Southern District of New York
Press releases recorded for this federal judicial district.
Former CEO of Real Estate Private Equity Investment Firm Charged with Securities FraudRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, 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 ERIC MALLEY, the founder and former chief executive officer of real estate private equity investment firm MG Capital Management L.P. on charges of securities fraud and wire fraud for his role in a scheme to fraudulently induce hundreds of individuals to invest a total of more than $50 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 was arrested this morning in New Canaan, Connecticut, on a criminal complaint (the “Complaint”) and will be presented before a magistrate judge in the Southern District of New York.
Acting Manhattan U.S. Attorney Audrey Strauss said: “Eric Malley allegedly promised his clients that they would reap the benefits of owning equity in Manhattan real estate through his time-tested, sophisticated, debt-free investment strategy. As alleged, those promises were lies. Malley lied about his prior funds’ existence and performance, and he lied in promising clients that the funds were free of debt and leased to prominent corporate tenants. While his investors lost money, Malley enriched himself. We will continue to work with our law enforcement partners to protect investors from these types of deceptive practices.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Malley, acting as CEO of an investment firm he founded, solicited investors with material misrepresentations and lies pertaining to luxury residential real estate and several investment funds. Ultimately, the investors, many of whom had entrusted Malley with all of their retirement savings, lost nearly everything. Today’s action should serve as a reminder to fraudsters who seek to prey on unwitting investors that the FBI and our partners will not waver in our commitment to bring them to justice.”
As alleged in the Complaint unsealed today in Manhattan federal Court[1]:
MALLEY founded MG Capital Management L.P. (“MG Capital”) in approximately January 2013, and served as its chief executive officer (“CEO”) from that time until approximately December 2019. MALLEY described MG Capital as an opportunity for investors to invest in luxury residential real estate properties through limited partnership interests, and formed two real estate investment funds, MG Capital Management Residential Fund III (“Fund III”) and MG Capital Management Residential Fund IV (“Fund IV”) (collectively, “the Funds”), in approximately February 2014 and September 2017, respectively.
In connection with marketing the Funds to investors, MALLEY touted two purportedly extremely successful prior funds he had formed, Fund I and Fund II. MALLEY also assured investors that the Funds would be and were debt-free, and that the properties held by the Funds would be and were leased primarily to corporate tenants. MALLEY’s representations about the existence and performance of Funds I and II were largely fabricated. Furthermore, the Funds were not debt-free, but instead held mortgaged properties, and the properties that made up the Funds were almost entirely leased to individual, not corporate, tenants.
Investors in the Funds, many of whom invested the entirety of their retirement savings, lost all or almost all of their investments. As to Fund III, in total, approximately 60 investors invested approximately $23 million. Fund III incurred net operating losses of approximately $860,000, and its investors never received either distributions or a return of their investments. MALLEY nevertheless distributed at least approximately $278,000 to himself in his capacity as general partner. As to Fund IV, in total, approximately 275 investors invested approximately $35 million. Fund IV incurred millions of dollars in losses, and MALLEY did not disclose those losses until approximately two years into Fund IV’s operation.
In or about mid-December 2019, MALLEY stepped down from his role as CEO of MG Capital. Between in or about February 2020 and on or about March 31, 2020 – after MALLEY had become aware that the U.S. Securities and Exchange Commission (“SEC”) was investigating him – MALLEY accessed MG Capital’s server and deleted approximately 10,000 files from the server, including broker information and closing documents detailing the closing costs associated with acquisition of properties, which were used to obtain funding from the Funds’ administrators.
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MALLEY, 50, of New Canaan, Connecticut, is charged with one count of securities fraud, which carries a maximum potential sentence of 20 years in prison, and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison. The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the investigative work of the FBI and thanked the New York Regional Office of the U.S. Securities and Exchange Commission, which has separately filed a civil action against MALLEY and M.G. Capital Management.
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.
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 below constitute only allegations, and every fact described should be treated as an allegation.
Acting Manhattan U.S. Attorney Announces Settlement of Civil Forfeiture Claims Against over $50 Million Laundered Through Black Market Peso ExchangeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Timothy J. Shea, the Acting Administrator of the U.S. Drug Enforcement Administration (“DEA”), and Susan A. Gibson, the Special Agent in Charge of the New Jersey Division of the DEA, announced today that the United States has settled a civil forfeiture action against assets of Sefira Capital LLC (“Sefira”) and 31 subsidiary corporations, which own high-end commercial and residential real estate throughout the United States. The Government’s complaint, which was filed on January 8, 2021, alleged that the defendant corporations accepted millions of dollars of narcotics proceeds laundered through the shadow financial system commonly known as the Black Market Peso Exchange, for investment in various real estate ventures.
In the stipulation of settlement filed with U.S. District Judge Andrew L. Carter Jr. today, which is still subject to approval by the Court, the defendant corporations agree to forfeit $29 million to resolve the Government’s claims, representing approximately $22.5 million previously seized from Sefira and its subsidiaries, and an approximately $6.5 million payment in lieu of the forfeiture of certain real estate interests. As part of the settlement, Sefira agreed to conduct reasonable due diligence on future investors, and not to accept investment funds from any source other than the actual investor.
In a related civil forfeiture action, the Government filed today a proposed judgment of forfeiture with U.S. District Judge George B. Daniels, covering $23.2 million seized from Hampus Assets, Inc., and Kaunas Assets Corp. in connection with their acceptance of millions of dollars of narcotics proceeds laundered through the Black Market Peso Exchange. Hampus Assets and Kaunas Assets previously entered into a settlement consenting to the forfeiture of the funds, agreeing to conduct reasonable due diligence on future deposits into bank accounts under their control, and to refrain from conducting certain cross-border money transfers.
Acting Manhattan U.S. Attorney Audrey Strauss said: “The Black Market Peso Exchange facilitates the laundering of vast sums of drug trafficking proceeds generated in the U.S., enabling the conversion of U.S. dollars into the currencies of drug trafficking organizations’ countries. The forfeiture filings announced today signal not only the surrender of more than $50 million in laundered proceeds, but also the agreement of corporate defendants to exercise due diligence to ensure they are not assisting in or facilitating money laundering.”
DEA Acting Administrator Timothy J. Shea said: “The alleged laundering of millions of dollars of illicit proceeds shows the incredible profit generated by ruthless drug cartels who only care about money and power, not the suffering of Americans or devastated communities left behind. The DEA’s unique ability to infiltrate money laundering organizations is essential to illuminating the global networks used to repatriate drug proceeds around the globe. Money is the lifeblood of the cartels, and DEA, together with our law enforcement partners, is committed to identifying, targeting, and prosecuting these organizations to protect the American people.”
The Government lawsuits alleged as follows:
The Black Market Peso Exchange allows drug trafficking organizations to transfer narcotics proceeds from the United States to the country in which they operate while concealing the source and nature of the funds. Drug trafficking organizations will sell bulk United States currency earned from their drug operations in the U.S. to money laundering brokers at a discount, in exchange for payment in the home country or countries of the drug trafficking organization in their local currency. To finance the transactions, the brokers will purchase bulk currency in the local currency of the drug trafficking organizations, typically from individuals who wish to transfer money to the United States while avoiding the banking system. The brokers pay these individuals by depositing the U.S. dollar drug proceeds into U.S.-based shell accounts, and then transferring them to accounts controlled by the individuals, or for their benefit.
As part of an investigation of international money laundering, the DEA used confidential sources to facilitate transactions on the Black Market Peso Exchange to uncover persons engaged in illegal activity and develop evidence for criminal prosecutions. As part of the DEA undercover operation, confidential sources bought narcotics proceeds on the Black Market Peso Exchange, and then transferred those funds to U.S.-based accounts in the United States at the direction of money laundering brokers.
Sefira is a Florida-based boutique investment company that has raised over $100 million in capital from various investors (“Sefira Investors”) to invest in real estate projects primarily in the Southeastern United States. From 2016 to 2019, Sefira or its subsidiaries received millions of dollars in criminal proceeds from certain Sefira Investors as part of an effort by drug trafficking organizations and others to launder the criminal proceeds through the Black Market Peso Exchange.
Between January 2018 and January 29, 2019, the DEA transferred millions of dollars of narcotics proceeds to certain Sefira subsidiaries at the instruction of money-laundering brokers. These funds were wired from DEA undercover accounts that were not titled in the name of, or under the control of, any particular Sefira Investor. Sefira accepted these funds without inquiring as to the source of ownership of these accounts or funds.
In addition, millions of dollars of criminal proceeds were used to fund other Sefira Investors’ investments in Sefira. Sefira ignored similar red flags for those investments, including discrepancies between the purported investment amount and the actual amount Sefira received from Sefira Investors, as well as discrepancies between the purported Sefira Investors and the entities sending the investments to Sefira.
Between July 2018 and February 2019, Hampus Assets received millions of dollars from a shell company used to transfer narcotics proceeds on the Black Market Peso Exchange. These deposits came in large amounts in rapid succession and did not follow an observable business pattern. In October 2018, Hampus Assets transferred a portion of these proceeds to Kaunas Assets Corp.
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Ms. Strauss praised the outstanding investigative work of Special Agents from the DEA New Jersey, Enforcement Group 2.
This case is being handled by the Office’s Narcotics and Money Laundering and Transnational Criminal Enterprises Units. Assistant United States Attorneys Aline R. Flodr, Stephanie Lake, and Sheb Swett are in charge of the case.
Chairman of Venture Capital Funds Sentenced to Six Years for Securities and Wire Fraud in Manhattan Federal CourtRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that DAVID WAGNER was sentenced in Manhattan federal court to 72 months in prison for securities fraud and wire fraud in connection with his operation of a number of corporate entities (collectively referred to as “Downing”) as a Ponzi-like scheme. WAGNER solicited almost $10 million from approximately 40 Downing investors through materially false and misleading statements and misappropriated a significant portion of those funds, using them for, among other things, the payment of management fees, the repayment of prior investors, and personal expenses. WAGNER previously pled guilty to these charges, and was sentenced today before U.S. District Judge Alvin K. Hellerstein.
Acting Manhattan U.S. Attorney Audrey Strauss said: “The employee-investors of the Downing entities entrusted David Wagner, Chairman and CEO, to provide various means of support to their ‘portfolio companies,’ designed to bring those companies to market and ultimately result in a return on their investments. Not only did Wagner not provide the financial support and expertise implicit in his sales pitch, he misspent those funds – which were largely from the investors themselves – for personal expenses, such a Porsche for himself and a BMW for his daughter. Wagner’s web of lies has finally caught up to him, and he has now been sentenced to six years in federal prison for bilking almost $10 million from investors.”
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 co-defendant 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. WAGNER also misappropriated a significant portion of investor funds by using them for, among other things, personal expenses, including the purchase of a Porsche.
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.
Finally, in or about January 2017, WAGNER obtained a $400,000 loan and $100,000 grant from the Connecticut Department of Economic and Community Development (“CTDECD”) for Cliniflow on the basis of materially false statements made by WAGNER to the CTDECD. WAGNER transferred a majority of the funds obtained from the State of Connecticut, which were required to be used for Cliniflow’s purported relocation from New York to Connecticut, to other Downing entities and also used a portion of the funds to purchase a BMW for his daughter.
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WAGNER, 54, of East Greenwich, Rhode Island, 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 WAGNER to serve three years of supervised release, and to pay forfeiture in the amount of $549,000 and restitution in the amount of at least $7,850,000 to victims of his criminal conduct. WAGNER’s co-defendant, Marc Lawrence, is scheduled to be sentenced before Judge Hellerstein on February 1, 2021 at 2:30 p.m.
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.
Russian Hacker Sentenced to 12 Years in Prison for Involvement in Massive Network Intrusions at U.S. Financial Institutions, Brokerage Firms, A Major News Publication, and Other CompaniesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that ANDREI TYURIN, a/k/a “Andrei Tiurin,” was sentenced in Manhattan federal court to 144 months in prison for computer intrusion, wire fraud, bank fraud, and illegal online gambling offenses in connection with his involvement in a massive computer hacking campaign targeting U.S. financial institutions, brokerage firms, financial news publishers, and other American companies. TYURIN is charged with committing these crimes with Gery Shalon, a/k/a “Garri Shalelashvili,” a/k/a “Gabriel,” a/k/a “Gabi,” a/k/a “Phillipe Mousset,” a/k/a “Christopher Engeham,” Joshua Samuel Aaron, a/k/a “Mike Shields,” and Ziv Orenstein, a/k/a “Aviv Stein,” a/k/a “John Avery,” in furtherance of securities market manipulation, illegal online gambling, and payment processing fraud schemes perpetrated by Shalon, Aaron, Orenstein, and their co-conspirators. TYURIN previously pled guilty to these charges, and was sentenced today before U.S. District Judge Laura Taylor Swain.
Acting U.S. Attorney Audrey Strauss said: “From his home in Moscow, Andrei Tyurin played a major role in orchestrating and facilitating an international hacking campaign that included one of the largest thefts of U.S. customer data from a single financial institution in history, stealing the personal information of more than 80 million J.P. Morgan Chase customers. The conspiracy targeted major financial institutions, brokerage firms, news agencies, and other companies, and netted Tyurin over $19 million in criminal proceeds. Now Tyurin has been sentenced to 12 years in prison for his crimes.”
According to the allegations contained in the Indictments to which TYURIN pled guilty, other filings in this case, and statements made during court proceedings, including TYURIN’s guilty plea hearing:
From approximately 2012 to mid-2015, TYURIN engaged in an extensive computer hacking campaign targeting financial institutions, brokerage firms, and financial news publishers in the U.S. (including but not limited to J.P. Morgan Chase Bank, E*Trade, Scottrade, and the Wall Street Journal), and was responsible for the theft of personal information of over 100 million customers of the victim companies. TYURIN’s hack of J.P. Morgan Chase Bank alone resulted in the theft of personal information of over 80 million customers. TYURIN engaged in these crimes at the direction of his partner Gery Shalon, and in furtherance of other criminal schemes overseen and operated by Shalon and his co-conspirators, including securities fraud schemes in the United States. For example, in an effort to artificially inflate the price of certain stocks publicly traded in the U.S., Shalon and his co-conspirators marketed the stocks in a deceptive and misleading manner to customers of the victim companies whose contact information TYURIN stole in the intrusions.
In addition to the U.S. financial sector hacks, from approximately 2007 to mid-2015 TYURIN also conducted cyberattacks against numerous U.S. and foreign companies in furtherance of various criminal enterprises operated by Shalon and his co-conspirators, including unlawful internet gambling businesses and international payment processors. Nearly all of these illegal businesses, like the securities market manipulation schemes, exploited the fruits of TYURIN’s computer hacking campaigns. TYURIN’s hacking activity included the targeting of companies known to be used for email marketing campaigns, competitor online casinos, and a merchant risk intelligence firm based in the United States, in order for the co-conspirators to monitor the firm’s efforts to audit potentially criminal online credit card transactions on behalf of major credit card networks, and thus avoid detection of their own criminal schemes.
In furtherance of his hacking activities, TYURIN used computer infrastructure located across five continents, which he controlled from his home in Moscow, and maintained persistent access over extended periods of time to the victims’ networks, regularly refreshing the stolen data by repeatedly downloading information from these companies. And once his hacking activities were detected, TYURIN worked with Shalon to destroy the evidence of their criminal activity and undermine U.S. law enforcement’s efforts to identify and arrest them.
Through these various criminal schemes, TYURIN, Shalon, and their co-conspirators obtained hundreds of millions of dollars in illicit proceeds, and TYURIN himself earned over $19 million in profits from his hacking activity.
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TYURIN, 37, of Moscow, Russia, pled guilty to one count of conspiracy to commit computer hacking, one count of wire fraud, one count of conspiracy to violate the Unlawful Internet Gambling Enforcement Act, and one count of conspiracy to commit wire fraud and bank fraud. In addition, TYURIN pled guilty to one count of conspiracy to commit wire fraud, and one count of conspiracy to commit computer hacking, from charges that were transferred from the Northern District of Georgia for purposes of his plea. In addition to the prison term, Judge Swain ordered TYURIN to serve three years of supervised release, and to pay forfeiture in the amount of $19,214,956. The Court will determine TYURIN’s restitution obligations at a hearing scheduled for April 6, 2021. TYURIN has been in U.S. custody since he was extradited from the country of Georgia in September 2018, and will commence serving his sentence immediately.
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Ms. Strauss praised the investigative work of the FBI and the U.S. Secret Service, and expressed her sincere gratitude to the Chief Prosecutor’s Office of Georgia and the Ministry of Justice of Georgia for their support and assistance with the extradition proceedings. She also thanked the Securities and Exchange Commission, Homeland Security Investigations, the Financial Industry Regulatory Authority, the Office of International Affairs of the U.S. Department of Justice’s Criminal Division for its assistance with the extradition, and the Financial Services Information Sharing and Analysis Center, which significantly aided the investigation by facilitating information sharing among the victim institutions.
The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Eun Young Choi, Noah Solowiejczyk, and Sarah Lai are in charge of the prosecution.
Former NYPD Sergeant Charged with 9/11 Benefits FraudRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Dermot Shea, Police Commissioner of the City of New York (“NYPD”), and Russell W. Cunningham, Special Agent in Charge of the Department of Justice Office of the Inspector General Washington Field Office (“DOJ-OIG”), announced today that SALLY SPINOSA was charged in Manhattan federal court with two counts of making false claims for monetary awards and medical benefits by falsely and materially overstating the amount of time she spent on recovery efforts after the September 11, 2001, attack on New York, as well as one count of aggravated identity theft for submitting a fraudulent affidavit in connection with her benefits application. SPINOSA surrendered this morning and will be presented before Magistrate Judge Kevin Nathaniel Fox in Manhattan this afternoon.
Acting U.S. Attorney Audrey Strauss said: “After the September 11 attacks on New York City, the brave men and women of the NYPD risked their lives and safety to rebuild the City. As alleged, former NYPD sergeant Sally Spinosa exploited her position by brazenly – and falsely – claiming to have worked hundreds of hours in the recovery effort. When law enforcement officers break the laws they are sworn to uphold, they do a disservice to their fellow officers, to the departments that employ them, and to the public they serve. My Office will work tirelessly with our law enforcement partners to uncover and prosecute such conduct.”
NYPD Commissioner Dermot Shea said: “There is no place in the NYPD for criminal behavior. I commend Deputy Commissioner Joseph Reznick and Internal Affairs officers for their thorough investigation, in partnership with the U.S. Attorney’s Office, Southern District, and the Department of Justice Office of the Inspector General.”
DOJ-OIG Special Agent in Charge Russell W. Cunningham said: “The victim compensation funds are meant to provide some relief for victims of the 9/11 terrorist attacks. Spinosa allegedly tried to defraud the government and take benefits from the fund that she did not deserve. The charges brought today show that the DOJ OIG will thoroughly investigate allegations of fraud of these funds.”
According to the allegations in the Complaint filed yesterday in Manhattan federal court[1]:
Following the attacks on New York and Washington, D.C., on September 11, 2001, Congress created certain programs to provide monetary compensation and medical treatment for victims of the attacks. Specifically, Congress created the September 11th Victim Compensation Fund (the “VCF”) to provide compensation for any individual who suffered physical harm or was killed as a result of either the September 11th attacks or the debris removal and recovery efforts that took place in the immediate aftermath of the attacks. Congress also created the World Trade Center Health Program (“WTCHP”) to provide, among other things, monitoring and medical treatment benefits for individuals who have or may develop health conditions due to exposure at disaster or recovery sites tied to the September 11th attacks. Both the VCF and the WTCHP are funded by Congress. An individual can be deemed eligible for a VCF award either by submitting medical documents and proof-of-presence documents directly to the VCF, or by going through the WTCHP’s process for having a medical condition certified.
SALLY SPINOSA served as an NYPD officer from in or about July 1986 until July 2019, and was a sergeant in the investigations unit of the NYPD’s Patrol Services Bureau of Staten Island (the “Staten Island Investigations Unit”) on September 11, 2001. In 2010, SPINOSA participated in a screening interview with the WTCHP in which she falsely stated that she worked for hundreds of hours at the Fresh Kills Landfill in Staten Island, New York (the “Landfill”), from September 2001 to June 2002. Similarly, in 2014, SPINOSA applied for a monetary award from the VCF, falsely claiming that she was at the Landfill for two hours each day for 62 straight days from September 20, 2001, to November 20, 2001. In support of her application, SPINOSA submitted proof-of-presence documents, including an affidavit purportedly signed by one of her supervisors at the Staten Island Investigations Unit (“Officer-1”) stating that Officer-1 frequently visited the Landfill with SPINOSA to supervise subordinates (the “Officer-1 Affidavit”).
However, contrary to SPINOSA’s representations to the WTCHP and the VCF, in fact SPINOSA spent little to no time at the Landfill. Indeed, during much of the time SPINOSA claimed to be working at the Landfill, SPINOSA was pregnant and doing limited work outside the Staten Island Investigations Unit’s offices, or was out of the office entirely on parental leave. Moreover, the Officer-1 Affidavit that SPINOSA submitted in support of her VCF application was fraudulent and was never signed by Officer-1.
Nevertheless, and based on her false and fraudulent misrepresentations, in or around 2017 the WTCHP granted her benefits. The WTCHP has since paid for certain medical visits and prescription drugs for SPINOSA. While SPINOSA’s original fraudulent application to the VCF was denied in 2014, she reapplied in 2017 and 2018 relying on the same false and fraudulent information. SPINOSA’s VCF claim remains pending.
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SPINOSA, 55, of Freehold, New Jersey, has been charged with one count of submitting false claims, which carries a maximum penalty of five years in prison, one count of wire fraud, which carries a maximum penalty of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory penalty of two years in prison. 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 NYPD’s Internal Affairs Bureau and DOJ-OIG.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Kedar S. Bhatia and Catherine E. Ghosh are 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 herein constitute only allegations, and every fact described should be treated as an allegation.
Two U.S. Army Reservists Plead Guilty for Involvement in $3 Million Fraud and Money Laundering SchemeRead the Press Release
Audrey Strauss, the Acting 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 Frank Robey, Director of the Criminal Investigation Command’s Major Procurement Fraud Unit, announced today that JOSEPH IORHEMBA ASAN JR. and CHARLES IFEANYI OGOZY each pled guilty to one count of conspiracy to commit wire fraud and bank fraud in connection with a scheme to commit fraud against victims across the United States, defraud banks, and launder over $3 million dollars in fraud proceeds. Both defendants were arrested on October 31, 2019. OGOZY pled guilty on December 22, 2020 before U.S. District Judge William H. Pauley III. ASAN pled guilty earlier today before U.S. Magistrate Judge Barbara Moses and his case is assigned to U.S. District Judge Kimba Wood.
Acting Manhattan U.S. Attorney Audrey Strauss said: “U.S. Army reservists Joseph Asan and Charles Ogozy admitted today to their roles in an internet fraud scheme to bilk victims across the country of over $3 million. The defendants and their co-conspirators callously victimized older men and women and even a Marine Corps veterans association in their business email compromises and online romance scams. I thank the FBI and U.S. Army CID for their assistance in holding these reservists accountable for their dishonorable conduct.”
FBI Assistant Director-in-Charge William F. Sweeney, Jr. said: “Using false identities, email compromises, and fake schemes to scam others out of money are clear federal crimes. But the fact that Mr. Asan, Jr. and Mr. Ogozy, who themselves voluntarily wear our Nation’s uniform and swore an oath to uphold our Constitution, also targeted a veteran’s organization adds insult to the injury endured by some of the victims. Because they chose to break the law, these two Army reservists will now be rolling along to federal prison.”
Director of the Criminal Investigation Command’s Major Procurement Fraud Unit, Frank Robey said: “To think that two Reserve Soldiers would perpetrate such brazen acts of fraud is beyond belief. However, for these two, greed was more important than being faithful to the trust put in them by our government, and it was their undoing. They will be held fully responsible for the acts of fraud they committed.”
According to allegations in the Complaint, the charging instruments, and other publically filed documents:
From at least in or about February 2018 through at least in or about September 2019, ASAN and OGOZY were members of the U.S. Army Reserves who participated in a scheme to commit fraud against victims across the United States, defraud banks, and launder over $3 million in fraud proceeds in bank accounts that they controlled. The funds laundered by ASAN and OGOZY were obtained primarily through (a) business email compromises, in which members of the scheme gained unauthorized access to or spoofed email accounts and impersonated employees of a company or third parties engaged in business with the company in order to fraudulently induce the victims to transfer money to bank accounts under the control of members of the scheme; and (b) romance scams, in which members of the scheme deluded unsuspecting older women and men into believing they were in a romantic relationship with a fake identity assumed by members of the scheme and used false pretenses to cause the victims to transfer money to bank accounts under the control of members of the scheme, including ASAN and OGOZY. Notably, one of the victims of the defendants’ scheme included a U.S. Marine Corps veteran’s organization.
In order to launder over $3 million in proceeds from those fraud schemes, ASAN and OGOZY opened several bank accounts in the names of fake businesses called Uxbridge Capital LLC, Renegade Logistics LLC, and Eldadoc Consulting LLC and received fraud proceeds in those bank accounts. ASAN and OGOZY then laundered the fraud proceeds to each other and to other co-conspirators based in Nigeria. In connection with the opening of the business bank accounts, the defendants made multiple false statements to banks about the purported legitimate business of their companies, including misrepresentations that they were involved in shipping, real estate, and public relations. In addition, a significant portion of the funds laundered by the defendants was deposited and withdrawn in cash that was not able to be traced by law enforcement.
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ASAN, 24, of Daytona Beach, Florida, and OGOZY, 31, of Hackensack, New Jersey, each pled guilty to one count of conspiracy to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
ASAN is scheduled to be sentenced on April 21, 2021 at 11:00 a.m. before Judge Wood. OGOZY is scheduled to be sentenced on April 14, 2021 at 11:00 a.m. before Judge Pauley.
Ms. Strauss praised the outstanding investigative work of the FBI and Army CID. Ms. Strauss also thanked the U.S. Customs and Border Protection for their assistance in 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.
Statement of Acting U.S. Attorney Audrey Strauss on Court Appointment as U.S. AttorneyRead the Press Release
“Chief Judge Colleen McMahon notified me today that the United States District Court for the Southern District of New York has appointed me United States Attorney for the District, pursuant to 28 U.S.C. § 546(d), effective January 16, 2021. I am deeply grateful for the Court’s support and the opportunity to continue serving the people of New York and this country. It is the privilege of a lifetime to lead the women and men of this District as they pursue justice without fear or favor and write the latest chapter in this Office’s proud legacy.”
Comptroller Pleads Guilty to Embezzling from Manhattan Financial Publishing CompanyRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that ERIC IAN WHITEHEAD pled guilty to wire fraud for his role in a years-long scheme to embezzle approximately $1.3 million from a financial publishing company (the “Company”), where he was then employed as comptroller. The plea was entered in front of U.S. District Judge Ronnie Abrams.
Acting U.S. Attorney Audrey Strauss said: “As he admitted in court today, Eric Ian Whitehead exploited his position of trust as comptroller of a publishing company to embezzle more than $1 million from the company. Now he awaits sentencing for his admitted theft.”
According to the Information and other filings and statements at public court proceedings in the case:
From at least in or around 2015 through in or around 2020, WHITEHEAD used wire transfers and cash deposits from the victim Company to benefit himself without authorization from the Company. Specifically, WHITHEAD used Company assets to pay for personal credit card expenses, overpay personal credit cards to receive cash balance refunds, write checks to cash for deposit into personal bank accounts, and purchase precious metals to sell for his own profit. WHITEHEAD consistently embezzled Company funds from in or around 2015 through in or around 2020, for a total loss amount of approximately $1.3 million.
* * *
WHITEHEAD, 53, of Smithtown, New York, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison. WHITEHEAD will be sentenced by Judge Abrams on April 9, 2021.
Ms. Strauss praised the outstanding investigative work of the Special Agents of the United States 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 Attorney Mitzi S. Steiner is in charge of the prosecution.
CEO of Clothing Company Sentenced to Prison for Million-Dollar Customs FraudRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that JOSEPH BAILEY, the CEO of a children’s apparel company (“Company-1”), was sentenced to six months in prison for participating in a years-long scheme to defraud U.S. Customs and Border Protection (“CBP”) by submitting invoices to CBP that falsely understated the true value of the goods Company-1 imported into the United States – fraudulently avoiding over $1.5 million in customs duties owed to CBP. BAILEY pled guilty on January 15, 2020, before United States District Judge William H. Pauley III, who also imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “Joseph Bailey defrauded the United States by misrepresenting the value of imported goods to avoid payment of customs duties. Now he has been sentenced to prison for his crime.”
According to the Indictment and other court documents filed in Manhattan federal court:
From in or about 2007 to in or about 2015, BAILEY and other employees of Company-1 engaged in a scheme to fraudulently understate the value of goods imported into the United States. During the charged time period, Company-1 purchased much of its merchandise from a manufacturer located in China (“Manufacturer-1”). Starting shortly after Company-1 began doing business with Manufacturer-1 in 2007, through approximately 2010, BAILEY and others at Company-1 engaged in a double-invoicing scheme by which Company-1 would receive two sets of invoices from Manufacturer-1 for the same shipment of goods. One invoice, referred to as the “pay by” invoice, was significantly higher and reflected the actual price paid by Company-1 for the goods. The second invoice reflected a significantly lower price for the goods and was presented to CBP. This allowed Company-1 to pay a fraudulently lower amount of customs duties.
In approximately 2010, BAILEY and other employees of Company-1 began a new variation of the customs fraud scheme, involving invoices for “sample” goods, by which Manufacturer-1 would send two separate sets of invoices for a given shipment that together reflected the true price Company-1 actually paid to Manufacturer-1 for a particular shipment of clothing. The first invoice, typically entitled the “commercial invoice,” described the goods purchased, and was submitted to CBP. The second invoice purportedly reflected amounts paid by Company-1 for “sample” goods, and was not submitted to CBP. Sample goods are not subject to customs duties.
The “samples” invoice was not, in fact, for samples actually purchased by Company-1. Rather, it was a means to make an additional payment to Manufacturer-1 for actual goods purchased by Company-1 without disclosing it to CBP. Typically, the “samples” invoices reflected a unit price for sample goods that was significantly greater than the unit price for the non-sample goods reflected on the invoice submitted to CBP (for example, $70-$90 per unit on the “samples” invoice versus a $4 per unit price on the “commercial invoice”). In addition, the “samples” invoice reflected the purchase of unusually large amounts of sample goods, for example the “samples” invoice reflected quantities as large as 24 or 48 pieces of a single color in a single style.
This multi-year fraud scheme resulted in the loss of over $1 million in duty revenue to the United States.
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In addition to his prison sentence, BAILEY, 58, of Brooklyn, New York, was sentenced to three years of supervised release, ordered to pay forfeiture in the amount of $1,661,617.
Ms. Strauss thanked CBP and Homeland Security Investigations for their efforts and ongoing support and assistance with the case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit, and Assistant U.S. Attorneys Dina McLeod and Dominika Tarczynska are in charge of the prosecution.
8 Bronx Defendants Indicted in Connection with Drug Trafficking and Firearms OffensesRead the Press Release
Audrey Strauss, the Acting 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 charging CARL WILBRIGHT, a/k/a “Brody,” TRAVIS BRECONIDGE, a/k/a “Jamaica,” ISAIAH FREEMAN, a/k/a “Oz,” LUIS GARCIA, a/k/a “Lu,” RICARDO GARCIA, a/k/a “Kika,” STANLEY HAMPTON, and JAMEL MURRAY with participating in a conspiracy to distribute crack cocaine and marijuana. WILBRIGHT and FREEMAN have also been charged with possessing firearms in furtherance of the narcotics conspiracy. The Indictment further charges FREEMAN and QUASHAWN ESCALERA, a/k/a “Tank,” with being felons in possession of ammunition in connection with a shooting that occurred on September 26, 2019. The case is assigned to U.S. District Judge Valerie E. Caproni.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged in the Indictment, the defendants are charged with narcotics trafficking and firearms offenses. We thank our partners at the NYPD for their outstanding work on this case.”
NYPD Commissioner Dermot Shea said: “These federal charges enhance the NYPD’s precision policing efforts to combat a crew of alleged narcotics distributors. I commend our partners in the U.S. Attorney’s office for the Southern District of New York for their sustained work in bringing this important case.”
As alleged in the Indictment unsealed last week in Manhattan federal court[1]:
From at least in or about 2018, up to and including in or about 2020, CARL WILBRIGHT, a/k/a “Brody,” TRAVIS BRECONIDGE, a/k/a “Jamaica,” ISAIAH FREEMAN, a/k/a “Oz,” LUIS GARCIA, a/k/a “Lu,” RICARDO GARCIA, a/k/a “Kika,” STANLEY HAMPTON, and JAMEL MURRAY, participated in a conspiracy to distribute 280 grams and more of crack cocaine and marijuana.
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CARL WILBRIGHT, a/k/a “Brody,” LUIS GARCIA, a/k/a “Lu,” RICARDO GARCIA, a/k/a “Kika,” and JAMEL MURRAY were taken into custody last week and were presented before Judge Lehrburger. STANLEY HAMPTON surrendered yesterday and was presented before Judge Moses. TRAVIS BRECONIDGE, a/k/a “Jamaica,” QUASHAWN ESCALERA, a/k/a “Tank,” and ISAIAH FREEMAN, a/k/a “Oz,” remain at large.
A chart containing the names, charges, and maximum penalties for each of the defendants is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only as any sentencing of a defendant would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the NYPD.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Christopher J. Clore 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.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Narcotics
Conspiracy
21 U.S.C. § 846
CARL WILBRIGHT, 47
TRAVIS BRECONIDGE, 28
ISAIAH FREEMAN, 32
LUIS GARCIA, 24
RICARDO GARCIA, 28
STANLEY HAMPTON, 25
JAMEL MURRAY, 43
Life in prison
Mandatory minimum of ten years in prison
2
Firearms Offense
18 U.S.C. §§ 924(c)(1)(A)(i) and 2
CARL WILBRIGHT
Life in prison
Mandatory minimum of five years in prison
3
Firearms Offense
18 U.S.C. § 924(c)(1)(A)(iii) and 2
ISAIAH FREEMAN
Life in prison
Mandatory minimum of ten years in prison
4
Felon in Possession of Ammunition
18 U.S.C. § 922(g)
QUASHAWN ESCALERA, 31
10 years in prison
5
Felon in Possession of Ammunition
18 U.S.C. § 922(g)
ISAIAH FREEMAN
10 years in prison
[1] As the introductory phrase signifies, the entirety of the text of the Indictment constitutes only allegations, and every fact described herein should be treated as an allegation.
Acting Manhattan U.S. Attorney Announces Settlement with Substance Abuse Treatment Center and Its Owner for Enrolling Patients Through Kickbacks and Using Falsified Patient Admissions FormsRead the Press Release
Audrey Strauss, the Acting 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, Office of Inspector General (“HHS-OIG”), announced today a $6 million settlement of a civil healthcare fraud lawsuit against A.R.E.B.A.-CASRIEL, Inc. d/b/a ADDICTION CARE INTERVENTIONS CHEMICAL DEPENDENCY TREATMENT CENTERS (“ACI”), a substance abuse treatment provider in New York City, and STEVEN YOHAY, ACI’s primary owner and former CEO. This settlement resolves allegations that ACI and YOHAY provided kickbacks and engaged in fraudulent conduct in connection with the enrollment of Medicaid beneficiaries into ACI’s inpatient treatment program. Specifically, the Government’s complaint alleges that ACI’s drivers targeted homeless individuals and offered them food, cash, money to purchase drugs, and/or alcohol in order to induce them to enroll in ACI’s inpatient treatment program. The lawsuit further alleges that ACI paid an individual a kickback in the form of a sham job for which she was compensated more than $75,000 to induce her to refer patients to ACI programs. The lawsuit also alleges that ACI used medical admissions forms containing photocopied physician signatures to make it appear that new patients had been evaluated by a qualified health care professional as required by law.
Under the settlement approved December 17 by U.S. District Judge Vernon S. Broderick, ACI agreed to pay $3 million, and YOHAY personally agreed to pay an additional $3 million. Of the $6 million total, $2.4 million is being paid to the United States and the remaining amount is being paid to the State of New York. The amount paid by ACI is based on the Office’s assessment of ACI’s ability to pay based on the financial information it provided.
ACI and YOHAY admitted and accepted responsibility for conduct alleged in the Government’s complaint as further described below. YOHAY also agreed to divest ownership and control of ACI, and ACI agreed to implement procedures designed to ensure that its patient transportation services comply with legal requirements. In addition, YOHAY has entered into a Voluntary Exclusion Agreement with HHS-OIG, under which he will be excluded from participation in Medicaid and other federal healthcare programs for a period of 15 years.
Acting U.S. Attorney Audrey Strass said: “ACI and Steven Yohay engaged in unscrupulous and illegal practices – including hiring drivers to scour the streets for potential patients – to fill the beds at their facilities and maximize the payments they received from Medicaid. This Office will continue to act aggressively to ensure that substance abuse treatment providers and those who run them are held accountable when they cheat the system to fraudulently obtain federal health care funds.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “ACI and Stephen Yohay operated a fraud scheme that targeted some of the most vulnerable people in our society and diverted valuable Medicaid funds that millions of New Yorkers depend on for vital services. This settlement should send a message that this behavior will not be tolerated, and we will hold those that attempt to steal from federal health care programs accountable for their actions.”
The Complaint filed in Manhattan federal court alleges three forms of illegal conduct:
First, from January 2014 to December 2019, ACI and YOHAY improperly induced Medicaid beneficiaries to be admitted into ACI’s inpatient treatment program by employing drivers, who were compensated based in part on the volume of patients they recruited for admission into the treatment program, to solicit and transport potential new patients to ACI’s facility. The drivers routinely targeted homeless individuals and sometimes offered them food, cash, money to purchase drugs, and/or alcohol to persuade them to enroll in the program. The drivers were expected to pick up a certain number of potential patients in order to be eligible for a pay raise. Most of the new enrollments into ACI’s inpatient program resulted from the ACI drivers’ solicitation efforts.
Second, in October 2012, ACI created a sham part-time Spanish “translator” position so that it could employ an individual whose real job was primarily to provide a stream of patient referrals. The individual was simultaneously employed at an organization that refers individuals to substance abuse clinics. ACI placed the individual on its payroll to receive referrals to its treatment programs. The individual translated only a few times, even though she remained on the payroll until March 2017 and was paid more than $75,000.
Third, from July 2012 through July 2013, ACI admitted Medicaid patients into its inpatient treatment program who were not evaluated by a qualified health care professional to determine the appropriate level of care, as required by applicable state law. ACI staff fraudulently created medical forms containing a photocopied physician’s signature to make it appear that a physician had conducted the evaluation. The falsified forms were used to support claims for reimbursement, for the indicated level of care, from Medicaid.
In the settlement agreement, ACI and YOHAY admit, acknowledge, and accept responsibility for the following conduct:
Role of Drivers:
- From January 2014 to December 2019, ACI employed drivers who were involved in identifying, recruiting, and providing transportation services for new patients who were admitted into ACI’s inpatient treatment program. During the relevant period, ACI employed approximately five to 10 drivers at any given time.
- ACI drivers rode in unmarked vehicles and picked up individuals, who were often homeless, from a wide range of locations, including parks, train stations, shelters, hospitals, under bridges, and from other substance abuse treatment centers.
- ACI financially incentivized its drivers to bring in new patients. ACI paid the driver who brought in the most new patients during the relevant period an annual salary of more than $200,000, as well as a bonus consisting of thousands of dollars.
- ACI’s management, including YOHAY, were made aware of allegations that certain ACI drivers gave some potential new patients money, drugs, and/or alcohol to induce them to enroll in ACI’s inpatient program. However, ACI and YOHAY failed to investigate these allegations adequately or take appropriate corrective actions in response.
Use of Paid Employee to Make Patient Referrals:
- In October 2012, ACI created a part-time “translator” position and hired an individual to fill the position who was simultaneously employed at an organization that refers individuals to substance abuse clinics, like ACI, for treatment as an alternative to incarceration.
- Throughout the course of her employment with ACI, the individual provided ACI managers with lists of individuals who were being referred by the organization to ACI for substance abuse services.
- Although the individual was hired to be a “translator,” she rarely was asked by ACI to provide any translation services. The individual translated for ACI only a few times in 2012, and thereafter, she did not perform any translation services for ACI but continued to be paid by ACI until 2017.
Medical Assessments Not Completed by Physicians:
- From July 2012 through July 2013, ACI admitted certain patients into its inpatient program who were not properly evaluated by a qualified health professional as required.
- During the relevant period, ACI admissions staff, who were not qualified health professionals, conducted the patient assessment and completed the admissions criteria forms. These forms, which were part of a patient’s file used to support claims for reimbursement from Medicaid, contained a photocopy of a physician’s signature.
In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.
Ms. Strauss thanked HHS-OIG, the Medicaid Fraud Control Unit of the New York State Attorney General’s Office, and the New York State Office of Addiction Services and Supports for their assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Kirti Vaidya Reddy is in charge of the case.
Acting Manhattan U.S. Attorney Announces $40.5 Million Settlement with Durable Medical Equipment Provider Apria Healthcare for Fraudulent Billing PracticesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Scott Lampert, the Special Agent in Charge for the New York Office of the Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), Patrick J. Hegarty, Special Agent in Charge of the Northeast Field Office of the U.S. Department of Defense - Office of Inspector General’s Defense Criminal Investigative Service (“DCIS”), and Norbert E. Vint, Deputy Inspector General Performing the Duties of the Inspector General, Office of Personnel Management Office of the Inspector General (“OPM OIG”), announced today a $40.5 million settlement of a fraud lawsuit against Apria Healthcare Group, Inc. and its affiliate, Apria Healthcare LLC (together, “Apria”), a large durable medical equipment (“DME”) provider with approximately 300 branch offices located throughout the United States. The lawsuit alleges, among other claims, that Apria submitted false claims to federal health programs, including Medicare and Medicaid, seeking reimbursement for the rental of costly non-invasive ventilators (“NIVs”) to program beneficiaries who were not using the NIVs such that the devices were not medically necessary or that involved the improper waiver of patient co-insurance payments.
Under the settlement, which was approved on December 18 by U.S. District Judge Edgardo Ramos, Apria agreed to pay a total sum of $40.5 million, with $37,632,789.89 being paid to the United States and the remaining amount to be paid to various states. As part of the settlement, Apria also made extensive factual admissions regarding its conduct.
Acting U.S. Attorney Audrey Strauss said: “It is critical to the financial integrity of federal health programs like Medicare and Medicaid that reimbursements are made only for medically necessary items and services. DME providers like Apria have an obligation to ensure that the equipment and devices they rent to patients are medically necessary. When companies knowingly disregard that obligation to maximize their profits, this Office will hold them accountable for their fraudulent conduct.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “Apria’s conduct compromised the integrity of the Medicare and Medicaid programs, and needlessly increased the financial burden on taxpayers. Along with our law enforcement partners, HHS-OIG will continue to ensure that those individuals and entities that bill federal health care programs improperly are held accountable for their actions.”
DCIS Special Agent in Charge Patrick J. Hegarty said: “The Defense Criminal Investigative Service (DCIS) is committed to protecting the integrity of TRICARE, the healthcare system for military members and their families. Charging TRICARE for DME that was not necessary betrays the public’s trust. This settlement demonstrates our partnership with HHS-OIG, OPM-OIG and the U.S. Attorney’s Office to investigate fraudulent schemes that impact TRICARE and put its beneficiaries at risk.”
OPM OIG Deputy Inspector General Norbert E. Vint said: “The OPM OIG is committed to fighting all forms of health care fraud. As demonstrated by this settlement, providers that exploit federal health care programs by submitting false claims will be held accountable.”
As alleged in the complaint filed by the United States, Apria decided in 2014 to prioritize the expansion of its NIV rental business because health care programs like Medicare paid as much as $1,400 per month to cover NIVs, a type of complex respiratory equipment that can dynamically adjust the pressure level of air delivery. That expansion, however, came at the cost of Apria’s compliance with the basic medical necessity requirement of federal health programs. Specifically, while Apria knew that it was responsible for monitoring patients’ utilization of their NIVs and to stop billing when NIVs were no longer being used, it did not have enough staff, or “respiratory therapists,” to conduct such monitoring. As a result, Apria routinely billed Medicare and other programs when it did not know whether NIVs were still being used by patients and, therefore, remained medically necessary. Further, even when Apria had information indicating that patients were no longer using their NIVs, it often continued to bill the federal health programs.
As further alleged, Apria engaged in two other types of improper practices to obtain more NIV orders and higher profits. First, Apria improperly billed federal health programs for certain NIV rentals that were being used in a setting called PAC mode to provide bi-level pressure support therapy, which was available from a less expensive device called VPAP RAD and did not qualify for reimbursement at the NIV rate. Second, Apria improperly waived co-pays for a number of Medicare and TRICARE beneficiaries to induce them to rent NIVs. For example, Apria employees offered to waive co-pays to convince patients to rent NIVs from Apria instead of competitors. Further, Apria also waived co-pays without making the required individualized assessment of financial need. As a result of those three widespread improper practices, Apria submitted thousands of false claims to federal health programs for NIV rentals and fraudulently received millions of dollars in reimbursements.
As part of the settlement, Apria admitted, acknowledged, and accepted responsibility for, among others, the following conduct:
NIV Continued Use Conduct
- Apria relied on the respiratory therapists (“RTs”) in its branches to monitor patients’ usage of their NIV devices. Further, Apria’s NIV promotional materials indicated that Apria’s RTs would regularly visit NIV patients to assess whether they used their NIV devices in accordance with their physicians’ instructions.
- The RTs at Apria’s branches, however, often did not conduct regular visits to NIV patients to confirm that patients were using their NIVs as directed by their physicians. A January 2017 internal analysis, for example, found that in December 2016, Apria’s RTs failed to complete more than half of the visits to NIV patients mandated by Apria’s NIV clinical procedures at all three of Apria’s operational zones.
- Apria continued to seek payments from federal health programs for NIV rentals each month even though its RTs frequently failed to conduct in-home visits to verify that patients were still using their NIVs.
- In addition, when it had information from the RT visits indicating that patients had stopped using their NIVs, Apria often did not take steps to stop seeking payments from federal health programs or to determine if the NIV rentals were still medically necessary.
PAC Mode Conduct
- In 2015, Apria encouraged its sales staff to actively urge physicians to order the Astral NIVs in PAC mode. When they urged physicians to order the Astral NIVs in PAC mode, Apria’s salespeople frequently did not tell the physicians that PAC mode therapy was also available through the VPAP RAD at a lower monthly cost.
- On a number of occasions, this resulted in Apria renting the more expensive Astral NIVs to patients with the PAC mode therapy orders, including patients covered by federal health programs, even though the less expensive VPAP RADs may have met those patients’ medical needs.
Co-Pay Waiver Conduct
- Managers at a number of Apria’s branches directed salespeople at those branches to routinely discuss the availability of co-pay waivers with NIV patients, including before the patients raised concerns about their ability to make these payments. In a number of cases, those managers also authorized salespeople to offer co-pay waivers to persuade patients to rent NIVs from Apria instead of other DME suppliers.
- During the Covered Period, Apria gave full co-pay waivers to hundreds of NIV patients without making an assessment as to whether those patients could have afforded some portion of their co-pay responsibilities.
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- As a result of the admitted conduct, Apria received reimbursements from the federal health programs for some NIV rental claims that did not comply with all of those programs’ billing rules and guidance.
In connection with this settlement, Apria also entered into a Corporate Integrity Agreement with HHS-OIG, which requires Apria to implement board oversight, a claims review process by an Independent Review Organization, and other compliance steps designed to foster adherence to federal health care program requirements and thereby protect the programs.
This settlement arises from a whistleblower case filed by three former Apria employees under the qui tam provisions of the False Claims Act, which allow private persons – known as “relators” – to file civil cases on behalf of the United States and share in the recovery.
Acting U.S. Attorney Strauss thanked the Washington State Medicaid Fraud Control Unit for its extensive collaboration in the investigation and resolution of this case, and also praised the outstanding investigative work of the HHS-OIG, DCIS, and OPM-OIG.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Li Yu and Steven Kochevar and former Assistant U.S. Attorney Casey Lee have handled the case.
Computer Programmer Sentenced to Prison for Making False Statements About His Involvement in the “Silk Road” WebsiteRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that MICHAEL R. WEIGAND, a/k/a “Shabang,” a/k/a “~Shabang~,” a/k/a “~s,” a/k/a “s,” was sentenced to eight months in prison today for making false statements to federal agents about his involvement in, and his work for, the “Silk Road” online illicit black market, which was responsible for distributing hundreds of millions of dollars of narcotics and other contraband. WEIGAND’s false statements concealed his role in the operation of the Silk Road website. WEIGAND previously pled guilty before United States District Judge William H. Pauley III, who also imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “Michael Weigand supplied technological advice directly to the leadership of Silk Road, a secret online marketplace for criminal activity. He laundered Silk Road proceeds and traveled overseas to remove Silk Road evidence from a co-conspirator’s residence. Weigand subsequently lied to law enforcement, falsely claiming to have done nothing for Silk Road, and has now been sentenced to prison for that knowing falsehood.”
According to the Information, court filings, statements made in court, and evidence presented during the 2015 trial of Ross Ulbricht, Silk Road’s founder and chief administrator:
Ulbricht created Silk Road in approximately January 2011, and owned and operated the underground website until it was shut down by law enforcement in October 2013. Silk Road emerged as the most sophisticated and extensive criminal marketplace on the Internet at the time. During its more than two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over one hundred thousand buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions. Silk Road was specifically designed to allow its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement through the use of the Tor network and a Bitcoin-based payment system.
WEIGAND, a computer programmer and electrical engineer, worked with Roger Thomas Clark, the senior adviser to Ulbricht, on certain aspects of Silk Road. For instance, WEIGAND and Clark worked to identify technological vulnerabilities in the Silk Road website. WEIGAND also supplied technological advice directly to Clark and Ulbricht. After Silk Road was shut down in October 2013, WEIGAND laundered more than $75,000 in Silk Road proceeds. In addition, in late 2013, the Government disclosed that it had been able to access the contents of Ulbricht’s laptop computer, which identified Clark as Ulbricht’s right-hand man; shortly after this revelation, Clark transferred more than $20,000 to WEIGAND in Bitcoin, and WEIGAND traveled to Clark’s London residence and removed Silk Road evidence.
In January 2019, WEIGAND was questioned by IRS and FBI Special Agents. After being specifically warned that it is a federal crime to make a false statement to a federal law enforcement officer, WEIGAND attempted to cover up his involvement in Silk Road by falsely stating, among other things, that (1) he never opened an account on Silk Road; (2) he never used the online pseudonyms “Shabang” or “~Shabang~”; (3) he never transferred Bitcoin to Silk Road; (4) he never exposed computer security vulnerabilities in the Silk Road website; (5) he never communicated with anyone who used the online pseudonym “Dread Pirate Roberts,” “DPR,” or “Silk Road” (i.e., Ulbricht); (6) he never performed any services for the Silk Road website; and (7) he did not know the true identity of “Variety Jones” (one of Clark’s pseudonyms) on Silk Road. WEIGAND also falsely stated that the purpose of his trip to London in late 2013, following the takedown of the Silk Road website and arrest of Ulbricht, was to meet with Clark’s associate regarding a marijuana seed business; in fact, WEIGAND went to Clark’s London residence and removed physical Silk Road evidence.
In addition to his prison term, WEIGAND, 59, of Kirtland, Ohio, was sentenced to three years of supervised release.
The founder and operator of Silk Road, Ross Ulbricht, was previously convicted of seven offenses after a jury trial: distributing narcotics, distributing narcotics by means of the Internet, conspiring to distribute narcotics, engaging in a continuing criminal enterprise, conspiring to commit computer hacking, conspiring to traffic in false identity documents, and conspiring to commit money laundering. Ulbricht was sentenced principally to life in prison and $183 million in forfeiture.
Ulbricht’s senior adviser, Roger Thomas Clark, pled guilty to conspiring to distribute narcotics and his sentencing is currently pending. Clark faces a maximum potential sentence of 20 years in prison.
* * *
Ms. Strauss praised the outstanding joint efforts of the Boston Field Office of the Internal Revenue Service – Criminal Investigation, the New York and Washington Field Offices of the Federal Bureau of Investigation, the New York Field Office of Homeland Security Investigations, and the New York City Police Department. Ms. Strauss also thanked the FBI’s Cleveland Office for its assistance.
This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Michael D. Neff is in charge of the prosecution.
Kenyan National Indicted for Conspiring to Hijack Aircraft on Behalf of the Al Qaeda-Affiliated Terrorist Organization Al ShabaabRead the Press Release
The Department of Justice announced the unsealing of an indictment charging Cholo Abdi Abdullah with six counts of terrorism-related offenses arising from his activities as an operative of the foreign terrorist organization al Shabaab, including conspiring to hijack aircraft in order to conduct a 9/11-style attack in the United States. Abdullah was arrested in July 2019 in the Philippines on local charges, and was subsequently transferred on Dec. 15, 2020 in connection with his deportation from the Philippines to the custody of U.S. law enforcement for prosecution on the charges in the indictment. Abdullah was transported from the Philippines to the United States yesterday, and is expected to be presented today before Magistrate Judge Robert W. Lehrburger in Manhattan federal court. The case is assigned to United States District Judge Analisa Torres.
“This case, which involved a plot to use an aircraft to kill innocent victims, reminds us of the deadly threat that radical Islamic terrorists continue to pose to our nation. And it also highlights our commitment to pursue and hold accountable anybody who seeks to harm our country and our citizens. No matter where terrorists who plan to target Americans may be located, we will seek to identify them and bring them to justice,” said Assistant Attorney General for National Security John C. Demers. “We owe a debt of gratitude to the detectives, agents, analysts, and prosecutors who are responsible for this defendant’s arrest.”
“Today’s announcement shows that foreign terrorist organizations, like al Shabaab, remain determined to plot, plan, and conspire to commit terrorist acts across the globe against the United States, our interests and our foreign partners,” said FBI Assistant Director for Counterterrorism Jill Sanborn. “Let there be no doubt that the FBI and our law enforcement colleagues, and in this case specifically those in the Philippines and Kenya, will not stop in our mission to hold terrorists accountable for their actions. The charges announced today against Cholo Abdi Abdullah eerily draws parallels to the heinous attacks on this country on September 11, 2001. The FBI, along with our U.S. Government and international partners, will continue to be in lockstep against terrorism and will not allow the safety or security of the public to be threatened – no matter where in the world it may be or whomever is responsible.”
“As alleged, Cholo Abdi Abdullah, as part of a terrorist plot directed by senior al Shabaab leaders, obtained pilot training in the Philippines in preparation for seeking to hijack a commercial aircraft and crash it into a building in the United States,” said Acting Manhattan U.S. Attorney Audrey Strauss. “This chilling callback to the horrific attacks of September 11, 2001, is a stark reminder that terrorist groups like al Shabaab remain committed to killing U.S. citizens and attacking the United States. But we remain even more resolute in our dedication to investigating, preventing, and prosecuting such lethal plots, and will use every tool in our arsenal to stop those who would commit acts of terrorism at home and abroad. Thanks to the outstanding investigative work of the New York Joint Terrorism Task Force, and the FBI’s global partnerships with law enforcement agencies around the world, Abdullah’s plot was detected before he could achieve his deadly aspirations, and now he faces federal terrorism charges in a U.S. court.”
“Nearly 20 years after the 9/11 terrorist attacks, there are those who remain determined to conduct terror attacks against United States citizens. Abdullah, we allege, is one of them,” said FBI Assistant Director-in-Charge William F. Sweeney Jr. “He obtained a pilot’s license overseas, learning how to hijack an aircraft for the purpose of causing a mass-casualty incident within our borders. Fortunately, the exceptional work by the men and women assigned to the many agencies that comprise the FBI’s New York JTTF have, once again, disrupted a threat to our communities.”
“As alleged in the federal indictment against him, Cholo Abdi Abdullah had obtained pilot training and begun plotting a terrorist attack against a target in the United States,” said NYPD Commissioner Dermot Shea. “But the outstanding work of our NYPD detectives and federal agents of the FBI’s New York Joint Terrorism Task Force, along with all of our law enforcement partners, put an end to those plans and ensured that no one would be harmed.”
As alleged in the Indictment,[1] unsealed today in Manhattan federal court:
The charges in the Indictment unsealed today arise out of a coordinated scheme by the terrorist organization Harakat al-Shabaab al-Mujahideen, commonly known as “al Shabaab,” to target Americans both at home and abroad. Al Shabaab, which has sworn allegiance to al Qaeda and serves as al Qaeda’s principal wing in East Africa, is responsible for numerous deadly terrorist attacks, including attacks that have claimed American lives. Recently, al Shabaab has embarked on a string of terrorist attacks as part of an operation purportedly in response to the United States’ decision to move its embassy in Israel to Jerusalem, which the group has dubbed “Operation Jerusalem Will Never be Judaized.” In particular, these terrorist attacks perpetrated by al Shabaab include an attack on Jan. 15, 2019, at a hotel in Nairobi, Kenya, which resulted in the deaths of approximately 21 people, including a U.S. national and survivor of al Qaeda’s 9/11 attack on the World Trade Center in New York, New York; a Sept. 30, 2019, attack on a U.S. military facility in Somalia; and a Jan. 5, 2020, attack on another U.S. facility in Kenya, in which three Americans were killed.
As alleged in the Indictment, Abdullah was an al Shabaab operative who participated in a plot to hijack commercial aircraft and crash them into a building in the United States. Beginning in 2016, at the direction of a senior al Shabaab commander who was responsible for, among other things, planning the 2019 Nairobi hotel attack, Abdullah traveled to the Philippines and enrolled in a flight school there (the “Flight School”), for the purpose of obtaining training for carrying out the 9/11-style attack. Between 2017 and 2019, Abdullah attended the Flight School on various occasions and obtained pilot’s training, ultimately completing the tests necessary to obtain his pilot’s license.
While Abdullah was obtaining pilot training at the Flight School, he also conducted research into the means and methods to hijack a commercial airliner to conduct the planned attack, including security on commercial airliners and how to breach a cockpit door from the outside, information about the tallest building in a major U.S. city, and information about how to obtain a U.S. visa.
Thanks to the extraordinary work of the FBI, law enforcement authorities foiled this plot. Abdullah has remained in custody since his arrest on the local charges in the Philippines.
Abdullah, 30, of Kenya, is charged with conspiring to provide and providing material support to a designated foreign terrorist organization (al Shabaab), conspiring to murder U.S. nationals, conspiring to commit aircraft piracy, conspiring to destroy aircraft, and conspiring to commit acts of terrorism transcending national boundaries. Abdullah faces a maximum sentence of life in prison, and a mandatory minimum sentence of 20 years in prison. The specific penalties for each of the charges is reflected in the chart below. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Assistant Attorney General Demers and Ms. Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD. They also thanked the FBI Hudson Valley office and the New York State Police. Ms. Strauss also thanked the FBI Legal Attaché Offices in Nairobi, Kenya, and Manila, the Philippines; the Counterterrorism Section of the Department of Justice’s National Security Division; the Office of International Affairs of the Department of Justice’s Criminal Division; the U.S. Department of Defense; “...the Kenyan Directorate of Criminal Investigations, the Kenyan Anti-Terrorism Police Unit, the Joint Terrorism Task Force-Kenya, and the Kenyan Office of the Director of Public Prosecutions; and the Philippine National Police, Philippine Department of Justice, the Joint Terrorism Financial Investigations Group - Philippines, and Philippine Bureau of Immigration, for their assistance.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys David W. Denton, Jr., Sidhardha Kamaraju, and Elinor Tarlow are in charge of the prosecution, with assistance from the Counterterrorism Section of the National Security Division.
The charges 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 are only allegations, and every fact described should be treated as an allegation.
Kenyan National Indicted for Conspiring to Hijack Aircraft on Behalf of the Al Qaeda-Affiliated Terrorist Organization Al ShabaabRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John C. Demers, the 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 the unsealing of an Indictment charging CHOLO ABDI ABDULLAH with six counts of terrorism-related offenses based on his activities as an operative of the foreign terrorist organization al Shabaab, including conspiring to hijack aircraft in order to conduct a 9/11-style attack in the United States. ABDULLAH was arrested in July 2019 in the Philippines on local charges, and was subsequently transferred on December 15, 2020, in connection with his deportation from the Philippines, to the custody of U.S. law enforcement for prosecution on the charges in the Indictment. ABDULLAH was transported from the Phillippines to the United States yesterday, and is expected to be presented today before Magistrate Judge Robert W. Lehrburger in Manhattan federal court. The case is assigned to United States District Judge Analisa Torres.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Cholo Abdi Abdullah, as part of a terrorist plot directed by senior al Shabaab leaders, obtained pilot training in the Philippines in preparation for seeking to hijack a commercial aircraft and crash it into a building in the United States. This chilling callback to the horrific attacks of September 11, 2001, is a stark reminder that terrorist groups like al Shabaab remain committed to killing U.S. citizens and attacking the United States. But we remain even more resolute in our dedication to investigating, preventing, and prosecuting such lethal plots, and will use every tool in our arsenal to stop those who would commit acts of terrorism at home and abroad. Thanks to the outstanding investigative work of the New York Joint Terrorism Task Force, and the FBI’s global partnerships with law enforcement agencies around the world, Abdullah’s plot was detected before he could achieve his deadly aspirations, and now he faces federal terrorism charges in a U.S. court.”
Assistant Attorney General John C. Demers said: “This case, which involved a plot to use an aircraft to kill innocent victims, reminds us of the deadly threat that radical Islamic terrorists continue to pose to our nation. And it also highlights our commitment to pursue and hold accountable anybody who seeks to harm our country and our citizens. No matter where terrorists who plan to target Americans may be located, we will seek to identify them and bring them to justice. We owe a debt of gratitude to the agents, detectives, analysts, and prosecutors who are responsible for this defendant’s arrest.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Nearly 20 years after the 9/11 terrorist attacks, there are those who remain determined to conduct terror attacks against United States citizens. Abdullah, we allege, is one of them. He obtained a pilot’s license overseas, learning how to hijack an aircraft for the purpose of causing a mass-casualty incident within our borders. Fortunately, the exceptional work by the men and women assigned to the many agencies that comprise the FBI’s New York JTTF have, once again, disrupted a threat to our communities.”
NYPD Commissioner Dermot Shea said: “As alleged in the federal indictment against him, Cholo Abdi Abdullah had obtained pilot training and begun plotting a terrorist attack against a target in the United States. But the outstanding work of our NYPD detectives and federal agents of the FBI’s New York Joint Terrorism Task Force, along with all of our law enforcement partners, put an end to those plans and ensured that no one would be harmed.”
As alleged in the Indictment,[1] unsealed today in Manhattan federal court:
The charges in the Indictment unsealed today arise out of a coordinated scheme by the terrorist organization Harakat al-Shabaab al-Mujahideen, commonly known as “al Shabaab,” to target Americans both at home and abroad. Al Shabaab, which has sworn allegiance to al Qaeda and serves as al Qaeda’s principal wing in East Africa, is responsible for numerous deadly terrorist attacks, including attacks that have claimed American lives. Recently, al Shabaab has embarked on a string of terrorist attacks as part of an operation purportedly in response to the United States’ decision to move its embassy in Israel to Jerusalem, which the group has dubbed “Operation Jerusalem Will Never be Judaized.” In particular, these terrorist attacks perpetrated by al Shabaab include an attack on January 15, 2019 at a hotel in Nairobi, Kenya, which resulted in the deaths of approximately 21 people, including a U.S. national and survivor of al Qaeda’s 9/11 attack on the World Trade Center in New York, New York; a September 30, 2019 attack on a U.S. military facility in Somalia; and a January 5, 2020 attack on another U.S. facility in Kenya, in which three Americans were killed.
As alleged in the Indictment, ABDULLAH was an al Shabaab operative who participated in a plot to hijack commercial aircraft and crash them into a building in the United States. Beginning in 2016, at the direction of a senior al Shabaab commander who was responsible for, among other things, planning the 2019 Nairobi hotel attack, ABDULLAH traveled to the Philippines and enrolled in a flight school there (the “Flight School”), for the purpose of obtaining training for carrying out the 9/11-style attack. Between 2017 and 2019, ABDULLAH attended the Flight School on various occasions and obtained pilot’s training, ultimately completing the tests necessary to obtain his pilot’s license.
While ABDULLAH was obtaining pilot training at the Flight School, he also conducted research into the means and methods to hijack a commercial airliner to conduct the planned attack, including security on commercial airliners and how to breach a cockpit door from the outside, information about the tallest building in a major U.S. city, and information about how to obtain a U.S. visa.
Thanks to the extraordinary work of the FBI, law enforcement authorities foiled this plot. ABDULLAH has remained in custody since his initial arrest in the Philippines.
* * *
ABDULLAH, 30, of Kenya, is charged with conspiring to provide and providing material support to a designated foreign terrorist organization (al Shabaab), conspiring to murder U.S. nationals, conspiring to commit aircraft piracy, conspiring to destroy aircraft, and conspiring to commit acts of terrorism transcending national boundaries. ABDULLAH faces a maximum sentence of life in prison, and a mandatory minimum sentence of 20 years in prison. The specific penalties for each of the charges is reflected in the chart below. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Ms. Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD. Ms. Strauss also thanked the FBI Legal Attaché Offices in Nairobi, Kenya, and Manila, the Philippines; the FBI’s Hudson Valley Resident Agency; the New York State Police; the Counterterrorism Section of the Department of Justice’s National Security Division; the Office of International Affairs of the Department of Justice’s Criminal Division; the U.S. Department of Defense; the Kenyan Directorate of Criminal Investigations, including the Anti-Terrorism Police Unit and the Joint Terrorism Task Force-Kenya; the Office of the Director of Public Prosecutions in Kenya; the Philippine National Police; the Philippine Department of Justice; the Joint Terrorism Financial Investigations Group-Philippines; and the Philippine Bureau of Immigration, for their assistance.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys David W. Denton, Jr., Sidhardha Kamaraju, and Elinor Tarlow are in charge of the prosecution, with assistance from Trial Attorneys Jason Denney and Rebecca Magnone of the Counterterrorism Section.
The charges in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Count
Charges
Penalties
1
Conspiracy to Provide Material Support to a Foreign Terrorist Organization (18 U.S.C. § 2339B)
20 years’ imprisonment
2
Provision of Material Support to a Foreign Terrorist Organization (18 U.S.C. § 2339B)
20 years’ imprisonment
3
Conspiracy to Murder U.S. Nationals (18 U.S.C. § 2332(b))
Life imprisonment
4
Conspiracy to Commit Aircraft Piracy (49 U.S.C. § 46502)
Life imprisonment; mandatory minimum of 20 years’ imprisonment
5
Conspiracy to Destroy Aircraft (18 U.S.C. § 32(a))
20 years’ imprisonment
6
Conspiracy to Commit Acts of Terrorism Transcending National Boundaries (18 U.S.C. § 2332b)
Life imprisonment, consecutive to any other term of imprisonment imposed
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein are only allegations, and every fact described should be treated as an allegation.
10 Defendants Arrested in Home-Health Aide Fraud SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, 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 unsealing of an Indictment charging MARIANNA LEVIN, TETYANA GOLYAK, ELENA LOKSHIN, SVITLANA ROHULYA, MARINA ZAK, ALINA KUPTSOVA, MALIHA IJAZ, MAKHINBONU NARZULLAEVA, NATALYA SHVARTS, and INNA GEKELMAN with conspiracy to commit mail, wire and healthcare fraud; substantive counts of mail fraud, wire fraud, and healthcare fraud; and conspiracy to violate the Anti-Kickback Statute, in connection with a scheme to fraudulently bill Medicaid for home-health and personal-care services that were not actually rendered. The ten defendants were arrested earlier this morning and will be presented today before United States Magistrate Judge Robert W. Lehrburger in Manhattan federal court. The case has been assigned to United States District Judge John P. Cronan.
Manhattan Acting U.S. Attorney Audrey Strauss said: “These ten defendants allegedly attempted to swindle the managed healthcare system by billing for no-show cases, where aides provided no actual assistance to patients. Now more than ever, the Medicare system is critical for so many Americans who depend on its services for their well-being. Conduct such as the alleged scheme today not only beleaguers the healthcare system, it unfairly penalizes those who depend on it most – the patients.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Money that’s earmarked for Medicaid-approved services, and fraudulently paid out to those who don’t render these services, is a crime that’s ultimately paid for by taxpayers themselves. In this case, as we allege, there were even patients involved in the kickback scheme who were willing to play along with the no-show scam in order to earn a few extra bucks. With a nearly $5 billion increase in managed long-term care plan spending recorded over a recent six-year period, the money paid out to those charged today is no drop in the bucket.”
As alleged in the Indictment unsealed today in Manhattan federal court[1]:
Since in or about 2015, the defendants have been engaged in a widespread fraud scheme through which the defendants defrauded Medicaid for home-health and personal-care services that were not actually rendered. At all times relevant to the Indictment, the defendants worked at or were otherwise associated with one of two affiliated licensed homecare service agencies based in Brooklyn, New York (“Agency-1”, “Agency-2”, collectively referred to as the “Agencies”), that provide home-health and personal-care services to patients residing in all five boroughs of New York City and Nassau County. Combined, the Agencies employed approximately 3,000 home-health and personal-care aides (the “Aides”). Most of the Aides were licensed to provide home-health aide services and personal-care services.
Home care is a health service provided in the patient’s home to promote, maintain, or restore health or lessen the effects of illness and disability. Home care includes personal-care services, administered by Aides, including housekeeping, meal preparation, bathing, toileting, and grooming.
At all times relevant to this Indictment, eligible Medicaid beneficiaries in New York were able to seek government-funded home-health and personal-care services through managed long-term care plans (“MLTCs”). In turn, MLTCs received Medicaid funding to pay for their beneficiaries’ home-health and personal-care services. In recent years, home-health costs in New York have ballooned. In or about January 2020, New York’s State budget director announced, in substance and in part, that spending on MLTCs tripled between the 2013 and 2019 fiscal years, representing a $4.8 billion increase.
The Agencies administer home-health and personal-care services to Medicaid beneficiaries enrolled in New York MLTCs. From in or about 2015 to in or about December 2020, Medicaid reimbursed the Agencies hundreds of millions of dollars for home-health and personal-care services. A significant portion of the Agencies’ billings were fraudulent. In particular, the Agencies billed Medicaid for “no-show” cases in which Aides claimed to be performing home-health or personal-care services when they were not. At times when Aides falsely claimed to be performing home-health or personal-care services, they in fact, stayed home, ran personal errands, vacationed, and socialized with family and friends. For example, on or about September 9, 2017, TETYANA GOLYAK was at a vineyard and winery in New Jersey at a time she claimed to be performing personal-care services for a patient residing in Brooklyn, New York; in or about January 2019, NATALYA SHVARTS was on a Caribbean cruise at a time she claimed to be performing personal-care services for a patient residing in Brooklyn, New York; and, on or about March 1, 2019, MALIHA IJAZ was at a Brooklyn restaurant at a time IJAZ claimed to be performing personal-care services. These no-show arrangements caused the Agencies to submit false Medicaid claims to MLTCs.
With no-show cases at the Agencies, an Aide’s fraudulently-obtained wages were often split between the no-show Aide and the no-show patient. In addition to paying kickbacks to no-show patients, no-show Aides sometimes paid kickbacks to conspirators who referred no-show cases to Aides at the Agencies.
The defendants are each charged with one count of conspiracy to commit mail, wire, and healthcare fraud, which carries a maximum sentence of 20 years in prison, one count of mail fraud, 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, one count of healthcare fraud, which carries a maximum sentence of 20 years in prison, and one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum sentence of five years in prison. The maximum potential sentences and minimum sentence in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
* * *
Ms. Strauss praised the outstanding investigative work of the New York FBI, New York City Police Department, and the Office of Medicaid Inspector General for New York State.
This case is being handled by the Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Nicholas Folly, Nicholas W. Chiuchiolo and Daniel G. Nessim 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.
DEFENDANT
AGE
ROLE
RESIDENCE
MARIANNA LEVIN
47
Manager at Agency-1
Brooklyn
TETYANA GOLYAK
43
Director of Case Coordinators at Agency-1
Brooklyn
ELENA LOKSHIN
34
Director of Human Resources at Agency-1
Howell, NJ
SVITLANA ROHULYA
43
Case Coordinator and Supervisor of Case Coordinators at Agency-1
Brooklyn
MARINA ZAK
43
Case Coordinator and Supervisor at Agency-1 and Supervisor at Agency-2
Staten Island
ALINA KUPTSOVA
60
Case Coordinator at the Agencies
Avenel, NJ
MALIHA IJAZ
33
Intake Employee and Aide at Agency-1
Brooklyn
MAKHINBONU NARZULLAEVA
31
Case Coordinator and Aide at Agency-1
Brooklyn
NATALYA SHVARTS
51
Coordinator and Aide at Agency-1
Brooklyn
INNA GEKELMAN
70
Recruiter for Agency-1
Brooklyn
[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.
Ms-13 Financier Sentenced to Four Years in PrisonRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that KELLY RIVAS, a/k/a “La Grumpy,” was sentenced today to four years in prison for managing dues collection and distribution for the transnational criminal organization La Mara Salvatrucha, also known as MS-13. RIVAS previously pled guilty to conspiracy to commit extortion in connection with the use of force to collect payments from MS-13 members and associates. U.S. District Judge Paul A. Engelmayer imposed the sentence in Manhattan federal court.
Acting U.S. Attorney Audrey Strauss said: “Kelly Rivas collected dues from MS-13 members in several states, and funneled those payments to MS-13 leaders in El-Salvador, as well as MS-13 members in U.S. prisons. For her role in funding this vicious gang, she has been sentenced to a significant term in prison.”
According to statements in the Indictment, and other filings and statements at public court proceedings in the case:
MS-13 is a transnational gang that operates in El Salvador and throughout the United States, among other places. MS-13 is infamous for being a brutally violent organization. Its leadership, members, and associates engage in a variety of serious and violent criminal activity, including acts of murder and attempted murder, malicious wounding with serious injury, assaults, kidnappings, firearms trafficking, extortion, and international and interstate narcotics distribution. One hallmark of the gang is its use of machetes to commit brutal attacks, including murders, in furtherance of the gang’s activities.
RIVAS belonged to an MS-13 “clique” known as Hollywood Locos Salvatrucha (HLS). HLS operates in Washington, D.C., Maryland, Virginia, New York, and elsewhere. HLS members have committed murder and other acts of violence, and generated revenue on behalf of MS-13, including through robbery, extortion, and narcotics and firearms trafficking. HLS members are required to pay monthly dues, which MS-13 uses to support various gang activities and to support other MS-13 members, including those who are incarcerated or who live in El Salvador. Members are induced to pay dues, including through threats of violence, and members who fall behind on dues are subjected to physical beatings carried out by other members of the gang. In addition to the violent consequences for failure to pay dues, MS-13 rules establish that MS-13 members who try to withdraw from the gang will be “green lit,” meaning that the gang’s leadership will authorize the gang to murder the withdrawing member.
RIVAS collected, and oversaw the collection, of dues in New York, Virginia, Maryland, and elsewhere. She also transmitted and ensured the transmission of the collected funds to other MS-13 members, including incarcerated members and members in El Salvador, to support the gang’s activities. In the course of overseeing the collection of dues, RIVAS pressured MS-13 members to meet their dues payment obligations by any means necessary, including through criminal activities that would generate income, such as narcotics and firearms trafficking. Like other MS-13 leaders, RIVAS resorted to threats of violence to extort dues from MS-13 members and relied on physical beatings carried out by other MS-13 members to enforce payment.
* * *
In addition to the prison term, RIVAS, 34, of Manassas Park, Virginia, was sentenced to three years of supervised release. She was further ordered to forfeit $19,346 in dues that she had collected or transmitted.
Ms. Strauss praised the outstanding investigative work of Homeland Security Investigations, U.S. Customs and Border Protection, and the Albemarle County Police Department, and thanked the Albermarle County Commonwealth’s Attorney’s Office for its assistance.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Hagan Scotten, Danielle R. Sassoon, and Daniel G. Nessim are in charge of the prosecution.
Co-Founder of Cryptocurrency Company Who Defrauded Ico Investors Sentenced to PrisonRead the Press Release
Ilan T. Graff, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that ROBERT JOSEPH FARKAS, a/k/a “RJ,” was sentenced on December 15 to one year and one day in prison, in connection with his participation in a scheme to induce victims to invest more than $25 million dollars’ worth of digital funds in Centra Tech, Inc. (“Centra Tech”), a Miami-based company he co-founded and that purported to offer cryptocurrency-related financial products. FARKAS previously pled guilty to conspiring to commit securities fraud and wire fraud in connection with his and his co-conspirators’ use of material misrepresentations and omissions to solicit investors to purchase securities, in the form of digital tokens issued by Centra Tech, through an initial coin offering (“ICO”) beginning in approximately July 2017. U.S. District Judge Lorna G. Schofield imposed the sentence in Manhattan federal court.
Mr. Graff said: “Farkas and his co-conspirators created fictitious executives and fabricated business relationships with legitimate institutions to dupe investors into handing over millions of dollars for a fraudulent ICO. We will continue to aggressively pursue frauds like this one, whether they involve traditional securities or newer financial instruments and crypto-assets.”
According to statements in the Superseding Information, and other filings and statements at public court proceedings in the case:
In or about July 2017, FARKAS, along with co-defendants Sohrab Sharma and Raymond Trapani, founded a company called Centra Tech that claimed to offer cryptocurrency-related financial products, including a purported debit card, the “Centra Card,” that supposedly allowed users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payment cards. From approximately July 30, 2017, through October 5, 2017, FARKAS and his co-defendants solicited investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech (“Centra tokens” or “CTR tokens”), through a so-called “initial coin offering” or “ICO.” As part of this effort, FARKAS and his co-defendants represented, in oral and written offering materials that were disseminated via the internet: (a) that Centra Tech had an experienced executive team with impressive credentials, including a purported CEO named “Michael Edwards” with more than 20 years of banking industry experience and a master’s degree in business administration from Harvard University; (b) that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard; and (c) that Centra Tech had money transmitter and other licenses in 38 states, among other claims. Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens. In or about October 2017, at the end of Centra Tech’s ICO, those digital funds raised from victims were worth more than $25 million. At certain times in 2018, as the defendants’ fraud scheme was ongoing, those funds were worth more than $60 million.
The claims that FARKAS and his co-conspirators made to help secure these investments, however, were false. In fact, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team were fictional people who were fabricated to dupe investors, Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard, and Centra Tech did not have such licenses in a number of those states.
In 2018, this Office and the Federal Bureau of Investigation (“FBI”) seized, pursuant to judicially authorized seizure warrants, 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech during its ICO based on fraudulent misrepresentations and omissions. The United States Marshals Service sold the seized Ether units for approximately $33.4 million earlier this year. Following entry of a final order of forfeiture, these funds and other forfeited fraud proceeds will be available for potential use in a remission program that the Department of Justice intends to create to compensate victims of the Centra Tech fraud.
* * *
FARKAS, 34, of Bay Harbor Islands, Florida, was also sentenced to three years of supervised release. He was further ordered to forfeit $347,062.58 and a Rolex watch purchased with fraud proceeds.
Mr. Graff praised the investigative work of the FBI and thanked the U.S. Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Samson Enzer, Negar Tekeei, and Daniel Loss are in charge of the prosecution.
Canadian Fashion Executive Peter J. Nygard Charged with Sex Trafficking and Racketeering OffensesRead the Press Release
Audrey Strauss, the Acting 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 Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of a nine-count indictment charging Canadian fashion executive PETER J. NYGARD, 79, with racketeering, sex trafficking, and related crimes arising out of a decades-long pattern of criminal conduct involving at least dozens of victims in the United States, the Bahamas, and Canada, among other locations.
NYGARD was taken into custody on December 14, 2020, in Winnipeg, Manitoba, Canada by Canadian authorities after the United States requested Canada issue a Provisional Arrest Warrant pursuant to the extradition treaty between the two countries.
The case has been assigned to United States District Judge Paul G. Gardephe.
If you believe you are a victim of the sexual abuse perpetrated by Peter Nygard, please contact the FBI at 1-800-CALL FBI, and reference this case.
As alleged in the Indictment unsealed today in Manhattan federal court[1]:
From at least in or about 1995, up to and including in or about 2020, PETER J. NYGARD was the leader and founder of an international clothing design, manufacturing, and supply business headquartered in Winnipeg, Canada, with major offices and warehouses in the United States, including New York City and California. NYGARD operated a constellation of corporate entities organized in various countries (the “Nygard Group”). Over this 25-year period, NYGARD used the Nygard Group’s influence, as well as its employees, funds, and other resources, to recruit and maintain adult and minor-aged female victims for NYGARD’s sexual gratification and the sexual gratification of his friends and business associates. NYGARD and his co-conspirators, including Nygard Group employees, used force, fraud, and coercion to cause women and minors to have sex with NYGARD and others.
NYGARD frequently targeted women and minor-aged girls who came from disadvantaged economic backgrounds and/or who had a history of abuse. He controlled his victims through threats, false promises of modeling opportunities and other career advancement, financial support, and by other coercive means, including constant surveillance, restrictions of movement, and physical isolation. NYGARD forcibly sexually assaulted some of his victims. Other victims were forcibly assaulted by NYGARD’s associates or drugged to ensure their compliance with his sexual demands.
NYGARD maintained personal and quasi-professional relationships with certain of his victims, whom he referred to as “girlfriends” or “assistants.” NYGARD required these “girlfriends” to travel and to stay with him regularly; to engage in sexual activity at his direction (including with NYGARD, with each other, and with others); and to recruit new women and minor-aged girls for NYGARD to have sex with. NYGARD controlled these “girlfriends” through a variety of means, including force, fraud, and coercion. At times, NYGARD and his associates provided illegal drugs and alcohol to “girlfriends” before sexual activity and threatened or berated “girlfriends” if they did not agree to participate. NYGARD sometimes forcibly assaulted “girlfriends” who did not comply with NYGARD’s sexual demands – or caused others to do so. NYGARD dictated the daily activities of “girlfriends” and the details of their appearance. “Girlfriends” were also under constant surveillance by NYGARD and his associates and were not permitted to leave premises without NYGARD’s express permission.
NYGARD used various tools to recruit women and minors for sex, including:
- Events hosted at NYGARD’s properties in Marina del Rey, California and in the Bahamas, including so-called “Pamper Parties,” named for the free food, drink, and spa services that NYGARD made available. NYGARD frequently used a “girlfriend” or another employee to approach a chosen woman or girl to indicate his interest in sex. NYGARD engaged in sexual activity with the victim on the premises and paid her cash. Some unwilling participants, including minors, were drugged to force their compliance with his sexual demands. Other victims had no advance warning of NYGARD’s interest in sexual activity before being lured to a secluded area of the property where NYGARD used physical force and/or psychological pressure to coerce sex.
- Sex and “swingers” clubs, where NYGARD directed and pressured “girlfriends” through manipulation, intimidation, degradation, threats and, on occasion, force, to engage in sex with other men in order to facilitate NYGARD having sex with other women and for his own sexual gratification.
- Sexual “swaps” with male friends and business associates, who would bring NYGARD a “date” for sex in exchange for sexual access to one of NYGARD’s “girlfriends.” NYGARD did not inform “girlfriends” in advance that he would trade them for sex and often used manipulation, intimidation, degradation, and threats to ensure compliance.
NYGARD paid his victims for commercial sex using Nygard Group funds, including by putting “girlfriends” on the payroll of Nygard Group entities as “models,” “assistants,” or in other positions. NYGARD also used the façade of legitimacy his fashion business created – as well as the Nygard Group’s business operations, reputation, and resources – to facilitate and conceal his crimes in other ways. Among other things, NYGARD used the promise of modeling and other fashion industry jobs to lure victims, Nygard Group money to fund “Pamper Parties,” and Nygard Group employees to recruit potential victims to attend those parties, including screening attendees for their physical appearance to confirm that NYGARD would find them attractive, and maintaining a register of Pamper Party attendees’ personal information, documenting their names, contact information, weight, and physical measurements. NYGARD also used Nygard Group employees and funds to intimidate, threaten, and corruptly persuade individuals who alleged that he was engaged in sexual assault and sex trafficking, including by paying witnesses for false statements and affidavits, threatening witnesses with arrest, prosecution, and reputational harm, and attempting to cause reputational harm and discredit potential witnesses by disseminating false or embarrassing information.
* * *
Ms. Strauss praised the outstanding investigative work of the FBI and the NYPD.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jacqueline C. Kelly, Allison Nichols, and Celia V. Cohen are 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 herein, constitute only allegations, and every fact described should be treated as an allegation.
Bronx Gang Member Charged with Racketeering and Firearms OffensesRead the Press Release
Audrey Strauss, the Acting 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 Margaret Garnett, Commissioner of the New York City Department of Investigation (“DOI”), announced the unsealing today of an Indictment charging NICHOLAS JOSEPH, a/k/a “Gotti,” a/k/a “Finesse,” with various racketeering and firearms offenses relating to the Castle Hill Crew, which operates principally in the Castle Hill Houses in the Soundview neighborhood of the Bronx. The charges include assault with a deadly weapon and attempted murder in aid of racketeering for the April 28, 2017, shooting in the Story Playground in Soundview, during which a 12-year-old child was struck by gunfire.
JOSEPH was taken into custody last night and will be presented before U.S. Magistrate Judge Sarah Netburn later today. The case is assigned to U.S. District Judge P. Kevin Castel.
Acting U.S. Attorney Audrey Strauss said: “As alleged in the indictment, the defendant carried out a shooting in a playground that injured a 12-year-old child. Thanks to the extraordinary work of the NYPD, HSI, and DOI, the defendant now faces federal charges for his crimes.”
NYPD Commissioner Dermot Shea said: “Targeting and dismantling gangs and crews, and preventing the violence so often associated with their illegal activities, continues to be among the highest priorities for the NYPD and our law enforcement partners. By precisely targeting the relatively small percentage of people responsible for committing much of the violence in New York, we are making New Yorkers safer. We remain relentless in our efforts to identify, arrest, and prosecute anyone who involves themselves in such behavior. I thank our colleagues at the Southern District and Homeland Security for their unceasing professionalism and dedicated work in removing from our streets those who allegedly commit crime and disorder, especially when it’s in the form of gang violence.”
HSI Special Agent-in Charge Peter C. Fitzhugh said: “As alleged, the Castle Hill gang was involved in drug dealing, firearms offenses, and conspiracy to murder. Their ruthlessness and blatant disregard for human life is further evidenced as Joseph is alleged to have opened fire on a rival gang member at a playground, only to have a child caught in the crossfire. We too will be relentless in our commitment to public safety and removing these violent gang members from our streets and playgrounds. Every parent and child should feel safe to play in their neighborhoods without wondering where the next stray bullet will come from.”
DOI Commissioner Margaret Garnett said: “This is a tragic example of how gang activity devastates our public housing neighborhoods and the families who live there, in this case, making a children’s playground perilous for a 12-year-old child. We cannot and will not stand for that violence. Working with our law enforcement partners we will make sure that those allegedly involved in this kind of brutality will be held accountable, and today’s arrest is part of that joint effort.”
As alleged in the Indictment unsealed today in Manhattan federal court[1]:
JOSEPH is a member and associate of the Castle Hill Crew, a racketeering enterprise that operates principally in the Castle Hill Houses in the Soundview neighborhood of the Bronx. In order to enrich the enterprise, preserve and protect the power of the enterprise, and enhance its criminal operations, Castle Hill Crew members and associates committed, conspired, attempted, and threatened to commit acts of violence, including murder; distributed and possessed with intent to distribute narcotics; engaged in fraud; and obtained, possessed, and used firearms.
On or about April 28, 2017, JOSEPH and others shot at a rival gang member in the vicinity of the Story Playground in the Bronx, New York, during which a 12-year-old child was injured.
* * *
The defendant is charged with one count of racketeering conspiracy, which carries a maximum sentence of 20 years in prison; one count of attempted murder, assault with a deadly weapon, and attempted assault with a deadly weapon in aid of racketeering, which carries a maximum sentence of 20 years in prison; one count of using and carrying a firearm in furtherance of a crime of violence, which was brandished and discharged, which carries a maximum sentence of life and a mandatory minimum sentence of 10 years in prison; and one count of being a felon in possession of a firearm and ammunition, 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 will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the NYPD, HSI, and DOI.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Andrew K. Chan and Justin V. Rodriguez 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 constitutes only allegations, and every fact described herein should be treated as an allegation.
Baggage Handler at Newark Liberty International Airport Sentenced to 15 Years in Prison for Role in Cocaine Smuggling SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that TYRONE WOOLASTON was sentenced today by U.S. District Judge Alison J. Nathan to 180 months in prison for his participation in a multi-year scheme to smuggle cocaine into the United States through Newark Liberty International Airport. WOOLASTON was convicted in February 2019, after a two-week jury trial, of conspiring to distribute more than five kilograms of cocaine, and using a firearm in furtherance of cocaine trafficking.
Acting U.S. Attorney Audrey Strauss said: “Tyrone Woolaston used his position as a baggage handler at Newark Liberty Airport to smuggle cocaine into the United States. When law enforcement conducted an undercover operation to investigate, Woolaston, carrying a semi-automatic pistol, delivered five kilos of what he believed to be cocaine. Now Woolaston has been sentenced to 15 years in prison for his crimes.”
According to court documents and the evidence at trial:
WOOLASTON was a lead baggage handler for a commercial airline at Newark Liberty International Airport (the “Airport”). From in or about 2013 through February 2018, WOOLASTON conspired to smuggle shipments of cocaine into the United States. WOOLASTON abused his secure access to the restricted areas of the Airport to remove suitcases containing shipments of multiple kilograms of cocaine from international flights and smuggle them through the Airport for distribution in the New York City area.
In 2017 and 2018, agents from the New Jersey Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”) conducted an undercover operation to investigate cocaine smuggling at the Airport. As part of the investigation, a confidential source met with WOOLASTON to arrange a cocaine shipment, and WOOLASTON agreed to bring a suitcase containing five kilograms of cocaine through the Airport. On February 10, 2018, HSI agents placed a suitcase containing approximately five kilograms of sham cocaine on an international flight from the Cayman Islands to the Airport. WOOLASTON was working on the Airport ramp when the flight arrived at the Airport, and took possession of the suitcase and carried the sham cocaine shipment through the Airport, evading customs screening. The following day, WOOLASTON carried a .40 caliber Glock pistol, equipped with a laser sight, to deliver the sham cocaine to the confidential source.
* * *
In addition to the prison term, WOOLASTON, 35, of Orange, New Jersey, was sentenced to five years of supervised release.
Ms. Strauss praised the outstanding investigative work of HSI.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Thane Rehn and Alison Moe are in charge of the prosecution.
“Diamond Enterprise” Members and Associates Indicted for Racketeering, Gambling, Extortion, Fraud, Money Laundering, and Obstruction OffensesRead the Press Release
Audrey Strauss, the Acting 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”), Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), and 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”), announced the unsealing of an Indictment charging 16 defendants in counts including racketeering, gambling, extortion, fraud, money laundering, and obstruction of justice offenses. Of the 16 defendants, ABDURAMAN ISENI, a/k/a “Diamond,” ERVIN MAKISHTI, a/k/a “Vinny,” SOKOL GJONI, MIRALEM LJULJANOVIC, and JETMIR SULAJ, are associated with a racketeering enterprise referred to in the Indictment as the “Diamond Enterprise,” a criminal group overseen by ISENI, and are charged in United States v. Iseni, et al. (the “Indictment”), which has been assigned to U.S. District Judge Andrew J. Carter.
Eleven additional defendants are charged in the Indictment with various offenses, many relating to the operations of the overarching Diamond Enterprise, including extortion, operation of illegal gambling establishments, money laundering, bank fraud, fraud on the federal Paycheck Protection Program (“PPP”), and obstruction of justice. Specifically:
- ISENI, MAKISHTI, GJONI, LJULJANOVIC, SULAJ, ELDI MAKISHTI, ENRI DIMO, a/k/a “Eni,” DARREN DANZIERI, AMIR BECOVIC, and RAFAEL JACOBS are charged with conspiring to operate illegal gambling businesses, including live poker, electronic poker machines, and gambling on sporting events.
- ISENI, MAKISHTI, GJONI, LJULJANOVIC, ISLAM LAMCE, a/k/a “Bachi,” BRAJAN TOLA, GAZMEND LITA, and SMAIL DJOKIC, a/k/a “Ismail Gjoka” are charged with conspiring to transmit wagering information by wire communication facility to assist in the placing of bets and wagers on sporting events.
- ISENI and BESIM KUKAJ are charged with conspiring to commit extortion and interstate threats, extortion, and interstate threats in connection with ISENI’s call to a victim threatening physical violence.
- KUKAJ is charged with bank fraud conspiracy, as part of a scheme to obtain Government-guaranteed loans from banks via the fraud on the Paycheck Protection Program, a law intended to assist small businesses during the COVID-19 pandemic.
- ISENI is charged with money laundering funds that were represented to be the proceeds of a scheme to fraudulently obtain Paycheck Protection Program funds.
- MELSA SKRAPALLIU is charged with obstruction of justice for false statements made to a federal law enforcement officer in order to interfere with an investigation of ISENI.
- ISENI and SKRAPALLIU are charged with bank fraud conspiracy and making false statements to a bank.
ISENI, ERVIN MAKISHTI, GJONI, LJULJANOVIC, SULAJ, ELDI MAKISHTI, DIMO, DANZIERI, JACOBS, TOLA, DJOKIC, KUKAJ, and SKRAPALLIU were taken into federal custody today and will be presented before U.S. Magistrate Judge Sarah Netburn of the Southern District of New York. LITA, LAMCE, and BECOVIC remain at large.
Acting Manhattan U.S. Attorney Audrey Strauss said: “Abduraman Iseni and his co-defendants allegedly operated a network of underground gambling establishments, and laundered the proceeds of that activity, to prop up a criminal enterprise under Iseni’s control. Going well beyond that racketeering activity, Iseni and others allegedly engaged in a variety of crimes, including extortion through violent threats, obstruction of justice, fraud on legitimate financial institutions, and fraud on the critical Paycheck Protection Program. They now face the possibility of serious time in prison for their alleged crimes.”
FBI Assistant Director William F. Sweeney Jr. said: “The organization we’ve disrupted with our enforcement action today is a textbook example of an organized-crime group. As we allege, the crimes these men committed ran the gamut from running illegal gambling operations to making extortionate threats to defrauding the government of PPP benefits intended for honest Americans suffering economic harm during the pandemic. While these men did all they could to avoid making an honest living, the outstanding work done by the FBI’s New York Balkan Organized Crime team ensures they won’t be able to avoid facing justice.”
SBA-OIG Special Agent-in-Charge Amaleka McCall-Brathwaite said: “The Paycheck Protection Program was developed to aide small businesses during these challenging times. Our Office will relentlessly pursue organized criminal enterprises that seek to exploit SBA’s vital economic programs. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”
NYPD Commissioner Dermot Shea said: “The web of alleged crimes unveiled by this federal indictment victimized everyday New Yorkers, undercut a federal aid program and eroded the fabric of life in the city. I commend our NYPD detective and federal partners for their sustained work in this important case.”
According to the allegations in the Indictment[1] unsealed today in Manhattan federal court and statements made during Court proceedings:
As alleged, the Diamond Enterprise was an organized criminal group operating under the direction of ISENI, who had substantial influence in the criminal underworld. The Diamond Enterprise operated through groups of individuals, often with overlapping members or associates, dedicated to particular criminal tasks, particularly operation of illegal gambling parlors, sports gambling by wire, and money laundering, among others. For their roles in leading and managing the Diamond Enterprise’s criminal activities, ABDURAMAN ISENI, a/k/a “Diamond,” ERVIN MAKISHTI, a/k/a “Vinny,” SOKOL GJONI, MIRALEM LJULJANOVIC, and JETMIR SULAJ are charged in Count One of the Indictment with racketeering conspiracy. The Diamond Enterprise thrived in part on the revenues generated by a network of illegal gambling parlors – “Sports Café,” “Friendly Café,” and “Oasis Café” – located throughout Brooklyn, that hosted underground poker games and hosted illegal sports books. Some of these revenues, in turn, were laundered through a series of bank accounts in an effort to conceal and facilitate the Enterprise’s continued operations.
In addition to the Enterprise’s operations, ISENI allegedly engaged in a series of additional crimes ranging from extortion through threats of violence, to money laundering, to fraud on the PPP. 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. As alleged, defendant KUKAJ engaged in a fraud to obtain PPP loan funds, which ISENI then attempted to launder through bank accounts designed to conceal the source and ownership of those fraudulently obtained funds.
* * *
A chart containing the names, charges, and maximum penalties for each of the defendants is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of a defendant would be determined by the judge.
Ms. Strauss praised the outstanding work of FBI New York’s Balkans and Middle East Organized Crime Squad, as well as the FBI’s Newark Office, the New York City Police Department, the Department of State Diplomatic Security Service, the Small Business Administration Office of the Inspector General, the Social Security Administration Office of the Inspector General, the New York State Liquor Authority, and United States Customs and Border Protection for their investigative efforts and ongoing support and assistance with the case.
The prosecution of this case is being overseen by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys Samuel L. Raymond and David R. Felton are in charge of the case.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Count
Defendants
Max. Penalty
Count One: Racketeering Conspiracy (18 U.S.C. § 1962(d))
Abduraman Iseni,
a/k/a “Diamond,”
Ervin Makishti,
a/k/a “Vinny,”
Sokol Gjoni,
Miralem Ljuljanovic,
Jetmir Sulaj,
20 years’ imprisonment
Count Two: Conspiracy to Operate Illegal Gambling Businesses (18 U.S.C. §§ 371 and 1955)
Abduraman Iseni,
a/k/a “Diamond,”
Ervin Makishti,
a/k/a “Vinny,”
Sokol Gjoni,
Miralem Ljuljanovic,
Jetmir Sulaj,
Eldi Makishti,
ENRI DIMO,
a/k/a “Eni,”
Darren Danzieri,
AMIR BECOVIC,
RAFAEL JACOBS
5 years’ imprisonment
Count Three: Conspiracy to Transmit Wagering Information (18 U.S.C. §§ 371 and 1084)
Abduraman Iseni,
a/k/a “Diamond,”
Ervin Makishti,
a/k/a “Vinny,”
Sokol Gjoni,
Miralem Ljuljanovic,
Islam Lamce,
a/k/a “Bachi,”
BRAJAN TOLA,
Gazmend Lita,
SMAIL DJOKIC,
a/k/a “Ismail Gjoka,”
5 years’ imprisonment
Count Four: Conspiracy to Commit Extortion and Interstate Threats (18 U.S.C. §§ 371 and 875)
Abduraman Iseni,
a/k/a “Diamond,”
BESIM KUKAJ
5 years’ imprisonment
Count Five: Extortion (18 U.S.C. § 875(b))
Abduraman Iseni,
a/k/a “Diamond,”
BESIM KUKAJ
20 years’ imprisonment
Count Six: Interstate Threats (18 U.S.C. § 875(c))
Abduraman Iseni,
a/k/a “Diamond,”
BESIM KUKAJ
5 years’ imprisonment
Count Seven: Bank Fraud Conspiracy (18 U.S.C. § 1349)
Besim Kukaj
30 years’ imprisonment
Count Eight: Money Laundering (18 U.S.C. § 1956)
Abduraman Iseni,
a/k/a “Diamond,”
20 years’ imprisonment
Count Nine: Obstruction of Justice (18 U.S.C. § 1512(c))
MELSA SKRAPALLIU
20 years’ imprisonment
Count Ten: Bank Fraud Conspiracy (18 U.S.C. § 1349)
Abduraman Iseni,
a/k/a “Diamond,”
MELSA SKRAPALLIU
30 years’ imprisonment
Count Eleven: False Statements to a Bank (18 U.S.C. § 1014)
Abduraman Iseni,
a/k/a “Diamond,”
MELSA SKRAPALLIU
30 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.
Justice Department Announces Additional Distribution of more than $488 Million to Victims of Madoff Ponzi SchemeRead the Press Release
The Department of Justice announced today that the Madoff Victim Fund (MVF) began its sixth distribution of approximately $488 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to almost $3.2 billion to nearly 37,000 victims worldwide.
In this distribution, payments will be sent to over 30,000 victims across the globe, bringing their total recovery to 80.05 percent. This distribution represents the sixth in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS. The MVF has received over 65,000 petitions from victims in 136 countries.
“With the $488 million distributed today, the department has now returned almost $3.2 billion to Madoff’s victims, allowing them to recover more than 80 percent of what they lost,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “This exceptional work – and there is more to come – has been made possible by the department’s steadfast commitment to the pursuit of the proceeds of fraud through civil forfeiture.”
“This office continues its efforts to seek justice for victims of history’s largest Ponzi scheme,” said Acting U.S. Attorney Audrey Strauss of the Southern District of New York. “Today’s additional payments of more than $488 million by this office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section represent the sixth in a series of distributions that will leave victims with compensation for more than 80 percent of their losses. That is an extraordinary level of recovery for a Ponzi scheme – but our work is not yet finished, and the office’s tireless commitment to compensating the victims who suffered as a result of Madoff’s heinous crimes continues.”
For decades, Bernard L. Madoff used his position as chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients. On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle.
On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to serve 150 years in prison for running the largest fraudulent scheme in history. Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. An additional $1.7 billion was collected as part of a deferred prosecution agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.
The MVF’s payouts would not have been possible without the extraordinary efforts of the Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case.
The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings. The Department of Justice also acknowledges the sacrifice of numerous individuals during this period of quarantine due to COVID-19 to ensure that this distribution occurred and remained on schedule.
More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions. Further questions may be directed to the MVF at 866-624-3670 or [email protected].
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.
Acting Manhattan U.S. Attorney Announces Additional Distribution of More Than $488 Million to Victims of Madoff Ponzi SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Attorney General Bill Barr, Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today that the Madoff Victim Fund established by the Department of Justice began its sixth distribution to victims of funds forfeited to the United States Government in connection with the Bernard L. Madoff Investment Securities LLC (“BLMIS”) fraud scheme. The distribution will include approximately $488 million in additional funds, bringing the total distributed to date to almost $3.2 billion. The funds will be sent to nearly 37,000 victims worldwide, the sixth payment to victims that will bring their total recovery from all sources of compensation to 80.05% of their losses. The Madoff Victim Fund will ultimately return to victims more than $4 billion in assets that have been recovered as compensation for losses suffered by the collapse of BLMIS, following the largest fraud in history. Another $5 billion in assets recovered by the U.S. Attorney’s Office are being separately paid to Madoff victims through the BLMIS Customer Fund administered by the Securities Investor Protection Act Trustee.
Acting Manhattan U.S. Attorney Audrey Strauss said: “This Office continues its efforts to seek justice for victims of history’s largest Ponzi scheme. Today’s additional payments of more than $488 million by this Office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section represent the sixth in a series of distributions that will leave victims with compensation for more than 80 percent of their losses. That is an extraordinary level of recovery for a Ponzi scheme—but our work is not yet finished, and the Office’s tireless commitment to compensating the victims who suffered as a result of Madoff’s heinous crimes continues.”
Assistant Attorney General Brian C. Rabbitt said: “With the $488 million distributed today, the department has now returned almost $3.2 billion to Madoff’s victims, allowing them to recover more than 80 percent of what they lost. This exceptional work – and there is more to come – has been made possible by the department’s steadfast commitment to the pursuit of the proceeds of fraud through civil forfeiture.”
Since the early 1970s, BERNARD L. MADOFF (“MADOFF”) used his position as Chairman of BLMIS, the investment advisory business he founded, to steal billions from his clients. On March 12, 2009, MADOFF pled guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family, and select members of his inner circle. On June 29, 2009, United States District Judge Denny Chin sentenced MADOFF to 150 years in prison for running the largest fraudulent scheme in history. Judge Chin ordered MADOFF to forfeit $170,799,000,000 as part of MADOFF’s sentence.
The Madoff Victim Fund is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.
Of the approximately $4.05 billion that will be made available to victims through the Madoff Victim Fund, approximately $2.2 billion was collected as part of the civil forfeiture recovery from the estate of deceased MADOFF investor Jeffry Picower. An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. for MADOFF-related Bank Secrecy Act violations. Additional funds were collected through criminal and civil forfeiture actions against MADOFF and his co-conspirators, and certain MADOFF investors.
Ms. Strauss praised the work of the FBI and the Madoff Victim Fund, and thanked the Money Laundering and Asset Recovery Section of the Department of Justice’s Criminal Division for their assistance.
For more information about the Madoff Victim Fund, compensation to victims of BLMIS, eligibility criteria, and payment information, please visit www.madoffvictimfund.com.
The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorney Louis A. Pellegrino is in charge of the case. The remission of these forfeited funds is being handled by the Office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section.
3 Defendants Arrested for over $13 Million Fraud Scheme to Obtain Loans Intended to Help Small Businesses During COVID-19 PandemicRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Amaleka McCall-Brathwaite, Eastern Region Special Agent-in-Charge of the Office of the Inspector General of the U.S. Small Business Administration (“SBA-OIG”), William F. Sweeney Jr., Assistant Director-in-Charge of the New York 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 arrests of NGOC MANH NGUYEN, a/k/a “Peter Nguyen,” VICTORIA DIEUY HO, a/k/a “Vicky Ho,” and DAT TAT HO for a fraudulent scheme to obtain over $13 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 COVID-19 relief available from the Paycheck Protection Program (“PPP”) of the SBA, the defendants falsely and grossly overstated the number of employees and payroll at their nail salons and other businesses through fraudulent and doctored payroll and tax records in order to obtain larger loans. The defendants were arrested this morning. VICTORIA HO will be presented tomorrow in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn. NGUYEN and DAT HO will be presented in United States District Court for the Eastern District of New York in connection with these and other unrelated charges.
Acting U.S. Attorney Audrey Strauss said: “As alleged, these defendants conspired to rip off the SBA’s COVID-relief small business loan program and financial institutions by lying about how many people they employed in their family business and how much they paid those employees. They allegedly exploited a program designed to provide vital funding for small businesses that are legitimately struggling in the midst of the pandemic. Thanks to the combined efforts of the SBA, the FBI, and IRS-CI, the defendants face prosecution.”
SBA-OIG Special Agent-in-Charge Amaleka McCall-Brathwaite said: “Falsifying documents to fraudulently gain access to SBA program funds is unconscionable. OIG and its law enforcement partners will relentlessly pursue fraudsters and bring them to justice. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and commitment to seeing justice served.”
FBI Assistant Director William F. Sweeney Jr said: “The benefits offered by the CARES Act for PPP loans were established to help small businesses survive during the pandemic. Unfortunately, the owners of Victoria Nails & Spa saw this program as their own personal piggy bank. Allegedly misrepresenting the number of employees on their payroll to obtain the funding, they deposited this money into accounts controlled solely by them. When the bank froze the funds, they froze as well, conducting Internet searches for topics related to PPP fraud. Today’s Internet search for ‘PPP Loan Fraud Arrests’ will certainly produce an unwanted result – one that includes the name of their company leading the headlines.”
IRS-CI Special Agent in Charge Jonathan D. Larsen said: “In this difficult time when many Americans are struggling financially, it is repugnant that there are those who would fraudulently take advantage of relief efforts offered. IRS-Criminal Investigation remains dedicated to working with our law enforcement partners to ensure that these types of fraud are investigated and the offenders are punished to the fullest extent of the law.”
According to the allegations contained 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 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.
NGUYEN, VICTORIA HO, and DAT HO are members of a family that owns a chain of over 15 nail salons called “Victoria Nails & Spa” and other companies (the “Victoria Companies”) in or around the New York metropolitan area, including the Bronx, Brooklyn, and Long Island. From at least in or about April 2020 through at least in or about June 2020, NGUYEN, VICTORIA HO, and DAT HO engaged in a scheme to submit online applications to at least two financial institutions for a total of over $13 million in government-guaranteed loans for the Victoria Companies through the SBA’s PPP. In connection with these loan applications, the defendants falsely and grossly overstated the number of employees at the Victoria Companies and wages paid to those employees in order to obtain larger loans. In order to support the false representations in the loan applications about the number of employees at, and the wages paid by, the Victoria Companies, the defendants submitted fraudulent and doctored payroll and tax records. In addition, the defendants falsely listed the same employees in applications for different nail salons to support the loan amounts applied for, and some purported employees were listed as employees of as many as seven different nail salons during the same time period.
Based on the fraudulent PPP loan applications submitted by NGUYEN, VICTORIA HO, and DAT HO, a total of more than $13 million in PPP loans were approved for the Victoria Companies and approximately $7.8 million in loan proceeds were disbursed into bank accounts controlled by NGUYEN, DAT HO, and other family members. After the defendants learned that a hold was placed on bank accounts of the Victoria Companies that received PPP loans issued by one financial institution due to suspicion of fraudulent activity, one of the defendants conducted Internet searches for “PPP Fraud,” “PPP Loan Fraud Arrests,” and “How to get rid of a PPP Loan.” The defendants thereafter withdrew the applications for and/or repaid the PPP loans for the Victoria Companies issued by that financial institution.
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NGUYEN, 44, and VICTORIA HO, 31, both of Hicksville, New York, and DAT HO, 33, of the Bronx, New York, are each charged with one count of conspiracy to commit bank and wire fraud, which carries a maximum sentence of 30 years in prison; one count of major fraud against the United States, which carries a maximum sentence of 10 years in prison; and one count of conspiracy to make false statements, which carries a maximum sentence of five years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Ms. Strauss praised the investigative work of the SBA-OIG, FBI, and IRS-CI, and noted that the investigation remains ongoing. Ms. Strauss also thanked Homeland Security Investigations and the U.S. Attorney’s Office for the Eastern District of New York 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 Attorneys Michael C. McGinnis and Sagar K. Ravi are in charge of the prosecution.
The charges contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
“Thief-In-Law’s” Money Launderer Pleads Guilty in Manhattan Federal CourtRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced the plea by DANIEL DANIEL of Miami, Florida, to the charge of conspiring to commit money laundering by concealing the proceeds of criminal activity. As described below, DANIEL conspired with Razhden Shulaya to launder the proceeds of the illicit activities of the Shulaya Enterprise, a prolific criminal organization dismantled in June 2017 upon the arrests of Shulaya and over twenty-five other members and associates of the Shulaya Enterprise. DANIEL faces a maximum term of twenty years in prison. DANIEL pled guilty before United States District Judge Loretta A. Preska.
Manhattan Acting U.S. Attorney Audrey Strauss said: “Money launderers like Daniel sit at the nexus of the legitimate world of finance and an international network of criminal activity. They embolden, enrich, and facilitate pernicious criminal actors, and seek to place well-heeled criminals like Razhden Shulaya beyond accountability. Today’s plea is another example of this Office’s dedication to uprooting and prosecuting these criminal facilitators.”
According to the Complaint and Indictment filed in the case, as well as statements made during the plea proceedings and earlier court appearances:
The Shulaya Enterprise was an organized criminal group controlled by Razhden Shulaya, a “vor v zakone,” which is a Russian phrase translated roughly as “Thief-in-Law,” and which refers to high-level criminal figures from the former Soviet Union who receive tribute from other criminals and laypersons within the vor’s protection, license criminal activity by others, and resolve disputes between members of the criminal community. Shulaya and the Shulaya Enterprise engaged in widespread criminal activities, including the transportation and sale of stolen property, wire and bank fraud, illegal gambling operations, extortion of debtors to its gambling operation, and the use of false identification documents and counterfeit credit cards in order to illegally purchase merchandise. Shulaya operated the Shulaya Enterprise in and around the New York City area, including in Manhattan and Brooklyn, as well as in other parts of the country, including Las Vegas, Los Angeles, and Southern Florida.
DANIEL facilitated the activities of the Shulaya Enterprise by conspiring with Shulaya and others to launder proceeds of the illicit activities of the Enterprise. DANIEL assisted Shulaya in establishing a purported vodka import-export business referred to as “Tropport” and related Tropport bank accounts that DANIEL knew were being used as fronts for laundering the criminal proceeds of the Shulaya Enterprise. As Shulaya’s money laundering consultant, DANIEL explained that Tropport would provide “a cover for where [Shulaya obtained his] money”; advised Shulaya on the details of fabricating documents to reflect nonexistent corporate debt in order to falsely lower Tropport’s tax liability; and described how this sham company and false documentation would allow the vor to plausibly deny any potential money laundering allegations.
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Ms. Strauss praised the outstanding work of the FBI, including the New York Eurasian Organized Crime Task Force and the Atlantic City, Los Angeles, Las Vegas, and Miami offices, U.S. Customs and Border Protection, and the NYPD for their investigative efforts and ongoing support and assistance with the case.
DANIEL is scheduled to be sentenced by Judge Preska on March 30, 2021.
The prosecution of this case is being overseen by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorney Jessica Greenwood is in charge of the case.
Former Founder and CEO of Nanotechnology Company Charged in Manhattan Federal Court in Connection with Multimillion-Dollar Securities Fraud SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that JAMES JEREMY BARBERA, the former founder and chief executive officer of a nanotechnology company based in New York, New York, was arrested this morning in New York on securities fraud and wire fraud charges stemming from a scheme to defraud investors in the company. Among other illicit activity, BARBERA fraudulently induced dozens of investors to invest at least approximately $12.2 million based on false and misleading statements, by failing to use investors’ funds as promised, and by converting investors’ money to his own use. BARBERA will be presented this afternoon in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn.
Acting U.S. Attorney Audrey Strauss said: “As alleged, James Barbera defrauded investors out of millions of dollars by offering the opportunity to invest in a seemingly plausible but wholly fictitious technology, purportedly developed in coordination with NASA. Barbera allegedly further misled investors with false statements about institutional investors, licensing agreements, an imminent IPO, and other lies, and misappropriated investor money for his own use. Now he is in custody and facing prosecution for his alleged crimes.”
FBI Assistant William F. Sweeney Jr. said: “As we allege today, Barbera, in his position as founder and CEO of a privately-held nanotechnology company, fraudulently collected more than $12 million from investors and used approximately half the money to pay for personal expenses including private school and college tuition for his children and mortgage payments on his Central Park West apartment. Among other misrepresentations he made, Barbera claimed his company had an exclusive relationship with NASA and even used NASA’s logo to solicit investors. As we demonstrated today, Barbera’s non-existent ‘exclusive’ landed him nothing more than a trip through the federal criminal justice system.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:[1]
Between in or about 2009 and in or about 2019, BARBERA was the founder and CEO of a privately held nanotechnology company that represented to investors that the company had developed a breathalyzer sensor technology that could detect cancer and narcotics in human breath, based on technology developed by the National Aeronautics and Space Administration (“NASA”), and that it was also partnered with a major U.S. research university.
From at least in or about 2013 through in or about 2020, BARBERA and others perpetrated a scheme to defraud dozens of investors out of at least approximately $12.2 million (i) by soliciting investments in the company’s equity and notes through false and misleading statements, (ii) by failing to use investors’ funds as promised, and (iii) by converting investors’ money to his own use. BARBERA and others made false and misleading representations to actual and potential investors, including as set forth below:
BARBERA falsely represented that the company had developed a breathalyzer sensor, based on technology developed by NASA, that could detect narcotics and cancer from a person’s breath. In truth and in fact, and as BARBERA well knew, the company and NASA never developed such a technology. Indeed, NASA conducted no research for the company related to this technology after in or about late 2017, and NASA did not permit research related to narcotics testing at NASA facilities.
BARBERA falsely represented that the company had an exclusive license with NASA for certain patents related to a breathalyzer sensor technology for the life of the patents, and used NASA’s name and logo to solicit investors in the company. In truth and in fact, and as BARBERA well knew, the company did not have an exclusive license with NASA.
BARBERA falsely represented to potential and actual investors that institutional investors, including a large, publicly traded chemical company, had made substantial investments in the company. In truth and in fact, and as BARBERA well knew, that institutional investor never invested in the company.
BARBERA falsely represented that the company would soon have an initial public offering (“IPO”), which would result in large profits to investors. In truth and in fact, and as BARBERA well knew, the company was not close to an IPO.
BARBERA converted to his own use approximately 50 percent of the approximately $12.2 million in investor funds in the form of cash withdrawals and to pay personal expenses, including private school and college tuition for his children, mortgage payments on his Central Park West apartment, and for his other personal items, such as credit card bills, jewelry, automobiles, and daily living expenses.
Previously, BARBERA was the CEO of a publicly traded company. On or about July 29, 2014, the U.S. Securities and Exchange Commission (“SEC”) announced the settlement of federal securities fraud charges against BARBERA and that company for making materially false and misleading statements about the true business operations and finances of that company. As part of that settlement, BARBERA was permanently enjoined from future violations of the antifraud provisions of the federal securities laws, and agreed to pay a $100,000 penalty and to be permanently barred from acting as an officer or director of a public company.
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BARBERA, 64, was arrested this morning at his home in New York, New York. BARBERA was charged with one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. He was also charged with one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of five years in prison. The charges carry a maximum fine of $5 million, or twice the gross gain or loss from the offenses. 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 work of the FBI and NASA’s Office of Inspector General, and also thanked the SEC for its assistance and cooperation in this investigation.
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.
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 texts of the Complaint and the descriptions of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Former Chief Operating Officer Who Defrauded Asset Management Company and Its Clients Sentenced to 3 Years in PrisonRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that RICHARD DIVER was sentenced on December 7 to 36 months in prison in connection with his embezzlement from the asset management company where he served as chief operating officer. DIVER previously pled guilty to investment adviser fraud in connection with his fraudulently overbilling the company’s clients by hundreds of thousands of dollars and rerouting those funds into his personal account, and wire fraud for diverting millions of dollars in the company’s payroll to which he was not entitled to his personal account over a period of several years. U.S. District Judge Loretta A. Preska, who accepted DIVER’s guilty plea, imposed the sentence in Manhattan federal court.
Manhattan U.S. Attorney Audrey Strauss said: “Richard Diver stole five million dollars, first by defrauding his employer over several years, and then – as if those millions were not enough – turning to the firm’s clients and lining his pockets with excess billings. This sentence should serve as a reminder that this kind of fraud and abuse will not be tolerated.”
According to statements in the Indictment and Complaint in this case, and statements made in public court proceedings:
DIVER was the chief operating officer (“COO”) of a Manhattan-based asset management company (“Company-1”) that offers its customers investment planning and wealth management services. As COO, DIVER’s responsibilities included overseeing the company’s payroll and billing functions, and he had unfettered access to the payroll controls.
Beginning in 2011 and continuing into December 2018, DIVER fraudulently caused Company-1’s third-party payroll vendor to pay him salary significantly beyond his authorized salary and bonus. Over that period, DIVER caused over $4.5 million to be routed to his personal checking account above and beyond his approved compensation.
In 2017, DIVER began to also defraud Company-1’s clients. Typically, Company-1 billed its clients quarterly, in most cases having been authorized by the clients to deduct its investment advisory fees directly from their custodial accounts. DIVER began to cause an employee to run the billing process, which was based on a fixed percentage of the assets the clients had under the company’s management, at off-cycle intervals as to certain clients in addition to the regular quarterly intervals at which it billed legitimately. These billings were not accompanied by any notice. The clients affected by this practice therefore had their accounts debited twice, but were only notified of the single legitimate billing in periodic reports and correspondence from the company. DIVER routed the excess funds to his own personal bank accounts through the company’s payroll system. Through this mechanism, DIVER defrauded the clients of over $700,000.
In December 2018, certain clients noticed the overbilling and complained to Company-1’s president, who confronted him. DIVER admitted to both fraudulent practices, stating that the funds he had stolen were consumed by his own “wild” spending. Prior to his arrest, law enforcement agents recorded a conversation in which DIVER acknowledged having defrauded the company of $4.5 million through the payroll fraud and certain clients of over $700,000 through the billing fraud.
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DIVER, 64, of New York New York, was also sentenced to a three-year term of supervised release. He was further ordered to forfeit $5,248,197 and pay an additional $5,248,197 in restitution to his former employer.
Ms. Strauss praised the investigative work of the U.S. Postal Inspection Service and thanked the New York Regional Office of the U.S. Securities and Exchange Commission, which separately filed civil charges against DIVER.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
Cryptocurrency Founder “Bruno Block” Charged with Multimillion-Dollar Tax Evasion SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Kelly R. Jackson, Special Agent in Charge of the Washington, D.C., Field Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), announced today the unsealing of an Indictment in Manhattan federal court charging AMIR BRUNO ELMAANI, a/k/a “Bruno Block,” the founder of the cryptocurrency “Oyster Pearl,” with tax evasion. As alleged, ELMAANI made millions of dollars from the sale of a new cryptocurrency but evaded reporting that income to the IRS, including by filing a false tax return, operating his business and owning assets through pseudonyms and shell companies, obtaining income through nominees, and dealing in gold and cash. ELMAANI was arrested this morning in Martinsburg, West Virginia, and will be presented later today before United States Magistrate Judge Robert W. Trumble in the Northern District of West Virginia. The case is assigned to Chief United States District Judge Colleen McMahon in the Southern District of New York.
In a separate civil action, the Securities and Exchange Commission is filing civil charges against ELMAANI today.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Amir Bruno Elmaani purported to establish a high-tech method of financing a high-tech business, but the underlying scheme was old-fashioned fraud and tax evasion. Elmaani allegedly generated millions by soliciting investor money through his own cryptocurrency, adding to the purportedly fixed number of tokens and converting them to other cryptocurrencies, and failing to report or pay tax on any of the proceeds. Thanks to the FBI and IRS-CI, Elmaani is now in custody and facing federal prosecution.”
FBI Assistant Director William F. Sweeney Jr. said: “Taking advantage of the ever-so-popular cryptocurrency market, Elmaani allegedly capitalized on the investments of those who purchased virtual currency through Oyster Pearl, which he founded. As it turns out, Elmaani was funneling the proceeds of his alleged cryptocurrency scheme through a shell company that hid the true nature of his financial interests, ultimately never paying taxes on his earnings. With minimal reported income in 2018, he still managed to spend over $10 million for the purchase of yachts, but after today’s arrest, he won’t be sailing anywhere anytime soon.”
IRS Special Agent-in-Charge Kelly R. Jackson said: “Ensuring the integrity of our tax system is a priority of IRS-CI. Evading taxes only aims to deteriorate the confidence in this system and those who fail to pay their fair share will be investigated. Using cryptocurrency as a means to defraud and evade taxes will not stop our agents from doing what we do best – following the money.”
As alleged in the Indictment unsealed today in Manhattan federal court:[1]
In September and October 2017, ELMAANI began promoting online his new cryptocurrency known as Pearl tokens. Using a variation of his online pseudonym “Bruno Block,” ELMAANI stated that he planned to develop an online data-storage platform, known as Oyster Protocol, which would allow users to purchase online data storage with Pearl tokens. Instead of using his real name, ELMAANI operated almost exclusively online under the pseudonym “Bruno Block.” ELMAANI concealed his true identity from his prospective employees and business associates and never met them in person.
In the fall of 2017 and thereafter, ELMAANI sold Pearl tokens to the investing public through an “initial coin offering” and on cryptocurrency market platforms. ELMAANI announced that he intended to take a “founder’s share” of Pearl tokens for his own personal use. ELMAANI owned and controlled the subsequently established company Oyster Protocol Inc. through a shell company not associated with his true name.
In a statement issued under ELMAANI’s online pseudonym on June 7, 2018, ELMAANI stated that he was retaining millions of Pearl tokens as his “ownership stake” in Oyster Protocol, but that he had to move the tokens to a different cryptocurrency wallet “in order to avoid being double-taxed.” In truth, ELMAANI did not report or pay tax on any of his cryptocurrency proceeds. At various points, ELMAANI used friends and family as nominees to receive cryptocurrency proceeds and transfer them or U.S. currency to his own accounts.
ELMAANI dealt substantially in precious metals, kept gold bars in a safe on a yacht he owned, and used large amounts of cash to pay personal expenses.
In late October 2018, although the number of Pearl tokens was purportedly fixed, ELMAANI used his access to the blockchain technology used to create Pearl tokens to mint new tokens, which he took for his own personal use (the “Exit Scheme”). ELMAANI thereby increased the total volume of Pearl tokens. Shortly after creating the new tokens, ELMAANI converted the Pearl tokens he had obtained to other types of cryptocurrency on an online marketplace or exchange. As a result of ELMAANI’s conduct, trading in Pearl tokens halted on that exchange and the price of Pearl tokens held by investors dropped substantially. Pearl tokens were subsequently de-listed from the primary exchange where they were traded. Subsequent to the Exit Scheme, ELMAANI used his friends and family to receive cryptocurrency and to transfer funds to a bank account in his name.
While ELMAANI initially attempted to hide even “Bruno Block’s” involvement in the Exit Scheme, he later effectively admitted to the conduct online under his “Bruno Block” pseudonym. In a recorded call with the then-chief executive officer (“CEO”) of Oyster Protocol Inc., after the Exit Scheme, the CEO asked ELMAANI why he had to take the additional new Pearl tokens if he had already cashed out millions of dollars’ worth of Pearl tokens in the past. ELMAANI responded, in part, that “taxes are pretty nasty.” ELMAANI carried out the Exit Scheme only days before the exchange he had used to cash out his Pearl tokens was set to require “know your customer” personal identifying information from its users.
ELMAANI filed a false 2017 tax return stating that he had only approximately $15,000 of income from a “patent design” business, and he filed no return and reported no income to the IRS in 2018. Nevertheless, ELMAANI spent, in 2018, over $10 million for the purchase of multiple yachts, $1.6 million at a carbon fiber composite company, hundreds of thousands of dollars at a home improvement store, and over $700,000 for the purchase of two homes, one of which was titled in the name of a shell company and the other in the name of two of his associates.
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ELMAANI, 28, is charged with two counts of tax evasion, each of which carries a maximum sentence of five years in prison. 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.
Ms. Strauss praised the investigative work of the FBI and IRS-CI and also thanked the Securities and Exchange Commission and the Commodity Futures Trading Commission for their assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Margaret Graham and Drew Skinner 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.
“Pure Armenian Blood” Members and Associates Indicted for Racketeering and Fraud OffensesRead the Press Release
Audrey Strauss, the Acting 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 Peter C. Fitzhugh, Special Agent in Charge of Homeland Security Investigations (“HSI”) in New York, announced the unsealing of an Indictment charging eight defendants with a variety of racketeering and fraud offenses. Of the eight defendants, NAREK MARUTYAN, ALBERT MARUTYAN, MIKAYEL YEGHOYAN, DAVIT YEGHOYAN, and VAHE HOVHANNISYAN are associated with a coast-to-coast racketeering enterprise referred to as “Pure Armenian Blood” or “P.A.B.” and are charged in United States v. Narek Marutyan, et al. (the “Indictment”), which has been assigned to U.S. District Judge Victor Marrero. Of those defendants, MIKAYEL YEGHOYAN and DAVIT YEGHOYAN were taken into federal custody and presented before U.S. Magistrate Judge Sarah Netburn today. Two defendants, ALBERT MURATYAN and VAHE HOVHANNISYAN, were presented in the Central District of California.
Three additional defendants, LUSINE GHAZARYAN, SARO MOURADIAN, a/k/a “Paul Mouradian,” and ZAVEN YERKARYAN, are charged in the Indictment with fraud-related offenses. Of those defendants, GHAZARYAN was taken into federal custody today and were presented before U.S. Magistrate Judge Sarah Netburn; YERKARYAN was presented in the Central District of California before U.S. Magistrate Judge Charles F. Eick . MOURADIAN will be presented in the Southern District of Florida before U.S. Magistrate Judge Lurana Snow.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Pure Armenian Blood members enriched themselves and their criminal associates through a raft of fraudulent schemes that included years’ long efforts to steal others’ identities, falsify documents, and spend other people’s money as though there were no consequences. Thanks to the remarkable efforts of our agency partners, spearheaded by the FBI, members of this nationwide network of crime will now face serious consequences in the form of federal charges.”
FBI Assistant William F. Sweeney Jr. said: "The members of this enterprise acted as if they were in another time, much like fiefdoms operated in the Dark Ages in which tributes were paid to protect fellow criminals and settle disputes between members under the benevolence of the vor. However the actions we allege they've taken, like using electronic devices to steal people's identities, using fake credit cards and setting up fake lines of credit at U.S. banks, are all modern day crimes. As a consequence, they now face modern justice."
HSI Special Agent in Charge Peter C. Fitzhugh said: “The only thing pure about this alleged crime syndicate is their thirst for stealing from our communities and endangering the security of our homeland from coast to coast. HSI New York is relentless in our pursuit of dismantling transnational criminal organizations, and we are grateful to have this opportunity working with our federal partners to ensure those involved will now face justice.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:[[1]]
Pure Armenian Blood was an organized criminal group operating under the direction and protection of an unindicted co-conspirator (“CC-1”), a “vor v zakone” or “vor,” which are Russian phrases translated roughly as “Thief-in-Law” or “Thief,” and which refer to an order of elite criminals from the former Soviet Union who receive tribute from other criminals, offer protection, and use their recognized status as vor to adjudicate disputes among lower-level criminals. Members and associates of Pure Armenian Blood operated under the direction and protection of CC-1, a vor of Armenian descent previously based in Los Angeles before being deported in or about 2018. Pure Armenian Blood operated through groups of individuals, often with overlapping members or associates, dedicated to particular criminal tasks, particularly identity theft, access device fraud and credit card fraud, among others. While Pure Armenian Blood exploited victims and the financial system in New York City, it had operations in various locations throughout the United States and abroad, including through the use of purportedly legitimate business entities operating under the control and in conjunction with members of P.A.B. at various points throughout the conspiracy.
NAREK MARUTYAN, ALBERT MARUTYAN, a/k/a “Abo,” MIKAYEL YEGHOYAN, a/k/a “Misho,” DAVIT YEGHOYAN and VAHE HOVHANNISYAN are charged in Count One of the Indictment with racketeering conspiracy. P.A.B.’s illicit activities included:
- The use of counterfeit credit cards and stolen personal identifying information;
- Selling goods purchased with counterfeit credit cards for profit;
- Fraudulently opening and exhausting lines of credit, and then falsifying documents to “clean” the credit of account holders in whose names the lines of credit were opened (the “Account Holders”), who were often relatives or acquaintances of members and associates of Pure Armenian Blood;
- Selling access device fraud devices to other criminals to install in order to steal personal identifying information; and
- Making purchases at collusive businesses with counterfeit credit cards or credit cards that were fraudulently opened.
Along with Pure Armenian Blood members NAREK MARUTYAN, ALBERT MARUTYAN, a/k/a “Abo,” MIKAYEL YEGHOYAN, a/k/a “Misho,” DAVIT YEGHOYAN and VAHE HOVHANNISYAN, two additional defendants, LUSO GHAZARYAN and SARO MOURADIAN, a/k/a “Paul Mouradian,” are charged in Counts Two and Three with conspiracy to commit fraud relating to means of identification and conspiracy to commit access device fraud. Each of these seven defendants, as well as ZAVEN YERKARYAN, are charged in Count Four with conspiracy to commit mail and wire fraud.
Defendants MIKAYEL YEGHOYAN and DAVIT YEGHOYAN are each charged with one count of Aggravated Identity Theft, in Counts Five and Six, respectively.
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Ms. Strauss praised the outstanding work of FBI New York’s Eurasian Organized Crime Squad, as well as the FBI’s New Jersey, Los Angeles, and Miami offices, Homeland Security Investigations, the New York City Police Department, the United States Postal Inspection Service, and United States Customs and Border Protection for their investigative efforts and ongoing support and assistance with the case. This case is part of an Organized Crime Drug Enforcement Task Force (“OCDETF”) operation. OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach.
The prosecution of this case is being overseen by the Office’s Money Laundering and Transitional Criminal Enterprise Unit. Assistant U.S. Attorneys Benet J. Kearney and Abigail S. Kurland are in charge of the case.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Defendant Charged with Attempted Enticement of 12-Year-Old and 9-Year-Old GirlsRead the Press Release
Audrey Strauss, the Acting 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 Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced charges against STEVE ROSADO, a registered sex offender, for attempted enticement of two minor girls in New York, New York. ROSADO was arrested yesterday evening and presented in Manhattan federal court today, before U.S. Magistrate Judge Sarah Netburn.
Acting U.S. Attorney Audrey Strauss stated: “Steve Rosado allegedly attempted to harm society’s most vulnerable – trying to engage in sexual activity with two young children, whom he believed to be 12 and 9 years old – even after he had been convicted of sex offenses in the past and required to register as a sex offender. I thank the FBI and the NYPD for their work in investigating and arresting Rosado before he could harm any more victims.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Mr. Rosado knew exactly what he was doing when he arranged to have sex with two children, one of whom he believed was only 9 years old. As a convicted sex offender, he knew the risk and allegedly took it anyway. He is now in federal custody and facing prosecution. It’s not easy to investigate sexual predators. The agents, detectives, and analysts who constitute the FBI/NYPD Child Exploitation and Human Trafficking Task Force do this work each and every day hoping to stop the next offender from harming another child.”
NYPD Commissioner Dermot Shea said: “These charges, by the United States Attorney’s Office for the Southern District of New York reflect our continuing commitment to keep those would who prey on children from stalking our streets. I praise our detectives and federal partners for their work in fighting on behalf of society’s most vulnerable individuals.”
According to the allegations in the Complaint charging ROSADO:[1]
On or about November 29, 2020, an undercover FBI agent (“UC-1”), posing as the mother of a 12-year-old girl and a 9-year-old girl, initiated a series of conversations on an instant messaging platform with an individual identified to be ROSADO. Thereafter, UC-1 and ROSADO had numerous communications via the instant messaging platform, text message, and telephone call.
In these conversations, ROSADO repeatedly expressed, in graphic and unambiguous terms, his desire to engage in sexual activity with both children – including both oral and vaginal sex. To help alleviate any concerns UC-1 might have regarding ROSADO having sexual relations with her young children, ROSADO provided UC-1 with his recent test results for COVID-19 and HIV, and he discussed what he and UC-1 could do if he were to impregnate one of the children.
UC-1 and ROSADO arranged to meet at a bar in Manhattan on the evening of December 7, 2020, with the understanding that they would return to UC-1’s apartment afterward and ROSADO would then engage in sexual activity with the children. On the evening in question, ROSADO met UC-1 at the agreed-upon location. After the two of them left the bar and began walking toward UC-1’s purported apartment, law enforcement arrested ROSADO. ROSADO was in possession of a backpack containing, among other things, a toothbrush, a change of clothes, and lubricant.
* * *
ROSADO is charged with one count of attempted enticement of a minor to engage in illegal sexual activity, in violation of Title 18, United States Code, Sections 2422(b) and 2, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; and one count of committing the aforementioned offense while being required to register as a sex offender, in violation of Title 18, United States Code, Section 2260A, which carries a mandatory sentence of an additional 10 years in prison.
Ms. Strauss praised the outstanding investigative work of the FBI-NYPD Child Exploitation and Human Trafficking Task Force.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Jonathan L. Bodansky 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 herein, constitute only allegations, and every fact described should be treated as an allegation.
Correctional Officer at Metropolitan Correctional Center Sentenced to 40 Months in Prison for Engaging in Abusive Sexual Contact with InmatesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that COLIN AKPARANTA, formerly a correctional officer at the Metropolitan Correctional Center (“MCC”), which houses federal inmates in Manhattan, was sentenced in Manhattan federal court to 40 months in prison for engaging in abusive sexual contact with an inmate. AKPARANTA previously pled guilty before United States Magistrate Judge Kevin Nathaniel Fox to one count of abusive sexual contact of an inmate, in violation of Title 18, United States Code, Section 2244(a)(4), and one count of deprivation of the constitutional rights of that inmate, in violation of Title 18, United States Code, Section 242. In connection with the plea, AKPARANTA also admitted that he engaged in abusive sexual contact with six additional victims, and engaged in sexual acts with all seven of the victims. U.S. District Judge Lorna G. Schofield, who accepted AKPARANTA’s guilty plea, imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “Colin Akparanta repeatedly abused his position of authority as a correctional officer at the MCC by sexually abusing inmates whose safety and security he was duty-bound to protect. Today’s sentence should send a strong message that correctional officers who abuse their authority and commit crimes will be held to account. This Office will remain vigilant to ensure that all inmates are afforded the dignity and security they deserve.”
According to the Indictment, other filings in this case, and statements during court proceedings:
AKPARANTA was employed as a correctional officer at the MCC starting in 2004. Between in or about late 2012 and in or about April 2018, AKPARANTA used his official position to engage in sexual acts and contact with at least seven female inmates at the MCC while they were under AKPARANTA’s custodial, supervisory, and disciplinary authority. AKPARANTA digitally penetrated the victims’ vaginas and touched their breasts, buttocks, and/or genitalia. AKPARANTA also had some of the victims touch his penis over his pants. In addition, AKPARANTA smuggled contraband, including, but not limited to, personal hygiene items, makeup, and food into the MCC for some of the victims, and, with respect to at least one of the victims, explicitly conditioned his provision of contraband on the inmate’s continued performance of sexual acts with him. AKPARANTA also asked the victims for their contact information in order to reach them after their release.
* * *
In addition to the prison term, Judge Schofield sentenced AKPARANTA, 44, of Irvington, New Jersey, to two years of supervised release.
Ms. Strauss praised the investigative work of the Department of Justice Office of the Inspector General and the Special Agents of the United States Attorney’s Office.
The prosecution is being handled by the Office’s Public Corruption, Violent and Organized Crime, and Civil Rights Units. Assistant U.S. Attorneys Lara Pomerantz, Sarah Krissoff, and Rachael Doud are in charge of the prosecution.
Bronx Man Charged with Harboring Fugitive and Making False Statements in Connection with Shooting of Two Deputy United States MarshalsRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Ralph Sozio, the United States Marshal for the Southern District of New York, and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced today the filing of a Complaint in Manhattan federal court charging GRANT GRANDISON with making false statements to federal agents and harboring or concealing a person from arrest. As alleged, GRANDISON allowed Andre K. Sterling, a fugitive wanted for the November 20, 2020, shooting of a state trooper in Massachusetts, to reside in his Bronx apartment. GRANDISON further allegedly lied to the Marshals who were seeking to arrest Sterling by telling the Marshals that no one was in the apartment, before Sterling fired multiple rounds at the Marshals, striking and injuring two Marshals. GRANDISON was arrested on December 4, 2020, and will be presented this afternoon before United States Magistrate Judge Sarah Netburn.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Grant Grandison’s conduct led to the horrific shooting of two Deputy United States Marshals who were just doing their jobs in attempting to arrest Andre K. Sterling, a man wanted for a violent felony. We are lucky that more law enforcement officers were not injured during the shooting, and it appears that both injured Marshals will recover. Grandison is now charged in federal court for his serious crimes. Our Office remains committed to defending our brave law enforcement partners, who risk their lives every day to keep New Yorkers safe.”
United States Marshal Ralph Sozio said: “Unfortunately, and as alleged, the actions of Grandison dictated the events that led to the shooting of two Deputy United States Marshals on that morning in the Bronx. The heroic actions of the Deputy United States Marshals and Task Force Members that day are a true testament to the dangers of entering an unknown location in search of a violent fugitive. On behalf of the United States Marshals Service I want to extend my gratitude to the United States Attorney’s Office and the New York City Police Department for their tireless investigation and their pursuit of Federal charges. Our thoughts and prayers are with our Deputies as they recover from their injuries. The United States Marshals Service and the law enforcement community remain united in our continued pursuit of justice.”
NYPD Commissioner Dermot Shea said: “By misleading federal agents, as alleged, the defendant led them into a violent attack. The ensuing shooting not only injured two Deputy U.S. Marshals but is an assault on society. I commend the U.S. Attorney’s Office for the Southern District of New York for answering it with these federal charges.”
As alleged in the Complaint[1] filed in Manhattan federal court:
On or about November 20, 2020, Andre K. Sterling allegedly shot a Massachusetts State Trooper during a traffic stop in Hyannis, Massachusetts. Sterling fled from Massachusetts and was deemed a fugitive. On or about November 24, 2020, a federal warrant was issued for Sterling’s arrest.
On the morning of December 4, 2020, several Deputy United States Marshals (the “Marshals”), along with officers from the NYPD and state troopers from the Massachusetts State Police, traveled to an apartment in the Bronx (the “Apartment”), where they believed Sterling was located, in order to arrest Sterling. The Marshals announced themselves as “U.S. Marshals” and encountered GRANDISON at the door. The Marshals asked GRANDISON, in sum and substance, if anyone else was in the Apartment, and GRANDISON replied, in sum and substance, that no one else was in the Apartment. At the time of GRANDISON’s statements to the Marshals, he knew that Sterling was a fugitive. The Marshals proceeded into the Apartment, at which point Sterling began firing at the Marshals, striking and injuring two Marshals. The Marshals returned fire, and Sterling was killed in the exchange. Law enforcement agents recovered a firearm from near Sterling.
Law enforcement agents later interviewed GRANDISON, who admitted, in sum and substance and among other things, that he had allowed Sterling to live with him. GRANDISON further admitted that Sterling had told him, in sum and substance and among other things, that if anyone was looking for him, GRANDISON should tell them Sterling was not there.
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GRANDISON, 35, of the Bronx, New York, is charged with one count of making false statements to a federal agents and one count of harboring or concealing a person from arrest, each of which carries a maximum sentence of five years in prison.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the United States Marshals Service, the New York/New Jersey Regional Fugitive Task Force, the New York City Police Department’s 47th Precinct Detective Squad, the Massachusetts State Police, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Alexandra N. Rothman 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 herein, constitute only allegations, and every fact described should be treated as an allegation.
5 Current/Former MTA Employees Charged with Extensive Overtime FraudRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Carolyn Pokorny, Inspector General of the Metropolitan Transportation Authority (“MTA OIG”), announced today the unsealing of complaints charging THOMAS CAPUTO, JOSEPH RUZZO, JOHN NUGENT, and JOSEPH BALESTRA, four current and former longtime employees of the Long Island Rail Road (“LIRR”), and MICHAEL GUNDERSEN, a longtime employee of the New York City Transit Authority (“NYC Transit”), with federal program fraud for submitting time reports falsely claiming to have worked hundreds of hours of overtime that they did not in fact work. CAPUTO, RUZZO, NUGENT, and BALESTRA were charged in a criminal complaint unsealed today (the “LIRR Complaint”), and GUNDERSEN was charged in a separate criminal complaint unsealed today (the “NYC Transit Complaint”). CAPUTO, RUZZO, NUGENT, BALESTRA, and GUNDERSEN are expected to be presented this afternoon before U.S. Magistrate Judge Katharine H. Parker.
Acting U.S. Attorney Audrey Strauss said: “These defendants, senior LIRR and New York City Transit employees, allegedly made themselves some of the highest-paid employees at the entire MTA by claiming extraordinary, almost physically impossible, amounts of overtime. As alleged, those almost impossible claims were fueled by brazen, repeated fraud, including falsely claiming to be working overtime hours while the defendants were at their homes or, in some instances, bowling. All New Yorkers ultimately bear the burden of fraud targeting our mass transit systems, and we will continue to work tirelessly to expose and prosecute those who engage in it. Our investigation remains ongoing.”
FBI Assistant Director William F. Sweeney Jr. said: “Today we’ve arrested five individuals, all senior MTA employees, for their role in an incredibly blatant overtime fraud scheme. In the case of at least one defendant, the excessive compensation he received from the MTA was equivalent to purportedly working 10 additional hours a day, every day, for 365 days. The others weren’t far behind, collectively earning more than $1 million in overtime pay. This type of double-dealing directly contributes to rising MTA fares for the average, hardworking commuter. Today these individuals learned the end of this line is the federal courthouse here in Lower Manhattan. If you or someone you know has additional information regarding this case, we want to hear from you. You may reach us by calling 1-800-CALL-FBI.”
MTA Inspector General Carolyn Pokorny said: “These employees allegedly worked very hard – to steal MTA time and money, ignoring their duty to keep the tracks and rails safe for their fellow workers and riders. For MTA employees who earn hundreds of thousands of dollars a year, it takes some nerve to steal overtime by only working a fraction of your shift – if at all. The situation underscores what our Office has been saying, again and again – the lack of management systems and controls at the MTA creates an environment where fraud could easily occur undetected – and it did, as alleged in these criminal complaints. When employees are on the clock, management needs to know that they are actually working, and not – say, enjoying concerts in Atlantic City, vacationing at resorts, or competing in a bowling league. In grateful cooperation with our law enforcement partners at the Office of the U.S. Attorney for the Southern District of New York and the FBI, MTA OIG continues to probe how these defendants allegedly succeeded in stealing so much overtime.”
According to the allegations in the LIRR Complaint and the NYC Transit Complaint (the “Complaints”):[1]
CAPUTO, RUZZO, NUGENT, BALESTRA, and GUNDERSEN each schemed to fraudulently receive thousands of dollars in compensation from the MTA by falsely claiming to have worked hundreds of voluntary overtime hours (and in the case of GUNDERSEN some regular time hours as well) that in fact they did not work. The overtime pay the defendants claimed led to significant increases in their salary and led to them being among the highest-paid MTA employees, and in the case of CAPUTO, the highest-paid MTA employee in 2018. The defendants frequently volunteered for overtime and then claimed to have been working lucrative overtime shifts at times when they were in fact at home or at other non-work locations, such as, in the case of CAPUTO, a bowling alley, or in the case of GUNDERSEN, family vacations.
The Defendants’ Employment at the MTA
The MTA runs North America’s largest transportation network, providing bus, subway and rail service to a population of more than 15 million people in New York City and the surrounding areas. The MTA’s operating agencies include the LIRR, a commuter railroad providing service between Manhattan and locations on Long Island, and NYC Transit, which operates New York City subways and buses.
CAPUTO, RUZZO, NUGENT, and BALESTRA are current or former LIRR employees. CAPUTO was an LIRR employee responsible for track inspection until he retired on or about April 1, 2019. RUZZO, who retired on or about October 1, 2019, and NUGENT and BALESTRA, who are still employed by LIRR, were all LIRR foremen during the relevant period.
In addition to their regular duties, CAPUTO, RUZZO, NUGENT, and BALESTRA each volunteered to work and were assigned a number of lucrative overtime shifts during which they were required to, among other things, support third-party contractors working on construction projects on or around LIRR properties. These voluntary overtime shifts were offered to LIRR employees in order of their seniority under the applicable union collective bargaining agreements, enabling CAPUTO, RUZZO, NUGENT, and BALESTRA to be assigned large numbers of voluntary overtime shifts due to their seniority.
GUNDERSEN is a current NYC Transit employee. Since in or about 2015, GUNDERSEN has been a Maintenance Supervisor Level II, which requires him to, among other things, provide managerial-level oversight and support of Third Rail Contract Compliance and Circuit Breakers.
At all relevant times, CAPUTO, RUZZO, NUGENT, BALESTRA, and GUNDERSEN received hourly rates for their regular schedule, and were then entitled to be paid higher “overtime” rates – typically one and a half or two times the regular hourly rate, depending on the circumstances – for additional hours worked. At all relevant times, CAPUTO, RUZZO, NUGENT, BALESTRA, and GUNDERSEN were required to self-report their time.
The Defendants’ Excessive Overtime Claims
In 2018, CAPUTO was paid approximately $461,000 by the MTA. Of that amount, approximately $117,000 comprised his base salary and other forms of compensation apart from overtime, while the additional approximately $344,000 was paid for overtime that CAPUTO ostensibly worked. In total, this made CAPUTO the highest paid employee at the MTA during 2018 – higher than, for example, the Chairman of the MTA.
In 2018, CAPUTO claimed to have worked approximately 3,864 overtime hours, on top of 1,682 regular hours. That is, if CAPUTO had worked every single calendar day in 2018 including weekends and holidays (although he did not), that would average out to approximately 10 hours of overtime every day for an entire year in addition to his regular, 40-hour work week.
Similarly, RUZZO, NUGENT, BALESTRA, and GUNDERSEN also claimed to have worked and were paid for an excessive number of overtime hours in 2018. Each of them was paid over $240,000 in overtime alone, putting each of them within the top 12 highest paid employees at the MTA during 2018. These payments were based on reported amounts of overtime hours ranging from 2,918 to 3,914, which if the defendants had worked every calendar day in 2018 would average out to approximately 8 to 10 hours for every single day, in addition to the employee’s regular 40-hour work weeks.
The Defendants’ Frequent Absences from Work
Staffers from the Office of the MTA Inspector General (“MTA OIG”) have worked with criminal investigators to perform a detailed review of the hours claimed to have been worked by the defendants in or around calendar year 2018. This investigation, among other things, compared the time records for CAPUTO, RUZZO, NUGENT, BALESTRA, and GUNDERSEN with various records that established their true whereabouts, such as location information for their cellular phones, bank records, MTA building access card data, work and personal emails and social media records, and records from third parties such as a bowling alley where CAPUTO participated in bowling league games despite claiming to work an average of 10 hours of overtime every single day of 2018.
In sum, the MTA OIG’s investigation reflects that CAPUTO, RUZZO, NUGENT, BALESTRA, and GUNDERSEN were each absent from work for hundreds of hours, for which they falsely claimed to have been present and worked in time reports submitted to the MTA. As a result, each received at least thousands of dollars in unjustified and fraudulently obtained compensation.
For example, CAPUTO claimed to have worked, and was paid for, a regular shift from 7:30 a.m. to 3:30 p.m. on October 11, 2018, followed by an overtime shift at the West Side Yard in Manhattan (the site of a construction project in the vicinity of West 34th Street near the Hudson River) from 4:00 p.m. until 7:00 a.m. on October 12. However, CAPUTO’s phone records revealed that CAPUTO made several calls while in the vicinity of his residence in Suffolk County during his overtime shift on October 11, and records maintained by a bowling alley in Suffolk County revealed that he participated in a bowling league game beginning at 7:30 p.m. that night – i.e., hours into his shift.
Similarly, GUNDERSEN claimed to have worked, and was paid for, back-to-back overtime shifts from 4:00 a.m. on September 29, 2018 to 12:00 a.m. on September 30, 2018, and was paid for 20 hours of overtime during that period. GUNDERSEN did not use any vacation time for this period, instead claiming in his time reports to be at work. However, several weeks later, GUNDERSEN sent himself an email attaching three photographs with metadata showing the images were taken at 3:05, 3:28, and 3:30 p.m. on September 29, 2018 – i.e., in the middle of the shifts described above. These photographs (one of which was posted to GUNDERSEN’s wife’s Facebook account) show GUNDERSEN and his family at a farm in Manalapan, New Jersey. GUNDERSEN’s telephone records reflect that he engaged in two phone calls from the vicinity of Manalapan at 1:09 p.m. and 4:07 p.m. on September 29, 2018, also in the middle of the overtime shifts he claimed to have worked.
* * *
THOMAS CAPUTO, 56, of Holbrook, New York, JOSEPH RUZZO, 56, of Levittown, New York, JOHN NUGENT, 50, of Rocky Point, New York, JOSEPH BALESTRA, 51, of Blue Point, New York, and MICHAEL GUNDERSEN, 42, of Manalapan, New Jersey, are each charged with one count of federal program fraud, which carries a maximum sentence of 10 years in prison.
The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI and MTA OIG, and encouraged anyone with any information regarding overtime fraud or abuse at the MTA to contact the MTA OIG at 800-MTA-IG4U (800-682-4448), online at mtaig.state.ny.us/ComplaintForm.aspx, or via email at [email protected].
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Paul M. Monteleoni, Aline R. Flodr, and Thomas A. McKay are in charge of the prosecution.
The allegations contained in the Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaints and the description of the Complaints set forth herein constitute only allegations, and every fact described should be treated as an allegation.
14 Defendants Indicted for Participation in Manhattan Drug Trafficking OrganizationRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Peter C. Fitzhugh, Special Agent in Charge of Homeland Security Investigations (“HSI”) in New York, and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of an indictment charging KENNETH SPEARMAN, a/k/a “Big Man,” a/k/a “Big Fella,” a/k/a “Friend,” SHELDON CLARK, a/k/a “Sal,” ERIC GRANT, a/k/a “E,” SIRRON STAFFORD, a/k/a “Sherm,” CAMERON FRANCIS, a/k/a “Cam,” ISAIAH LEDGISTER, a/k/a “Pooch,” TRISTAN OLIVER, a/k/a “Jay,” JOSEPH CAMPBELL, a/k/a “JoJo,” ERIC GASTON, HARVEY FOSTER, a/k/a “Fresh,” MAURICE WOMACK, a/k/a “Moe,” REGINALD CLAXTON, a/k/a “Dread,” a/k/a “Reggie,” LAVELLE MAITLAND, a/k/a “Vee,” and RAY BOYD, a/k/a “Mustafa,” with participating in a conspiracy to distribute crack cocaine in the vicinity of Adam Clayton Powell Jr. Boulevard (also known as 7th Avenue) between approximately 120th Street and 123rd Street, in Harlem. The case is assigned to U.S. District Judge Alvin K. Hellerstein.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged in the Indictment, the defendants were responsible for selling large amounts of crack cocaine in Manhattan. Thanks to the extraordinary work of our partners at NYPD and HSI, the defendants now face federal charges for their crimes.”
HSI Special Agent in Charge Peter C. Fitzhugh said: “HSI and NYPD dismantled a criminal organization that allegedly trafficked and distributed heroin and cocaine while terrorizing our streets with violence and no regard for the welfare of our community. Eradicating this ruthless syndicate will provide some relief to our neighborhoods, and is a step forward in an effort to safeguard our homeland.”
NYPD Commissioner Dermot Shea said: “The NYPD is relentless in combating the kind of violent crimes alleged in this federal indictment, which tear at the fabric of life in New York. I commend the United States Attorney’s Office for the Southern District of New York, and all of our partners, for their sustained focus in this important case.”
As alleged in the Indictment unsealed today in Manhattan federal court and in other court papers and proceedings[1]:
From at least in or about November 2019 up to and including in or about November 2020, KENNETH SPEARMAN, a/k/a “Big Man,” a/k/a “Big Fella,” a/k/a “Friend,” SHELDON CLARK, a/k/a “Sal,” ERIC GRANT, a/k/a “E,” SIRRON STAFFORD, a/k/a “Sherm,” CAMERON FRANCIS, a/k/a “Cam,” ISAIAH LEDGISTER, a/k/a “Pooch,” TRISTIAN OLIVER, a/k/a “Jay,” JOSEPH CAMPBELL, a/k/a “JoJo,” ERIC GASTON, HARVEY FOSTER, a/k/a “Fresh,” MAURICE WOMACK, a/k/a “Moe,” REGINALD CLAXTON, a/k/a “Dread,” a/k/a “Reggie,” LAVELLE MAITLAND, a/k/a “Vee,” and RAY BOYD, a/k/a “Mustafa,” participated in a conspiracy to distribute 280 grams and more of crack cocaine in and around Adam Clayton Powell Jr. Boulevard (also known as 7th Avenue) between approximately 120th Street and 123rd Street, in Harlem.
On or about November 3, 2020, in the same area, FRANCIS and two others robbed at gunpoint someone attempting to purchase narcotics and a firearm from FRANCIS.
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KENNETH SPEARMAN, a/k/a “Big Man,” a/k/a “Big Fella,” a/k/a “Friend,” 45, SHELDON CLARK, a/k/a “Sal,” 55, ERIC GRANT, a/k/a “E,” 45, TRISTIAN OLIVER, a/k/a “Jay,” 43, ERIC GASTON, 36, REGINALD CLAXTON, a/k/a “Dread,” a/k/a “Reggie,” 57, LAVELLE MAITLAND, a/k/a “Vee,” 25, and RAY BOYD, a/k/a “Mustafa,” 57, were arrested yesterday and presented before United States Magistrate Judge Katharine H. Parker. JOSEPH CAMPBELL, a/k/a “JoJo,” 27, was arrested yesterday and will be presented before Judge Parker today. SIRRON STAFFORD, a/k/a “Sherm,” 43, CAMERON FRANCIS, a/k/a “Cam,” 20, ISAIAH LEDGISTER, a/k/a “Pooch,” 30, HARVEY FOSTER, a/k/a “Fresh,” 36, and MAURICE WOMACK, a/k/a “Moe,” 51, remain at large.
A chart containing the names, charges, and maximum penalties for each of the defendants is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of a defendant would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of HSI and the NYPD.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Ryan B. Finkel, Alexander Li, and Andrew A. Rohrbach 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
Defendants
Max. Penalty
Count One: Conspiracy to Distribute Controlled Substances (21 U.S.C. § 846)
KENNETH SPEARMAN, a/k/a “Big Man,” a/k/a “Big Fella,” a/k/a “Friend”
SHELDON CLARK, a/k/a “Sal”
ERIC GRANT, a/k/a “E”
SIRRON STAFFORD, a/k/a “Sherm”
CAMERON FRANCIS, a/k/a “Cam”
ISAIAH LEDGISTER, a/k/a “Pooch”
TRISTAN OLIVER, a/k/a “Jay”
JOSEPH CAMPBELL, a/k/a “JoJo”
ERIC GASTON
HARVEY FOSTER, a/k/a “Fresh”
MAURICE WOMACK, a/k/a “Moe”
REGINALD CLAXTON, a/k/a “Dread,” a/k/a “Reggie”
LAVELLE MAITLAND, a/k/a “Vee”
RAY BOYD, a/k/a “Mustafa”
Life imprisonment; Mandatory minimum sentence of 10 years
Count Two: Conspiracy to Commit Hobbs Act Robbery (18 U.S.C. §§ 1951 and 2)
CAMERON FRANCIS, a/k/a “Cam”
20 years’ imprisonment
Count Three: Hobbs Act Robbery (18 U.S.C. §§ 1951 and 2)
CAMERON FRANCIS, a/k/a “Cam”
20 years’ imprisonment
Count Four: Possession of a Firearm in Furtherance of a Crime of Violence, which Firearm was Brandished (18 U.S.C. §§ 924(c) and 2)
CAMERON FRANCIS, a/k/a “Cam”
Life imprisonment; Mandatory minimum sentence of 7 years
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Licensed Attorney and Disbarred Attorney Charged with Securities Fraud for Roles in Fraudulent Opinion Letter SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Carl W. Hoecker, the Inspector General of the Office of Inspector General of the U.S. Securities and Exchange Commission (“SEC-OIG”), announced today the unsealing of an Indictment in Manhattan federal court charging RICHARD RUBIN and THOMAS CRAFT with securities fraud. The Indictment alleges that RUBIN, a disbarred attorney, and CRAFT, an attorney licensed in Florida, engaged in a fraudulent scheme in which CRAFT falsely represented that he had undertaken certain legal work in connection with three types of attorney opinion letters, all of which enabled the relevant securities to be sold to the investing public. In truth and in fact, RUBIN, despite his disbarment, had undertaken all of the legal work attested to in the letters; CRAFT merely served as a “rubber stamp” on the letters in exchange for tens of thousands of dollars in monetary compensation. RUBIN was taken into custody today in New York, New York, and will be presented today before Magistrate Judge Katharine H. Parker in Manhattan federal court. CRAFT was taken into custody today in West Palm Beach, Florida, and will be presented today in federal court in Florida. The case has been assigned to United States District Judge Paul A. Engelmayer.
Acting U.S. Attorney Audrey Strauss said: “As alleged, rather than act as gatekeepers against fraud, the defendants used their positions as attorneys – albeit one of them disbarred – to actively carry out a fraud, working to generate dozens of attorney opinion letters containing false representations that brought false comfort to the investing public that certain legal work had been performed and certain information had been confirmed as accurate.
SEC Inspector General Carl W. Hoecker said: “Today’s criminal indictment demonstrates our commitment to holding bad actors accountable for undermining the integrity of the securities registration system.”
As alleged in the Indictment unsealed today in Manhattan federal court:[1]
Securities Registration Requirements and SEC Rule 144
Under the Securities Act of 1933 (the “Securities Act”), anyone seeking to sell a security must first register the offering of that security unless an exemption applies. See 15 U.S.C. § 77e. This registration requirement protects investors by promoting disclosure of information pertinent to informed investment decisions.
A company registering the offer of securities must complete a registration statement such as SEC Form S-1 before the securities can be listed on a national exchange and publicly traded. SEC Form S-1 contains information pertinent to informed investment decisions, including, among other things, information on the company’s business operations, the company’s financial condition, and a description of the company’s management. In connection with SEC Form S-1, the company is required to file an opinion letter (the “Form S-1 Opinion Letter”) from a licensed attorney regarding the legality of the securities being offered or sold pursuant to the registration statement. A company’s SEC Form S-1 and the Form S-1 Opinion Letter are available to the public on the SEC’s Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”).
“Restricted securities” refers to securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer, with “affiliate” meaning a person that directly or indirectly controls, or is controlled by, or is under common control with, an issuer. Affiliates can also include an executive officer or a director or large shareholder who is in a relationship of control with respect to the issuing company. Restricted securities bear a legend indicating that the securities may not be resold in the marketplace unless they are registered with the SEC or are exempt from such registration requirements.
Securities Act Rule 144 (“Rule 144”), codified at 17 C.F.R. § 230.144, provides a registration exemption for the resale of restricted securities. Specifically, it permits the public resale of restricted securities if a number of conditions are met, including conditions relating to how long the securities are held, the way in which they are sold, the public information available to investors about the securities, and the amount that can be sold at any one time. However, even if these conditions are met, the sale of restricted securities to the public is still not permitted until a transfer agent removes the “restricted” legend from the security.
The term “transfer agent” refers to a company that keeps track of individuals and entities that own the stocks and bonds of a given company that has publicly traded securities. Among other things, transfer agents issue and cancel certificates to reflect changes in ownership, serve as the company’s intermediary for payouts, exchanges, or mailings, and handle lost, destroyed or stolen certificates. Transfer agents also, when appropriate, remove the “restricted” legend from securities.
A Rule 144 Seller’s Representation Letter, or “Seller’s Representation Letter,” is a letter to a transfer agent to establish certain facts underlying a legal opinion that the securities at issue can be sold publicly pursuant to Rule 144. The transfer agent relies on the Seller’s Representation Letter in determining whether to remove the restricted legend from a security.
Over-the-Counter Securities and OTC Markets Group
Over-the-counter (“OTC”) securities are securities that are traded between two counterparties outside of a formal securities exchange. OTC Markets Group (“OTC Markets”) is a company headquartered in New York, New York that provides price and liquidity information for OTC securities.
OTC Markets requires issuers seeking to be quoted on certain tiers of OTC Markets to hire a licensed attorney to review company records and submit a letter to OTC Markets (an “OTC Markets Attorney Letter”) regarding whether information publicly disclosed by the issuer is in compliance with the condition in SEC Rule 144 governing the public information available to investors about the issuer. OTC Markets relies on the OTC Markets Attorney Letter to determine whether an issuer’s security may be quoted on OTC Markets. OTC Markets Attorney Letters are available to the public on the OTC Markets website.
The Scheme to Defraud
From at least in or about 2011 through at least in or about September 2018, RUBIN and CRAFT, the defendants, participated in a fraudulent scheme in which CRAFT falsely represented that he had undertaken certain legal work in connection with Seller’s Representation Letters, OTC Markets Attorney Letters, and S-1 Opinion Letters, all of which enabled the relevant securities to be sold to the investing public. In addition, in connection with the securities of certain issuers, RUBIN, the defendant, falsely represented that he was an attorney in Seller’s Representation Letters and OTC Markets Attorney Letters, all of which enabled the relevant securities to be sold to the investing public. The false representations were in letters pertaining to over a dozen companies.
RUBIN, 78, of Brooklyn, New York, and CRAFT, 55, of Tequesta, Florida, are each charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison, one count of securities fraud in violation of 18 U.S.C. §§ 1348 and 2, which carries a maximum sentence of 25 years in prison, and one count of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2, which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
* * *
Ms. Strauss praised the investigative work of the SEC OIG. Ms. Strauss also thanked the U.S. Postal Inspection Service, Office of the Inspector General, which assisted in the investigation. Ms. Strauss also thanked the SEC Division of Enforcement, which brought a separate civil enforcement action against the defendants.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Martin Bell and Jordan Estes are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Justice Department Files Lawsuit Against Village of Airmont, New York, for Zoning Restrictions that Target the Orthodox Jewish CommunityRead the Press Release
The Justice Department today announced that it filed a lawsuit against the Village of Airmont, New York, alleging that it violated the Religious Land Use and Institutionalized Persons Act (RLUIPA) by targeting the Orthodox Jewish community through zoning ordinances restricting religious schools and home synagogues, and by enforcing its zoning code in a discriminatory manner to prevent Orthodox Jews from using their property consistent with their faith.
“In this country, states, towns, and villages cannot make or enforce any law that abridges the privileges or immunities of American citizens, nor can they deny to any person within their jurisdiction the equal protection of the laws,” said Eric Dreiband, Assistant Attorney General for the Civil Rights Division. “The Fourteenth Amendment to the U.S. Constitution enshrined these principles in our law, and the Congress extended them when it enacted the Religious Land Use and Institutionalized Persons Act. Zoning ordinances that seek to exclude people and organizations because of their religion violate the law. Furthermore, targeting Orthodox Jewish individuals for the purpose of excluding them from a community is both illegal and a direct assault on this Nation’s fundamental values. This unlawful anti-Semitic conduct is wholly unacceptable in the United States of America, and the U.S. Department of Justice will not tolerate it. The Department of Justice will continue to use the full force of its authority to stop this despicable conduct and prevent its recurrence.”
“As a jury found over two decades ago, the Village of Airmont was born out of a spirit of animus against a religious minority,” said Acting U.S. Attorney for the Southern District of New York Audrey Strauss. “Sadly, rather than working to overcome that shameful legacy, Airmont has flagrantly ignored the terms of a court judgment and implemented land use practices that by design and operation are again meant to infringe unlawfully on the rights of a minority religious community. Religious discrimination will not be tolerated. We will remain vigilant to ensure that the right to worship freely and without undue interference is protected for all.”
The complaint, filed in the Southern District of New York, alleges that the Village adopted a zoning code that, in violation of the terms of a prior federal court judgment, eliminated residential places of worship as by-right uses and applied its code in a manner that made it impossible for members of the Orthodox Jewish community to obtain approval for religious schools and home synagogues. The complaint also alleges that the Village implemented an 18-month moratorium used to prevent the Orthodox Jewish community from advancing religious zoning applications, and interpreted and enforced its zoning code to prevent Orthodox Jews from using their property to construct Sukkahs, ritual huts required under Orthodox Jewish beliefs, and Mikvahs, ritual baths necessary for religious observance.
RLUIPA is a federal law that protects religious institutions from unduly burdensome or discriminatory land use regulations. In June 2018, the Justice Department announced its Place to Worship Initiative, which focuses on RLUIPA’s provisions that protect the rights of houses of worship and other religious institutions to worship on their land. More information is available at www.justice.gov/crt/placetoworship.
In July 2018, the Department of Justice announced the formation of the Religious Liberty Task Force. The Task Force brings together department components to coordinate their work on religious liberty litigation and policy, and to implement the Attorney General’s 2017 Religious Liberty Guidance.
Individuals who believe they have been subjected to discrimination in land use or zoning decisions may contact the Civil Rights Division Housing and Civil Enforcement Section at (800) 896-7743, or through the complaint portal on the Place to Worship Initiative website. More information about RLUIPA, including questions and answers about the law and other documents, may be found at http://www.justice.gov/crt/about/hce/rluipaexplain.php.
Acting U.S. Attorney Sues Village of Airmont for Renewed Religious Discrimination Against Orthodox Jewish ResidentsRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced the filing today of a lawsuit in federal district court against the Village of Airmont in Rockland County (“AIRMONT” or the “VILLAGE”) to rectify AIRMONT’S renewed efforts to discriminate against its Orthodox Jewish community. As alleged in the Complaint, AIRMONT has violated the Religious Land Use and Institutionalized Persons Act (“RLUIPA”) by imposing land use and zoning provisions that, among other things, restrict Orthodox Jewish residents’ ability to worship in private homes and prevent operation of a private religious school. The lawsuit marks the third time that the United States has sued AIRMONT since its 1991 incorporation for discriminatory treatment of Orthodox Jewish residents under both RLUIPA and the Fair Housing Act. The first two lawsuits resulted in the entry of court judgments against the VILLAGE – a judgment following a jury trial in 1996 and judgment pursuant to a court-entered consent decree in 2011.
Acting U.S. Attorney Audrey Strauss said: “As a jury found over two decades ago, the Village of Airmont was born out of a spirit of animus against a religious minority. Sadly, rather than working to overcome that shameful legacy, Airmont has flagrantly ignored the terms of a court judgment and implemented land use practices that by design and operation are again meant to infringe unlawfully on the rights of a minority religious community. Religious discrimination will not be tolerated. We will remain vigilant to ensure that the right to worship freely and without undue interference is protected for all.”
According to the Complaint filed in White Plains federal court:
Following the expiration of the last court-entered consent decree against AIRMONT in 2015, and beginning with an administration elected in 2017 on an openly anti-Hasidic platform, the VILLAGE has actively sought to prevent its Orthodox Jewish residents from operating home synagogues and a private school in conformity with their faith. AIRMONT has pursued its discriminatory agenda by, among other actions:
- Imposing a nearly two-year land use moratorium in 2017 that was motivated by a desire to prevent the growing Orthodox Jewish community from developing property rather than any legitimate governmental purpose.
- Amending the Village Zoning Code in 2018 to strike “residential place of worship” as a recognized land use category, in direct violation of the terms of the final judgment entered by the court in 1996.
- Imposing new Zoning Code requirements that place an unlawful and arbitrary limit on the gross floor area of private residences that can be used for worship, ban the use of private home mikvahs, or ritual baths, and restrict the co-congregants whom homeowners are allowed to host.
- Implementing a new, arbitrary land use application process controlled by the Village designed to impose unreasonable and unnecessary zoning requirements on Orthodox Jewish residents, drive up their costs, and ensure their applications, including minor alterations to private homes, are never approved despite years of good faith efforts to comply.
- Targeting Orthodox Jewish residents with the threat and imposition of unfounded fines for supposed zoning infractions in order to thwart and intimidate land use applicants.
RLUIPA authorizes the Department of Justice to commence an action against any local government that implements a land use regulation that places a substantial burden on religious exercise, discriminates on the basis of religion, or unreasonably limits religious assemblies, institutions, and structures. The Complaint seeks declaratory and injunctive relief against AIRMONT.
The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorney Stephen Cha-Kim is in charge of the case.
- Imposing a nearly two-year land use moratorium in 2017 that was motivated by a desire to prevent the growing Orthodox Jewish community from developing property rather than any legitimate governmental purpose.
Three Defendants Charged in Connection with Bronx Home Invasion Shooting and RobberyRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John B. DeVito, Special Agent in Charge of the New York Field Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced charges against SHAWN GARCIA, a/k/a “Ralph Porter,” OSCAR RIOS, a/k/a “Oski,” and SUTHA TAYLOR, a/k/a “Sutha Colon,” (collectively, the “defendants”), in connection with their participation in an August 29, 2020 armed home invasion robbery in the Bronx, New York. GARCIA and TAYLOR were arrested earlier this morning and will be presented in Manhattan federal court later today before U.S. Magistrate Judge Katharine H. Parker. RIOS remains at large.
Acting U.S. Attorney Audrey Strauss stated: “Oscar Rios and his co-defendants allegedly planned and executed a violent robbery, during which one victim was shot and another had her head covered with a garment while the alleged perpetrators coerced her to divulge the location of the other victim’s cash. The three ultimately absconded with a safe containing cash, a cell phone, and marijuana. I thank the ATF and NYPD for their assistance in bringing these alleged brazen and reckless actors to justice."
According to the allegations in the Complaint charging GARCIA, RIOS, and TAYLOR, unsealed today in Manhattan federal court:[1]
On or about August 29, 2020, the defendants participated in an armed home invasion robbery of an apartment in the Bronx, New York. Shortly before the robbery took place, defendant OSCAR RIOS, a/k/a “Oski,” coordinated with certain other co-conspirators (referred to in the Complaint as “CC-1” and “CC-2”) to cause a resident of the Apartment (“Victim-1”) to leave the Apartment, under the guise that CC-1 wanted to buy liquor from Victim-1. Once RIOS learned from CC-2 that Victim-1 was about to exit the Apartment, RIOS informed defendants SHAWN GARCIA, a/k/a “Ralph Porter,” and SUTHA TAYLOR, a/k/a “Sutha Colon,” via text message.
When Victim-1 opened the door to the Apartment, GARCIA, TAYLOR, and a third co-conspirator (“CC-3”) ran into the Apartment and physically assaulted Victim-1, including by striking Victim-1 in the head several times with at least one firearm. While the assault on Victim-1 was in progress, another resident of the Apartment (“Victim-2”) was thrown into the bathroom and ordered to remain there. Victim-1 was then shot one time. After the shooting, one of the robbers placed a dark garment over Victim-2’s head and demanded to know where Victim-1 kept his safe, which contained proceeds from Victim-1’s marijuana sales. Meanwhile, RIOS, who had gone to a nearby building, texted GARCIA and TAYLOR to inform them that area was clear for them to flee. GARCIA, TAYLOR, and CC-3 then fled the Apartment, stealing the safe with cash proceeds from Victim-1’s marijuana sales, as well as other items found in the Apartment, including cash proceeds from Victim-1’s liquor sales, Victim-1’s cellphone, and marijuana belonging to Victim-1.
As a result of the assault and shooting, Victim-1 was hospitalized for several days.
* * *
GARCIA, RIOS, and TAYLOR are each charged with one count of conspiracy to commit Hobbs Act robbery, in violation of Title 18, United States Code, Section 1951, which carries a maximum sentence of 20 years in prison; and one count of substantive Hobbs Act robbery, in violation of Title 18, United States Code, Section 1951, which carries a maximum sentence of 20 years in prison. GARCIA and TAYLOR are also each charged with one count of carrying and discharging a firearm during and in relation to a crime of violence, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison.
Ms. Strauss praised the outstanding investigative work of the ATF and NYPD, in particular, the Strategic Patterned Armed Robbery Technical Apprehension (“SPARTA”) Task Force, which comprises agents and officers of the ATF and the NYPD.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney David J. Robles is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Recording Artist Kintea McKenzie Sentenced to 4½ Years in Prison in Connection with 2018 Shooting in Times SquareRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that KINTEA MCKENZIE, a/k/a “Kooda B,” was sentenced to 54 months in prison in connection with a shooting outside a hotel in Times Square on June 2, 2018, in furtherance of the Nine Trey Gangsta Bloods (“Nine Trey”) criminal enterprise. MCKENZIE pled guilty on June 3, 2019, before U.S. District Judge Paul A. Engelmayer, who imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “Kintea McKenzie helped to orchestrate a brazen shooting in Times Square. Now, thanks to the outstanding work of our partners at the NYPD, HSI, and ATF, McKenzie will spend 54 months in federal prison.”
As alleged in the Indictment and statements made in open court:
Nine Trey was a criminal enterprise involved in committing numerous acts of violence, including shootings, robberies, and assaults in and around Manhattan and Brooklyn. Members and associates of Nine Trey engaged in violence to retaliate against rival gangs, to promote the standing and reputation of Nine Trey, and to protect the gang’s narcotics business. On or about June 2, 2018, MCKENZIE agreed to accept money from Daniel Hernandez, a/k/a “Tekashi 6ix 9ine,” to shoot at a rival gang member and rapper who was staying at a hotel in Times Square. MCKENZIE helped to organize the shooting in order to scare that rival gang member.
* * *
In addition to the prison term, MCKENZIE, 22, of Brooklyn, New York, was sentenced to three years of supervised release.
Ms. Strauss praised the outstanding investigative work of the New York City Police Department, Homeland Security Investigations, and the Bureau of Alcohol, Tobacco, Firearms and Explosives. Ms. Strauss also praised the New York City Department of Correction, Correction Intelligence Bureau, and the New York County District Attorney’s Office for their assistance in the investigation.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Michael Longyear, Jacob Warren, Jonathan Rebold, and Sebastian Swett are in charge of the prosecution.
4 Charged in White Plains Federal Court with Crack Cocaine Distribution in PeekskillRead the Press Release
Audrey Strauss, Acting 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”), Don Halmy, Chief of the Peekskill Police Department (“PPD”), and Thomas Gleason, Commissioner of the Westchester County Department of Public Safety (“WCDPS”), announced the unsealing of a one-count Indictment charging JORDAN CAMPBELL, a/k/a “Jayoh,” DERRICK DICKEY, a/k/a “D,” TERRANCE PATTERSON, a/k/a “Cupid,” a/k/a “Q,” and JOHNNIE THOMAS, a/k/a “Country,” with crack cocaine distribution in the Peekskill-area. All four defendants were taken into custody today. The case is assigned to U.S. District Judge Kenneth M. Karas.
As alleged in the Indictment unsealed today in White Plains federal court[1]:
JORDAN CAMPBELL, a/k/a “Jayoh,” DERRICK DICKEY, a/k/a “D,” TERRANCE PATTERSON, a/k/a “Cupid,” a/k/a “Q,” and JOHNNIE THOMAS, a/k/a “Country,” conspired to distribute at least 280 grams or more of crack cocaine between March 2020 and August 2020.
* * *
Each defendant faces a maximum term of life in prison and a mandatory minimum term of 10 years. 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.
Ms. Strauss praised the outstanding investigative work of the FBI’s Westchester County Safe Streets Task Force – which comprises agents and detectives from the FBI, Yonkers Police Department, Westchester County District Attorney’s Office, WCDPS, PPD, Putnam County Sheriff, Mount Vernon Police Department, NYPD, Greenburgh Police Department, New Rochelle Police Department, Ramapo Police Department, and U.S. Probation.
This case is being handled by the Office’s White Plains Division and Violent and Organized Crime Unit. Assistant United States Attorneys Shiva H. Logarajah, Jacob Warren, and David R. Felton are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.
18 Members of the “Untouchable Gorilla Stone Nation” Gang Charged with Racketeering, Murder, Narcotics, Firearms, and Fraud OffensesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William V. Grady, Dutchess County District Attorney, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Thomas Pape, Chief of the City of Poughkeepsie Police Department (“CPPD”), Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), Don Halmy, Chief of the Peekskill Police Department (“PPD”), Thomas Gleason, Commissioner of the Westchester County Department of Public Safety (“WCDPS”), and Anthony J. Annuci, Acting Commissioner of the New York State Department of Corrections and Community Supervision (“DOCCS”), announced the unsealing of a 16-Count Indictment charging 18 members of the Untouchable Gorilla Stone Nation Gang (“Gorilla Stone”) with committing various racketeering, murder, narcotics, firearms, and fraud offenses. BRANDON SOTO, a/k/a “Stacks,” is charged in connection with the September 21, 2020, murder of a minor in Poughkeepsie. The case is assigned to U.S. District Judge Philip M. Halpern.
Acting U.S. Attorney Audrey Strauss said: “As alleged in the Indictment, members of Gorilla Stone committed terrible acts of violence, trafficked in narcotics, and even engaged in brazen fraud by exploiting benefits programs meant to provide assistance in response to the COVID-19 pandemic. Because of that, communities across the Southern District – from Poughkeepsie to Peekskill to New York City – suffered. Most shocking, as alleged in the indictment, a minor was murdered in furtherance of the gang’s activities. Because of the extraordinary work of our law enforcement partners, the defendants now face federal charges for their crimes.”
FBI Assistant Director William F. Sweeney Jr. said: “As the indictment alleges, the violence and drug activity committed by these gang members threatened the safety of our communities and placed innocent lives at risk. Their unabashed criminal behavior, as alleged, included the murder of a 15 year-old and even extended to defrauding programs meant for people suffering economic hardship due to the pandemic. But thanks to the partnership and hard work of all law enforcement agencies involved in this investigation, we were able to stop this violent criminal organization – and show that Gorilla Stone is actually not ‘untouchable.’”
NYPD Commissioner Dermot Shea said: “These arrests demonstrate the NYPD’s relentless pursuit of the few individuals who drive violence and disorder in New York City. I commend the NYPD investigators and the many law enforcement agencies involved in this investigation whose hard work resulted in these arrests. Murder, robberies, narcotics trafficking, and other associated gang behavior will never be tolerated by the people we serve.”
Peekskill Police Chief Don Halmy said: “While it’s clear that the alleged actions of these individuals had a negative impact on the quality of life in Peekskill, it’s also obvious that the extent of their alleged criminal enterprise was much further reaching. Through this joint operation, utilizing Federal, County and local law enforcement agencies, communities both large and small will benefit from the arrest of those allegedly responsible for the distribution of illegal narcotics as well as the commission of violent felonies. We thank all those involved in bringing this to such a successful conclusion."
Westchester County Department of Public Safety Commissioner Thomas Gleason said: “Today’s arrests put a halt to an alleged criminal enterprise involved in drug trafficking, gang-related violence and other crimes in Westchester and the Hudson Valley. Our streets are indeed safer thanks to the great work of the Westchester Safe Streets Task Force and all of the partner agencies that contributed to the success of this complex investigation.”
DOCCS Acting Commissioner Anthony J. Annuci said: “DOCCS has zero tolerance for any criminal activity involving incarcerated individuals in its custody and within our facilities. These arrests highlight the successful investigation that the Department fully assisted with in the pursuit of justice.”
Dutchess County Chief Assistant District Attorney Matthew A. Weishaupt said: “Gorilla Stone Nation, as alleged below, was involved in widespread crimes of violence which erodes the infrastructure and quality of life in our community. Our office will continue to collaborate with our Federal, State, County and Local partners to eradicate the crime drivers that fuel gang violence. This effort will enhance the safety and quality of life in our community. We extend our thanks to the outstanding job of all the law enforcement agencies involved and special thanks to the City of Poughkeepsie Police Department, Hudson Valley Safe Streets Task Force, and Bureau Chief Sara Thompson of our office.”
City of Poughkeepsie Chief of Police Thomas Pape said: “I would like to thank our partners at the Federal, State and Local levels of law enforcement for the unwavering assistance and dedication to their sworn duties. These partnerships are proof that collaborations with agencies at all levels of law enforcement work to bring those responsible for the heinous murder of a 15-year-old on our City streets to justice.”
As alleged in the Indictment unsealed today in White Plains federal court[1]:
DWIGHT REID, a/k/a “Dick Wolf,” CHRISTOPHER ERSKINE, a/k/a “Beagle,” WALTER LUSTER, a/k/a “Shells,” DESHAWN THOMAS, a/k/a “Don,” NAYA AUSTIN, a/k/a “Baby,” BRANDON NIEVES, a/k/a “Untouchable Dot,” AHMED WALKER, a/k/a “Ammo,” CASWELL SENIOR, a/k/a “Casanova,” BRANDON SOTO, a/k/a “Stacks,” DEZON WASHINGTON, a/k/a “Blakk,” ROBERT WOODS, a/k/a “Blakk Rob,” STEPHEN HUGH, a/k/a “Chino,” JORDAN INGRAM, a/k/a “Flow,” SHANAY OUTLAW, a/k/a “Easy,” ISAIAH SANTOS, a/k/a “Zay,” ROBERTA SLIGH, a/k/a “Trouble,” and BRINAE THORNTON, a/k/a “Luxury,” are members of a racketeering conspiracy known as Gorilla Stone.
On September 21, 2020, BRANDON SOTO, to further the Gorilla Stone enterprise, participated in and facilitated the murder of a minor victim, and aided and abetted the same, in Poughkeepsie, New York.
On July 20, 2020, STEPHEN HUGH shot at rival gang members in New Rochelle. HUGH shot at rival gang members to maintain and increase his position in the Gorilla Stone racketeering enterprise operating in the Southern District of New York.
On June 12, 2020, NAYA AUSTIN, DEZON WASHINGTON, and JORDAN INGRAM committed a gunpoint robbery of a rival drug dealer in Peekskill, New York. AUSTIN, WASHINGTON, and INGRAM committed the robbery in order to maintain or increase their position in the Gorilla Stone racketeering enterprise operating in the Southern District of New York.
On August 28, 2018, BRINAE THORNTON shot at a rival gang member in Brooklyn, New York, and aided and abetted the same. THORNTON shot at the rival gang member to maintain and increase her position in the Gorilla Stone racketeering enterprise operating in the Southern District of New York.
On January 12, 2018, ROBERT WOODS maimed and assaulted an individual with a dangerous weapon, and aided and abetted the same, by slashing the individual in the face. WOODS slashed the individual in part to maintain and increase his position in the Gorilla Stone racketeering enterprise operating in the Southern District of New York.
In August 2020, NAYA AUSTIN and SHANAY OUTLAW, without lawful authority, knowingly used the identification of others to file fraudulent applications for COVID-19-related unemployment benefits, and aided and abetted the same.
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Seventeen of the 18 defendants are in custody.
Charts containing the names, charges, and maximum penalties for the defendants are set forth below. 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.
Ms. Strauss praised the outstanding investigative work of the FBI’s Westchester County Safe Streets Task Force – which comprises agents and detectives from the FBI, Yonkers Police Department, Westchester County District Attorney’s Office, WCDPS, PPD, Putnam County Sheriff, Mount Vernon Police Department, NYPD, Greenburgh Police Department, New Rochelle Police Department, Ramapo Police Department, and U.S. Probation – as well as the outstanding investigative work of the CPPD and DOCCS, Office of Special Investigations. Ms. Strauss also thanked the FBI’s Hudson Valley Safe Streets Task Force, the FBI’s Newark, Albany, and Tampa Divisions, the New York City Department of Correction, Correction Intelligence Bureau, and the New York State Department of Labor for their assistance in the investigation.
This case is being handled by the Office’s White Plains Division and Violent and Organized Crime Unit. Assistant United States Attorneys Shiva H. Logarajah, Jacob Warren, and David R. Felton are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
COUNT
DEFENDANT(S)
MAX. TERM OF IMPRISONMENT
Count One: Conspiracy to Commit Racketeering (18 U.S.C. § 1962(d))
DWIGHT REID
CHRISTOPHER ERSKINE
WALTER LUSTER
DESHAWN THOMAS
NAYA AUSTIN
BRANDON NIEVES
AHMED WALKER
CASWELL SENIOR
BRANDON SOTO
DEZON WASHINGTON
ROBERT WOODS
STEPHEN HUGH
JORDAN INGRAM
SHANAY OUTLAW
ISAIAH SANTOS
ROBERTA SLIGH
BRINAE THORNTON
Life in prison as to all defendants except OUTLAW, for whom the maximum term is 20 years in prison
Count Two: Travel Act Murder
(18 U.S.C. §§ 1952 and 2)
BRANDON SOTO
Life in prison
Count Three: Attempted Murder and Attempted Assault with a Dangerous Weapon in Aid of Racketeering (18 U.S.C. §§ 1959(a)(5), (a)(6), and 2)
STEPHEN HUGH
10 years in prison
Count Four: Possession and Discharge of a Firearm in Furtherance of a Crime of Violence (18 U.S.C. §§ 924(c)(1)(A)(i), (ii), (iii) and 2)
STEPHEN HUGH
Life in prison; Mandatory minimum of 10 years in prison to run consecutively to any other sentence imposed
Count Five: Assault with a Dangerous Weapon in Aid of Racketeering (18 U.S.C. §§ 1959(a)(3) and 2)
NAYA AUSTIN
DEZON WASHINGTON
JORDAN INGRAM
20 years in prison
Count Six: Possession and Brandish of a Firearm in Furtherance of a Crime of Violence (18 U.S.C. §§ 924(c)(1)(A)(i), (ii), and 2)
NAYA AUSTIN
DEZON WASHINGTON
JORDAN INGRAM
Life in prison; Mandatory minimum of 7 years in prison to run consecutively to any other sentence imposed
Count Seven: Attempted Murder and Attempted Assault with a Dangerous Weapon in Aid of Racketeering (18 U.S.C. §§ 1959(a)(5), (a)(6), and 2)
BRINAE THORNTON
10 years in prison
Count Eight: Possession and Discharge of a Firearm in Furtherance of a Crime of Violence (18 U.S.C. §§ 924(c)(1)(A)(i), (ii), (iii) and 2)
BRINAE THORNTON
Life in prison; Mandatory minimum of 10 years in prison to run consecutively to any other sentence imposed
Count Nine: Maiming and Assault in Aid of Racketeering (18 U.S.C. §§ 1959(a)(2), (a)(3), and 2)
ROBERT WOODS
30 years in prison
Count Ten: Possession with Intent to Distribute Crack Cocaine (21 U.S.C. §§ 841(a)(1), (b)(1)(B) and 18 U.S.C. § 2)
NAYA AUSTIN
40 years in prison; Mandatory minimum of 5 years in prison
Count Eleven: Possession with Intent to Distribute Crack Cocaine (21 U.S.C. §§ 841(a)(1), (b)(1)(B) and 18 U.S.C. § 2)
CHRISTOPHER ERSKINE
NAYA AUSTIN
JORDAN INGRAM
40 years in prison; Mandatory minimum of 5 years in prison
Count Twelve: Possession with Intent to Distribute Crack Cocaine (21 U.S.C. §§ 841(a)(1), (b)(1)(B) and 18 U.S.C. § 2)
BRANDON SOTO
40 years in prison; Mandatory minimum of 5 years in prison
Count Thirteen: Conspiracy to Distribute Controlled Substances (21 U.S.C. § 846)
DWIGHT REID
CHRISTOPHER ERSKINE
WALTER LUSTER
DESHAWN THOMAS
NAYA AUSTIN
BRANDON NIEVES
AHMED WALKER
CASWELL SENIOR
BRANDON SOTO
DEZON WASHINGTON
ROBERT WOODS
STEPHEN HUGH
JORDAN INGRAM
ISAIAH SANTOS
ROBERTA SLIGH
BRINAE THORNTON
JAMAL TRENT
Life in prison; Mandatory minimum of 10 years in prison
Count Fourteen: Possession of a Firearm in Furtherance of a Drug Trafficking Crime (18 U.S.C. §§ 924(c)(1)(A)(i) and 2)
DWIGHT REID
CHRISTOPHER ERSKINE
WALTER LUSTER
DESHAWN THOMAS
NAYA AUSTIN
BRANDON NIEVES
AHMED WALKER
CASWELL SENIOR
BRANDON SOTO
DEZON WASHINGTON
ROBERT WOODS
STEPHEN HUGH
JORDAN INGRAM
ROBERTA SLIGH
BRINAE THORNTON
Life in prison; Mandatory minimum of 5 years in prison to run consecutively to any other sentence imposed
Count Fifteen: Possession and Brandish of a Firearm in Furtherance of a Drug Trafficking Crime (18 U.S.C. §§ 924(c)(1)(A)(i), (ii), and 2)
ISAIAH SANTOS
Life in prison; Mandatory minimum of 7 years in prison to run consecutively to any other sentence imposed
Count Sixteen: Aggravated Identity Theft (18 U.S.C. §§ 1028A(a)(1), 1028(b) and 2)
NAYA AUSTIN
SHANAY OUTLAW
20 years in prison;
Mandatory minimum of two years in prison
[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.
NYC Restaurateur Sentenced to Two Years in Prison for Tax Evasion SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that ADEL KELLEL, owner of Raffles Bistro, formerly a restaurant located in New York City, was sentenced in Manhattan federal court to two years in prison for perpetrating a tax evasion scheme. KELLEL previously pled guilty before U.S. Magistrate Judge Gabriel W. Gorenstein to one count of tax evasion for the calendar years 2011 through 2015. U.S. District Judge Paul G. Gardephe, who accepted KELLEL’s guilty plea, imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “Adel Kellel cooked his books to conceal income from the IRS and his own accountants. He spent the ill-gotten gains on personal luxuries like a Mercedes, a Porsche, and a Maserati. Now he will spend two years in federal prison.”
According to the allegations contained in the Information to which KELLEL pled guilty, court filings, and statements made in public court proceedings:
In 2011, KELLEL was the President and a 45 percent owner of K&H Restaurant, Inc. (“K&H”), which operated Raffles Bistro (“Raffles”), a restaurant then located in a hotel (the “Hotel”) in Manhattan. From 2012 through 2015, KELLEL was the 100 percent owner of K&H. The gross receipts of K&H consisted primarily of: (a) credit card payments by Raffles’ customers; (b) cash payments by Raffles’ customers; and (c) check payments by the Hotel for various services that Raffles provided to hotel guests and patrons, including room service, banquets, and catering.
KELLEL perpetrated a scheme to evade income taxes by diverting and failing to report to the Internal Revenue Service (“IRS”) a substantial portion of K&H’s gross receipts for the calendar years 2011 through 2015. As part of his tax evasion scheme, KELLEL diverted over 150 Hotel checks, totaling over $2.1 million in gross receipts, which he hid from his accountants and the IRS. KELLEL concealed these receipts – representing approximately 43 percent of this particular revenue stream for the restaurant – by depositing them into more than a dozen bank accounts that KELLEL did not disclose to his accountants. KELLEL also diverted cash income received from Raffles’ customers, a portion of which he deposited into personal bank accounts or spent directly on personal expenses, without disclosing it to his accountants or paying taxes on it.
KELLEL used the diverted income for various personal expenses, including overseas transfers; condominium fees; rent for a high-end Manhattan apartment; college tuition payments from his children; shopping at luxury retailers, such as Hugo Boss and Saks Fifth Avenue; payments for luxury cars manufactured by Mercedes, Porsche, and Maserati; and payments for domestic and international travel.
By fraudulently concealing from his accountants a substantial portion of K&H’s gross receipts, KELLEL caused K&H’s corporate income tax returns and KELLEL’s own individual income tax returns for the calendar years 2011 through 2015 to be materially false. As a result of his conduct, KELLEL admitted to causing a combined tax loss of at least $771,195 to the IRS and the New York State Department of Taxation and Finance (“NYSDTF”).
* * *
In addition to the prison term, Judge Gardephe ordered KELLEL, 63, of New Hyde Park, New York, to pay restitution to the IRS in the amount of $613,478, and to pay restitution to NYSDTF in the amount of $157,717. KELLEL was also ordered to serve three years of supervised release.
Ms. Strauss praised the outstanding work of the Internal Revenue Service, Criminal Investigation, in this case. Ms. Strauss also thanked the U.S. Department of Justice’s Tax Division for its significant assistance in the investigation.
This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Olga I. Zverovich and Special Assistant U.S. Attorney Jorge Almonte of the Department of Justice’s Tax Division are in charge of the prosecution.
Acting Manhattan U.S. Attorney Announces Extradition of Co-Founder of Global Cryptocurrency Ponzi SchemeRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced that GUTEMBERG DOS SANTOS, a citizen of Brazil and the United States, was extradited from Panama on November 25. DOS SANTOS is charged by indictment with co-defendants Pablo Renato Rodriguez, Scott Hughes, Cecilia Millan, Karina Chairez, and Jackie Aguilar for their roles in an internationally coordinated fraud and money laundering ring involved in defrauding individuals through investments in AirBit Club, a purported cryptocurrency mining and trading company. DOS SANTOS was arrested on August 18, 2020, in Panama City, Panama, and will be presented later today before U.S. Magistrate Judge Katharine H. Parker. Rodriguez, Hughes, Millan, and Aguilar were arrested in the United States on August 18, 2020, and Chairez was arrested in the United States on October 20, 2020. The case has been assigned to U.S. District Judge George B. Daniels.
Acting United States Attorney Audrey Strauss said: “As alleged, Gutemberg Dos Santos played a key role in an international investment scam that promised extraordinary rates of return on phantom investments in cryptocurrencies, defrauding victims of tens of millions of dollars. Thanks to HSI, Dos Santos is now in U.S. custody.”
HSI Special Agent in Charge Peter C. Fitzhugh said: “The extradition of Dos Santos reflects the determination of agents from HSI New York’s El Dorado Financial Crimes Task Force to dismantle global criminal organizations, wherever the investigation takes us. Utilizing our broad authorities and network of law enforcement partners, HSI will continue to hunt those who allegedly prey upon innocent citizens for financial gain.”
According to the allegations in the Superseding Indictments: [1]
Rodriguez, DOS SANTOS, Hughes, Millan, Chairez, and Aguilar participated in a coordinated scheme in which victim-investors (the “Victims”) were induced to invest in AirBit Club based on the promise of guaranteed profits in exchange for cash investments in club “memberships” (the “AirBit Club Scheme” or the “Scheme”). Beginning in late 2015, AirBit Club, through its founders, Rodriguez and DOS SANTOS, as well as its promoters (the “Promoters”), including Millan, Chairez, and Aguilar, marketed AirBit Club as a multilevel marketing club in the cryptocurrency industry. Promoters falsely promised Victims that AirBit Club earned returns on cryptocurrency mining and trading and that Victims would earn passive, guaranteed daily returns on any membership purchased.
Rodriguez, DOS SANTOS, Hughes, Millan, Chairez, and Aguilar traveled throughout the United States, and around the world to places in Latin America, Asia, and Eastern Europe, where they hosted lavish expos and small community presentations aimed at convincing Victims to purchase AirBit Club memberships. In furtherance of the AirBit Club Scheme, the Victims were induced to buy memberships in cash, including in the Southern District of New York. Following a Victim’s investment, a Promoter provided the Victim with access to an online AirBit Club portal to view the purported returns on memberships (the “Online Portal”). While Victims saw “profits” accumulate on their Online Portal, those representations were false: No Bitcoin mining or trading on behalf of Victims in fact took place. Instead, Rodriguez, DOS SANTOS, Millan, Chairez, and Aguilar enriched themselves, and spent Victim money on cars, jewelry, and luxury homes, and financed more extravagant expos to recruit more Victims.
Hughes, an attorney licensed to practice law in California, had previously represented Rodriguez and DOS SANTOS in a Securities and Exchange Commission (“SEC”) investigation related to another investment scheme known as Vizinova before aiding Rodriguez and DOS SANTOS in perpetrating the AirBit Club Scheme by, among other things, helping to remove negative information about AirBit Club and Vizinova from the internet.
In many instances, as early as 2016, Victims who attempted to withdraw money from the AirBit Club Online Portal and complained to a Promoter were met with excuses, delays, and hidden fees amounting to more than 50% of the Victim’s requested withdrawal, if they were able to make any withdrawal at all. In one instance, Aguilar told one Victim of the AirBit Club Scheme who was complaining about her inability to withdraw AirBit Club returns that she should “bring new blood” into the AirBit Club Scheme in order to receive her returns.
In April 2020, another victim received a notice on the AirBit Club Online Portal that his account was closed – and principal investment lost – due to “execution of financial sustainability Reserve, policy #34 of the Airbit Club Terms and Conditions, due to the economic and financial crisis caused by (Covid-19).”
Rodriguez, DOS SANTOS, Hughes, Chairez, and Millan sought to conceal the AirBit Club Scheme, as well as their respective control of the proceeds of that Scheme, by requesting that Victims purchase memberships in cash, using third-party cryptocurrency brokers, and by laundering the Scheme’s proceeds through several domestic and foreign bank accounts, including an attorney trust account managed by Hughes (the “Hughes Trust Account”). The Hughes Trust Account was ostensibly intended to maintain custody of Hughes’s law practice’s client funds. Instead, the Hughes Trust Account was used by Rodriguez, DOS SANTOS, Hughes, and Millan to conceal the nature and origin of the AirBit Club Scheme’s illicit proceeds. Through that account, Hughes directed Victim funds to the personal expenses of Rodriguez, DOS SANTOS, Millan, and himself, and funded promotional events and sponsorships designed to further promote the AirBit Club Scheme. In total, the defendants laundered at least $20 million in proceeds of the Scheme through these various methods.
* * *
DOS SANTOS, 45, of Panama City, Panama, is charged with one count of conspiracy to commit wire fraud, one count of conspiracy to commit bank fraud, and one count of conspiracy to commit money laundering. The wire fraud conspiracy and money laundering conspiracy charges each carry a maximum term of 20 years in prison, and the bank fraud conspiracy charge carries a maximum term of 30 years in prison. The maximum potential sentences 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 Special Agents from Homeland Security Investigations’ El Dorado Task Force, HSI Panama, the HSI Panama City Transnational Criminal Investigative Unit, and HSI New Orleans. Ms. Strauss further thanked the attorneys and investigators at the SEC whose expertise and diligence were integral to the development of this investigation.
The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Kiersten A. Fletcher, Cecilia E. Vogel, and Elizabeth A. Espinosa are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictments and the description of the Superseding Indictments set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Acting Manhattan U.S. Attorney Announces Settlement of Lawsuit Against Pharmacist for Fraudulent Billing PracticesRead the Press Release
Audrey Strauss, the Acting 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 settled a civil healthcare fraud lawsuit against RAMESH TADUVAI (“TADUVAI”), the former part-owner and Pharmacist-in-Charge of Manav II, Inc., d/b/a Good Health Pharmacy (“Good Health Pharmacy”) in Manhattan. The settlement resolves claims that, from February 2013 through February 2014, TADUVAI submitted false claims for payment to Medicare and Medicaid for prescriptions that Good Health Pharmacy never dispensed to patients, and received reimbursements to which the pharmacy was not entitled, in violation of the False Claims Act. Under the settlement approved yesterday by U.S. District Judge P. Kevin Castel, TADUVAI will pay $600,000 to the United States to resolve the fraudulent billing claims. TADUVAI also made admissions regarding his conduct as further described below.
Acting U.S. Attorney Audrey Strauss said: “For more than a year, pharmacist Ramesh Taduvai knowingly billed the Medicare and Medicaid programs for prescriptions that his pharmacy never dispensed to patients. This Office will continue to hold accountable those who engage in fraudulent billing schemes to personally profit at the expense of federally funded healthcare programs.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “Health care professionals must be held to a high standard of ethical behavior. HHS-OIG will continue to ensure that those individuals and entities that bill federal health care programs do so in an honest manner.”
According to the Complaint filed in Manhattan federal court:
TADUVAI has been a licensed pharmacist since 1999 and was a 50% owner of Good Health Pharmacy, a retail pharmacy in New York, New York, from late 2005 until October 2014. From February 2013 through February 2014, TADUVAI, on behalf of Good Health Pharmacy, knowingly billed Medicare and Medicaid for prescription drugs that were never actually dispensed to patients. After Pharmacy Benefit Manager CVS/Caremark (“CVS”) determined that Good Health Pharmacy had submitted claims for medications that were not supported by records showing that it had purchased the medications, TADUVAI presented checks that he had issued, purportedly to independent pharmaceutical wholesalers, and falsely claimed they were proof of the purchases. However, Good Health Pharmacy had in fact not purchased these drugs and the checks were instead deposited into bank accounts controlled by TADUVAI. In March 2017, TADUVAI, Good Health Pharmacy, and others were indicted by the Manhattan District Attorney’s Office for crimes related to underreporting income, some of which related to the issuance of these checks. In November 2018, TADUVAI pled guilty to three counts of criminal tax fraud in the second degree.
As part of the settlement, TADUVAI admits, acknowledges, and accepts responsibility for the following conduct:
- At all times during the relevant time period, TADUVAI was Good Health Pharmacy’s Pharmacist-in-Charge and was responsible for the pharmacy’s operations and the management of its staff.
- Good Health Pharmacy, under the management of TADUVAI, as Pharmacist-in-Charge, submitted false claims for payment to Medicare and Medicaid for prescriptions that were never dispensed to patients and received reimbursements on these prescriptions to which it was not entitled.
- TADUVAI issued checks, purportedly to independent pharmaceutical wholesalers, and claimed that these checks were proof that Good Health Pharmacy had ordered and paid for drugs for which the pharmacy billed CVS and federal healthcare programs, but the medications were not actually purchased and the checks were instead deposited into bank accounts controlled by TADUVAI and others.
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. Attorney Jennifer Jude is in charge of the case.
Two Individuals Charged in Connection with Armed RobberiesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced the unsealing of an Indictment charging VICTOR RIVERA, 29, and MICHOLS PENA, 38, with conspiracy to commit robbery, robbery, and firearms offenses. RIVERA and PENA were arrested on this morning. PENA was arrested in Queens and will be presented early next week before United States Magistrate Judge Gabriel W. Gorenstein. RIVERA was arrested in Miami and will be presented early next week before United States Magistrate Judge Edwin Torres in the Southern District of Florida. This case is assigned to United States District Judge Alvin Hellerstein.
Acting U.S. Attorney Audrey Strauss said: “As alleged in the Indictment, the defendants are charged in connection with a violent robbery conspiracy. In one of the robberies a victim was shot. Thanks to the outstanding work of the Special Agents of our office and cooperation across multiple law enforcement agencies, the defendants now face federal charges for their crimes. We especially want to thank the Bergen County Prosecutor’s Office for its assistance in this matter.”
As alleged in the Indictment unsealed today in Manhattan federal court[1]:
From at least in or about June 2020 up to and including November 2020, VICTOR RIVERA, MICHOLS PENA, and others known and unknown, agreed to commit robberies in which the objects of the robberies were Richard Mille watches worth hundreds of thousands of dollars, and the watches were owned by businesses transacting in interstate commerce. RIVERA participated in an armed robbery on June 11, 2020, in which the victim was shot. RIVERA also participated in an armed robbery on August 2, 2020.
* * *
RIVERA and PENA are charged with conspiring to commit Hobbs Act robbery; this count carries a statutory maximum sentence of twenty years in prison. RIVERA is further charged with two counts of Hobbs Act robbery, each of which carries a statutory maximum sentence of twenty years in prison; aiding and abetting the use, carrying, and possession of a firearm, which firearm was brandished and discharged in furtherance of a crime of violence, which carries a statutory maximum sentence of life in prison, and a mandatory minimum sentence of ten years in prison, which must run consecutively to any other sentence imposed; and using, carrying, and possessing a firearm in furtherance of a crime of violence, which firearm was brandished, which carries a statutory maximum sentence of life in prison and a mandatory minimum sentence of seven years in prison, which must run consecutively to any other sentence imposed.
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.
Ms. Strauss praised the outstanding investigative work of the Special Agents of the U.S. Attorney’s Office for the Southern District of New York, the New York City Police Department, the Bergen County Prosecutor’s Office, the Englewood Cliffs Police Department, the Weehawken Police Department, and the Nassau County Police Department.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Mathew Andrews 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, the description of the Indictment, and the statements made in related court filings and proceedings set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Tuckahoe Tutor Charged with Sexual Exploitation of A 7-Year-Old Minor and Transporting Child PornographyRead the Press Release
Audrey Strauss, the Acting 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 today the arrest of JOHN MUESER. MUESER, 69, is charged with sexual exploitation of a 7-year-old minor and with transporting child pornography from Fairfield County, Connecticut to Westchester County, New York. MUESER was arrested this morning and is expected to be presented today before U.S. Magistrate Judge Judith C. McCarthy in White Plains federal court.
Acting U.S. Attorney Audrey Strauss said: “John Meuser allegedly used his position of trust as a tutor to engage in unspeakable acts with a 7-year-old child. Alleged conduct such as Meuser’s can inflict long-lasting negative effects on victims which no child should ever endure. Meuser now faces federal charges and substantial prison time for his craven conduct, as alleged. I thank the FBI for their assistance in this case and urge anyone with knowledge of child sexual abuse to call 1-800-CALL-FBI.”
FBI Assistant Director William F. Sweeney Jr. said: “Announcements of charges like those we bring today should make anyone’s stomach turn. Mueser allegedly induced his seven-year-old tutoring student to engage in sexually-explicit conduct and recorded it on his phone. Mueser's conduct should shock the community into action to help others. The FBI will never waver in its commitment to protect our society's most vulnerable citizens, but we are all better working together as we try to protect our children. We believe there may be more victims in this case, and we need your help. We implore parents or family members of potential victims to contact us at 1-800-CALL-FBI.”
According to the Complaint[1] filed on November 17, 2020, and unsealed today in White Plains federal court:
On May 1, 2019, JOHN MUESER induced a 7-year-old minor, whom he was tutoring, to engage in sexually explicit conduct, used his iPhone to record the activity and then transported the images from Fairfield County, Connecticut to Westchester County, New York.
On October 1, 2019, JOHN MUESER transported child pornography maintained on his iPhone from Westchester County, New York to Fairfield County, Connecticut.
On or about March 19, 2020, JOHN MUESER was charged in Connecticut with Possession of Child Pornography, Risk of Injury to a Minor, Sexual Assault 4th, and Voyerism.
There may be more victims of this alleged conduct. If you have information to report, contact the Federal Bureau of Investigation at 1-800-CALL-FBI.
* * *
MUESER, 69, of Tuckahoe, New York, is charged with one count of sexual exploitation, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison, and one count of transportation of child pornography, which carries a mandatory minimum sentence of 5 years in prison and a maximum sentence of 20 years 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 Federal Bureau of Investigation in connection with this investigation. She added that the investigation is ongoing.
The prosecution is being handled by the Office’s White Plains Division. 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.
Member of International Burglary Crew Pleads Guilty to RacketeeringRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today the guilty plea of DAMIR PEJCINOVIC, a/k/a “Damian,” a/k/a “CoCo,” to participating in a criminal organization that committed a series of burglaries and engaged in the interstate transportation of stolen goods between 2006 and 2017. PEJCINOVIC pled guilty today before U.S. Magistrate Judge Kevin Nathaniel Fox. Gzimi Bojkovic, a/k/a “Jimmy,” pled guilty on October 7, 2019, before U.S. Magistrate Judge Ona T. Wang. Adrian Fiseku pled guilty on March 13, 2020, before U.S. Magistrate Judge Ona T. Wang. Elvis Cirikovic, a/k/a “Gorilla,” pled guilty on August 26, 2019, before U.S. Magistrate Judge Katharine H. Parker.
Acting U.S. Attorney Audrey Strauss said: “As they have now admitted, the defendants were part of a sophisticated criminal enterprise that carried out burglaries on both sides of the Atlantic, to the tune of over $10 million. We continue our daily work with our law enforcement partners to vigorously investigate criminal organizations that commit crimes in New York City and elsewhere. We especially want to thank the FBI and the NYPD for their outstanding work on this case.”
As alleged in the Indictment and statements made in open court:
Between 2006 and April 2017, DAMIR PEJCINOVIC, a/k/a “Damian,” a/k/a “CoCo,” Gzimi Bojkovic, a/k/a “Jimmy,” Adrian Fiseku, and Elvis Cirikovic, a/k/a “Gorilla,” participated in a criminal organization whose members and associates engaged in, among other things, the commission of burglaries and interstate transportation and sale of stolen goods. The criminal organization operated principally in New York City, California, New Jersey, Pennsylvania, Florida, Massachusetts, Maine, and Europe. Members and associates of the organization committed, conspired to commit, and attempted to commit numerous burglaries of jewelry stores and banks, as well as the interstate transportation and sale of stolen property from the burglaries. PEJCINOVIC, Bojkovic, Fiseku, Cirikovic, and other members and associates of the criminal organization committed the following burglaries and attempted burglaries:
On March 29, 2008, PEJCINOVIC, Bojkovic, and Cirikovic participated in a burglary of a jewelry store in Manhattan, which resulted in the theft of jewelry valued at over $2.5 million.
On October 11, 2008, PEJCINOVIC and Cirikovic participated in an attempted burglary of a jewelry store in Germany, attempting to steal gold valued at more than €10 million.
On July 26, 2009, PEJCINOVIC and Bojkovic participated in a burglary of a jewelry store in Manhattan, which resulted in the theft of jewelry valued at over $850,000.
On August 25, 2010, PEJCINOVIC participated in an attempted burglary of a jewelry store in Manhattan.
On August 28, 2010, PEJCINOVIC and Bojkovic participated in a burglary of a jewelry store in Beverly Hills, which resulted in the theft of jewelry valued at over $70,000.
On September 5, 2010, PEJCINOVIC participated in a burglary of a jewelry store in Kansas City, which resulted in the theft, interstate transportation, and sale of jewelry valued at over $1 million.
On February 19, 2011, PEJCINOVIC, Cirikovic, and Fiseku participated in a jewelry store in Los Angeles, which resulted in the theft, interstate transportation, and sale of jewelry valued at over $3 million.
In the summer of 2011, PEJCINOVIC participated in an attempted burglary of a jewelry store in Brooklyn.
On September 16, 2011, PEJCINOVIC and Cirikovic participated in a burglary of a jewelry store in Los Angeles, which resulted in the theft of jewelry valued at over $150,000.
In the fall of 2012, PEJCINOVIC and Bojkovic participated in an attempted burglary of a bank in Philadelphia.
On June 30, 2012, PEJCINOVIC and Cirikovic participated in an attempted burglary of a bank in Scarsdale.
On July 22, 2012, PEJCINOVIC participated in an attempted burglary of a jewelry store in Manhattan.
In the fall of 2013, PEJCINOVIC, Bojkovic, and Cirikovic participated in the burglary of a jewelry store in New Jersey.
On December 31, 2016, PEJCINOVIC, Bojkovic, and Fiseku participated in the burglary of a jewelry store in Manhattan, which resulted in the theft, interstate transportation, and sale of jewelry valued at over $3 million.
On March 20, 2017, PEJCINOVIC, Bojkovic, and Fiseku participated in the burglary of a jewelry store in Los Angeles, which resulted in the theft of jewelry valued at over $2 million.
* * *
PEJCINOVIC, Bojkovic, Fiseku, and Cirikovic each pled guilty to racketeering conspiracy, 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 sentencings of the defendants will be determined by the judge.
PEJCINOVIC is scheduled to be sentenced on March 9, 2021.
Bojkovic was sentenced by U.S. District Judge Victor Marrero on November 17, 2020, to 36 months in prison.
Fiseku is scheduled to be sentenced on January 22, 2021.
Cirikovic was sentenced by Judge Marrero on January 13, 2020, to 27 months in prison.
Ms. Strauss praised the outstanding investigative work of the FBI and the NYPD. Ms. Strauss also thanked the Los Angeles Police Department, Beverly Hills Police Department, Kansas City Police Department, Portland Police Department, German Federal Police, Interpol, Europol, the Office of International Affairs, and the Manhattan District Attorney’s Office for their assistance in this investigation.
This case is being handled by the Office’s Violent & Organized Crime Unit. Assistant United States Attorneys Andrew K. Chan, Margaret Graham, and Jamie Bagliebter 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.
Former Chief Executive Officer and Chief Operating Officer of Publicly Traded Biopharmaceutical Company Found Guilty of Accounting FraudRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that, following a four-week trial, PARKER H. “PETE” PETIT, the former chief executive officer of MiMedx Group, Inc. (“MiMedx”), a publicly traded biopharmaceutical company, was convicted of securities fraud, and WILLIAM TAYLOR, the former chief operating officer of MiMedx, was convicted of conspiracy to commit securities fraud, to make false statements in SEC filings, and to mislead the conduct of audits. The convictions stem from their participation in a scheme to fraudulently inflate MiMedx’s revenue.
Acting U.S. Attorney Audrey Strauss said: “As the jury found, Parker Petit and William Taylor employed secret agreements and corrupt financial inducements with four distributors to materially misstate the quarterly and annual sales revenue of MiMedx. In the process, they deceived the SEC, auditors, and the investing public, repeatedly misrepresenting the financial condition of their publicly traded company. Now they await sentencing for their crimes.”
According to the allegations contained in the Indictment and the evidence presented at trial:
MiMedx was headquartered in Marietta, Georgia, and its securities traded under the symbol “MDXG” on the NASDAQ. MiMedx sold regenerative biologic products, such as skin grafts and amniotic fluid, both directly to end users, such as public and private hospitals, and to various stocking distributors, which, in turn, resold the product to end users.
One of the most critical financial metrics disclosed in MiMedx’s public filings with the Securities and Exchange Commission (“SEC”), and touted in MiMedx’s accompanying press releases, was MiMedx’s quarterly and annual sales revenue. Under Generally Accepted Accounting Principles (GAAP) and SEC guidance, a company like MiMedx that engages in the sale of products through a distributor may recognize revenue upon transfer of the product to a distributor if certain requirements are satisfied, including that delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability of payment is reasonably assured. PETIT and TAYLOR repeatedly demonstrated and touted their understanding of these rules governing revenue recognition. They also publicly identified revenue as the principal metric reflecting MiMedx’s growth, and touted MiMedx’s consistent record of quarter-over-quarter revenue growth and meeting or exceeding revenue guidance in 17 consecutive quarters, from 2011 through year-end 2015. By 2015, however, it became increasingly difficult for MiMedx to reach its revenue guidance due to decreased demand from certain distributors and the increasingly aggressive revenue targets that MiMedx had publicly announced.
Confronted with the difficulties faced by MiMedx in meeting its quarterly and annual revenue guidance by legitimate means, PETIT and TAYLOR engaged in a fraudulent scheme to falsely recognize revenue upon the shipment of MiMedx product to four stocking distributors, CPM, SLR, Stability Biologics (“Stability”), and First Medical, in the second through fourth quarters of 2015. PETIT and TAYLOR caused MiMedx to report fraudulently inflated revenue figures to the investing public in order to ensure that the reported figures fell within MiMedx’s publicly announced revenue guidance, and to fraudulently convey to the investing public that MiMedx was accomplishing consistent growth quarter after quarter, as PETIT and TAYLOR had falsely touted to the investing public. The fraudulent scheme involved the following central features:
- As to CPM, in the second quarter of 2015, PETIT and TAYLOR caused MiMedx fraudulently to recognize $1.4 million in revenue by (1) making a $200,000 sham “consulting” payment to CPM’s owner to bribe CPM to buy MiMedx product and (2) secretly agreeing to send CPM approximately $1.1 million of product it did not want and did not intend to sell, while promising that CPM could return the product to MiMedx and swap it for different product in a subsequent quarter. PETIT and TAYLOR entered into the sham “consulting” agreement to conceal that the payment was a bribe to purchase product, and CPM’s owner performed no consulting work for the payment. Neither PETIT nor TAYLOR disclosed to MiMedx’s outside auditors the “consulting” payment or product swap.
- As to SLR, in the third quarter of 2015, PETIT and TAYLOR caused MiMedx fraudulently to recognize $4.6 million in revenue by booking the revenue despite understanding that SLR would not make a timely payment for the product, and certainly would not do so within contractual terms. To hide from MiMedx’s auditors that the collectability of payment from SLR was questionable, during the fourth quarter 2015, PETIT arranged for his adult children to use a shell company to loan money to SLR (money that came from a trust fund established by PETIT for their benefit), with the understanding that the loan proceeds would be used in substantial part to pay down SLR’s debt to MiMedx. PETIT did not disclose the loan to MiMedx’s outside auditors and made false and misleading statements to the auditors about SLR’s ability to pay MiMedx.
- As to Stability, in the third and fourth quarters of 2015, PETIT and TAYLOR caused MiMedx improperly to recognize $2.6 million of revenue, where they (1) failed to agree with Stability on the essential terms of the deal, including when payment was due; (2) reached a secret understanding that Stability could swap or return unwanted product in subsequent quarters; and (3) understood that Stability could not pay for the product in a timely fashion. In fact, PETIT granted the right of return to Stability in a back-dated letter he hid from MiMedx’s internal accountants and outside auditors.
- As to First Medical, in the fourth quarter of 2015, TAYLOR caused MiMedx improperly to recognize $2.2 million in revenue by making an undisclosed promise to First Medical that it could return any product that it could not sell and that MiMedx would not leave First Medical with any losses. To carry out the scheme, TAYLOR sent two emails four seconds apart to First Medical. The first was a “cover story” that purported to require payment within a fixed period, as required by MiMedx’s accountants. TAYLOR forwarded the first email to MiMedx’s accounting department. The second email, sent only four seconds after the first, memorialized the true terms of the deal, which involved an agreement to defer payment and take back product if it could not be sold. TAYLOR hid the second email from MiMedx’s internal accountants and outside auditors. TAYLOR also arranged for a false audit “confirmation,” which falsely represented that First Medical was required to pay within a fixed period and omitted the true terms of the deal, to be provided to MiMedx’s outside auditors.
PETIT’s and TAYLOR’s fraudulent manipulation of MiMedx’s revenue caused MiMedx to report materially inflated revenue in the second, third, and fourth quarters of 2015, and for the full year 2015. In its 2015 10-K, MiMedx reported annual revenue that was fraudulently inflated by approximately $8.2 million. Absent this fraudulent inflation of revenue, MiMedx would have missed both (1) its quarterly revenue guidance in the third and fourth quarters of 2015 and annual revenue guidance for 2015 and (2) analyst revenue consensus for the second through fourth quarters of 2015 and the full year 2015.
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PARKER H. “PETE” PETIT, 81, was convicted of one count of securities fraud, and WILLIAM TAYLOR, 52, was convicted of one count of conspiracy to commit securities fraud, make false filings with the SEC, and mislead the conduct of audits. The securities fraud count carries a maximum sentence of 20 years in prison, and the conspiracy count 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 defendants would be determined by the Court.
PETIT is scheduled to be sentenced before Judge Rakoff on February 23, 2021, and TAYLOR is scheduled to be sentenced before Judge Rakoff on February 24, 2021.
Ms. Strauss praised the outstanding investigative work of the United States Postal Inspection Service. Ms. Strauss also thanked the SEC, which brought a separate civil action.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore, Scott A. Hartman, and Daniel M. Tracer are in charge of the prosecution.
Doctor and Office Manager Charged for Illegally Distributing Oxycodone from Midtown Manhattan PracticeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), 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 Inspector General (“HHS-OIG”), announced today the unsealing of an Indictment in Manhattan federal court charging HOWARD ADELGLASS, a licensed physician, and MARCELLO SANSONE, an employee at ADELGLASS’s clinic, with conspiracy to distribute oxycodone illegally. The defendants were arrested yesterday afternoon, and will be presented before United States Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court today. The case is assigned to U.S. District Judge Kimba M. Wood.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Howard Adelglass betrayed his profession by writing thousands of medically unnecessary opioid prescriptions for more than a million oxycodone pills in less than three years. Marcello Sansone allegedly got promoted from trusted gatekeeper patient to office manager, helping Adelglass run his grotesquely lucrative pill mill. Now both are in custody and facing federal felony charges.”
FBI Assistant Director William F. Sweeney Jr. said: “The alleged behavior of Adlelglass, a licensed physician, who held a position of trust in our society, causes lasting harm to our communities. To intentionally peddle these substances into our communities, especially to those who have struggled to overcome the addiction of powerful painkillers, is an offense against all of society. The type of conspiracy alleged here has led to devastating consequences for addicted patients and their families, and has placed an immense burden on communities who will be left to pick up the pieces of shattered lives. This particular alleged operation has been shut down, but our message to others engaging in the same type of illegal activity should be clear – put the prescription pad away. Your medical degree won’t provide you immunity from federal charges or the consequences that will follow.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “The defendants allegedly operated a greed-fueled scheme that callously put lives at risk and worsened the opioid epidemic that plagues our country. Working with our law enforcement partners, we will continue to hold accountable medical professionals who act like drug dealers at the expense of some of the most vulnerable people in our society.”
According to the allegations contained in the Indictment unsealed today in Manhattan federal court:[1]
HOWARD ADELGLASS is a licensed physician who, with MARCELLO SANSONE, operated a pain-management clinic located in Midtown Manhattan (the “Clinic”). The Clinic serviced purported patients seeking oxycodone and other pain-relief medications commonly diverted for illicit purposes. In exchange for cash payments, ADELGLASS wrote thousands of prescriptions for large quantities of oxycodone to individuals who ADELGLASS knew did not need the pills for any legitimate medical purpose. Many of the purported patients were addicted to opioids and, in some cases, sold oxycodone pills on the street to drug users. Most patients were referred to the Clinic by existing, trusted “gatekeeper” patients, of which SANSONE was one. The Clinic primarily operated on a cash-only basis, and generally operated only for a few hours per day, opening sometime between approximately 2:00 p.m. and 5:00 p.m. After serving as a gatekeeper patient, SANSONE’s role at the Clinic expanded beginning in or about October 2018, when he joined ADELGLASS in managing the Clinic’s operations. SANSONE helped to control access to ADELGLASS and the lucrative prescriptions he wrote for medically unnecessary oxycodone.
Between in or about November 2017 and in or about September 2020, ADELGLASS prescribed more than 1.3 million oxycodone pills. ADELGLASS generally dispensed these pills after conducting limited or no examination of the purported patient. The purported patients who obtained oxycodone through ADELGLASS and SANSONE at the Clinic were often drug-addicted individuals who failed drug tests administered by the Clinic. ADELGLASS nevertheless continued to prescribe large quantities of oxycodone to these patients, many of whom traveled long distances to obtain the illicit oxycodone from the Clinic.
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HOWARD ADELGLASS, 65, of New York, New York, and MARCELLO SANSONE, 35, of Old Bridge, New Jersey, are charged each with one count of conspiracy to distribute oxycodone illegally, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI, NYPD, and HHS-OIG. She also thanked for its assistance the Drug Enforcement Administration (“DEA”) Tactical Diversion Squad - New York City, which comprises agents and officers from the DEA, the NYPD, the New York State Police, New York State Department of Financial Services, New York National Guard, New York City Department of Investigation, and New York State Department of Health Bureau of Narcotics Enforcement.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Nicholas W. Chiuchiolo and Daniel G. Nessim are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.