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Michael R. Herman is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and Complaint, and the description of the Indictment and Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Four Men Charged for Large-Scale Distribution of Synthetic Cannabinoids Through Multiple WebsitesRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced the unsealing of an Indictment charging NIAZ KHAN, NOEL SANABRIA, ANDRE GOMES, and PATRICK PATTERSON with conspiracy to distribute and possess with intent to distribute synthetic cannabinoids and to distribute controlled substances using the internet. The case has been assigned to United States District Judge J. Paul Oetken.
KHAN, SANABRIA, GOMES, and PATTERSON were arrested this morning. KHAN, SANABRIA, and GOMES will be presented later today in Manhattan federal court before United States Magistrate Judge Robert W. Lehrburger. PATTERSON will be presented tomorrow in San Francisco federal court before United States Magistrate Judge Thomas S. Hixson.
Manhattan U.S. Attorney Audrey Strauss said: “Trafficking of synthetic cannabinoids – sometimes called K2 or Spice – poses a serious threat to public health and safety. Packaged attractively to appeal to teenagers and young adults, synthetic cannabinoids are in reality toxic concoctions that can be very dangerous to consume. As alleged, the defendants used websites they operated to distribute massive quantities of synthetic cannabinoids throughout the United States. Thanks to our law enforcement partners, the defendants have been arrested and their dangerous business has been dismantled.”
NYPD Commissioner Dermot Shea said: “Whether synthetic cannabinoids are trafficked on the street or through the internet, the NYPD and our law enforcement partners will work to stop the source of these dangerous substances and hold accountable those responsible for the sales. I thank and commend the detectives of the NYPD’s Intelligence Bureau, members of the U.S. Attorney’s Office for the Southern District, the New York Field Office of Homeland Security Investigations, and the United States Postal Inspection Service whose dedication resulted in these charges and ended this national trafficking operation.”
HSI Special Agent-in-Charge Peter C. Fitzhugh said: “Smokable synthetic cannabinoids (SSCs) are unlawful and their usage has caused serious medical issues to include overdose deaths. As alleged, the defendants blatantly disregarded public safety while hiding behind a website in an effort to make a quick profit. HSI will continue to work with its law enforcement partners to protect the American public, arrest these individuals, seize their assets, and take down websites that advertise the sale of narcotics.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Synthetic cannabinoids contain psychoactive chemicals that can result in hallucinations and pose other dangers. The accused in this case may have thought their alleged criminal drug enterprise would go undetected by law enforcement. Today’s arrests should send a strong message to drug traffickers that Postal Inspectors and their law enforcement partners will vigorously investigate and bring them to justice.”
According to the allegations in the Indictment[1]:
From February 2019 until May 2021, KHAN, SANABRIA, GOMES, and PATTERSON operated a scheme to distribute massive quantities of smokeable synthetic cannabinoids (“SSC”), colloquially referred to as “K2” or “Spice,” containing controlled substances and/or a controlled substance analogue, throughout the United States.
KHAN, SANABRIA, GOMES, and PATTERSON sold SSC through at least four different websites that they operated, namely K2HerbStore.com, HerbalPlug.com, LegalAromaTherapy.com, and LegalHerbalSmack.com (collectively, the “Websites”). The SSC the defendants sold through the Websites included dried, shredded plant material onto which synthetic cannabinoid chemicals had been sprayed. The SSC distributed by the scheme was branded with colorful graphics and distinctive names, including “Train Wrecked,” “Scooby Snax Kush,” “Bizarro,” “AK 47,” “Hi5 Triple X,” “Evil Santa,” “Krazy Turkey,” “Sexy Monkey,” “W.T.F.,” and “COVID-19 Coronavirus Limited Edition.”
In an effort to conceal their criminal activity and advertise their illegal products, KHAN, SANABRIA, GOMES, and PATTERSON used names for certain of the Websites that falsely represented that their SSC products were “legal.” The defendants also sometimes misleadingly described their SSC products publicly as “not for human consumption,” “potpourri,” “herbal incense,” and “legal aroma therapy,” when, in fact, the defendants intended that the SSC would be consumed by drug users and they knew that their conduct was unlawful.
Over the course of the scheme, KHAN, SANABRIA, GOMES, and PATTERSON shipped thousands of packages of SSC through the United States mail from the Bronx, New York, to customers in all 50 states and the District of Columbia, which contained a total of hundreds of kilograms of SSC. The defendants earned more than approximately $1 million from their illegal marketing and sale of SSC during the course of the scheme.
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KHAN, 34, of Queens, New York, SANABRIA, 57, of the Bronx, New York, GOMES, 38, of Queens, New York, and PATTERSON, 32, of the Bronx, New York, are each charged with conspiracy to distribute and possess with intent to distribute controlled substances and a controlled substance analogue, and to distribute controlled substances using the internet, which carries a maximum sentence of 20 years. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the NYPD, HSI, and the USPIS. The long-term investigation of this case was partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (“HIDTA”), a federal grant program that invests in law enforcement partnerships to build safe and healthy communities.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Rebecca T. Dell and Robert B. Sobelman are in charge of the prosecution.
The charge contained in the Indictment is merely an accusation, 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.
Four Defendants Charged in Coast-To-Coast Bank Fraud ConspiracyRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, Patrick J. Freaney, Deputy Special Agent in Charge of the New York Field Office of the United States Secret Service (“USSS”), Philip R. Bartlett, Inspector-in-Charge of the United States Postal Inspection Service’s New York Division (“USPIS”), and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced the indictment of DRAMION COOMBS, OLUFEMI NATHANIEL ITIOWE, TANZANIA HOGAN, and DEIBI SANCHEZ for conspiracy to commit bank fraud, bank fraud, and aggravated identity theft, in connection with a scheme to order bank checks in the names of multiple victims and then fraudulently deposit those checks drawn from the victims’ accounts into accounts that the defendants controlled. All four defendants were arrested pursuant to a complaint and presented before United States Magistrate Judges on April 20, 2021. ITIOWE and SANCHEZ were arrested in New York, COOMBS was arrested in Pennsylvania, and HOGAN, was arrested in California.
U.S. Attorney Audrey Strauss said: “As alleged, Dramion Coombs, Olufemi Nathaniel Itiowe, Tanzania Hogan, and Deibi Sanchez conspired to defraud multiple banks of nearly $1 million by obtaining the identities of other people and cashing fraudulent checks from their bank accounts. Thanks to the terrific investigative work of our law enforcement partners, these defendants are now facing prosecution for their alleged crimes.”
Deputy Special Agent in Charge Patrick J. Freaney said: “The U.S. Secret Service, alongside our valued partners from the New York City Police Department and the U.S. Postal Inspection Service, continue to prioritize financial fraud investigations. In this instance, the accused allegedly utilized social engineering techniques to gain access to numerous bank accounts to make fraudulent deposits totaling nearly $1 million. This case illustrates the perils of social engineering and highlights the importance of authentication practices and procedures to better secure financial and personal information.”
Police Commissioner Dermot Shea said: “These defendants allegedly orchestrated a nationwide cyber scheme to stalk victims and steal their money. But the United States Secret Service and the United States Postal Service, together with our NYPD detectives and the prosecutors of the United States Attorney’s Office in the Southern District of New York, meticulously tracked their digital moves to piece together this important case and ensure justice will be served.”
Inspector-In-Charge Bartlett said: “These individuals engaged in an old school low tech check/bank fraud scam. While their scheme was unsophisticated, they managed to steal hundreds of thousands of dollars from financial institutions. Their crimes would have continued had it not been for the collaborative efforts of law enforcement.”
According to the allegations in the Indictment[1] unsealed today:
Between at least September 2018 and November 2018, COOMBS, ITIOWE, HOGAN, and SANCHEZ executed schemes to defraud financial institutions of more than $890,000. They did so by depositing false and fraudulent checks drawn from the accounts of at least three different New York victims into banks located in New York and California. In addition, between at least December 2019 and July 2020, COOMBS deposited multiple additional false and fraudulent checks into his own bank account and deposited checks into a separate bank account that he opened in the name of another individual.
COOMBS, 37, of East Stroudsburg, Pennsylvania, is charged with one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison, two counts of bank fraud, which each carry a maximum sentence of 30 years in prison, and two counts of aggravated identity theft, which each carry mandatory minimum sentence of two 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 defendant will be determined by the judge.
ITIOWE, 47, of Brooklyn, New York, HOGAN, 47, of Canoga Park, California, and SANCHEZ, 48, of Bronx, New York, are charged with 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 minimum sentence of two 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 defendant will be determined by the judge.
Ms. Strauss praised the United States Secret Service, New York City Police Department, and United States Postal Inspection Service for their outstanding investigative work.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Brandon D. Harper is in charge of the prosecution.
The charges 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.
Former CEO of Real Estate Private Equity Investment Firm Pleads Guilty to $58 Million Securities FraudRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that ERIC MALLEY, the founder and former chief executive officer of real estate private equity investment firm MG Capital Management L.P., pled guilty today to a securities fraud scheme in which he fraudulently induced hundreds of individuals to invest a total of approximately $58 million in two real estate investment funds by, among other things, lying about his own prior experience and investment track record and about the nature and characteristics of those funds. MALLEY pled guilty before United States District Judge Edgardo Ramos.
U.S. Attorney Audrey Strauss said: “As Eric Malley has now admitted, he lied to his victims to induce them to invest approximately $58 million in his investment funds, promising victims they would reap the benefits of owning equity in Manhattan real estate and falsely touting his prior experience. Those lies continued for years, all while Malley enriched himself. As today’s plea demonstrates, our Office remains committed to protecting investors from investment professionals’ deceptive and fraudulent conduct.
According to the allegations contained in the Complaint and the Information and based on statements made in Manhattan federal court:
MALLEY founded MG Capital Management L.P. (“MG Capital”) in approximately January 2013, and served as its chief executive officer and chief investment officer from that time until approximately December 2019. During that time, MALLEY formed two real estate investment funds (collectively, “the Funds”) – MG Capital Management Residential Fund III (“Fund III”), in approximately February 2014, and MG Capital Management Residential Fund IV (“Fund IV”), in approximately September 2017.
MALLEY promised, when soliciting investors and throughout the life of the Funds, that the Funds would provide investors with the opportunity to own an equity interest in hundreds of luxury income-producing properties across Manhattan, following a debt-free investment strategy informed by sophisticated proprietary analytics that MALLEY had developed over the course of his career in real estate. MALLEY touted two purportedly extremely successful prior funds he had formed, Fund I and Fund II; assured investors that the Funds would be and were debt-free; and represented that the properties held by the Funds would be and were leased primarily to corporate tenants, including, among others, well known technology companies and a prominent university based in New York City. But MALLEY’s representations were false. His claims about the existence and performance of Funds I and II were largely fabricated; the Funds were not debt-free, but instead held mortgaged properties; the properties that made up the Funds were almost entirely leased to individual, not corporate, tenants; and the Funds held far fewer properties than MALLEY had represented.
Through these and other fraudulent misrepresentations and omissions throughout the life of the Funds, MALLEY induced approximately 335 investors to invest a total of approximately $58 million in the Funds. The Funds together incurred millions of dollars in losses, yet MALLEY distributed at least $278,000 to himself in his capacity as general partner in connection with Fund III, and did not disclose Fund IV’s losses until approximately two years into Fund IV’s operation.
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MALLEY, 50, of New Canaan, Connecticut, pled guilty to one count of securities fraud, which carries a maximum potential sentence of 20 years in prison. The maximum potential penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Sentencing has been scheduled for September 16, 2021, at 11:00 a.m.
Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and thanked the New York Regional Office of the U.S. Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Task Force. Assistant United States Attorney Elizabeth A. Hanft is in charge of the prosecution.
Cardiologist Sentenced to Prison for Decade-Long Health Care Fraud SchemeRead the Press Release
Ilan T. Graff, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced today that cardiologist ASIM HAMEEDI was sentenced to 20 months in prison for orchestrating a widespread healthcare fraud scheme from approximately 2003 to 2015. HAMEEDI owned a Queens, New York, medical clinic, City Medical Associates (“CMA”), through which he perpetrated a fraud scheme involving, among other things, fraudulent reimbursement claims and false representations to insurers regarding medical tests and procedures. HAMEEDI previously pled guilty to conspiracy to commit health care fraud before U.S. District Judge John G. Koeltl, who imposed today’s sentence.
Mr. Graff said: “Doctors and medical clinics should be focused on their patients’ wellbeing, not on fraudulently lining their own pockets. Thanks to the dogged investigative work of our partners at the FBI, HHS, and NYPD, Asim Hameedi is headed to prison for defrauding Medicare, Medicaid, and private health insurance companies.”
According to the Indictment, other court filings, and statements made in public court proceedings:
CMA, a cardiology and neurology clinic based in Bayside, Queens, conducted a multifaceted scheme spanning approximately 12 years and involving millions of dollars in falsified claims. HAMEEDI, a board-certified interventional cardiologist, was CMA’s president and owner. As HAMEEDI has acknowledged, he was a leader of this long-running, wide-ranging fraud scheme, which involved various co-conspirators and several codefendants.
HAMEEDI’s healthcare fraud scheme included, among other things: (1) making false representations to insurance providers about patients’ symptoms in order to obtain preauthorization for medical tests and procedures; (2) backdating bills in order to create the false impression that medical procedures had not been performed until after CMA received “pre”-authorization from an insurer; (3) submitting false claims to insurance providers for parts of tests that were not performed, as well as for drug items not used or provided; (4) evading scrutiny from insurers for the large volume of claims that CMA submitted by falsely representing that several doctors – who did not work at CMA – had purportedly ordered or performed tests or procedures there; and (5) violating HIPAA by accessing, without authorization, electronic health records of patients at a particular hospital on Long Island, New York, in order to identify patients to be recruited to CMA. Additionally, HAMEEDI tried to obstruct an investigation by hospital officials into misconduct by his nephew, codefendant Fawad Hameedi.
In addition to his prison sentence, HAMEEDI, 50, of New York, New York, was sentenced to two years of supervised release, restitution of $554,331, and a $100,000 fine.
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Fawad Hameedi, 35, pled guilty on February 7, 2018, to one count of conspiracy to commit health care fraud.
Arif Hameedi, 59, pled guilty on February 6, 2018, to one count of conspiracy to commit money laundering.
Absar Haaris, 51, pled guilty on November 15, 2016, to conspiracy to commit health care fraud and wire fraud, health care fraud, false statements relating to health care matters, conspiracy to commit fraud in connection with identification information, aggravated identity theft, conspiracy to violate the anti-kickback statute, conspiracy to commit money laundering, and conspiracy to wrongfully obtain and disclose individually identifiable health information. Haaris was previously sentenced, by the Honorable Jed S. Rakoff, principally to time served, three years of supervised release, and restitution of $544,331.51.
Michelle Landoy, 40, pled guilty on January 29, 2018, to conspiracy to commit health care fraud and wire fraud, health care fraud, wire fraud, false statements relating to health care matters, conspiracy to commit fraud in connection with identification information, and aggravated identity theft.
Desiree Scott, 41, pled guilty on February 6, 2018, to conspiracy to commit health care fraud and wire fraud, health care fraud, wire fraud, false statements relating to health care matters, conspiracy to commit fraud in connection with identification information, and aggravated identity theft.
Mr. Graff praised the outstanding investigative work of the New York Field Office of the Federal Bureau of Investigation, the New York Regional Office of the United States Department of Health and Human Services Office of the Inspector General, and the New York City Police Department. Mr. Graff also thanked the New York State Department of Financial Services.
The Office’s Complex Frauds and Cybercrime Unit is handling this criminal case. Assistant U.S. Attorneys Michael D. Neff, David M. Abramowicz, and Kristy J. Greenberg are in charge of the prosecution.
Alleged Manhattan Drug Dealer Arrested for Causing Overdose DeathRead the Press Release
Audrey Strauss, United States Attorney for the Southern District of New York, and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of an Indictment charging EDWARD NAVEDO, a/k/a “Eddy Bolsas,” with distributing fentanyl that resulted in the death of a 41-year-old man (the “Victim”) on or about December 19, 2020, in New York, New York. NAVEDO was arrested this morning, presented and arraigned before United States Magistrate Judge Robert W. Lehrburger this afternoon, and ordered detained. The case is assigned to United States District Judge Analisa Torres.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Edward Navedo sold fentanyl, and a dose he sold resulted in a victim’s death. Today’s arrest is part of our ongoing commitment to confront this serious public health crisis.”
NYPD Commissioner Dermot Shea said: “Today’s arrest is another example of the NYPD’s commitment to holding accountable those allegedly responsible for causing overdose deaths and our continued close partnerships with the U.S. Attorney for the Southern District. Anyone who deals in illegal narcotics should understand that the nation’s best investigators will stop at nothing to fight crime and keep safe all the people we serve.
According to the allegations in the Indictment and information in the public record[1]:
On or about December 19, 2020, the Victim died due to a drug overdose and was found to be in possession of, among other things, a packet stamped with a distinctive red marking. Following an investigation, the NYPD identified NAVEDO as the dealer who sold the Victim the drugs that resulted in his death. The NYPD subsequently made several undercover purchases of additional narcotics from NAVEDO – including heroin and fentanyl – some of which NAVEDO sold in packets that bore the same distinctive red stamp as that recovered from the Victim.
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NAVEDO, 60, of Brooklyn, New York, is charged with distribution and possession with intent to distribute fentanyl, which carries a maximum sentence of life in prison and a mandatory minimum 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 will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the NYPD. This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Jarrod L. Schaeffer is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[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.
Switzerland’s Largest Insurance Company and Three Subsidiaries Admit to Conspiring with U.S. Taxpayers to Hide Assets and Income in Offshore AccountsRead the Press Release
Audrey Strauss, United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James C. Lee, Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the filing of a criminal Information charging Swiss Life Holding AG (“Swiss Life Holding”), Swiss Life (Liechtenstein) AG (“Swiss Life Liechtenstein”), Swiss Life (Singapore) Pte. Ltd. (“Swiss Life Singapore”), and Swiss Life (Luxembourg) S.A. (“Swiss Life Luxembourg”) (collectively, the “Swiss Life Entities”) with conspiring with U.S. taxpayers and others to conceal from the Internal Revenue Service (the “IRS”) more than $1.452 billion in offshore insurance policies, including more than 1,600 insurance wrapper policies, and related policy investment accounts in banks around the world and the income generated in these accounts.
Ms. Strauss, Mr. Goldberg, and Mr. Lee also announced a deferred prosecution agreement with the Swiss Life Entities (“the Agreement”) under which they agreed to accept responsibility for their criminal conduct by stipulating to the accuracy of the Statement of Facts attached to the Agreement. The Agreement requires the Swiss Life Entities to refrain from all future criminal conduct, enhance remedial measures, and continue to cooperate fully with further investigations into hidden insurance policies and related policy investment accounts. Further, as part of today’s resolution, the Swiss Life Entities agreed to pay approximately $77.3 million to the U.S. Treasury, which includes restitution, forfeiture of all gross fees, and a penalty component. If the Swiss Life Entities abide by all of the terms of the Agreement, the Government will defer prosecution on the Information for three years and then seek to dismiss the charge.
Manhattan U.S. Attorney Audrey Strauss said: “As they admit, Swiss Life and its subsidiaries sought out and offered their services to U.S. taxpayers to help them become U.S. tax evaders. The Swiss Life Entities offered private placement life insurance policies and related policy investment accounts to U.S. customers, and provided services that concealed the policies and other assets from the IRS. Indeed, the Swiss Life Entities saw U.S. authorities’ stepped-up offshore tax enforcement as an opportunity to pitch themselves to tax-evading U.S. customers as an alternative to Swiss banks. Under the terms of today’s agreement, Swiss Life will turn over more than $77 million and be required to continue to cooperate with the United States in identifying U.S. tax evaders.”
Acting Deputy Assistant Attorney General Stuart M. Goldberg said: “Swiss Life today is held responsible for creating and marketing specially designed insurance products to U.S. tax evaders seeking a new way to hide their offshore assets, in light of heightened Justice Department and IRS tax enforcement efforts. Financial enablers here and abroad – and the taxpayers seeking their services – should know that we will continue to identify and unmask such schemes.”
IRS-CI Chief James C. Lee said: “The successful resolution of this investigation is an important victory for the American taxpayer for two primary reasons. First, the recovery of more $77 million owed to the U.S. government sends an unequivocal message that offshore evasion is still a high priority of IRS Criminal Investigation. Secondly, this agreement further requires Swiss Life Entities to continue to cooperate with the government and does not shield them from future civil or criminal sanctions, which should put every entity engaged in offshore evasion on notice.”
According to documents filed today in Manhattan federal court:
Swiss Life Holding is the ultimate parent company of the Swiss Life group of companies (“Swiss Life”), a Switzerland-based provider of comprehensive life insurance and pension products for individuals and corporations, as well as asset management and financial planning services. From 2005 to 2014, Swiss Life through affiliated insurance carriers in Liechtenstein (Swiss Life Liechtenstein), Luxembourg (Swiss Life Luxembourg), and Singapore (Swiss Life Singapore) (collectively, the “PPLI Carriers”) maintained approximately 1,608 Private Placement Life Insurance (“PPLI”) policies. The PPLI Carriers’ issuance and administration of those policies (colloquially known as “insurance wrappers”) and the related investment accounts were often done in a manner to assist U.S. taxpayers in evading U.S. taxes and reporting requirements and concealing the ownership of offshore assets.
Moreover, beginning as early as the summer of 2008, the PPLI Carriers were aware that UBS and other Swiss banks were terminating or reevaluating their business relationships with U.S. clients in response to increasing offshore tax enforcement efforts by U.S. authorities. Certain management and sales personnel within the Swiss Life PPLI Business Unit viewed these developments as a business opportunity to expand the PPLI Business by onboarding U.S. clients who were fleeing UBS and other Swiss banks. Such clients with undeclared assets were typically referred within Swiss Life as “non-comprehensive advice seeking,” which was frequently abbreviated to “NCAS.” Because Swiss Life would be identified as the owner of the policy investment accounts, rather than the U.S. policyholder and/or ultimate beneficial owner of the assets, the insurance wrapper policies could be and were used by unscrupulous U.S. taxpayers to hide undeclared assets and income and to evade taxes. In turn, Swiss Life grew its PPLI business and earned fees on those policies. Members of management of the PPLI Business Unit knew about and authorized the onboarding of U.S. clients without regard to whether they were declared or undeclared.
Swiss Life engaged in other misconduct with respect to U.S.-related policies:
• U.S.-related PPLI Policies were funded or terminated through asset transfers from/to an account maintained by a third party associated with the policyholder, such as an offshore law firm or intermediary.
• Swiss Life PPLI personnel assisted U.S. taxpayers in establishing and maintaining Swiss Life PPLI policies in the name of a foreign relative with the effect of obscuring the U.S. nexus of the assets used to fund the policy or to repatriate the U.S. taxpayer’s undeclared assets through a sham death payout.
• Certain U.S.-related PPLI Policies issued by Swiss Life Liechtenstein involved transfers of physical gold, other precious metals, or precious gemstones into or out of the policy investment account, presumably for the purpose of avoiding detection by U.S. authorities.
• The PPLI Carriers allowed policyholders to designate an authorized recipient – typically the policyholder’s asset manager or other foreign representative – to receive policy documents and custodian investment account statements, rather than having those documents sent directly to the policyholder.
• Certain Swiss Life Liechtenstein personnel promoted the use of Swiss Life products to turn U.S. taxpayers’ undeclared or so-called “black” money into so-called “white” money by parking the funds in a Swiss Life insurance policy until the clock had run on the perceived statute of limitations for tax offenses.
• Corporate premium bank accounts were also misused as a transitory account to help conceal the movement of U.S. clients’ funds.
Under today’s resolution, the Swiss Life Entities are required to continue to cooperate fully with ongoing investigations and affirmatively disclose any information they may later uncover regarding U.S.-related insurance policies and related policy investment accounts. The Swiss Life Entities are also required to disclose information consistent with the Department of Justice’s Swiss Bank Program relating to accounts closed between Jan. 1, 2008, and Dec. 31, 2019. The Agreement provides no protection from criminal or civil prosecution for any individuals.
Swiss Life Holding will pay a total of $77,374,337, which has three parts. First, Swiss Life Holding has agreed to pay $16,345,454 in restitution to the IRS, which represents the approximate unpaid taxes resulting from the Swiss Life Entities’ participation in the conspiracy. Second, Swiss Life Holding has agreed to forfeit $35,782,375 to the United States, which represents the approximate gross fees (not profits) that the Swiss Life Entities earned on the penalized insurance policies and related policy investment accounts between 2005 and 2014. Finally, Swiss Life Holding has agreed to pay a penalty of $25,246,508.
The penalty amount takes into consideration that Swiss Life conducted a robust internal investigation, supplied client-related data, facilitated the acquisition by the Justice Department of information relating to custodian banks, asset managers, and other entities and individuals related to Switzerland, Liechtenstein, and Singapore, and otherwise meaningfully assisted the Department’s cross-border tax enforcement efforts. In addition, Swiss Life conducted extensive outreach to current and former U.S. clients to confirm historical tax compliance, and to encourage disclosure to the IRS when policyholders’ historical tax compliance issues had not yet been resolved. Swiss Life further implemented remedial measures to protect against the use of its services for tax evasion in the future.
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Ms. Strauss and Mr. Goldberg praised the outstanding work of IRS-CI. Ms. Strauss also thanked the Department of Justice’s Tax Division for their partnership on this case.
This prosecution is being handled by the Complex Frauds and Cybercrime Unit of the United States Attorney’s Office for the Southern District of New York and the Department of Justice’s Tax Division. Assistant U.S. Attorneys Nicholas Folly and Olga I. Zverovich of the United States Attorney’s Office for the Southern District of New York and Senior Litigation Counsel Nanette Davis and Trial Attorney Jack Morgan of the Tax Division are in charge of the prosecution.
Tax Preparer Arrested for Stealing from His Clients and Filing False Tax ReturnsRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, Jonathan D. Larsen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Amanda Hiller, Acting Commissioner of the New York State Department of Taxation and Finance (“DTF”), announced today the unsealing of a Complaint charging CARLOS DE LA TORRE with wire fraud, mail fraud, and filing false income tax returns in connection with a years-long scheme to steal from the clients of his tax preparation business and defraud the Internal Revenue Service (“IRS”) and New York State Department of Taxation and Finance (“NYSDTF”). DE LA TORRE was arrested today and will be presented in Manhattan federal court before United States Magistrate Judge Sarah Netburn.
U.S. Attorney Audrey Strauss said: “As alleged, Carlos De La Torre defrauded the clients of his tax preparation business by converting to his own use money the clients had been told they owed the IRS and New York State. Further, De La Torre allegedly defrauded the IRS and the State by seeking refunds for overpayments of his taxes that were actually the funds he stole from his clients, and by failing to report those stolen funds as income. Now Carlos De La Torre is facing multiple federal felony charges.”
IRS-CI Special Agent in Charge Jonathan D. Larsen said: “With the tax filing deadline only days away, the arrest of Mr. De La Torre is a timely reminder to taxpayers to do their due diligence when selecting a tax preparer. Not only is the defendant accused of violating the trust placed in him by his clients, he also allegedly profited nearly half a million dollars in this years-long scam. IRS-CI special agents are working tirelessly to protect taxpayers from fraud and investigate potential unscrupulous tax return preparers.”
Acting DTF Commissioner Amanda Hiller said: “Tax preparers are expected to operate with honesty and integrity. Those who instead defraud their clients – and New York State – for personal gain must be held accountable. We’ll continue to work with all levels of law enforcement, including the U.S. Attorney’s Office for the Southern District of New York, to bring dishonest tax preparers to justice.”
As alleged in the Complaint unsealed today in Manhattan federal court[1]:
DE LA TORRE is a tax preparer and the sole proprietor of a bookkeeping and tax preparation business in New York, New York. From at least in or about 2014 through at least in or about 2020, DE LA TORRE represented certain small businesses based in New York City and their owners (the “Victims”) in connection with the preparation and filing of their personal and business federal and state tax returns. During that time period, DE LA TORRE told the Victims how much they allegedly owed in state and federal personal and business taxes, and the Victims gave DE LA TORRE checks in those amounts.
Instead of submitting the Victims’ checks as payments to be applied toward the Victims’ federal and state tax liabilities, DE LA TORRE fraudulently altered the checks and mailed them to the IRS and the NYSDTF as estimated tax payments to be credited against his own personal tax liabilities. Those payments greatly exceeded DE LA TORRE’s own tax liabilities each year. At the end of each tax period, DE LA TORRE fraudulently sought and received refunds from the IRS and the NYSDTF for the total amount of the altered checks he submitted to each agency, less any amount DE LA TORRE actually owed in taxes. Refunds from the IRS and the NYSDTF were wired by the U.S. Treasury and New York State, respectively, directly into DE LA TORRE’s personal bank account. In total, DE LA TORRE stole at least approximately $455,000 from the Victims through this scheme.
DE LA TORRE also filed false tax returns with the IRS in connection with this scheme. He failed to report the money he stole from the Victims on his federal tax returns. Had DE LA TORRE reported that income, as he was required to do, his total federal tax liability each year would have been much greater than it was, and he would not have been entitled to the refunds that he claimed. As a result, DE LA TORRE defrauded the IRS of at least approximately $48,000 in tax liabilities (including interest).
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DE LA TORRE, 79, of Little Neck, New York, is charged with one count of mail fraud, in violation of Title 18, United States Code, Section 1341, and one count of wire fraud, in violation of Title 18, United States Code, Section 1343, each of which carries a maximum sentence of 20 years in prison, and five counts of subscribing to false individual tax returns, in violation of Title 26, United States Code, Section 7206(1), each of which carries a maximum sentence of three 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 defendant would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the IRS-CI and NYSDTF.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Sarah L. Kushner 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 description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Man Sentenced to 20 Years in Prison for Attempting to Provide Material Support to ISISRead the Press Release
WASHINGTON – A New York man was sentenced today to 20 years in prison for attempting to provide material support to the Islamic State of Iraq and al-Sham, aka ISIS.
Zachary Clark, aka Umar Kabir, Umar Shishani and Abu Talha, 42, of Brooklyn, pleaded guilty in August 2020 to one count of attempting to provide material support or resources to a designated foreign terrorist organization, namely, ISIS.
“Today’s 20-year sentence recognizes the gravity of Clark’s conduct, including his calls for other ISIS supporters to carry out lone wolf terrorist attacks in New York City,” said Assistant Attorney General John C. Demers for the Justice Department’s National Security Division. “Having pledged allegiance to ISIS, Clark provided others with specific instructions on knifing and bomb-making for use in such attacks. We remain vigilant to the threat of terrorism and committed to identifying and holding accountable those who threaten our communities through their support for foreign terrorist organizations.”
“Zachary Clark pledged allegiance to ISIS and posted calls for attacks on the public and institutions in New York City on encrypted pro-ISIS chatrooms, along with detailed instructions for carrying out those violent acts,” said U.S. Attorney Audrey Strauss for the Southern District of New York. “Thanks to the Joint Terrorism Task Force, Clark’s efforts to incite deadly violence on behalf of ISIS have been silenced. Today’s sentence sends a clear message that those who seek to further ISIS’s campaign of terror and violence, no matter the method, will face serious consequences.”
“The FBI remains steadfast in the fight against terrorism," said Acting Assistant Director Patrick Reddan for the FBI’s Counterterrorism Division. “I would like to thank the men and women of the FBI, along with our partners in law enforcement, for holding accountable individuals, such as Zachary Clark, who pledge allegiance to ISIS and support and spread their violent terrorist agenda. We remain vigilant in our efforts to prevent terrorism and protect the American people, and today’s sentencing underscores that commitment.”
According to court documents, Clark pledged allegiance to ISIS twice: first in July 2019 to ISIS’s then-leader Abu Bakr al-Baghdadi, and then in October 2019 to ISIS’s new leader, Abu Ibrahim al-Sashemi al-Qurayshi, whom ISIS promoted after al-Baghdadi’s death. Beginning in at least March 2019, Clark disseminated ISIS propaganda through, among other avenues, encrypted chatrooms intended for members, associates, supporters and potential recruits of ISIS. Clark’s propaganda included, among other things, calls for ISIS supporters to commit lone wolf attacks in New York City.
For example, on Aug. 3, 2019, Clark posted instructions about how to conduct such an attack, including directions on how to select an attack target, how to conduct preoperational surveillance, how to conduct operational planning and how to avoid attracting law enforcement attention when preparing for and conducting the attack. On another occasion, Clark posted a manual entitled “Knife Attacks,” which stated, among other things, that discomfort at “the thought of plunging a sharp object into another person’s flesh” is “never an excuse for abandoning jihad” and that “[k]nives, though certainly not the only weapon for inflicting harm upon the kuffar [non-believers], are widely available in every land and thus readily accessible.”
Clark urged the participants in encrypted chatrooms to attack specific targets, posting maps and images of the New York City subway system and encouraging ISIS supporters to attack those locations. Clark’s guidance also included posting a manual entitled “Make a bomb in the kitchen of your Mom,” which was issued by al-Qaeda in the Arabian Peninsula and included detailed instructions about constructing bombs using readily available materials.
The FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD and over 50 other federal, state and local agencies, investigated the case.
Assistant U.S. Attorneys Gillian Grossman, Matthew Hellman and Sidhardha Kamaraju of the Southern District of New York prosecuted the case with assistance from Trial Attorneys Jason Denney and Chad Davis of the National Security Division’s Counterterrorism Section.
Former Controller of Manhattan Company and Three Family Members Charged with Embezzling $17 MillionRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), and Patrick J. Freaney, Deputy Special Agent-in-Charge of the New York Field Office of the United States Secret Service (“USSS”), announced today the unsealing of a criminal indictment charging SABITRI LAFOREST, GARRY LAFOREST, TATIANA LAFOREST a/k/a “Tatiana Mays,” and SANJAY LAFOREST with wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering in connection with their scheme to defraud SABITRI LAFOREST’s employer, a Manhattan-based electrical contracting company, of at least approximately $17 million.
The defendants were arrested this morning: SABITRI LAFOREST and GARRY LAFOREST in Parkland, Florida, TATIANA LAFOREST in Queens, New York, and SANJAY LAFOREST in New York, New York. Later today, TATIANA LAFOREST and SANJAY LAFOREST will be presented in federal court in Manhattan before U.S. Magistrate Judge Sarah Netburn; SABITRI LAFOREST and GARRY LAFOREST will be presented in federal court in Ft. Lauderdale, Florida, before U.S. Magistrate Judge Alicia O. Valle.
Manhattan U.S. Attorney Audrey Strauss said: “The defendants lived a life of luxury: international travel, fancy apartments and homes, a 2020 Ford Shelby GT500, and a 2019 Chevrolet Corvette ZR-1, as well as ownership in successful restaurants. But, as alleged, this was all paid for with $17 million that the defendants stole from the company that employed Sabitri Laforest for over 30 years. Thanks to our partners at the NYPD and U.S. Secret Service, the defendants’ alleged greed has led to their facing federal charges of embezzlement and money laundering.”
NYPD Commissioner Dermot Shea said: “As alleged in this federal indictment, these defendants exploited a position of trust to engage in a vast scheme of criminal plunder. These arrests and the work of our NYPD detectives, the United States Secret Service and the prosecutors of the United States Attorney’s Office in the Southern District of New York will ensure they face justice.”
USSS Deputy Special Agent-in-Charge Patrick J. Freaney said: “Bringing those to justice who commit financial fraud remains a key focus of the U.S. Secret Service. In this instance, the accused allegedly used her professional position as controller to embezzle approximately $17 million which was then allegedly laundered with the aid of family members. Not only are these alleged actions a violation of trust, but also a violation of law. The Secret Service looks forward to our continued partnership with the New York City Police Department in our joint pursuit of those who seek to commit financial crimes. Special thanks to the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA) Intelligence Analysts and the Miami Field Office of the Secret Service for their considerable support in the success of this investigation.”
According to the allegations in the Indictment:[1]
Between at least 2013 and 2020, SABITRI LAFOREST, GARRY LAFOREST, TATIANA LAFOREST, and SANJAY LAFOREST used SABITRI LAFOREST’s position as the controller of an electrical contracting company (“Victim-1”) to embezzle over $17 million from Victim-1. The defendants used SABITRI LAFOREST’s access to Victim-1’s bank account to make payments to a charge card account that TATIANA LAFOREST opened. The defendants regularly charged hundreds of thousands of dollars to the account, all paid for each month using Victim-1’s money.
The defendants used the charge card account to pay for, among other things, over $639,000 in air travel, over $242,000 in tickets for a New York City professional basketball team, over $250,000 in rent for two luxury apartments in Manhattan leased by TATIANA LAFOREST and SANJAY LAFOREST, over $100,000 in home improvements for a Florida home purchased by SABITRI LAFOREST and GARRY LAFOREST, and a 2020 Ford Shelby GT500 and a 2019 Chevrolet Corvette ZR-1.
The defendants also laundered millions of dollars of the proceeds of their embezzlement scheme by transferring the money to other financial accounts controlled by themselves and their family members, and by making payments to a restaurant in Elmont, New York, owned by SABITRI LAFOREST and GARRY LAFOREST, and a group of hospitality companies, including two Manhattan restaurants, owned by SANJAY LAFOREST.
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SABITRI LAFOREST, 59, and GARRY LAFOREST, 64, of Parkland, Florida, TATIANA LAFOREST a/k/a “Tatiana Mays,” 36, of Queens, New York, and SANJAY LAFOREST, 38, of New York, New York, are each charged with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, which carries a maximum sentence of 20 years in prison, one count of wire fraud, in violation of 18 U.S.C. § 1343, which carries a maximum sentence of 20 years in prison, and one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956, 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 would be determined by a judge.
Ms. Strauss praised the outstanding investigative work of the NYPD’s Financial Crimes Task Force and the USSS. Ms. Strauss also thanked the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA) Intelligence Analysts for their support and assistance in this matter.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Matthew R. Shahabian is in charge of the prosecution.
[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.
CEO of Private Equity Fund Charged in Manhattan Federal Court with Lying to Bank to Secure $95 Million LoanRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ELLIOT SMERLING was indicted this morning on charges of wire fraud, bank fraud, and aggravated identity theft for seeking and obtaining an approximately $95 million subscription-backed line of credit for his $500 million private equity fund on the basis of a forged audit letter, falsified subscription agreements, and falsified bank account statements.
Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Elliot Smerling went to elaborate measures to create a blatantly false picture of the financial underpinnings of a private equity fund in order to obtain a $95 million line of credit. Through a forged audit letter and falsified subscription agreements and bank statements, Smerling allegedly induced a California bank to make a loan commitment it never would have made had it known the truth. Now, the truth has landed Elliot Smerling in federal court.”
FBI Assistant Director William F. Sweeney Jr. said: “Falsifying information in order to secure a loan, regardless of the amount, is a crime. When the loan secured is nearly $100 million, the stakes are even higher. As alleged, Smerling engaged in illegal practices in order to benefit his interests. Today he’s learned the consequences of his alleged actions.”
According to the Indictment filed today in Manhattan federal court, and the Complaint[1] unsealed February 26, 2021, in the Southern District of Florida:
From at least in or about December 2020 through at least in or about February 2021, ELLIOT SMERLING, the defendant, solicited and obtained on behalf of the general partner (“General Partnership-1”) of a private equity fund (“Private Equity Fund-1”), a loan of approximately $95 million from a commercial bank headquartered in California (“Victim Bank-1”), which was secured by purported capital commitments made by the limited partnership of investors in Private Equity Fund-1 (“Limited Partnership-1”). SMERLING obtained the approximately $95 million loan on the basis of falsified documents and material misrepresentations, including: (1) a forged audit letter, purportedly prepared by an international network of accounting, audit, tax, and professional services firms (“Audit Firm-1”), attesting to the audited financial statements of Limited Partnership-1; (2) forged subscription agreements that falsely represented that the investment fund of a private university based in New York, New York (“University Endowment Fund-1”), and the chief investment officer of that fund (“Chief Investment Officer-1”) had committed $45 million to fund Limited Partnership-1, and that the investment management division of a banking and financial services firm headquartered in New York, New York (“Investment Manager-1”), and the chief executive officer of Investment Manager-1 had committed $40 million to fund Limited Partnership-1; and (3) falsified bank records purporting to attest to a $4.5 million wire transfer from University Endowment Fund-1 to Limited Partnership-1.
On or around December 1, 2020, SMERLING contacted an employee of Victim Bank-1 concerning SMERLING’s interest in acquiring an approximately $95 million loan for SMERLING’s $500 million private equity fund, Limited Partnership-1. The loan sought by SMERLING would substitute for an existing line of credit SMERLING had secured from a multinational financial services company (“Commercial Bank-1”), where Limited Partnership-1 purported to have an existing line of credit with an outstanding loan balance equal to the amount sought by SMERLING from Victim Bank-1. The employee of Victim Bank-1 referred SMERLING to a director in the Global Fund Banking Group at Victim Bank-1 (“Witness-1”).
Thereafter, in or around December 2020, Witness-1 requested from SMERLING materials concerning Limited Partnership-1 and General Partnership-1 in order to evaluate SMERLING’s loan request. In response, SMERLING sent Victim Bank-1 materially false materials, the veracity of which Victim Bank-1 relied upon in ultimately deciding to make the loan sought by SMERLING, including:
i. An audit letter (the “Audit Letter”), purportedly prepared by Audit Firm-1, attesting to the sound finances of Limited Partnership-1.
ii. Subscription agreements purportedly signed by investors in the fund, including an agreement reflecting a purported commitment of $45 million by University Endowment Fund-1 and the purported signature of Chief Investment Officer-1 (“Subscription Agreement-1”), and an agreement reflecting a purported commitment of $40 million by Investment Manager-1 and the purported signature of the chief executive officer of Investment Manager-1 (“Subscription Agreement-2”).
iii. A table (the “Capital Commitment Table”) listing $500 million in paid and unpaid capital commitments purportedly made to Limited Partnership-1 as of December 13, 2019, including a purported $45 million commitment by University Endowment Fund-1, consisting of a “call amount” of $4.5 million and an “unpaid commitment” of $40.5 million as of that date, as well as a purported $40 million commitment by Investment Manager-1, consisting of a “call amount” of $4 million and an “unpaid commitment” of $36 million as of that date.
Following receipt of the materials, employees of Victim Bank-1, including at least one employee based in Victim Bank-1’s office in New York, New York, reviewed the materials as part of Victim Bank-1’s diligence process.
On or around January 7, 2021, Witness-1 wrote an email to the chief financial officer of Private Equity Fund-1, with a copy to SMERLING, in which Witness-1, in substance and in part, advised that Victim Bank-1 was in the process of finalizing its approvals for the loan. Witness-1 requested bank statements “evidencing receipt of the most recent capital call.” On the same date, SMERLING replied with an email to which he attached a December 2019 bank statement (the “Bank Statement”) for an account purportedly held in the name of Limited Partnership-1 at Commercial Bank-1’s Americas headquarters in New York, New York. The statement reflected wires into the account with a combined value of $50 million, including a purported wire of $4.5 million from University Endowment Fund-1 and a purported wire of $4 million from Investment Manager-1.
The materials that SMERLING submitted to Victim-Bank-1 were materially false. For example, the Audit Letter was not prepared by Audit Firm-1. Chief Investment Officer-1 of the University Endowment Fund-1 has no knowledge of ELLIOT SMERLING, Limited Partnership-1, or General Partnership-1, and the signature appearing on the Subscription Agreement-1 is not that of Chief Investment Officer-1. University Endowment Fund-1 has found no indication that it made the $4.5 million wire transfer reflected in the Bank Statement or made any other investment or capital commitment to ELLIOT SMERLING, the defendant, Limited Partnership-1, or General Partnership-1.
Similarly, Investment Manager-1 has found no indication that Investment Manager-1 in fact made the $4 million wire transfer reflected in the Bank Statement or made any other investment or capital commitment to ELLIOT SMERLING, the defendant, Limited Partnership-1, or General Partnership-1.
SMERLING was arrested and presented in the Southern District of Florida on February 26, 2021, before United States Magistrate Judge William Matthewman.
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SMERLING, 52, of Lake Worth, Florida, is charged in three counts, with wire fraud, bank fraud, and aggravated identity theft. Wire fraud affecting a financial institution carries a maximum sentence of 30 years in prison, and a maximum fine of $1 million or twice the gross gain or loss from the offense. Bank fraud carries a maximum sentence of 30 years in prison, and a maximum fine of $1 million or twice the gross gain or loss from the offense. Aggravated identity theft carries a mandatory sentence of two years in prison consecutive to any other sentence imposed and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential 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.
Ms. Strauss praised the work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Jilan J. Kamal and Timothy V. Capozzi are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the texts of the Indictment and the Complaint, and the descriptions of the Indictment and the Complaint set forth in this release, constitute only allegations, and every fact described should be treated as an allegation.
Brooklyn Man Sentenced in Manhattan Federal Court to 20 Years in Prison for Attempting to Provide Material Support to ISISRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, John C. Demers, Assistant Attorney General for National Security, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that ZACHARY CLARK, a/k/a “Umar Kabir,” a/k/a “Umar Shishani,” a/k/a “Abu Talha,” was sentenced today to 20 years in prison, for attempting to provide material support to the Islamic State of Iraq and al-Sham (“ISIS”). CLARK pled guilty on August 10, 2020, in Manhattan federal court before U.S. District Judge Naomi Reice Buchwald, who sentenced Clark today.
U.S. Attorney Audrey Strauss said: “Zachary Clark pledged allegiance to ISIS and posted calls for attacks on the public and institutions in New York City on encrypted pro-ISIS chatrooms, along with detailed instructions for carrying out those violent acts. Thanks to the Joint Terrorism Task Force, Clark’s efforts to incite deadly violence on behalf of ISIS have been silenced. Today’s sentence sends a clear message that those who seek to further ISIS’s campaign of terror and violence, no matter the method, will face serious consequences.”
Assistant Attorney General John C. Demers said: “Today’s 20-year sentence recognizes the gravity of Clark’s conduct, including his calls for other ISIS supporters to carry out lone wolf terrorist attacks in New York City. Having pledged allegiance to ISIS, Clark provided others with specific instructions on knifing and bomb-making for use in such attacks. We remain vigilant to the threat of terrorism and committed to identifying and holding accountable those who threaten our communities through their support for foreign terrorist organizations.”
FBI Assistant Director William F. Sweeney Jr. said: “Zachary Clark will no longer spend his time in chat rooms supporting terrorist ideals, but behind bars in federal prison for the next 20 years. The successful ending in this case is a result of the dedication of the FBI’s JTTF here in New York and our partners around the world. We will continue to work together to protect the people of New York from anyone who wishes to do us harm.”
NYPD Commissioner Dermot Shea said: “Zachary Clark, using encrypted social media platforms became the facilitator for the voice of ISIS in America. He controlled a private channel, communicating with ISIS followers, posting terrorist attack manuals and bomb making instructions and making statements in support of suicide attacks. He also affirmed his own ambitions of becoming a martyr for ISIS on US soil. His arrest comes out of the tight-knit partnership of the Joint Terrorism Task force agents and detectives as well as the NYPD’s Intelligence Bureau. It is another example---among many---of protecting New York City from terrorist violence through intelligence sharing, joint investigation, and prosecution, which results in prevention.”
According to the Indictment, Complaint, other court filings, and statements made during court proceedings:
CLARK pledged allegiance to ISIS twice, first in July 2019, to ISIS’s then-leader Abu Bakr al-Baghdadi, and then in October 2019, to ISIS’s new leader, Abu Ibrahim al-Sashemi al-Qurayshi, whom ISIS promoted after al-Baghdadi’s death. Beginning in at least March 2019, CLARK disseminated ISIS propaganda through, among other avenues, encrypted chatrooms intended for members, associates, supporters, and potential recruits of ISIS. CLARK’s propaganda included, among other things, calls for ISIS supporters to commit lone wolf attacks in New York City. For example, on August 3, 2019, CLARK posted instructions about how to conduct such an attack, including directions on how to select an attack target, how to conduct preoperational surveillance, how to conduct operational planning, and how to avoid attracting law enforcement attention when preparing for and conducting the attack. On another occasion, CLARK posted a manual entitled “Knife Attacks,” which stated, among other things, that discomfort at “the thought of plunging a sharp object into another person’s flesh” is “never an excuse for abandoning jihad” and that “[k]nives, though certainly not the only weapon for inflicting harm upon the kuffar [non-believers], are widely available in every land and thus readily accessible.” CLARK urged the participants in encrypted chatrooms to attack specific targets, posting maps and images of the New York City subway system and encouraging ISIS supporters to attack those locations. CLARK’s guidance also included posting a manual entitled “Make a bomb in the kitchen of your Mom,” which was issued by al-Qaeda in the Arabian Peninsula and included detailed instructions about constructing bombs using readily available materials.
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In addition to his prison sentence, CLARK, 42, of Brooklyn, New York, was sentenced to lifetime supervised release.
Ms. Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state, and local agencies. Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Gillian Grossman, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from Trial Attorneys Jason Denney, Justin Sher, and Chad Davis of the National Security Division’s Counterterrorism Section.
Former Honduran National Police Officer Sentenced to 12 Years in Prison for Conspiring to Import Cocaine into the United States and Related Weapons OffenseRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced today that LUDWIG CRISS ZELAYA ROMERO, a former member of the Honduran National Police (“HNP”), was sentenced today to 12 years in prison for conspiring to import cocaine into the United States and conspiring to use machineguns and destructive devices in furtherance of drug trafficking. ZELAYA ROMERO previously pled guilty before U.S. District Judge Lorna G. Schofield, who imposed today’s sentence.
Manhattan U.S. Attorney Audrey Strauss said: “Ludwig Criss Zelaya Romero was a lawless law enforcement officer, a purported crime-fighter working for a murderous criminal enterprise. For the personal role he played in cocaine trafficking and multiple murders, Zelaya Romero has been sentenced to a lengthy prison term.”
According to the Superseding Indictment, other court filings, and statements made during court proceedings:
Between at least approximately 2004 and 2014, ZELAYA ROMERO worked with members of a drug trafficking organization known as the Cachiros, which was a prolific and violent criminal syndicate that relied on connections to politicians, military personnel, and law enforcement to transport cocaine to, within, and from Honduras. During that time, and while ZELAYA ROMERO was purportedly enforcing the law as member of the HNP, he participated in the Cachiros’ criminal enterprise by engaging in cocaine trafficking and violence. Among other things, ZELAYA ROMERO participated in Cachiros drug shipments, recruited other members of the HNP to join the Cachiros, located teams of hitmen in Honduras to carry out murders for the Cachiros, and himself committed and attempted to commit murders to protect and strengthen the Cachiros’ criminal enterprise.
Beginning in about 2004, ZELAYA ROMERO personally helped escort large drug shipments belonging to the Cachiros as they were transported through Honduras over land toward the Guatemalan border, so that the drugs could be brought by others to the United States via Mexico and Guatemala. ZELAYA ROMERO helped transport cocaine from the Atlantic coast of Honduras, where many maritime shipments arrived on their way to the United States, and also coordinated with other members of the HNP along the planned drug routes to ensure that tons of cocaine would transit Honduras unimpeded. With the help of ZELAYA ROMERO and other members of the HNP, the Cachiros were able to distribute over 130 tons of cocaine to the United States.
In addition, ZELAYA ROMERO participated in violence and murder for the Cachiros. ZELAYA ROMERO participated in a 2011 massacre at the airport in San Pedro Sula, Honduras, that left six dead, and recruited a hitman who murdered Honduran journalist Anibal Barrow in 2013. ZELAYA ROMERO also himself shot and killed a victim at the Cachiros’ request, murdering an individual who had participated in the robbery of a truck containing a large quantity of concealed currency.
This prosecution resulted in the drug trafficking convictions of Fabio Porfirio Lobo, the son of former Honduran president Porfirio Lobo Sosa, and seven former members of the HNP: Zelaya Romero, Mario Guillermo Mejia Vargas, Juan Manuel Avila Meza, Carlos Jose Zavala Velasquez, Victor Oswaldo Lopez Flores, Jorge Alfredo Cruz Chavez, and Carlos Alberto Valladares Garcia. On September 5, 2017, Judge Schofield sentenced Lobo to 24 years in prison. On February 6, 2018, Judge Schofield sentenced Lopez Flores to five years in prison. On June 27, 2018, Judge Schofield sentenced Zavala Velasquez to 12 years in prison. On September 27, 2018, Judge Schofield sentenced Valladares Garcia to 14 years in prison. On March 29, 2021, Judge Schofield sentenced Avila Meza to 12 years in prison.
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In addition to the prison term, ZELAYA ROMERO, 44, was sentenced to four years of supervised release and forfeiture of $120,000.
Ms. Strauss praised the outstanding efforts of the DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and Tegucigalpa Country Office, as well as the U.S. Department of Justice’s Office of International Affairs.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Jacob Gutwillig, Jason A. Richman, and Elinor Tarlow are in charge of the prosecution.
New York Hedge Fund Founder Sentenced for Bankruptcy FraudRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that DANIEL KAMENSKY, the founder and former manager of New York-based hedge fund Marble Ridge Capital (“Marble Ridge”), was sentenced today in Manhattan federal court to six months in prison for engaging in fraud and extortion to pressure a rival bidder to abandon its higher bid for assets in connection with Neiman Marcus’s bankruptcy proceedings so that Marble Ridge could obtain those assets for a lower price. KAMENSKY pled guilty on February 3, 2021, before United States District Judge Denise L. Cote, who imposed today’s sentence.
U.S. Attorney Audrey Strauss said: “Daniel Kamensky committed bankruptcy fraud – undermining the integrity of bankruptcy proceedings and violating his fiduciary responsibility – in an effort to take extra profits for himself and his hedge fund. As he himself predicted, this fraud has now landed Daniel Kamensky in prison.”
As alleged in the Complaint, the Information, and statements made in court:
DANIEL KAMENSKY was the principal of Marble Ridge, a hedge fund with assets under management of more than $1 billion that invested in securities in distressed situations, including bankruptcies. Prior to opening Marble Ridge, KAMENSKY worked for many years as a bankruptcy attorney at a well-known international law firm, and as a distressed debt investor at prominent financial institutions.
The Neiman Marcus Bankruptcy
Neiman Marcus, an American chain of luxury department stores with stores located across the United States, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) in May 2020. At the outset of the bankruptcy, Marble Ridge, through KAMENSKY, applied to be on the Official Committee of Unsecured Creditors (the “Committee”) and was thereafter appointed to be a member of the Committee. As a member of the Committee, KAMENSKY had a fiduciary duty to represent the interests of all unsecured creditors as a group.
During the bankruptcy process, the Committee had negotiated with the owners of Neiman Marcus to obtain certain securities, known as MyTheresa Series B Shares (the “MYT Securities”), and ultimately, the Committee was successful in coming to a settlement to obtain 140 million shares of MYT Securities for the benefit of certain unsecured creditors of the bankruptcy estate. In July 2020, KAMENSKY was negotiating with the Committee for Marble Ridge to offer 20 cents per share to purchase MYT Securities from any unsecured creditor who preferred to receive cash, rather than MYT Securities, as part of that settlement.
Kamensky’s Fraudulent Scheme
On July 31, 2020, KAMENSKY learned that a diversified financial services company headquartered in New York, New York (the “Investment Bank”), had informed the Committee that it was interested in bidding a price between 30 and 40 cents per share – substantially higher than KAMENSKY’s bid – to purchase the MYT Securities from any unsecured creditor who was interested in receiving cash.
That afternoon, KAMENSKY sent messages to a senior trader at the Investment Bank (“IB Employee-1”) telling him not to place a bid, and followed those messages up with a phone call with IB Employee-1 and a senior analyst of the Investment Bank (“IB Employee-2,” and collectively the “Employees”). During that call, KAMENSKY asserted that Marble Ridge should have the exclusive right to purchase MYT Securities, and he threatened to use his official role as co-chair of the Committee to prevent the Investment Bank from acquiring the MYT Securities. KAMENSKY also stated that Marble Ridge had been a client of the Investment Bank in the past but that if the Investment Bank moved forward with its bid, then Marble Ridge would cease doing business with the Investment Bank.
The Investment Bank thereafter decided not to make a bid to purchase MYT Securities and informed the legal adviser to the Committee of its decision. The Investment Bank further told the legal adviser it made that decision because KAMENSKY – a client of the Investment Bank – had asked them not to.
Advisers to the Committee informed counsel for Marble Ridge of their call with the Employees, and after speaking with KAMENSKY, counsel for Marble Ridge falsely informed the advisers that KAMENSKY had not asked the Employees not to bid, but instead had told them to place a bid only if they were serious. Later that evening, KAMENSKY contacted IB Employee-1 and attempted to influence what IB Employee-1 would tell others, including the Committee and law enforcement, about KAMENSKY’s attempt to block the Investment Bank’s bid for the MYT Securities. KAMENSKY said at the outset of the call, in substance, “this conversation never happened.” During the call, KAMENSKY asked IB Employee-1 to say falsely that IB Employee-1 had been mistaken and KAMENSKY had actually suggested that the Investment Bank bid only if it were serious, and made comments including the following: “Do you understand . . . I can go to jail?” “I pray you tell them that it was a huge misunderstanding, okay, and I’m going to invite you to bid and be part of the process.” “But I’m telling you . . . this is going to the U.S. Attorney’s Office. This is going to go to the court.” “[I]f you’re going to continue to tell them what you just told me, I’m going to jail, okay? Because they’re going to say that I abused my position as a fiduciary, which I probably did, right? Maybe I should go to jail. But I'm asking you not to put me in jail.”
During a subsequent interview with the Office of the United States Trustee, which was conducted under oath and in the presence of counsel, KAMENSKY stated that his calls to IB Employee-1 were a “terrible mistake” and “profound errors in lapses of judgment.”
After this series of events, Marble Ridge resigned from the Committee and advised its investors that it intended to begin winding down operations and returning investor capital.
* * *
In addition to his prison term, KAMENSKY, 48, of Roslyn, New York, was sentenced to six months of supervised release on home confinement and ordered to pay a fine of $55,000.
Ms. Strauss praised the work of the FBI. Ms. Strauss further thanked the Office of United States Trustee and the Securities and Exchange Commission for their cooperation and assistance in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Richard Cooper and Daniel Tracer are in charge of the prosecution.
Seven Members of Violent Gang Charged with Racketeering and Firearms OffensesRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), Raymond P. Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and Kevin P. Bruen, Acting Superintendent of the New York State Police (“NYSP”), announced today the unsealing of an eleven-count Indictment charging JAYQUAN SMITH, a/k/a “Six,” RASHIEN JACKSON, a/k/a “Pop,” JAMES BELL, a/k/a “Dex,” DAQUAN MURPHY, a/k/a “Fritz,” JONATHAN ODENTHAL, a/k/a “White Boy,” HASSAN SIMMONS, a/k/a “Hart,” and DERICK MURPHY, a/k/a “Yogi,” with racketeering and firearms offenses, as well as violent crimes in aid of racketeering, in connection with their membership and association with the 800 YGz gang (the “800 YGz”). DAQUAN MURPHY was taken into custody yesterday. DERICK MURPHY and SMITH were already in federal custody on separate charges. BELL and JACKSON were in state custody on separate charges. The defendants will be presented this afternoon before U.S. Magistrate Judge Katharine H. Parker in Manhattan federal court. SIMMONS and ODENTHAL remain at large. The case has been assigned to U.S. District Judge Alison J. Nathan.
U.S. Attorney Audrey Strauss said: “As alleged in today’s indictment, members and associates of a violent street gang wreaked havoc in the Bronx for many years, committing numerous acts of violence against rival gang members. Thanks to the hard work of our law enforcement partners, the defendants now face federal charges for these serious crimes.”
DEA Special Agent in Charge Raymond P. Donovan said: “These defendants are charged with participating in the activities of the 800 YGz gang and committing numerous acts of violence. Their alleged criminal conduct has been a scourge on communities in the Bronx for years. I applaud the New York Drug Enforcement Task Force and U.S. Attorney’s Office Southern District of New York on their teamwork and diligence throughout this impactful investigation.”
NYPD Commissioner Dermot Shea said: “The kind of street violence these defendants were allegedly willing to carry out threatens the fabric of life for everyone in our city. This federal prosecution puts an end to it, strengthened by the joint work of our NYPD officers, federal partners and prosecutors from the United States Attorney’s Office in the Southern District of New York.”
New York State Police Acting Superintendent Kevin P. Bruen said: “This case involves members of a gang that engaged in numerous alleged acts of violence, with absolutely no regard for the consequences of their actions. I want to commend our partners for their cooperation and hard work to hold these subjects accountable and remove this threat from our neighborhoods.”
According to the allegations in the Indictment unsealed today in Manhattan federal court[[1]]:
JAYQUAN SMITH, a/k/a “Six,” RASHIEN JACKSON, a/k/a “Pop,” JAMES BELL, a/k/a “Dex,” DAQUAN MURPHY, a/k/a “Fritz,” JONATHAN ODENTHAL, a/k/a “White Boy,” HASSAN SIMMONS, a/k/a “Hart,” and DERICK MURPHY, a/k/a “Yogi,” are members and associates of the 800 YGz, a racketeering enterprise that operates principally in the New York City metropolitan area. In order to enrich the enterprise, preserve and protect the power of the enterprise, and enhance its criminal operations, 800 YGz members and associates committed, conspired, attempted, and threatened to commit acts of violence; distributed and possessed with intent to distribute narcotics, including crack cocaine and marijuana; engaged in wire fraud; and obtained, possessed, and used firearms.
On or about July 8, 2019, BELL shot at rival gang members, injuring two individuals, in the Bronx, New York.
On or about March 27, 2020, JACKSON shot at rival gang members in the Bronx, New York.
On or about September 16, 2020, JACKSON slashed a rival gang member in the Bronx, New York.
On or about November 21, 2020, SMITH shot at rival gang members in the Bronx, New York.
On or about December 21, 2020, SMITH shot at rival gang members in the Bronx, New York.
On or about August 28, 2020, JACKSON possessed a firearm during and in relation to a drug trafficking offense.
A chart containing the names, charges, and maximum and minimum penalties for the defendants is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendants will be determined by the judge.
Ms. Strauss praised the outstanding work of the New York Drug Enforcement Task Force, comprising agents and officers of the DEA, NYPD, and NYSP. Ms. Strauss also thanked the NYPD’s 48th Precinct for its assistance with the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jim Ligtenberg and Alexandra Rothman 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
CHARGE
DEFENDANTS
MAX. PENALTY
Count One
Racketeering Conspiracy
18 U.S.C. § 1962(d)
All defendants
Life imprisonment
Count Two
Attempted Murder and Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959 and 2
JAMES BELL
Twenty years’ imprisonment
Count Three
Firearms Offense
18 U.S.C. §§ 924(c) and 2
JAMES BELL
Life imprisonment
Mandatory minimum of ten years’ imprisonment
Count Four
Attempted Murder and Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959 and 2
RASHIEN JACKSON
Twenty years’ imprisonment
Count Five
Firearms Offense
18 U.S.C. §§ 924(c) and 2
RASHIEN JACKSON
Life imprisonment
Mandatory minimum of ten years’ imprisonment
Count Six
Attempted Murder and Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959 and 2
RASHIEN JACKSON
Twenty years’ imprisonment
Count Seven
Attempted Murder and Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959 and 2
JAYQUAN SMITH
Twenty years’ imprisonment
Count Eight
Firearms Offense
18 U.S.C. §§ 924(c) and 2
JAYQUAN SMITH
Life imprisonment
Mandatory minimum of ten years’ imprisonment
Count Nine
Attempted Murder and Assault with a Dangerous Weapon in Aid of Racketeering
18 U.S.C. §§ 1959 and 2
JAYQUAN SMITH
Twenty years’ imprisonment
Count Ten
Firearms Offense
18 U.S.C. §§ 924(c) and 2
JAYQUAN SMITH
Life imprisonment
Mandatory minimum of ten years’ imprisonment
Count Eleven
Firearms Offense
18 U.S.C. §§ 924(c) and 2
RASHIEN
JACKSON
Life imprisonment
Mandatory minimum of five years’ imprisonment
[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.
Bronx Man Charged with 2012 Murder of Michael PerezRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an indictment charging SHAREEF LANDSMARK, a/k/a “Reef, a/k/a “Wreef,” with murdering Michael Perez in the Bronx, New York, on September 17, 2012. LANDSMARK was arrested yesterday and will be presented later today before U.S. Magistrate Judge Katharine H. Parker. The case is assigned to U.S. District Judge Lorna G. Schofield.
U.S. Attorney Audrey Strauss said: “As alleged in the Indictment, almost nine years ago, Shareef Landsmark executed Michael Perez in the streets of the Bronx. Thanks to the perseverance of the NYPD, Landsmark now stands charged in federal court.”
NYPD Commissioner Dermot Shea said: “Today’s charges prove that the best investigators in the world will never cease to secure justice that is owed to victims and their families. I would like to thank the NYPD Detectives, our law enforcement partners, and the prosecutors of the U.S. Attorney’s Office for the Southern District of New York for their dedication to this investigation.”
As alleged in the Indictment[[1]] unsealed yesterday in Manhattan federal court:
On September 17, 2012, LANDSMARK was hired by a co-conspirator to kill Michael Perez in furtherance of a conspiracy to distribute crack cocaine. Later that night, LANDSMARK shot and killed Perez, who was standing in the street near the intersection of East 213th Street and Willett Avenue in the Bronx.
* * *
LANDSMARK, 35, from the Bronx, New York, is charged with one count of murder through use of a firearm, which carries a maximum penalty of death or life in prison and a mandatory minimum sentence of five years in prison; one count of murder in connection with a drug trafficking crime, which carries a maximum penalty of death or life in prison and a mandatory minimum sentence of 20 years in prison; and one count of murder-for-hire, which carries a maximum penalty of death or life in prison and a mandatory minimum sentence of life in prison.
The 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.
Ms. Strauss praised the outstanding work of the NYPD. She also thanked the Special Agents of the United States Attorney’s Office for the Southern District of New York for their assistance in the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Alexandra Rothman and Adam Hobson are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[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.
Owner of A Consumer Products Testing Company Pleads Guilty to $46 Million Fraud Scheme Involving Fabricated Test ResultsRead the Press Release
Audrey Strauss, United States Attorney for the Southern District of New York, announced that GABRIEL LETIZIA Jr., the owner and executive director of AMA Laboratories, Inc. (“AMA”), a consumer products testing company in New City, pled guilty today to defrauding customers by reporting laboratory test results for panelist testing that was not fully performed. LETIZIA pled guilty before United States Magistrate Judge Paul E. Davison. Former AMA employees David Winne, Mayya Tatsene, Patrycja Wojtowicz, and Kaitlyn Gold previously pled guilty in connection with their respective roles in the scheme.
U.S. Attorney Audrey Strauss said: “As he has now admitted, Gabriel Letizia schemed for decades to defraud customers of his laboratory, and caused sunscreens and other consumer products to be sold and marketed to consumers on the basis of false laboratory testing reports. Letizia’s guilty plea underscores that my Office will continue to work with our law enforcement partners to investigate and prosecute fraud and endangerment in the consumer products testing industry.”
According to the allegations contained in the Second Superseding Information, publicly available information, court filings, and statements made during the plea proceedings:
LETIZIA is the owner and executive director of AMA, a consumer products testing company in Rockland County, New York. David Winne served as AMA’s technical director, Mayya Tatsene served as AMA’s clinical laboratory director, Patrycja Wojtowicz served as AMA’s associate director of clinical studies, and Kaitlyn Gold served as AMA’s supervising laboratory technician. AMA tested the safety and efficacy of cosmetics, sunscreens and other products on specified numbers of volunteer panelists for consumer products companies.
From 1987 through April 2017, LETIZIA and his co-conspirators defrauded AMA’s customers of more than $46 million by testing products on materially lower numbers of panelists than the numbers specified and paid for by AMA’s customers. LETIZIA, and AMA employees acting under his direction, sent the customers fraudulent reports, which falsely represented that AMA had tested the products on the number of panelists specified by the customers, causing the introduction of misbranded products into interstate commerce.
* * *
LETIZIA, 71, of New City, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum penalty of five years in prison; and two counts of causing a misbranded drug to be introduced into interstate commerce, each of which carries a maximum penalty of one year in prison.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentence of LETIZIA will be determined by the Court.
LETIZIA will be sentenced by U.S. District Judge Kenneth M. Karas on September 14, 2021, at 2:00 p.m.
Ms. Strauss praised the outstanding work of the Federal Bureau of Investigation, the U.S. Food and Drug Administration, Office of Criminal Investigations, and the Rockland County District Attorney’s Office.
This case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey C. Coffman, James McMahon, and Olga I. Zverovich are in charge of the prosecution
Former CEO of Live Well Financial Convicted in Connection with $200 Million Bond Fraud SchemeRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that MICHAEL HILD, the founder and former chief executive officer of Live Well Financial, Inc. (“Live Well”), was convicted today of securities fraud, wire fraud, and bank fraud charges in connection with a scheme to fraudulently inflate the value of a portfolio of bonds owned by Live Well in order to induce various securities dealers and at least one financial institution into loaning more money to Live Well – through repurchase (“repo”) agreements and collateralized loans – than they otherwise would have had they known the actual value of Live Well’s bond portfolio. The scheme allowed Live Well to grow its bond portfolio exponentially, from approximately 20 bonds with a stated value of approximately $50 million in 2014 to approximately 50 bonds with a stated value of over $500 million by the end of 2016. In May 2019, in conjunction with an effort to wind down the company, Live Well wrote down the value of its portfolio by over $200 million.
Manhattan U.S. Attorney Audrey Strauss said: “As a unanimous jury found, Michael Hild obtained millions of dollars in secured loans for Live Well Financial by grossly inflating the value of bonds used as collateral. Hild deceived a third-party pricing service by providing it with inflated marks, resulting in the pricing service publishing valuations for the bonds far in excess of market value. Lenders were hoodwinked into lending far more than they otherwise would have. The house of cards came crashing down with the unwinding of Live Well and the revelation to lenders that the bond portfolio had been overvalued by $200 million. Now, Michael Hild awaits sentencing for his crimes.”
According to the evidence presented during the trial:
Live Well’s Bond Portfolio and Repurchase Agreements
Live Well was a Richmond, Virginia-based company that originated, serviced, and securitized government-guaranteed reverse mortgages known as Home Equity Conversion Mortgages (“HECMs”). In or about 2014, Live Well acquired a portfolio of approximately 15 bonds, each entitling the holder to receive a portion of the interest payments, but not the principal payments, from a particular pool of reverse mortgages (“HECM IO bonds.”). Live Well purchased the HECM IO bond portfolio for approximately $50 million. At the same time that Live Well purchased the HECM IO bond portfolio, HILD established within Live Well a New York City-based trading desk to manage and grow Live Well’s bond portfolio.
Live Well financed the acquisition and growth of its bond portfolio through a series of loans in which Live Well used its bond portfolio as collateral. The majority of Live Well’s lenders were securities dealers whose lending arrangements with Live Well were structured as bond repurchase agreements, also known as “repo agreements.” A repo agreement is a short-term loan in which both parties agree to the sale and future repurchase of an asset within a specified contract period. The seller sells the asset to the lender with a promise to buy it back at a specific date and at a price that includes an interest payment. Functionally, a repo agreement is a collateralized loan in which title of the collateral is transferred to the lender. When the loan is repaid by the borrower, the collateral is returned to the borrower through a repurchase. Additionally, at least one of Live Well’s lenders was an FDIC-insured bank, and its lending arrangement with Live Well was structured as a secured loan, with certain bonds held as collateral by a third-party custodian.
The Scheme to Mismark the Bond Portfolio
Live Well’s financing agreements with all but one of the lenders required that any bond that Live Well sought to borrow against be priced by a third-party pricing source in order to determine the market value of the bond as of the measurement date. The lenders then used the value of the bond, coupled with the application of a haircut of generally 10% to 20%, to determine the amount of money to lend Live Well.
The lenders generally relied on a particular widely utilized subscription service (the “Pricing Service”) to price various securities. In or about September 2014, HILD and his co-conspirators embarked on a scheme to cause the Pricing Service to publish valuations for the bonds that far exceeded actual market prices. By doing so, the conspirators induced the lenders to extend credit to Live Well far in excess of the prices for which the bonds could be sold in the market. The inflated prices were based on a set of market assumptions that the conspirators called “Scenario 14.”
HILD was aware that if the lenders had known that the Pricing Service was publishing bond prices that did not reflect fair value, meaning the price at which a lender could sell the bond in the market if necessary to recoup its capital, they would have refused to use those prices in determining how much money to loan to Live Well. To prevent the Pricing Service and the lenders from learning that the prices did not reflect market value, HILD directed his co-conspirators at Live Well to take steps to conceal their provision of inflated marks to the Pricing Service. Ultimately, due to the asset overvaluation and the purchase of additional bonds using the capital generated by the scheme, Live Well grew the purported value of its bond portfolio to over $500 million by December 2016.
In addition to using the liquidity generated by the scheme to expand Live Well’s bond portfolio, in or about September 2016, HILD used $18 million generated from the repo lenders to buy out the preferred stockholders in Live Well. The elimination of the preferred stockholders gave HILD control of the company and allowed him to substantially increase his personal compensation. Accordingly, HILD’s compensation jumped from approximately $1.4 million in 2015, to approximately $5 million in 2016, approximately $9.7 million in 2017, and over $8 million in 2018.
In or about late 2018, the chief financial officer of Live Well resigned after HILD refused to reduce the compensation he was receiving from the company. In or about May 2019, the company’s interim chief financial officer informed HILD that he would not sign the company’s interim financial statements because he believed that the company’s carrying value for the HECM IO bond portfolio was significantly overstated. In or about May 2019, Live Well announced that it would cease operations and unwind. After the announcement of Live Well’s closing, Live Well’s interim chief financial officer provided a balance sheet to Live Well’s lenders showing that Live Well had reduced the value of its bond portfolio by over $200 million.
* * *
HILD, 46, of Richmond, Virginia, was convicted of five counts: one count of conspiracy to commit securities fraud; one count of conspiracy to commit wire and bank fraud; one count of securities fraud; one count of wire fraud; and one count of bank fraud. Count One carries a maximum sentence of five years in prison, Counts Two, Four, and Five each carry a maximum sentence of 30 years in prison, and Count Three carries a maximum sentence of 20 years in prison. The charges also contain a maximum fine of $5 million, or twice the gross gain or loss from the offense.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
HILD is scheduled to be sentenced at 10:00 a.m. on August 20, 2021, by U.S. District Judge Ronnie Abrams, who presided over the trial.
Ms. Strauss praised the investigative work of the FBI and also thanked the Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jordan Estes and Scott Hartman are in charge of the prosecution.
Manhattan Man Arrested for $5.8 Million Scheme to Defraud Loan Program Intended to Help Small Businesses During COVID-19 PandemicRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Amaleka McCall-Brathwaite, Special Agent-in-Charge of the Eastern Region Office of the Inspector General of the U.S. Small Business Administration (“SBA-OIG”), and Jonathan D. Larsen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Patricia Tarasca, Special Agent in Charge of the New York Region Office of the Inspector General of the Federal Deposit Insurance Corporation (“FDIC-OIG”), announced today the unsealing of a criminal complaint charging MARCUS FRAZIER with major fraud against the United States, bank fraud, wire fraud, making false statements, and money laundering, for carrying out a fraudulent scheme to obtain $5.8 million in government-guaranteed loans designed to provide relief to small businesses during the novel coronavirus/COVID-19 pandemic. FRAZIER was arrested this morning and presented before United States Magistrate Judge Gabriel W. Gorenstein this afternoon.
U.S. Attorney Audrey Strauss said: “As alleged, Marcus Frazier sought millions of dollars in unsecured SBA-guaranteed loans for which his businesses did not qualify. Frazier allegedly did this by lying about the number of people employed by his businesses, the salaries they were paid, even that these employees existed. Further, Frazier allegedly used the loan proceeds he did obtain not to pay allowable expenses, but rather, to fund his lavish lifestyle. Now Marcus Frazier stands to learn the true cost of his alleged conduct.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Frazier fraudulently sought approximately $5.8 million in PPP loans through a government program designed to help small businesses continue to pay their employees during the pandemic. Rather than use the proceeds he ultimately secured for this purpose, he used the funds for personal expenses that included luxury hotels and travel. With today’s action, the only place he’ll travel is the courthouse in Lower Manhattan to face justice and the possibility of a lengthy stay in federal prison.”
SBA-OIG Special Agent-in-Charge Amaleka McCall-Brathwaite said: “Lying to gain access to economic stimulus funds will be met with justice. Greed has no place in SBA’s programs that are intended to provide assistance to the nation’s small businesses struggling with the pandemic challenges. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”
IRS-CI Special Agent-in-Charge Jonathan D. Larsen said: “Instead of using these vital CARES Act funds to keep his purported businesses afloat, the defendant allegedly drowned himself in luxuries. I applaud the speed with which the federal law enforcement community uncovered these alleged abuses. The arrest today should be an unequivocal message about the consequences that await those engaged in related alleged criminal activities.”
FDIC-OIG Special Agent-in-Charge Patricia Tarasca said: “These charges represent blatant falsehoods, fraud, and other criminal conduct that sought to take advantage of tax dollars meant to help the nation recover from the ongoing pandemic. We appreciate the work of our law enforcement partners on this important case.”
According to the allegations in the Complaint[1] unsealed today in Manhattan federal court:
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other business expenses through the Paycheck Protection Program (the “PPP”). The PPP allows qualifying small businesses and other organizations to receive unsecured SBA-guaranteed loans. PPP loan proceeds must be used by businesses on payroll costs, mortgage interest, rent, and/or utilities, among other specified expenses. Pursuant to the CARES Act, the amount of PPP funds a business is eligible to receive is determined by the number of employees employed by the business and their average payroll costs. Businesses applying for a PPP loan must provide documentation to confirm that they have in the past paid employees the compensation represented in the loan application.
Between in or about May 2020 and in or about April 2021, FRAZIER submitted at least seven applications for PPP loans for various businesses he controlled (collectively, the “Frazier Companies”). These applications relied upon fraudulent statements regarding the number of employees of each business and the amount of payroll involved in each business and were submitted, in many cases, alongside fake bank statements, designed to support FRAZIER’s false statements. These fake bake statements included, among other things, fraudulent account statements for a checking account that showed balances far greater than the account actually held, and depicted payroll withdrawals that never occurred. FRAZIER also submitted lists of employees on the purported payrolls of the Frazier Companies, which included names and Social Security numbers that do not match the records of the Social Security Administration, suggesting that FRAZIER fabricated the employee records. On at least one occasion, FRAZIER also provided documents purporting to show that one of the Frazier Companies had been in existence for approximately 10 years. In truth and in fact, however, the corporate entity had not been registered until on or about July 2020, months after the onset of the COVID-19 pandemic.
FRAZIER sought more than approximately $5.8 million in PPP loans and was awarded at least approximately $2.17 million. A substantial portion of the funds awarded were spent not on payroll for the Frazier Companies but, rather, on FRAZIER’s personal expenses. During the period between on or about June 18, 2020, shortly after his first PPP loan was funded, and on or about April 7, 2021, FRAZIER utilized PPP funds to spend approximately $124,982 on hotels, including more than approximately $88,791 at a luxury hotel located in Miami, Florida. During the same period, FRAZIER spent approximately $63,000 on restaurants and food service, approximately $17,000 on transportation with Uber, approximately $16,519 on airline travel, and approximately $11,000 on clothing. During this same period, FRAZIER collected approximately $21,000 in unemployment benefits.
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FRAZIER, 47, of New York, New York York, is charged in the Complaint with (1) major fraud against the United States, in violation of 18 U.S.C. § 1031, which carries a maximum sentence of 10 years in prison; (2) bank fraud, in violation of 18 U.S.C. § 1349, which carries a maximum sentence of 30 years in prison ; (3) wire fraud, in violation of 18 U.S.C. § 1343, which carries a maximum sentence of 30 years in prison; (4) making false statements to a bank, in violation of 18 U.S.C. § 1014, which carries a maximum sentence of 30 years in prison; (5) making false statements, in violation of 18 U.S.C. § 1001, which carries a maximum sentence of five years in prison; (6) making false statements to the SBA, in violation of 18 U.S.C. § 645, which carries a maximum sentence of two years in prison and (7) money laundering, in violation of 18 U.S.C. § 1957, which carries a maximum sentence of 10 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 defendant would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI, SBA-OIG, IRS-CI, and FDIC-OIG in this case.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Katherine Reilly 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 phase 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.
Leader of Brooklyn Chapter of the United Brotherhood of Carpenters Convicted in Union Bribery SchemeRead the Press Release
Audrey Strauss, the United States Attorney for the Southern District of New York, announced that SALVATORE TAGLIAFERRO, the president of Local 926 chapter of the United Brotherhood of Carpenters and Joiners of America (the “Union”), was found guilty today in Manhattan federal court of honest services wire fraud, conversion of union assets, and conspiracy, in connection with his involvement in a scheme to solicit cash bribes from hundreds of prospective members in exchange for union membership. The jury convicted TAGLIAFERRO today following a one-week trial before U.S. District Judge Paul A. Crotty. TAGLIAFERRO is scheduled to appear for sentencing before Judge Crotty on July 27, 2021.
U.S. Attorney Audrey Strauss said: “As a unanimous jury has now found, Salvatore Tagliaferro is guilty of old-fashioned corruption – betraying his duty to the union and the trust of its hard-working members by taking cash bribes to line his own pockets.”
As reflected in the Indictment, public filings, and the evidence presented at trial:
From at least in or about 2017 up through and including in or about June 2019, TAGLIAFERRO, as the President of the Local 926 chapter of the Union in Brooklyn, abused his position as an officer and employee of the Union by soliciting and accepting cash bribes from prospective Union members in exchange for securing the bribe payors’ admission to the Local 926. Working with other co-conspirators, including John DeFalco, the former Vice President of the Local 157 chapter of the Union in Manhattan, TAGLIAFERRO identified prospective members and solicited cash payments in amounts ranging from $600 to $2,000. Once prospective members had paid bribes, TAGLIAFERRO then used his authority to ensure they were admitted into the Local 926 and received Union membership cards. Over the course of the scheme, the Local 926 ballooned by over 800 new members, but for two years more than half of the new members never worked a single Union job. TAGLIAFERRO and DeFalco split the cash bribes obtained from the bribe payors’ during clandestine early morning meetings outside a construction site in lower Manhattan, and each received at least $70,000 as a result of the scheme.
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TAGLIAFERRO was found guilty of one count of conspiracy, which carries a maximum sentence of five years in prison; one count of conversion of union assets, which carries a maximum sentence of five years in prison; and one count of honest services wire fraud, which carries a maximum sentence of 20 years in prison.
Ms. Strauss praised the investigative work of the Department of Labor, Office of the Inspector General, the Department of Labor, Office of Labor-Management Standards, and the New York City Department of Investigation.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Thomas McKay and Jarrod Schaeffer and are in charge of the prosecution.