Southern District of New York
Press releases recorded for this federal judicial district.
New Rochelle Man Charged with Attempted Murder of FBI Task Force Officer During Broad Daylight Shooting in YonkersRead 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 John J. Mueller, Commissioner of the Yonkers Police Department, announced charges today against DARREN SMITH for attempting to murder a federal law enforcement officer. The defendant will be presented in White Plains federal court today before Chief United States Magistrate Judge Paul E. Davison.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, the defendant fired a handgun into a commercial hub in Yonkers and, in a further wanton disregard for human life, attempted to direct his fire at a federal law enforcement officer. Our Office will work to ensure that those who put our law enforcement partners in danger are held to account.”
FBI Assistant Director William F. Sweeney Jr. said: “As law enforcement professionals, we all take an oath to protect the public from harm. When this subject allegedly fired his gun wildly into a public square to prevent his arrest, police officers, including a task force officer from our Westchester Safe Streets Task Force, took immediate action to prevent innocent people from being killed or injured by stray bullets. We take our oath seriously, and we won’t back away from our pursuit of holding criminals accountable for their actions.”
Yonkers Police Commissioner John J. Mueller said: “As this was one of the most depraved and reckless acts I have witnessed in my 28 years in law enforcement, the response by our Yonkers Police Officers was also one of the most heroic and selfless acts I have witnessed in my career. We often hear how our police officers run toward danger, without consideration for their own well-being. In this incident, everyone who views the video can attest to the validity of this often used term. As Yonkers Police Commissioner, I could not be prouder of the officers and supervisors that God has blessed me to work with. Thank you also to the outpouring of support from our beloved community who have inundated the Yonkers Police with well wishes and gratitude.”
As alleged in the Complaint[1]:
On September 25, 2020, after law enforcement officers attempted to stop SMITH’s car, he fled on foot with a handgun. As officers, including a FBI Task Force Officer, attempted to arrest him, SMITH fired his handgun into Getty Square in Yonkers. As the FBI Task Force Officer attempted to control SMITH’s hand to prevent him firing again, SMITH struggled to turn the gun in the Task Force Officer’s direction and continued to fire. In the course of the struggle, the Task Force Officer fractured his finger, sprained his knee, and suffered several abrasions to his right hand.
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SMITH, 24, of New Rochelle, New York, is charged with one count of attempting to murder a federal officer, which carries a maximum sentence of 20 years in prison, one count of using a deadly weapon to interfere with the performance of a federal officer’s official duties, which carries a maximum sentence of 20 years in prison, and one count of discharging a firearm in the course of a crime of violence, which carries a maximum sentence of life in prison and a mandatory minimum of 10 years in prison to run consecutive 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 defendant 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 officers from the FBI, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, U.S. Probation, the New York State Police, the New York City Police Department, the Westchester County Police Department, the Westchester County District Attorney’s Office, the Yonkers Police Department, the Mount Vernon Police Department, the Peekskill Police Department, the Greenburgh Police Department, and the New Rochelle Police Department.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorney Shiva H. Logarajah is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the descriptions of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Acting U.S. Attorney Announces Charges Against Correctional Officer Who Demanded Bribe in the Form of Sex from A Female Prison VisitorRead 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging ROBERT ADAMS with bribery and blackmail. ADAMS was arrested this morning and is expected to be presented before U.S. Magistrate Judge Robert W. Lehrburger. The case is assigned to U.S. District Judge Paul G. Gardephe.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Robert Adams was derelict in his duties as an MCC correctional officer, not only by turning a blind eye to the smuggling of contraband, thereby putting inmates and fellow officers at risk, but also by exploiting his position of authority to pressure a prison visitor into having unwanted sex with him. Now Adams, a sworn law enforcement officer, is facing prosecution for these alleged serious violations of the law.”
FBI Assistant Director William F. Sweeney Jr. said: “Correctional officers are supposed to serve as society’s guardians – protecting us all from some of the worst offenders while they complete their sentences, not making offenders’ lives more comfortable by breaking rules, and certainly not engaging in their own extortionate behavior while doing so. We allege Adams did just that – he allowed illegal contraband into the MCC, risked the overall security of the facility and safety of his co-workers, and even more egregiously, he used his position of authority to blackmail a victim to have sex. Today we want to remind those who guard federal facilities the consequences for illegal behavior are just as severe for sworn officers as they are for anyone else in society.”
According to the allegations contained in the Indictment unsealed today in Manhattan federal court:[1]
ADAMS is a correctional officer employed by the United States Bureau of Prisons (“BOP”) at the Metropolitan Correctional Center (“MCC”), a federal prison located in New York, New York. Between June 2019 to August 2019, ADAMS was, among other responsibilities, assigned to work in the visit area of the MCC. Among his official responsibilities in that capacity, ADAMS was required to conduct searches, deny entry, detain visitors, and make reports when, among other things, he believed a visitor was smuggling contraband into the MCC.
ADAMS abused his official position as a correctional officer by blackmailing and corruptly demanding that a visitor, whom he had caught smuggling contraband into the MCC (“Visitor-1”), engage in sexual acts with him, or else be arrested and denied future entry to the MCC. Specifically, on or about July 5, 2019, while working as a correctional officer in the MCC’s visit area, ADAMS escorted an inmate away from a visit with Visitor-1, who was still in the visit area. After discovering that the inmate was carrying contraband, ADAMS confronted Visitor-1 and told her that he had caught the inmate with contraband she had provided to him. ADAMS further told Visitor-1 that she would be in trouble unless she met him at a nearby pizzeria.
As instructed by ADAMS, Visitor-1 left the MCC – without being reported or arrested for smuggling contraband – and walked to the nearby pizzeria. Soon thereafter, ADAMS met Visitor-1 at the pizzeria, where he requested that Vistor-1 get in his car and travel with him to a motel to have sex. ADAMS conveyed to Visitor-1that unless she had sex with him, she would be prohibited from visiting the MCC and would be arrested. After arriving at the motel, ADAMS and Visitor-1 had sex. Visitor-1 did not want to have sex with ADAMS, but agreed to it in exchange for not being reported to law enforcement or having her visiting privileges at the MCC revoked.
After the July 5, 2019, incident, Visitor-1 was permitted to continue to visit the MCC. Not only did ADAMS not report Visitor-1 on July 5, 2019, for smuggling contraband, in dereliction of his official duties, but he was also present on other occasions where she returned to the MCC with contraband.
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ADAMS, 39, of New York, New York, is charged with one count of bribery, which carries a maximum penalty of 15 years in prison, and one count of blackmail, which carries a maximum penalty of one year 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.
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Ms. Strauss praised the outstanding investigative work of the FBI. She also thanked the Department of Justice’s Office of the Inspector General for its assistance in this matter.
The prosecution of this case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Nicolas Roos and Rushmi Bhaskaran 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 descriptions set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Head of Investment Management Firm Sentenced to 85 Months in Prison in Connection with $18 Million Pre-IPO Securities Fraud SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that FRED ELM, a/k/a “Frederic Elmaleh,” the founder and manager of Elm Tree Investment Advisors LLC (“ETIA”), was sentenced today to 85 months in prison for participating in a scheme to defraud investors in multiple investment funds created and controlled by ELM and Ahmad Naqvi, ETIA’s chief operating officer. Among other illicit activity, ELM and Naqvi fraudulently induced more than 50 investors to invest over $18 million based on false representations that investor money would be invested, through the funds, in the shares of well-known privately held technology companies before their initial public offerings (“IPOs”). Instead, the majority of investor funds was misappropriated for personal use, lost through poor trading, or used to repay investors in a Ponzi-like fashion. ELM pled guilty to conspiracy to commit securities fraud and securities fraud on May 15, 2020, before U.S. District Judge Edgardo Ramos, who also imposed today’s sentence. Naqvi pled guilty before Judge Ramos on May 4, 2020, and was sentenced on June 29, 2020.
Acting U.S. Attorney Audrey Strauss said: “Fred Elm told investors the Elm Tree Funds would generate huge profits from investments in privately held technology companies. In fact, the Elm Tree Funds never invested in these pre-IPO companies and never returned a profit. Further, Elm lied to investors to conceal that their money was being comingled, misused, and lost. Now Elm is headed to prison for his crimes.”
According to the Superseding Indictment charging ELM and Naqvi, and other filings in the case:
From at least June 2013 through December 2014, ELM and Naqvi engaged in a scheme to defraud investors in funds that ELM and Naqvi created and controlled at ETIA, where ELM was the founder and manager, and Naqvi was the chief operating officer. ELM and Naqvi raised more than $18 million from over 50 investors in four limited partnerships for which ETIA acted as the fund manager: Elm Tree Investment Fund, LP; Elm Tree Emerging Growth Fund, LP; Elm Tree ‘e’Conomy Fund, LP; and Elm Tree Motion Opportunity, LP (collectively the “Elm Tree Funds”).
ELM and Naqvi falsely represented that the Elm Tree Funds used investor capital to purchase shares in privately held technology companies before their IPOs. These companies included Twitter, Alibaba, Uber, Square, Pinterest, and GoDaddy. Moreover, ELM and Naqvi falsely represented that they had access to these pre-IPO shares because of their relationships with leading venture capital firms, such as Kleiner Perkins Caufield & Byers, Benchmark Capital, and Silver Lake. In truth and in fact, ELM and Naqvi did not invest in the pre-IPO shares of these companies and did not have relationships with these venture capital firms.
ELM and Naqvi comingled the approximately $18 million that was invested in the Elm Tree Funds in a single investment account and then invested only a portion of the money, approximately $7.1 million. At no point did any of the Elm Tree Funds return a profit. Instead, for example, between January 2014 and November 2014, the Elm Tree Funds lost approximately $3.9 million in poor trading.
Moreover, of the investor funds that ELM and Naqvi did not lose in securities trading, ELM routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including to purchase a multimillion-dollar home, high-end furnishings, and other personal items, such as jewelry, daily living expenses, and luxury automobiles, including a Bentley, a Maserati, and a Range Rover.
The conversion of investors’ funds was contrary to the representations that ELM and Naqvi made to investors concerning their and ETIA’s fees. ELM and Naqvi falsely represented that they and ETIA would take a two percent annual management fee plus a performance fee of 20 percent of any profits that the Elm Tree Funds earned. In truth and in fact, ELM converted investor money that far exceeded the two percent management fee. Moreover, because the Elm Tree Funds never returned a profit, ELM, Naqvi, and ETIA were not entitled to any profit-based performance fees.
ELM and Naqvi also used approximately $5.2 million of new investor funds to make payments to earlier investors in a Ponzi-like fashion. To prevent or forestall redemptions, and continue to raise money to fund their scheme, ELM and Naqvi also generated fictitious account statements and made oral and written misrepresentations that their trading strategies were generating consistently positive returns.
ELM was initially arrested in April 2016 and released on bail. In June 2017, approximately one week before his then-scheduled guilty plea, ELM fled to Canada. ELM was subsequently arrested in Canada and extradited to the United States in January 2020. Naqvi, who had been a fugitive since his indictment in 2016, was arrested in Canada and extradited to the United States in November 2019.
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ELM, 51, was also sentenced to three years of supervised release, ordered to forfeit $8,318,840.07, and to pay restitution in the amount of $12,426,293.11.
Ms. Strauss praised the work of Homeland Security Investigations and the U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division, and thanked the U.S. Securities and Exchange Commission for its assistance. Ms. Strauss also thanked Canadian law enforcement for its support and assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.
Extradited Colombian National Sentenced in Manhattan Federal Court to 9 Years in Prison for Narcotics TraffickingRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Raymond P. Donovan, Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), Peter C. Fitzhugh, Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), Keith M. Corlett, Superintendent of the New York State Police (“NYSP”), and Dermot Shea, Police Commissioner of the City of New York (“NYPD”), announced that SANTIAGO LONDONO-VELEZ, a/k/a “Zack,” a/k/a “Carlos Avila,” a Colombian national, was sentenced today to 108 months[1] in prison for his participation in a Colombian drug trafficking organization that conspired to distribute significant quantities of heroin in the United States. On October 25, 2019, LONDONO-VELEZ pled guilty to a conspiracy to distribute and possess with intent to distribute heroin before U.S. District Judge P. Kevin Castel, who imposed today’s sentence. LONDONO-VELEZ’s co-defendant, Rolando Francisco Ossa-Calderon, was previously sentenced by Judge Castel to nine years in prison for his role in the conspiracy.
Acting Manhattan U.S. Attorney Audrey Strauss said: “Santiago Londono-Velez was responsible for the importation of multi-kilogram quantities of heroin and cocaine into the U.S. The prison sentence he received today is commensurate with his admitted crime.”
DEA Special Agent in Charge Raymond P. Donovan said: “Regional Priority Target Londono-Velez has found himself in the United States again, this trip with a visa based on justice. His sentencing underscores law enforcement’s commitment to stemming the flow of illegal drugs into the United States. I commend our law enforcement partners on their diligent efforts in this investigation and prosecution.”
HSI Special Agent in Charge Peter C. Fitzhugh said: “With an extensive criminal history in the United States, Londono-Velez is again headed to prison for narcotics trafficking after moving cocaine and heroin through New York and Europe. It is with the incredible collaboration between federal and state law enforcement agencies that those criminals who move highly addictive drugs through our borders will face the consequences of their illicit acts.”
State Police Superintendent Keith M. Corlett said: “This investigation and today’s sentencing are evidence of the commitment we share with our law enforcement partners in keeping dangerous drugs off of our streets. This organization utilized ships to transport large quantities of dangerous drugs to the New York area and Europe. Great police work has stopped this enterprise and this career criminal. The State Police remain committed to partnering with other members of law enforcement to eliminate these types of operations and shutting down the distribution of illegal drugs.”
According to the Indictment and other filings in the case:
From at least in or about 2015 through in or about 2016, LONDONO-VELEZ was a member of a Colombian drug trafficking organization. LONDONO-VELEZ’s role in the organization was to coordinate the shipment of multi-kilogram loads of cocaine and heroin to the New York area and Europe via cargo containers on ships in which the narcotics were frequently concealed in loads of fresh produce. In one drug transaction that took place on November 3, 2015, LONDONO-VELEZ coordinated a delivery of six kilograms of heroin, which has a street value of more than $360,000, by his co-conspirator Ossa-Calderon to an undercover law enforcement officer in Queens, New York.
LONDONO-VELEZ was previously convicted twice in the United States for felony narcotics offenses. In 1995, he was sentenced in the U.S. District Court for the Middle District of Florida to 57 months in prison for a conspiracy to distribute approximately 47 kilograms of cocaine and deported to Colombia in 1999. After illegally reentering the United States in 2003, LONDONO-VELEZ was sentenced in New York State Supreme Court in Queens County to six years in prison for criminal possession of approximately 40 kilograms of cocaine in 2006. LONDONO-VELEZ was also convicted of illegal reentry in this District and deported to Colombia in 2011. In connection with the charges in this case, LONDONO-VELEZ was arrested in Colombia on August 8, 2018, and extradited to the United States on August 16, 2019.
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In addition to the prison term, LONDONO-VELEZ, 50, was sentenced to five years of supervised release.
Ossa-Calderon, 42, of Elmont, New York, pled guilty to conspiracy to distribute and possess with intent to distribute heroin on March 13, 2018, and was sentenced by Judge Castel on June 12, 2018, to 108 months in prison and four years of supervised release.
Ms. Strauss praised the outstanding investigative work of the Organized Crime Drug Enforcement Task Force (“OCDETF”) New York Strike Force. The OCDETF New York Strike Force is a crime-fighting unit comprising federal, state, and local law enforcement agencies supported by the Organized Crime Drug Enforcement Task Force and the New York/New Jersey High Intensity Drug Trafficking Area. The Strike Force is affiliated with the DEA’s New York Division and includes agents and officers of the DEA, New York City Police Department, New York State Police, Homeland Security Investigations, U.S. Internal Revenue Service Criminal Investigation Division, Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Customs and Border Protection, U.S. Secret Service, U.S. Marshals Service, New York National Guard, Clarkstown Police Department, U.S. Coast Guard, Port Washington Police Department and New York State Department of Corrections and Community Supervision.
Ms. Strauss also thanked the DEA’s Bogota Country Office, the United States Marshals Service, and the U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division, which provided significant assistance in securing the defendant’s extradition from Colombia.
The prosecution of his case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Sagar K. Ravi and Jilan J. Kamal are in charge of the prosecution.
[1] The 108-month sentence includes the 13 months LONDONO-VELEZ was incarcerated in Colombia pending extradition.
U.S. Accountant in Panama Papers Investigation Sentenced to PrisonRead the Press Release
A U.S. accountant was sentenced in the Southern District of New York to 39 months in prison for wire fraud, tax fraud, money laundering, aggravated identity theft, and other charges, announced Acting Assistant Attorney General Brian C. Rabbitt and Acting U.S. Attorney Audrey Strauss of the Southern District of New York.
Richard Gaffey, aka Dick Gaffey, 76, a U.S. citizen and resident of Medfield, Massachusetts, pleaded guilty to one count of conspiracy to commit tax evasion and to defraud the United States; one count of wire fraud; one count of money laundering conspiracy; four counts of willful failure to file Reports of Foreign Bank and Financial Accounts, FinCEN Reports 114; and one count of aggravated identity theft. In addition to 39 months’ imprisonment, U.S. District Judge Richard M. Berman ordered Gaffey to serve three years of supervised release, to pay forfeiture in the amount of a sum of $5,373,609 and restitution in the amount of $3,459,315, and to pay a fine in the amount of $ 25,000.
Gaffey was charged along with Harald Joachim von der Goltz, Ramses Owens, and Dirk Brauer in connection with a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (Mossack Fonseca), a Panama-based global law firm, and its related entities. Gaffey previously pled guilty to the charges, and was sentenced today by U.S. District Judge Richard M. Berman.
According to the allegations contained in the indictments, other filings in this case, and statements during court proceedings, including Gaffey’s guilty plea and sentencing hearings:
Since at least 2000 through 2018, Gaffey conspired with others to defraud the United States by concealing his clients’ assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means. During all relevant times, Gaffey assisted U.S. taxpayers who were required to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts.
Gaffey helped those U.S. taxpayers evade their tax reporting obligations in a variety of ways, including by hiding the beneficial ownership of his clients’ offshore shell companies and setting up bank accounts for those shell companies. These shell companies and bank accounts made investments totaling tens of millions of dollars. For one U.S. taxpayer, Gaffey advised how to covertly repatriate approximately $3 million to the United States by reporting to the IRS a fictitious company sale that never actually occurred to evade paying the full U.S. tax amount. Gaffey was assisted in this scheme through the use of Mossack Fonseca, including Ramses Owens, a Panamanian lawyer who previously worked at Mossack Fonseca.
Gaffey was the U.S. accountant for Harald Joachim von der Goltz. From 2000 until 2017, von der Goltz was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income. In furtherance of von der Goltz’s efforts to conceal his assets and income from the IRS, Gaffey falsely claimed that von der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and – unlike von der Goltz – was not a U.S. taxpayer. In support of this fraudulent scheme, Gaffey submitted the name, date of birth, government passport number, address, and other means of identification of von der Goltz’s elderly mother to a U.S. bank in Manhattan.
Von der Goltz was previously sentenced by Judge Berman principally to 48 months’ imprisonment. Owens and Brauer remain at large.
The Justice Department praised the outstanding investigative work of IRS-Criminal Investigation and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. The Justice Department’s Tax Division and Office of International Affairs, the FBI, and law enforcement partners in France, the United Kingdom, and Germany provided significant assistance.
This case is being prosecuted by Trial Attorney Michael Parker of the Criminal Division’s Money Laundering and Asset Recovery Section of the Justice Department and Assistant U.S. Attorneys Eun Young Choi and Thane Rehn of the Manhattan U.S. Attorney’s Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit, with substantial support from previous co-counsel, Trial Attorney Parker Tobin of the Tax Division.
The charges as to Owens and Brauer are merely accusations, and they are presumed innocent unless and until proven guilty.
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.
U.S. Accountant in Panama Papers Investigation Sentenced to 39 Months in PrisonRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Brian C. Rabbitt, Acting Assistant Attorney General of the Criminal Division of the U.S. Department of Justice, announced today that RICHARD GAFFEY, a/k/a “Dick Gaffey,” was sentenced in Manhattan federal court to 39 months in prison for wire fraud, tax fraud, money laundering, aggravated identity theft, and other charges. GAFFEY, a resident of Massachusetts, was charged along with Harald Joachim von der Goltz, Ramses Owens, and Dirk Brauer in connection with a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (“Mossack Fonseca”), a Panama-based global law firm, and its related entities. GAFFEY previously pled guilty to the charges, and was sentenced today by U.S. District Judge Richard M. Berman.
Acting U.S. Attorney Audrey Strauss said: “Richard Gaffey was a tax accountant who specialized in sheltering his clients’ assets and income, aiding and abetting their evasion of their U.S. tax obligations. Now, after nearly two decades of felonious hide-and-seek, Gaffey has been sentenced to prison for his crimes.”
According to the allegations contained in the Indictments,[1] other filings in this case, and statements during court proceedings, including GAFFEY’s guilty plea and sentencing hearings:
Since at least 2000 through 2018, GAFFEY conspired with others to defraud the United States by concealing his clients’ assets and investments, and the income generated by those assets and investments, from the Internal Revenue Service (“IRS”) through fraudulent, deceitful, and dishonest means. During all relevant times, GAFFEY assisted U.S. taxpayers who were required to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts. GAFFEY helped those U.S. taxpayers evade their tax reporting obligations in a variety of ways, including by hiding the beneficial ownership of his clients’ offshore shell companies and setting up bank accounts for those shell companies. These shell companies and bank accounts made investments totaling tens of millions of dollars. For one U.S. taxpayer, GAFFEY advised how to covertly repatriate approximately $3 million to the United States by reporting to the IRS a fictitious company sale that never actually occurred to evade paying the full U.S. tax amount. GAFFEY was assisted in this scheme through the use of Mossack Fonseca, including Ramses Owens, a Panamanian lawyer who previously worked at Mossack Fonseca.
GAFFEY was the U.S. accountant for Harald Joachim von der Goltz. From 2000 until 2017, von der Goltz was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income. In furtherance of von der Goltz’s efforts to conceal his assets and income from the IRS, GAFFEY falsely claimed that von der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and – unlike von der Goltz – was not a U.S. taxpayer. In support of this fraudulent scheme, GAFFEY submitted the name, date of birth, government passport number, address, and other means of identification of von der Goltz’s elderly mother to a U.S. bank in Manhattan.
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GAFFEY, 76, a U.S. citizen and resident of Medfield, Massachusetts, pled guilty to one count of conspiracy to commit tax evasion and to defraud the United States; one count of wire fraud; one count of money laundering conspiracy; four counts of willful failure to file Reports of Foreign Bank and Financial Accounts, FINCEN Reports 114; and one count of aggravated identity theft. In addition to the prison term, Judge Berman ordered GAFFEY to serve three years of supervised release, to pay forfeiture in the amount of a sum of $5,373,609 and restitution in the amount of $3,459,315, and to pay a fine in the amount of $ 25,000.
Harald von der Goltz was sentenced by Judge Berman on September 21, 2020, principally to 48 months in prison. Owens and Brauer remain at large.
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Ms. Strauss praised the outstanding investigative work of IRS-CI and HSI, and thanked the Justice Department’s Tax Division and the Federal Bureau of Investigation for their significant assistance in the investigation. Ms. Strauss also thanked the U.S. Justice Department’s Office of International Affairs of the Department’s Criminal Division and law enforcement partners in France, the United Kingdom, and Germany for their assistance in the case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit, working in partnership with the Money Laundering and Asset Recovery Section of the Criminal Division. Assistant United States Attorneys Eun Young Choi and Thane Rehn, along with Trial Attorney Michael Parker of the Money Laundering and Asset Recovery Section, are in charge of the prosecution.
The charges as to Owens and Brauer are merely accusations, and they are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the texts of the Indictments and the descriptions of the Indictments set forth herein constitute only allegations as to Owens and Brauer, and every fact described should be treated as an allegation.
Jason Galanis Sentenced in Manhattan Federal Court for Multiple Securities Fraud SchemesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that JASON GALANIS was sentenced to 189 months in prison for his participation in multiple fraudulent schemes. In particular, GALANIS was sentenced for his role in a scheme to manipulate the market for Gerova Financial Group, Ltd. (“Gerova”), a publicly traded company listed on the New York Stock Exchange, and defrauding the shareholders of that company (the “Gerova Scheme”), and for defrauding the clients of an investment advisory firm. GALANIS was also sentenced for his role in a scheme to defraud a Native American tribal entity and the investing public of tens of millions of dollars in connection with the issuance of bonds by the tribal entity (the “Tribal Bond Scheme”). GALANIS pled guilty on January 31, 2020, to a seven-count information charging GALANIS with participation in the Gerova and Tribal Bond Schemes. GALANIS was sentenced today by United States District Judge P. Kevin Castel. GALANIS had previously been sentenced, in February 2017, for his participation in the Gerova Scheme and, in August 2017, for his participation in the Tribal Bond Scheme, but those convictions were subsequently vacated.
Acting U.S. Attorney Audrey Strauss said: “Jason Galanis orchestrated two multimillion-dollar fraud schemes, and hid behind a team of co-conspirators to conceal his involvement and defy an SEC ban. He and his codefendants engaged in market manipulation and the defrauding of shareholders, and they stole a large portion of the proceeds of tribal bonds that were intended to fund economic development projects. Now Jason Galanis has been sentenced to a lengthy prison term that reflects the magnitude and pervasiveness of his crimes.”
According to the allegations contained in the Indictment[1] filed against JASON GALANIS and his co-conspirators and statements made in related court filings and proceedings:
The Gerova Scheme
From 2009 to 2011, GALANIS, along with his co-conspirators John Galanis, Gary Hirst, Derek Galanis, Ymer Shahini, and Gavin Hamels, engaged in a scheme to defraud the shareholders of Gerova and the investing public, by effecting securities transactions in Gerova stock for the purpose of conferring millions of dollars of undisclosed remuneration to GALANIS and his co-conspirators, without adequate disclosure of GALANIS’s role in directing the transactions or the benefits received by GALANIS and his co-conspirators.
As a part of the scheme to defraud, GALANIS obtained sufficient control over Gerova so as to be able to cause Gerova to enter into transactions of his design, and for his benefit, including the issuance of Gerova stock. GALANIS obtained this control without causing himself to be identified as an officer or director of Gerova so as to purport to abide by an SEC-imposed bar that forbade him from holding such positions at publicly traded companies. Among other means and methods, GALANIS, with the assistance of Hirst, caused over 5 million shares of Gerova stock, which represented nearly half the company’s public float and which were intended for GALANIS’s ultimate benefit, to be issued to and held in the name of Ymer Shahini, who knowingly served as a foreign nominee for GALANIS. GALANIS, John Galanis, Jared Galanis, Derek Galanis, Hirst, and Shahini understood that the purpose of the stock grant to Shahini was to disguise GALANIS’s ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock.
At the same time, and as a further part of the scheme to defraud, GALANIS’s co-conspirators, with his knowledge and approval, opened and managed brokerage accounts in the name of Shahini (the “Shahini Accounts”), effected the sale of Gerova stock from the Shahini Accounts, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public GALANIS’s ownership of and control over the Gerova stock.
GALANIS, among others, also fraudulently induced investment advisers, including Gavin Hamels, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser. By causing the purchase of Gerova stock at the time, quantity, and/or price of their choosing, GALANIS and others were able to, among other things, effectuate the sale of large quantities of Gerova stock from the Shahini Accounts that GALANIS controlled while artificially maintaining the price of Gerova stock through coordinated match trading. Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public. As a result, GALANIS and his co-conspirators reaped nearly $20 million in profits.
The Scheme to Defraud Clients of Investment Firm-1
From 2007 to 2010, GALANIS along with an investment adviser identified in the Information as “CC-2,” participated in a scheme to defraud the clients of CC-2’s investment advisory firm, identified in the Information as “Investment Firm-1.” Oftentimes in exchange for compensation from GALANIS, CC-2 caused Investment Firm-1 clients to invest in notes issued by entities associated with GALANIS.
When obligations owed by entities associated with GALANIS became due, CC-2 used client funds to purchase either notes issued by other entities associated with GALANIS or publicly traded shares held by such entities. The funds generated were then used to pay the original obligations owed to other Investment Firm-1 clients. Through these securities trades, funds in client accounts of one set of Investment Firm-1 investors were used to pay obligations owed to a different set of Investment Firm-1 investors by entities associated with GALANIS.
The Tribal Bond Scheme
From March 2014 through April 2016, GALANIS, along with his co-conspirators Gary Hirst, John Galanis, a/k/a “Yanni,” Hugh Dunkerley, Michelle Morton, Devon Archer, and Bevan Cooney, engaged in a fraudulent scheme to misappropriate the proceeds of bonds issued by the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity (the “Tribal Bonds”), and to use funds in the accounts of clients of asset management firms controlled by GALANIS and his codefendants to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market.
Documents governing the Tribal Bonds specified that an investment manager would invest the proceeds of the Tribal Bonds in investments that would generate annuity payments sufficient to pay interest on the Tribal Bonds and provide funds to the WLCC to be used for tribal economic development purposes. In fact, none of the proceeds of the Tribal Bonds were turned over to the investment manager specified in the closing documents. Instead, significant portions of the proceeds were misappropriated by GALANIS and his codefendants for their own personal use.
Specifically, the proceeds of the Tribal Bonds were deposited into a bank account in the name of Wealth Assurance Private Client Corporation (“WAPCC”), an entity controlled by Dunkerley and Hirst. Dunkerley transferred more than $38 million from the WAPCC account to an account controlled by GALANIS, who then misappropriated more than $8.5 million of the proceeds for his personal use, including for expenses associated with his home, jewelry and clothing purchases, travel and entertainment, and restaurant meals.
There was no ready secondary market for the Tribal Bonds. Nonetheless, without prior notice to their clients, Morton and Hirst, acting at the direction of GALANIS, used funds belonging to clients of two related investment advisers, Hughes Capital Management, Inc. (“Hughes”), and Atlantic Asset Management, LLC (“Atlantic”), to purchase the Tribal Bonds, even though GALANIS, Hirst, and Morton were well aware that material facts about the Tribal Bonds had been withheld from clients in whose accounts they were placed, including the fact that the Tribal Bond purchases fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients and of the Atlantic pooled investment vehicle in which the Tribal Bonds were purchased. When Hughes and Atlantic clients learned about the purchase of the Tribal Bonds in their accounts, several of them demanded that the Tribal Bonds be sold. However, because there was no ready secondary market for the Tribal Bonds, no Tribal Bonds have been sold from any Hughes or Atlantic client accounts. In addition, GALANIS and his codefendants failed to apprise clients of Hughes and Atlantic regarding substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf.
In addition, a portion of the misappropriated proceeds was recycled and provided by GALANIS to entities affiliated with Archer and Cooney in order to enable Archer and Cooney to purchase subsequent Tribal Bonds issued by the WLCC. As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase.
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In addition to the prison term, JASON GALANIS, 50, was sentenced to three years of supervised release. GALANIS was also ordered to forfeit $80,869,117.10, as well as his interest in properties in New York and Los Angeles, and to make restitution in the amount of $80,817,513.43.
Ms. Strauss praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian Blais, Rebecca Mermelstein, and Negar Tekeei are in charge of the prosecution.
[1] As to the defendants whose charges are still pending, 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.
Head of Financial Services Firm 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 (“SDNY”), and Philip R. Bartlett, Inspector-in-Charge of the United States Postal Inspection Service’s New York Division (“USPIS”), announced that CRAIG ZABALA, the chairman, chief executive officer, and president of Concorde Group Holdings Inc. (“Holdings”), was arrested this morning in New York on securities fraud and wire fraud charges stemming from a scheme to defraud investors in Holdings, a purported financial services firm. Among other illicit activity, ZABALA fraudulently induced at least 18 investors to invest at least approximately $4.4 million based on false and misleading statements, by failing to use investors’ funds as promised, including to build Holdings’ purported business by investing in and buying other financial services companies, and by converting investors’ money to his own use, including to repay other investors in a Ponzi-like fashion. ZABALA is expected to be presented this morning in Manhattan federal court before U.S. Magistrate Judge Sarah Netburn.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Craig Zabala held a controlling interest in a purported financial services firm through which he defrauded investors of more than $4 million. Zabala allegedly lied to investors about how much money had been raised, how investors’ money would be used, who had invested, and how close the firm was to an initial public offering. As further alleged, Zabala appropriated most of the fraudulently obtained funds for his own use, or to pay off investors in Ponzi-like fashion.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “It can always be said, greed has a way of overcoming honest business practices; and in this case Mr. Zabala allegedly exhibited an indifference to investing regulations and the truth when he lied to his investors to enhance his lifestyle and enrich himself. As alleged, this case has all the elements of a classic Ponzi scheme. Investors should remember where there is high reward, there is high risk. Always verify ‘once in a lifetime’ investment claims to ensure you won't be taken for a ride.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:[1]
CRAIG ZABALA was the chairman, CEO, and president of various affiliated and intertwined purported financial services companies: Holdings, Concorde Group, Inc. (“Group”), Blackhawk Capital Group BDC, Inc. (“Blackhawk”), DBL Holdings, LLC, d/b/a “Drexel Burnham Lambert” (“DBL”), Concorde Investment Managers, LLC (“CIM”), and Concorde Europe, Ltd. (“Concorde Europe”). In or about August 2019, FINRA barred ZABALA from the broker-dealer industry, including because of his failure to cooperate with a FINRA investigation.
Holdings was a Delaware corporation formed in or about 2015, with an office in Jersey City, New Jersey, and a mailing address in New York, New York. Holdings purported to provide financial services, including merchant banking, investment banking, asset management, and securities brokerage services, to entrepreneurs, investors, and businesses in the middle market, meaning small to mid-sized companies with revenue and market capitalizations of less than $1 billion, in North America, Europe, and Asia. Holdings’ purported affiliates included Group, DBL, Blackhawk, CIM, and Concorde Europe. ZABALA was a majority owner of Holdings.
Group was a Delaware corporation formed in or about 1995, based in New York, New York, that purported to provide the same types of financial services as Holdings. Group’s purported affiliates included DBL, Blackhawk, CIM, and Concorde Europe. ZABALA was a majority owner of Group. Between in or about 2001 and in or about 2014, Group purportedly raised approximately $18 million from investors.
From at least in or about 2015 through in or about 2020, ZABALA and others perpetrated a scheme to defraud at least approximately 18 investors out of at least approximately $4.4 million in Holdings notes, warrants, and equity, almost all of whom invested in a private offering by Holdings of $25 million in senior secured notes with attached warrants paying 13 percent interest (the “Holdings Offering”).
ZABALA and others falsely represented that the proceeds from the offerings would be used to grow Holdings’ purported business by investing in and buying other financial services companies. In truth and in fact, and as ZABALA well knew, Holdings did not make any investments in or buy other companies.
ZABALA and others falsely represented to Holdings investors that Holdings had raised nearly $25 million in the Holdings Offering. In truth and in fact, and as ZABALA well knew, Holdings only raised a few million dollars.
ZABALA and others falsely represented to Holdings investors that the family office of a wealthy German family had invested millions of dollars in Holdings. In truth and in fact, and as ZABALA well knew, this family office never invested in, and never committed to invest in, Holdings.
ZABALA and others falsely represented to Holdings investors that Holdings would soon have an initial public offering (“IPO”), which would result in large profits to Holdings investors. In truth and in fact, and as ZABALA well knew, Holdings was not close to an IPO.
ZABALA converted at least approximately 70 percent of the approximately $4.4 million in Holdings investor funds in the form of cash withdrawals and other transfers to himself, payments to his girlfriend, payments of his personal credit card bills, and repayment of Group investors in a Ponzi-like fashion.
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ZABALA, 68, was arrested this morning at his home in New York, New York. ZABALA 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 USPIS, 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.
Doctor Pleads Guilty in Manhattan Federal Court to Illegal Distribution of Oxycodone PillsRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that RUVIM KRUPKIN, a New York state-licensed doctor, pled guilty today to conspiring to illegally distribute large quantities of oxycodone from a medical office in Brooklyn, New York. As part of his guilty plea, KRUPKIN also agreed to forfeit $124,000 in proceeds obtained through his illicit distribution of oxycodone. KRUPKIN pled guilty before United States District Judge Analisa Torres in Manhattan federal court.
Acting U.S. Attorney Audrey Strauss said: “As he admitted in court today, Ruvim Krupkin, for more than a decade, wrote thousands of medically unnecessary prescriptions for oxycodone, enriching himself at the expense of others, while the country suffered from a devastating opioid epidemic. He now awaits sentencing for his crime.”
According to the allegations contained in the Indictment and statements made during court proceedings:
KRUPKIN, a licensed internal medicine doctor with specialties in oncology and hematology, practiced at a medical office in Brooklyn. From 2006 to July 2017, KRUPKIN prescribed over four million oxycodone pills to individuals he knew had no legitimate medical need for the pills. KRUPKIN charged each patient $200 in cash for each visit, payable directly to him.
As a hematologist, KRUPKIN treated patients who had, or claimed to have, sickle cell anemia – a medical condition that can cause pain for which oxycodone, in conjunction with other treatments, may be legitimately prescribed. However, KRUPKIN wrote thousands of prescriptions for large quantities of oxycodone to patients, knowing that they in fact had no legitimate medical need for the prescriptions. KRUPKIN generally performed little to no physical examination on these patients; indeed, the medical notes for each patient were largely the same from one visit to the next.
In addition, KRUPKIN typically issued patients prescriptions for a large dose of oxycodone – typically 180 80-milligram pills, until approximately 2010, when the formula for oxycodone changed, reducing the street value of the 80-milligram pills. At that time, KRUPKIN began prescribing 180 or 240 30-milligram pills. KRUPKIN’s patients filled their prescriptions at pharmacies throughout New York, and in certain cases, sold the oxycodone pills they received to drug dealers, who in turn re-sold the pills at high value on the street. KRUPKIN knew that certain of his patients were diverting the oxycodone pills he was prescribing, but he nonetheless continued writing prescriptions of oxycodone for such individuals.
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KRUPKIN, 69, of Summit, New Jersey, pled guilty to one count of participating in a conspiracy to distribute narcotics, which carries a maximum sentence of 20 years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentence for the defendant will be determined by the judge.
KRUPKIN is scheduled to be sentenced by Judge Torres on January 26, 2021, at 11:00 a.m.
Ms. Strauss praised the outstanding investigative work of the FBI-NYPD Health Care Fraud Task Force. Ms. Strauss also thanked the New York City Human Resources Administration for its work on the investigation.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Tara M. La Morte and Alexandra N. Rothman are in charge of the prosecution.
Former Owner of La Cremaillere Restaurant Sentenced to Federal Prison for FraudRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that BARBARA MEYZEN, a/k/a "Bobbie Meyzen," the former owner and operator of La Cremaillere Restaurant in Banksville, New York, was sentenced in White Plains federal court to two years in prison for fraud in connection with her multi-year scheme to defraud the restaurant’s lenders, mortgagee, bankruptcy creditors and customers and to obstruct the bankruptcy process. MEYZEN had previously pleaded guilty to one count of wire fraud and was sentenced today by U.S. District Judge Vincent L. Briccetti.
According to the allegations in the Superseding Information to which MEYZEN pleaded guilty and other court documents:
MEYZEN owned and operated the La Cremaillere Restaurant in Banksville, New York from 1993 to August 2020. From August 2015 to July 2016, MEYZEN submitted applications for credit on behalf of La Cremaillere to at least nine lenders, factors and financiers. In support of those applications, MEYZEN gave the potential lenders La Cremaillere's bank statements that she had modified to change negative balances to positive balances; to remove references to checks returned for insufficient funds; and to reduce service fees. For example, MEYZEN modified one month's statement to change a negative beginning balance of $32,865.57 to a positive beginning balance of $27,766.29; to change from negative to positive the negative ending balance for that month of $5,268.13; and to change service charges of $2,385.60 to $8.00. When one lender discovered that MEYZEN had altered the bank statements, MEYZEN created an email account in the name of one of the bank's officers and sent the lender an email in which she, in the guise of the bank officer, told the lender that the statements were genuine.
MEYZEN also falsely represented to the same lender that the second mortgage on the restaurant's property in Banksville had been discharged. She created a false satisfaction of mortgage on which she forged the signature of a representative of the restaurant's second mortgagee, who is MEYZEN'S relative by marriage. MEYZEN filed the false satisfaction of mortgage with the Westchester County Clerk, paid the Clerk's filing fee, and sent a copy of the filed satisfaction of mortgage to the lender. MEYZEN later denied filing the false satisfaction of mortgage or paying the filing fee when she was interviewed by Special Agents of the FBI. She told the FBI that she believed a loan broker with whom she had worked in the past, and whom she identified by name, had filed the false satisfaction of mortgage.
Throughout the summer of 2017, MEYZEN charged more than $148,979 in restaurant and personal expenses to credit card accounts of two of the restaurant's customers. When one of the customers discovered the charges, MEYZEN claimed the charges were a mistake and repeatedly promised to resolve the problem. MEYZEN gave the customer two checks in a total amount of $32,000 but the checks bounced. When she was interviewed by the FBI, MEYZEN denied knowing anything about unauthorized charges to the customer's credit card or ever speaking with the customer about the unauthorized charges. MEYZEN also denied giving the customer checks.
Meyzen filed bankruptcy petitions for Meyzen Family Realty Associates, LLC, which owned the real property from which the restaurant operated, in the U.S. Bankruptcy Court in White Plains in September 2018. She filed a bankruptcy petition for La Cremaillere Restaurant Corp., which operated the restaurant, in April 2019. In May 2019, MEYZEN misled the office of the United States Trustee, which oversees bankruptcy cases, about insurance coverage on the restaurant property. MEYZEN caused her bankruptcy counsel to give the United States Trustee and an attorney for Meyzen Family Realty's largest creditor documents indicating that the property was insured when, in fact, she knew that the insurance coverage had been canceled months earlier for nonpayment. In June 2019, MEYZEN falsely testified under oath in a deposition conducted by the United States Trustee that she was not aware that the insurance had been canceled when she caused her attorney to turn the documents over to the United States Trustee.
Two days after La Cremaillere filed for bankruptcy in April 2019, MEYZEN opened a bank account in her name and diverted more than $40,000 of the restaurant's credit card receipts to that account. MEYZEN used a portion of that money to make payments to a food distributor and to an in-home nursing service. This account was closed on May 1, 2019. On May 7, 2019, MEYZEN opened an account in the name of Honey Bee Farm, LLC at another bank and diverted La Cremaillere's credit card receipts, as well as $20,000 in advances on La Cremaillere's future credit card revenue, to that account. MEYZEN used a portion of that money to pay restaurant and personal expenses.
In addition to the prison term, Judge Briccetti ordered MEYZEN, 57, of Redding, Connecticut, to serve two years of supervised release, and to pay forfeiture and restitution each in the amount of $320,289.35.
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Ms. Strauss praised the outstanding investigative work of Special Agents of the FBI and the Criminal Investigators of the Office of Internal Affairs, New York State Department of Taxation and Finance.
The prosecution of this case is being handled by the Office’s White Plains Division. Assistant United States Attorney James McMahon is in charge of the prosecution.
United States Obtains Court Order Requiring City of Mount Vernon to Address Polluting Storm SewersRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Peter D. Lopez, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the federal District Court has ordered the City of Mount Vernon, New York (“Mount Vernon”), to bring its polluting storm sewer system into compliance with the Clean Water Act. U.S. District Judge Cathy Seibel issued the order and permanent injunction yesterday, in a lawsuit brought by the United States and New York State.
Acting U.S. Attorney Audrey Strauss said: “Mount Vernon’s longstanding failure to comply with its Clean Water Act obligations, including flouting EPA administrative orders, will now be remedied through judicial relief. This lawsuit was brought to protect the waters of this District, and the Court’s detailed and comprehensive order requires Mount Vernon to fix its ongoing violations, including the discharge of raw sewage and other illicit pollutants from its storm sewer system into the Hutchinson and Bronx Rivers.”
EPA Regional Administrator Peter D. Lopez said: “I am pleased that the City of Mount Vernon is being required to take the appropriate actions to protect its residents and downstream communities from threats posed by raw sewage and other pollutants. EPA and New York State have worked with Mount Vernon over the past several years and we look forward to seeing the problems with the storm sewer system resolved to protect public health and the environment.”
The Clean Water Act generally prohibits discharges of pollutants into navigable waters, absent a permit. Many municipalities, like Mount Vernon, operate “municipal separate storm sewer systems” that carry storm water and discharge it without treatment into nearby waters. Because separate storm sewer systems do not treat the water they discharge, a municipality is required by its Clean Water Act permit to maintain a program for identifying and eliminating any sewage or other illicit pollutants that are flowing into the storm sewers. On June 28, 2018, the United States filed a complaint in White Plains federal court, alleging that since at least January 2012, Mount Vernon has failed to comply with these permit obligations and, as a result, has allowed raw sewage to flow into its storm sewer system, and then to be discharged into the Hutchinson and Bronx Rivers. Mount Vernon has also failed to comply with two EPA Administrative Orders issued to compel Mount Vernon’s compliance with these requirements.
Before the Court, Mount Vernon did not dispute that it was liable for violating the Clean Water Act, and admitted that it was not in compliance with its legal obligations. The Court concluded that the undisputed facts regarding Mount Vernon’s non-compliance with the Clean Water Act were likely to cause irreparable injury and warranted the issuance of a permanent injunction to require Mount Vernon to come into full compliance and halt illicit discharges into the Hutchinson and Bronx Rivers. The Court ordered Mount Vernon to:
- Track down and identify all sources of illicit discharge for impaired storm sewer system outfalls, and eliminate all sources of illicit discharge;
- Perform necessary construction and repairs for impaired outfalls;
- Complete inspections to ensure detection of future illicit discharge;
- Obtain the necessary equipment, staffing, and funding to comply with its Clean Water Act and permit obligations;
- Develop an updated storm water management plan;
- Perform a sewer system evaluation survey of the sanitary sewer system to identify possible discharges of sewage and develop a sewer system corrective action plan; and
- Submit periodic reports to EPA and New York’s Department of Environmental Conservation.
The Court deferred a determination of civil penalties owed by Mount Vernon until a later date.
The State of New York and the Commissioner of the New York State Department of Environmental Conservation are co-plaintiffs in this lawsuit, asserting parallel claims under state law.
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Ms. Strauss thanked EPA’s attorneys and program staff for their invaluable efforts in this matter.
This case is being handled by the Office’s Environmental Protection Unit. Assistant United States Attorney Natasha W. Teleanu and former Assistant U.S. Attorney Emily E. Bretz have been in charge of the case.
Antiquities Dealers Arrested for 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 in Manhattan federal court charging ERDAL DERE, the owner and operator of the Manhattan-based antiquities gallery Fortuna Fine Arts Ltd. (“Fortuna”), and his longtime business associate and co-conspirator, FAISAL KHAN, with engaging in a years-long scheme to defraud buyers and brokers in the antiquities market by using false provenances to offer and sell antiquities. DERE is also charged with aggravated identity theft for his misappropriation of the identities of deceased collectors who were falsely represented to be the prior owners of the antiquities.
Federal law enforcement agents arrested DERE this morning at his residence in New York, New York. KHAN was also arrested this morning at his residence in New Jersey. Both DERE and KHAN will be presented later today before U.S. Magistrate Judge Sarah Netburn.
Acting U.S. Attorney Audrey Strauss said: “The integrity of the legitimate market in antiquities rests on the accuracy of the provenance provided by antiquities dealers, which prevents the sale of stolen and looted antiquities that lack any legitimate provenance. As alleged, Erdal Dere and Faisal Khan compromised that integrity, and defrauded buyers and brokers of the antiquities they sold, by fabricating the provenance of those antiquities, and concealing their true history. Now, thanks to the FBI’s Art Crime Team, Dere and Khan are in custody and facing prosecution for their alleged crimes.”
FBI Assistant Director William F. Sweeney Jr. said: “Antiquities and art allow us to see a piece of history from a world that existed hundreds and, in some cases, thousands of years ago. As alleged, the men who trafficked in fake documents and used dead people’s names to bolster their lies had no care for the precious items they sold and no regard for the people they defrauded. We are asking anyone who may have dealt with Mr. Dere or Mr. Khan to contact us at [email protected]. You may have been a victim of their alleged scheme.”
According to the allegations in the Indictment[1] unsealed today in Manhattan federal court:
From approximately 2015 through September 2020, DERE and KHAN engaged in a scheme to defraud buyers and brokers in the antiquities market by providing false information regarding the provenance of antiquities they offered for sale. Specifically, DERE and KHAN falsely claimed that various deceased collectors of antiquities were the prior owners of items being sold and offered for sale, in order to conceal the true provenance of the antiquities and the sources from which Fortuna had acquired them.
DERE communicated the false provenances featuring the names of deceased collectors to buyers and brokers. DERE also fabricated documents purporting to evidence the prior ownership of antiquities by the deceased collectors, and provided them to buyers and brokers, including to an auction house in New York, New York in connection with a December 2015 antiquities auction.
KHAN assisted Fortuna in finding buyers for items from its pre-existing inventory and acquired new items, primarily in Asia, that KHAN worked with Fortuna to sell to collectors in the United States and internationally. With KHAN’s knowledge, DERE provided false provenance information to potential buyers of items that KHAN had personally located and acquired, listing deceased collectors as the long-time owners of items which KHAN and DERE well knew had not been owned by those collectors.
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DERE, 50, of New York, New York, was charged in the Indictment with wire fraud conspiracy, wire fraud, and aggravated identity theft. The wire fraud conspiracy charge carries a maximum prison term of 20 years. The wire fraud charge carries a maximum prison term of 20 years. The aggravated identity theft charge carries a mandatory sentence of two years in prison.
KHAN, 47, of Flanders, New Jersey, was charged in the Indictment with wire fraud conspiracy and wire fraud. The wire fraud conspiracy charge carries a maximum prison term of 20 years. The wire fraud charge carries a maximum prison term of 20 years.
The statutory maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the judge.
Ms. Strauss praised the investigative work of the FBI/NYPD Joint Major Theft Task Force/Art Crime Team. In addition, Ms. Strauss thanked authorities in Germany, Italy, the United Kingdom, Spain, and France, as well as the United States Justice Department’s Office of International Affairs of the Department’s Criminal Division, the FBI’s Legal Attaché in Frankfurt, Germany, and the New York City Police Department for their assistance.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorney Jessica Greenwood is in charge of the prosecution.
To report information related to this case, please contact the FBI’s Art Crime Team at [email protected].
The allegations 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 descriptions of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Acting Manhattan U.S. Attorney Announces $11.5 Million Settlement with Biotech Testing Company for Fraudulent Billing and Kickback PracticesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, 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”), and Leigh-Alistair Barzey, 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”), announced today an $11.5 million settlement of a False Claims Act case against BIO-REFERENCE LABORATORIES, INC. (“BRL”), a New Jersey-based biotechnology company that provides molecular and diagnostic tests. The settlement resolves claims that from 2009 to 2012, BRL fraudulently billed federal healthcare programs for testing conducted on hospital inpatients that should have been billed to the hospitals instead, and that BRL knowingly donated the cost of electronic medical records software to physicians’ offices throughout the country based solely on the volume of business generated by those practices, in violation of the False Claims Act and the federal Anti-Kickback Statute. Under the settlement approved by U.S. District Judge George B. Daniels, BRL will pay $11,500,960.00 to the United States to resolve the fraudulent billing and kickback claims. BRL also made extensive admissions regarding the company’s conduct.
Acting U.S. Attorney Audrey Strauss said: “Bio-Reference Labs received millions of dollars from federal healthcare programs through its fraudulent billing and kickback schemes. The company knowingly and recklessly billed the government for tests it should have billed to the hospitals instead, and provided kickbacks to doctors in order to induce them to order more tests. Our Office will continue to hold healthcare providers accountable when they engage in fraud and other illegal conduct.”
HHS Special Agent in Charge Scott Lampert said: “The irresponsible behavior by Bio-Reference Labs compromised the integrity of the Medicare program, and wasted millions of taxpayer dollars. Working with our law enforcement partners, HHS-OIG will continue to ensure that healthcare providers that do business with federally funded health care programs do so in an honest fashion.”
DCIS Special Agent in Charge Leigh-Alistair Barzey said: “Fraudulent billing and kickback schemes threaten the integrity of TRICARE, the Defense Department's healthcare system for military members and their families. Today’s settlement is the result of a joint effort and it demonstrates the DCIS’s ongoing commitment to work with the USAO-SDNY and HHS-OIG to investigate and prosecute companies that seek to fraudulently profit at the expense of federal health care plans.”
As alleged in the Complaint filed in Manhattan federal court:
Fraudulent Billing Practices & Kickback Scheme
From 2009 through 2012, BRL knowingly and willfully billed Medicare and Tricare for certain testing performed for hospital inpatients that should have been paid by the hospitals themselves. As a result, BRL received reimbursement from Medicare and Tricare for tests that the federally funded programs had already paid for, because hospitals receive payments for all items and services provided to the patient under the inpatient prospective payment system (“IPPS”), unless an exemption applies, which is inapplicable here.
In addition, in violation of the Anti-Kickback Statute, BRL knowingly and willfully offered and paid remuneration, in the form of a percentage of the cost of electronic medical records software, to physicians based on the volume of business generated by those physicians in order to induce them to use BRL’s services. The Anti-Kickback Statute prohibits medical service providers, such as testing facilities, from paying any remuneration to providers in order to induce them to refer medical services.
As part of the settlement approved today, BRL admitted, acknowledged, and accepted responsibility for the following conduct:
Inpatient Testing Claims
- From 2009 through 2012, BRL billed Medicare and Tricare for certain testing (i) listed on the Clinical Lab Fee Schedule (“CLFS”) and (ii) performed on beneficiaries who were hospital inpatients at the time of service.
- Specifically, from 2009-2012, approximately 2.51% of all of BRL’s Medicare and Tricare billing originating from hospitals consisted of testing performed on hospital inpatients and listed on the CLFS.
- For example, from 2009-2012, BRL did not bill Triad of Alabama/Flowers Hospital in Dothan, Alabama (“Triad”), for any inpatient testing. As a result, from 2009-2012, BRL improperly billed Medicare and Tricare for approximately 2.51% of all testing BRL performed for Triad and its associated pathology practices on behalf of Medicare or Tricare beneficiaries.
- In 2009, BRL’s requisition form – the form BRL provided to hospitals to order tests for their patients – did not contain any place for a hospital to indicate whether the patient was an inpatient or an outpatient. But as of at least January 2010, BRL management had a clear understanding of the necessity to bill hospitals – and not Medicare or Tricare – for testing performed on hospital inpatients and listed on the CLFS. Indeed, on January 27, 2010, the Director of Genpath Accounts Receivable wrote to management, “I’m afraid that we can end up billing Medicare for hospital patients.” Nevertheless, the requisition forms remained the same, and through at least 2012, BRL billed Medicare and Tricare for hospital inpatient testing listed on the CLFS.
Software Cost Donations- In addition, from 2009 through 2012, BRL provided a percentage of the cost of electronic medical records transition software (“EMR Software”) to physicians’ offices based on the volume of business generated by those offices.
- Specifically, from 2009 through 2012, BRL engaged in a practice – at the direction of its management – entitled the “3 to 1 calculation,” meaning that BRL conditioned the provision of payment for EMR Software to physicians’ offices on whether a physician’s office would generate revenue equal to three times the value of the EMR Software BRL provided.
- For example, on January 24, 2009, a BRL employee, in an email to BRL management, applied the 3 to 1 calculation to a particular physician’s office and suggested that BRL provide the payment for EMR Software, but noted, “You find the legal way to say that. I don’t feel they will make us put it in writing.”
- Similarly, on January 7, 2011, BRL management evaluated a BRL salesperson’s request for payment for EMR Software to a particular physician’s office, and directed that salesperson to “[b]uild volume to meet 3x rule.”
- During this timeframe, BRL provided payment for EMR Software based on this formula to 69 separate physicians’ offices.
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BRL agreed to pay a total of $11,500,960.00 to resolve these claims: $1,396,386 to resolve the Inpatient Testing Claims and $10,104,574 to resolve the Software Cost Donation claims. OPKO Health Inc. (“OPKO”), which merged with BRL in 2015, will serve as guarantor of BRL’s obligation to pay the settlement amount.
In connection with the filing of the lawsuit and settlement, the Government joined two private whistleblower lawsuits that had previously been filed under seal pursuant to the False Claims Act.
Ms. Strauss thanked HHS-OIG and DCIS for their assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Michael Byars and Ellen Blain are in charge of the case.
U.S. Taxpayer in Panama Papers Investigation Sentenced to PrisonRead the Press Release
A former U.S. resident and taxpayer was sentenced in the Southern District of New York to four years in prison for wire fraud, tax fraud, money laundering, false statements, and other charges.
Harald Joachim von der Goltz, aka H.J von der Goltz, Johan von der Goltz, Jochen von der Goltz, Tica, and Tika, 83, of Needham, Massachusetts, and Key Biscayne, Florida, pleaded guilty to one count of conspiracy to commit tax evasion; one count of wire fraud; one count of money laundering conspiracy; four counts of willful failure to file Reports of Foreign Bank and Financial Accounts, FinCEN Reports 114; and two counts of false statements before U.S. District Judge Richard M. Berman. In addition to the prison term, Judge Berman ordered von der Goltz to serve three years of supervised release, to pay forfeiture in the amount of $5,373,609 and restitution in the amount of $3,448,848, and to pay a fine in the amount of $30,000.
Von der Goltz was charged along with Ramses Owens, Dirk Brauer, and Richard Gaffey, aka Dick Gaffey, in connection with a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (Mossack Fonseca), a Panamanian-based global law firm, and its related entities. Von der Goltz previously pleaded guilty to the charges, and was sentenced today by U.S. District Judge Richard M. Berman.
“Harald Joachim von der Goltz sought to conceal his considerable wealth through a sham foreign foundation and various shell companies. But his decades-long scheme to evade his tax obligations and defraud the U.S. government came to an end today thanks to the tireless efforts of U.S. law enforcement,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “No matter how complicated the scheme, the U.S. government will bring to justice those who attempt to evade their tax obligations under the law. In particular, I would like to recognize the outstanding work of the Internal Revenue Service in this case.”
“Harald Joachim von der Goltz, a one-time U.S. resident, previously admitted to an elaborate scheme to evade millions in taxes owed to the IRS,” said Acting U.S. Attorney Audrey Strauss of the Southern District of New York. “Von der Goltz was abetted by the specialized criminal services of the law firm Mossack Fonseca to conceal income and assets in shell companies and off-shore bank accounts. Now von der Goltz has been sentenced to four years in federal prison for his conduct.”
According to the allegations contained in the indictments, other filings in this case, and statements during court proceedings, including von der Goltz’s guilty plea and sentencing hearings:
Since at least 2000 through 2017, von der Goltz conspired with others to conceal his assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means. During all relevant times, von der Goltz was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts. Nevertheless, von der Goltz evaded his tax reporting obligations by setting up a series of shell companies and bank accounts, and hiding his beneficial ownership of the shell companies and bank accounts from the IRS. These shell companies and bank accounts made investments totaling tens of millions of dollars.
Von der Goltz was assisted in this scheme through the use of Mossack Fonseca, including Owens, a Panamanian lawyer who previously worked at Mossack Fonseca, and by Gaffey, a partner at a U.S.-based accounting firm. Specifically, in furtherance of von der Goltz’s efforts to conceal his assets and income from the IRS, von der Goltz engaged the services of Mossack Fonseca, including Owens, to create a sham foundation and shell companies formed under the laws of Panama and the British Virgin Islands to conceal from the IRS and others the ownership by von der Goltz of accounts established at overseas banks, as well as the income generated in those accounts. Von der Goltz, Gaffey, and Owens also falsely claimed that von der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and – unlike von der Goltz – was not a U.S. taxpayer.
Gaffey previously pled guilty and is scheduled to be sentenced by Judge Berman on Sept. 24, 2020, at 10:30 a.m. EDT. Owens and Brauer remain at large.
The Justice Department praised the outstanding investigative work of IRS-Criminal Investigation and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and thanked the Justice Department’s Tax Division and the FBI for their significant assistance in the investigation. The Justice Department’s Office of International Affairs and law enforcement partners in France, the United Kingdom, and Germany provided significant assistance.
This case is being prosecuted by Trial Attorney Michael Parker of the Criminal Division’s Money Laundering and Asset Recovery Section of the Justice Department and Assistant U.S. Attorneys Eun Young Choi and Thane Rehn of the Manhattan U.S. Attorney’s Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit, with substantial support from previous co-counsel, Trial Attorney Parker Tobin of the Tax Division.
The charges as to Owens and Brauer are merely accusations, and they are presumed innocent unless and until proven guilty.
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.
U.S. Taxpayer in Panama Papers Investigation Sentenced to 4 Years in PrisonRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Brian C. Rabbitt, Acting Assistant Attorney General of the Criminal Division of the U.S. Department of Justice, announced today that HARALD JOACHIM VON DER GOLTZ, a/k/a “H.J. von der Goltz,” a/k/a “Johan von der Goltz,” a/k/a “Jochen von der Goltz,” a/k/a “Tica,” a/k/a “Tika,” was sentenced in Manhattan federal court to 48 months in prison for wire fraud, tax fraud, money laundering, false statements, and other charges. VON DER GOLTZ, a former U.S. resident and taxpayer, was charged along with Ramses Owens, Dirk Brauer, and Richard Gaffey, a/k/a “Dick Gaffey,” in connection with a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (“Mossack Fonseca”), a Panamanian-based global law firm, and its related entities. VON DER GOLTZ previously pleaded guilty to the charges, and was sentenced today by U.S. District Judge Richard M. Berman.
Acting U.S. Attorney Audrey Strauss said: “Harald Joachim von der Goltz, a one-time U.S. resident, previously admitted to an elaborate scheme to evade millions in taxes owed to the IRS. Von der Goltz was abetted by the specialized criminal services of the law firm Mossack Fonseca to conceal income and assets in shell companies and off-shore bank accounts. Now von der Goltz has been sentenced to four years in federal prison for his conduct.”
Acting Assistant Attorney General Brian C. Rabbitt said: “Harald Joachim von der Goltz sought to conceal his considerable wealth through a sham foreign foundation and various shell companies. But his decades-long scheme to evade his tax obligations and defraud the U.S. government came to an end today thanks to the tireless efforts of U.S. law enforcement. No matter how complicated the scheme, the U.S. government will bring to justice those who attempt to evade their tax obligations under the law. In particular, I would like to recognize the outstanding work of the Internal Revenue Service in this case.”
According to the allegations contained in the Indictments[1], other filings in this case, and statements during court proceedings, including VON DER GOLTZ’s guilty plea and sentencing hearings:
Since at least 2000 through 2017, VON DER GOLTZ conspired with others to conceal his assets and investments, and the income generated by those assets and investments, from the Internal Revenue Service (“IRS”) through fraudulent, deceitful, and dishonest means. During all relevant times, VON DER GOLTZ was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts. Nevertheless, VON DER GOLTZ evaded his tax reporting obligations by setting up a series of shell companies and bank accounts, and hiding his beneficial ownership of the shell companies and bank accounts from the IRS. These shell companies and bank accounts made investments totaling tens of millions of dollars. VON DER GOLTZ was assisted in this scheme through the use of Mossack Fonseca, including Ramses Owens, a Panamanian lawyer who previously worked at Mossack Fonseca, and by Richard Gaffey, a partner at a U.S.-based accounting firm. Specifically, in furtherance of VON DER GOLTZ’s efforts to conceal his assets and income from the IRS, VON DER GOLTZ engaged the services of Mossack Fonseca, including Owens, to create a sham foundation and shell companies formed under the laws of Panama and the British Virgin Islands to conceal from the IRS and others the ownership by VON DER GOLTZ of accounts established at overseas banks, as well as the income generated in those accounts. VON DER GOLTZ, Gaffey, and Owens also falsely claimed that VON DER GOLTZ’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and – unlike VON DER GOLTZ – was not a U.S. taxpayer.
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VON DER GOLTZ, 83, of Needham, Massachusetts, and Key Biscayne, Florida, pled guilty to one count of conspiracy to commit tax evasion; one count of wire fraud; one count of money laundering conspiracy; four counts of willful failure to file Reports of Foreign Bank and Financial Accounts, FINCEN Reports 114; and two counts of false statements. In addition to the prison term, Judge Berman ordered VON DER GOLTZ to serve three years of supervised release, to pay forfeiture in the amount of $5,373,609 and restitution in the amount of $3,448,848, and to pay a fine in the amount of $30,000.
Gaffey previously pled guilty and is scheduled to be sentenced by Judge Berman on September 24, 2020, at 10:30 a.m. Owens and Brauer remain at large.
* * *
Ms. Strauss praised the outstanding investigative work of IRS, Criminal Investigation, and Homeland Security Investigations, and thanked the Justice Department’s Tax Division and the Federal Bureau of Investigation for their significant assistance in the investigation. Ms. Strauss also thanked the U.S. Justice Department’s Office of International Affairs of the Department’s Criminal Division and law enforcement partners in France, the United Kingdom, and Germany for their assistance in the case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit, working in partnership with the Money Laundering and Asset Recovery Section of the Criminal Division. Assistant United States Attorneys Eun Young Choi and Thane Rehn, along with Trial Attorney Michael Parker of the Money Laundering and Asset Recovery Section, are in charge of the prosecution.
The charges as to Owens and Brauer are merely accusations, and they are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the texts of the Indictments and the descriptions of the Indictments set forth herein constitute only allegations as to Owens and Brauer, and every fact described should be treated as an allegation.
Computer Programmer Pleads Guilty in Manhattan Federal Court to 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, Joleen Simpson, Acting Special Agent in Charge of the Boston Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced that MICHAEL R. WEIGAND, a/k/a “Shabang,” a/k/a “~Shabang~,” a/k/a “~s,” a/k/a “s,” pled guilty today to 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 surrendered today and pled guilty before United States District Judge William H. Pauley III, to whom his case is assigned.
Acting U.S. Attorney Audrey Strauss said: “Silk Road was a secret online marketplace for illegal drugs, hacking services, and a number of other criminal activities. Michael Weigand helped Silk Road by, among other things, identifying technological vulnerabilities in the site, supplying technological advice directly to Silk Road’s leadership, and travelling overseas to remove Silk Road evidence from a co-conspirator’s residence. When Weigand was questioned by law enforcement in 2019, he falsely claimed not to have done anything at all for Silk Road. For his various false statements, Weigand now faces potential prison time.”
IRS-CI Acting Special Agent in Charge Joleen Simpson said: “During its years of operation the Silk Road website allowed thousands of individuals to anonymously conduct narcotics transactions, launder money, and facilitate other illegal transactions. This investigation took law enforcement above and beyond its traditional role in financial crimes. In effect, it put us squarely in the middle of the high-tech world of cyber-crime and the dark web. When given the opportunity to provide truthful statements to the agents, Weigand knowingly and willfully attempted to deceive the agents of the role he played in providing technical expertise to the Silk Road operators. I hope that this guilty plea will discourage others from providing false information to law enforcement officers in the future.”
FBI Assistant Director William F. Sweeney Jr. said: “Weigand and others used their skills and savvy to create a secret online enclave for criminals to trade in illegal drugs and illicit goods and services. They thought they were smart enough to evade law enforcement, but they were wrong. When Weigand was confronted, he lied about his involvement – once again thinking we weren’t smart enough to catch him. With today’s plea, he’ll have time to contemplate the truth as he awaits his sentence.”
HSI Special Agent-in-Charge Peter C. Fitzhugh said: “Criminal activity on the dark web continues to be more prevalent, allowing easy accessibility to narcotics and illicit goods with the click of a button. With online criminal enterprises growing, law enforcement technologies are advancing, and HSI with its partners are infiltrating the dark web, intercepting online dealings and locating the perpetrators. Today’s guilty plea should stand as reminder to those criminals who have a false sense of security behind their computer screen, that they too will one day face the consequences of their actions.”
According to the allegations in 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 – who is 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. In January 2019, WEIGAND was questioned by an IRS Special Agent and an FBI Special Agent. 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”; (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 traveled to Clark’s London residence and removed Silk Road evidence.
WEIGAND, 56, of Kirtland, Ohio, pled guilty to one count of making false statements, 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. WEIGAND is scheduled to be sentenced by Judge Pauley on December 18, 2020, at 2:00 p.m.
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 imprisonment and $183 million in forfeiture. The senior adviser to Ulbricht, 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.
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Ms. Strauss praised the outstanding joint efforts of the IRS-CI, the FBI, and HSI. 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.
Chairman of Venture Capital Funds Pleads Guilty in Mahhattan Federal Court to Securities and Wire FraudRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that DAVID WAGNER pled guilty to 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 over $8 million from 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 pled guilty before U.S. District Judge Alvin K. Hellerstein.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As he admitted in court, David Wagner conned employee-investors into handing over more than $8 million they thought would be invested in a viable operation that would generate returns. Instead, Wagner’s business was largely a sham, and employee-investor funds went to pay Wagner’s personal expenses or pay off other investors in Ponzi-like fashion. David Wagner now awaits sentencing for his crimes.”
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 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 more than approximately $8 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 employee investments were the overwhelming source of funding. Employee-investors also learned that WAGNER and Lawrence had misrepresented the companies in Downing’s portfolio, their product readiness, and ability to generate revenue. While the particular formulation of these misrepresentations shifted over time, WAGNER and Lawrence systematically sought and obtained employee-investor money through materially false and misleading statements.
Beginning in or about May 2016, after several employee-investors had brought lawsuits against WAGNER, 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 luxury car 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, each of which carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of the plea agreement with the Government, Wagner agreed to forfeit $549,000 in United States currency and pay restitution of $7,850,000 to victims of his criminal conduct.
WAGNER will be sentenced by Judge Hellerstein on January 11, 2021, at 11:00 a.m.
The case against co-defendant Marc Lawrence is still pending[1].
Ms. Strauss praised the work of the Federal Bureau of Investigation, and thanked the U.S. 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.
[1] The charges against Marc Lawrence contained in the Indictment are merely accusations, and he is presumed innocent unless and until proven guilty.
Lev Parnas and David Correia Charged with Conspiring to Defraud Investors in Their Fraud Insurance Company “Fraud Guarantee”Read 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced that LEV PARNAS and DAVID CORREIA were charged in a Superseding Indictment with conspiring to commit wire fraud in connection with their efforts to raise funds ostensibly for their business, “Fraud Guarantee.” The Superseding Indictment also includes additional campaign finance charges against the defendants.
In October 2019, PARNAS, CORREIA, IGOR FRUMAN, and ANDREY KUKUSHKIN were charged in a four-count indictment alleging that each of the defendants conspired to violate the ban on political donations and contributions by foreign nationals. In addition, PARNAS and FRUMAN were charged with conspiring to make contributions in connection with federal elections in the names of others, and with making false statements to and falsifying records to obstruct the administration of a matter within the jurisdiction of the Federal Election Commission (“FEC”).
The Superseding Indictment returned today – in addition to charging PARNAS and CORREIA with conspiracy to commit wire fraud – charges CORREIA with making false statements to and falsifying records to obstruct the administration of a matter within the jurisdiction of the FEC; charges PARNAS, FRUMAN, and CORREIA with soliciting a foreign national to make donations and contributions in connection with federal and state elections; and charges PARNAS, FRUMAN, and KUKUSHKIN with aiding and abetting the making of donations and contributions by a foreign national in connection with federal and state elections.
The case is assigned to U.S. District Judge J. Paul Oetken in the Southern District of New York. Trial is currently scheduled for February 1, 2021.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Lev Parnas and David Correia conspired in a fraud using a company called ‘Fraud Guarantee’ that purported to insure investors against corporate fraud while in fact, as alleged, they misled investors as to what would be done with their money. ‘Fraud Guarantee’ takes on a different meaning in light of today’s allegations that the company was a vehicle for committing fraud, not insuring against it. Parnas, Correia, Igor Fruman, and Andrey Kukushkin are also charged with additional violations of the laws prohibiting foreign nationals from donating or contributing to federal or state election campaigns. This Office remains committed to investigating and prosecuting those whose alleged criminal conduct threatens to undermine the integrity of our political process.”
FBI Assistant Director William F. Sweeney Jr. said: “We couldn't say it better ourselves – the behavior alleged today is indeed fraudulent – guaranteed. The FBI and the American public expect that it will be our fellow citizens whose voices determine the outcome of our Nation's elections, not deliberately corrupt behavior, or foreign influence disguised as legitimate activity. The FBI is determined to disrupt this type of behavior, and our investigation is ongoing.”
According to the Superseding Indictment[1] filed in Manhattan federal court:
Between in or about late 2012 and in or about mid-2019, PARNAS and CORREIA conspired to defraud multiple victims by inducing them to invest in their company, “Fraud Guarantee,” based on materially false and misleading representations. Among other things, PARNAS and CORREIA falsely claimed that the investors’ funds would be used solely for legitimate business expenses of Fraud Guarantee, when in fact the funds were largely withdrawn as cash, transferred to personal accounts, and used for various apparently personal expenditures. PARNAS and CORREIA also made materially false representations concerning, among other things, how much money PARNAS had contributed to the company and how much money the company had raised overall. At least seven victims invested in Fraud Guarantee based at least in part on PARNAS’s and CORREIA’s false and misleading representations, with each victim being fraudulently induced to pay hundreds of thousands of dollars, for a total of more than $2 million.
The scheme started in or about late 2012, when PARNAS and CORREIA established Fraud Guarantee. Ironically, they pitched Fraud Guarantee to potential investors as a company that would provide services to protect investors from fraud. In particular, PARNAS and CORREIA claimed that Fraud Guarantee would offer an insurance product that would allow policyholders to recoup their losses in the event they lost money due to fraudulent conduct. Thus, for example, if an investor invested in “Company XYZ” and purchased a Fraud Guarantee policy, then in the event that the investor lost the value of the investment due to a criminal fraud at Company XYZ, Fraud Guarantee would enable the investor to recoup the investor’s losses. However, despite certain efforts by PARNAS and CORREIA to launch Fraud Guarantee and bring its products to market, the company never became operational.
PARNAS and CORREIA induced multiple victims to invest in Fraud Guarantee by claiming, among other things, that they were raising funds to facilitate the company’s development, that all of the money would be used for legitimate business expenses, and that PARNAS and CORREIA were not taking salaries. PARNAS and CORREIA even provided one victim with a contract providing that his funds would be used “to finance the development, promotion, and initial operation of an investment protection business” and would be “fully reserved and committed” for such purposes. In fact, while a portion of the victims’ funds was used for Fraud Guarantee business expenses, the majority was not. Rather, the funds were largely withdrawn as cash, transferred to accounts in the name of PARNAS or CORREIA or their family members, or spent on various apparently personal expenditures, including hundreds of thousands of dollars in rent for PARNAS’s personal residence and tens of thousands of dollars at luxury car leasing companies. PARNAS and CORREIA also used certain victim money to fund political donations.
PARNAS and CORREIA also induced certain victims to invest in Fraud Guarantee by misrepresenting, among other things, the amount of money PARNAS personally contributed to the company, and the amount raised overall. For example, PARNAS and CORREIA provided at least one victim with a table reflecting that PARNAS’s “capital account” was as high as $1.1 million; CORREIA told another victim via email that “[t]here was ‘significant’ investment from all parties in order to take ownership [in Fraud Guarantee] . . . equated to several millions of dollars invested”; and CORREIA told another victim – during a phone call that the victim recorded without CORREIA’s knowledge – that “[m]illions . . . $4 or $5 million probably” had been invested overall in Fraud Guarantee. These representations were false and misleading because the company had not only raised far less money than they claimed, but also the funds they had raised had largely been withdrawn as cash, transferred to personal accounts, and spent on various apparently personal expenditures, rather than being used solely for legitimate business expenses.
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PARNAS, 48, FRUMAN, 54, CORREIA, 45, and KUKUSHKIN, 47, are each charged with one count of conspiring to violate the ban on donations and contributions in connection with federal and state elections by foreign nationals, which carries a maximum sentence of five years in prison. PARNAS and FRUMAN are also charged with one count of conspiring to make contributions in connection with federal elections in the names of others, which carries a maximum sentence of five years in prison. PARNAS, FRUMAN, and CORREIA are each charged with one count of making false statements, which carries a maximum sentence of five years in prison; and one count of falsifying records to obstruct the administration of a matter within the jurisdiction of the FEC, which carries a maximum sentence of 20 years in prison. PARNAS, FRUMAN, and CORREIA are each charged with one count of soliciting a foreign national to make donations and contributions in connection with federal and state elections, which carries a maximum sentence of five years in prison; and PARNAS, FRUMAN, and KUKUSHKIN are each charged with one count of aiding and abetting the making of donations and contributions by a foreign national in connection with federal and state elections, which carries a maximum sentence of five years in prison. PARNAS and CORREIA are charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Ms. Strauss praised the outstanding work of the FBI.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Rebekah Donaleski, Nicolas Roos, and Douglas Zolkind are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations. The defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described therein should be treated as an allegation.
Founder and CEO of Cyberfraud Prevention Company Arrested and Charged with 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., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ADAM ROGAS, the co-founder and former CEO, CFO, and member of the board of directors of Las Vegas-based cyberfraud prevention company NS8, Inc. (“NS8”), was charged in a Complaint in Manhattan federal court with securities fraud, fraud in the offer and sale of securities, and wire fraud. ROGAS used fraudulent financial data to obtain over $123 million in financing for NS8, of which he personally obtained approximately $17.5 million. ROGAS was arrested today in the District of Nevada and is expected to be presented before a judge there tomorrow.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Adam Rogas was the proverbial fox guarding the henhouse. While raising over $100 million from investors for his fraud prevention company, Rogas himself allegedly was engaging in a brazen fraud. Today’s arrest of Rogas ensures that he will be held accountable for his alleged scheme.”
FBI Assistant Director William F. Sweeney Jr. said: “It seems ironic that the co-founder of a company designed to prevent online fraud would engage in fraudulent activity himself, but today that’s exactly what we allege Adam Rogas did. Rogas allegedly raised millions of dollars from investors based on fictitious financial affirmations, and in the end, walked away with nearly $17.5 million worth of that money. Within our complex financial crimes branch, securities fraud cases remain among our top priorities. We’ve seen far too many examples of unscrupulous actors engaging in this type of criminal activity, and we continue to work diligently to weed out this behavior whenever and wherever we find it.”
As alleged in the Complaint unsealed today in Manhattan federal court:
ADAM ROGAS was a co-founder of NS8, and served as its CEO, CFO, and a member of its board of directors. ROGAS was also primarily responsible for the company’s fundraising activities. NS8, based in Las Vegas, Nevada, is a cyberfraud prevention company that developed and sold electronic tools to help online vendors assess the fraud risks of customer transactions. In the fall of 2019 and the spring of 2020, NS8 engaged in fundraising rounds through which it issued Series A Preferred Shares and obtained approximately $123 million in investor funds.ROGAS maintained control over a bank account into which NS8 received revenue from its customers, and periodically provided monthly statements from that account to NS8’s finance department so that NS8’s financial statements could be created. ROGAS also maintained control over spreadsheets that purportedly tracked customer revenue, which were also used to generate NS8’s financial statements.
ROGAS altered the bank statements before providing them to NS8’s finance department to show tens of millions of dollars in both customer revenue and bank balances that did not exist. In the period from January 2019 through February 2020, between at least approximately 40% and 95% of the purported total assets on NS8’s balance sheet were fictitious. In that same period, the bank statements that ROGAS altered reflected over $40 million in fictitious revenue.
ROGAS used these materially misleading financial statements to raise approximately $123 million from investors in the fall of 2019 and the spring of 2020. During the fundraising process, ROGAS also provided the falsified bank records he had created to auditors who were conducting due diligence on behalf of potential investors. After these fundraising rounds concluded, NS8 conducted a tender offer with the funds raised from investors, and ROGAS received $17.5 million in proceeds from that tender offer, personally and through a company he controlled.
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ROGAS, 43, of Las Vegas, Nevada, is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison, one count of fraud in the offer or sale of securities, which carries a maximum sentence of five years in prison, and one count of wire fraud, 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 defendant will be determined by the judge.
Ms. Strauss praised the work of the FBI. Ms. Strauss further thanked the Securities and Exchange Commission for its cooperation and assistance in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Richard Cooper and Jared Lenow are in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Two Plead Guilty to Racehorse Doping ChargesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that two defendants, SCOTT ROBINSON and SARAH IZHAKI, each pled guilty today to conspiring to unlawfully distribute adulterated and misbranded drugs for the purpose of doping racehorses in connection with the two cases in which they are charged, United States v. Robinson, 20 Cr. 162 (JPO), and United States v. Izhaki, 20 Cr. 161 (MKV). ROBINSON pled guilty before U.S. District Judge J. Paul Oetken, and will be sentenced by Judge Oetken on January 15, 2021. IZHAKI pled guilty before U.S. District Judge Mary Kay Vyskocil, and will be sentenced by Judge Vyskocil on December 2, 2020.
Acting U.S. Attorney Audrey Strauss said: “Scott Robinson and Sarah Izhaki represent the supply side of a market of greed that continues to endanger racehorses through the sale of performance-enhancing drugs. Each of these defendants provided the raw materials for fraud and animal abuse through the sale of unregulated and dangerous substances: Robinson’s products were manufactured in shoddy facilities with no professional oversight of their composition; Izhaki’s products were smuggled into the country and sold from cars in supermarket parking lots. These convictions show that our Office and our partners at the FBI are committed to the prosecution and investigation of corruption, fraud, and endangerment in the horse racing industry.”
According to the Indictments, the Superseding Information to which ROBINSON pled guilty, the Superseding Information to which IZHAKI pled guilty, and other court documents, as well as statements made in public court proceedings:
From at least in or about 2011 through at least in or about March 2020, ROBINSON conspired with others to manufacture, sell, and ship millions of dollars’ worth of adulterated and misbranded equine drugs, including performance-enhancing drugs intended to be administered to racehorses for the purpose of improving those horses’ race performance in order to win races and obtain prize money. ROBINSON sold these drugs through several direct-to-consumer websites designed to appeal to racehorse trainers and owners, including, among others, “horseprerace.com.”
ROBINSON contributed to the conspiracy by, among other things, sourcing chemicals used to create custom PEDs that were advertised and sold; falsely labeling, packaging, and shipping those PEDs to customers across the country, including in the Southern District of New York; and collecting, reporting, and responding to employee and customer complaints regarding the misbranded and adulterated products advertised and sold online. Among the drugs advertised and sold during the course of the conspiracy were “blood builders,” which are used by racehorse trainers and others to increase red blood cell counts and/or the oxygenation of muscle tissue of a racehorse in order to stimulate the horse’s endurance, which enhances that horse’s performance in, and recovery from, a race, as well as customized analgesics which are used by racehorse trainers and others to deaden a horse’s nerves and block pain in order to improve a horse’s race performance. The drugs distributed through the defendants’ websites were manufactured in non-FDA registered facilities and carried significant risks to the animals affected through the administration of those illicit PEDs. For example, in 2016, ROBINSON received a complaint regarding the effect of his unregulated drugs on a customer’s horse: “starting bout 8 hours after I give the injection and for about 36 hours afterwards both my horses act like they are heavily sedated, can barely walk. Could I have a bad bottle of medicine, I’m afraid to give it anymore since this has happened three times.” Commenting on this complaint, ROBINSON wrote simply, “here is another one.”
In a separate conspiracy, from at least in or about February 2018 through at least in or about November 2019, IZHAKI conspired with others to transport, sell, and deliver, tens of thousands of dollars of erythropoietin, a “blood builder” drug intended to increase a horse’s racing performance, which had been smuggled into the country from Mexico. This drug was covertly transported into the United States and sold by IZHAKI, who believed it would be used by racehorse trainers to illicitly improve their horses’ race performance. IZHAKI also offered for sale amphetamines, and a substance that IZHAKI referred to as “the Devil,” which IZHAKI claimed would mask the presence of potent drugs in a human or animal’s body.
The defendants are among 27 individuals charged in a series of Indictments arising from an investigation of a widespread scheme by racehorse trainers, veterinarians, PED distributors, and others to manufacture, distribute, and receive adulterated and misbranded PEDs and to secretly administer those PEDs to racehorses competing at all levels of professional horseracing. By evading PED prohibitions and deceiving regulators and horse racing officials, participants in these schemes sought to improve race performance and obtain prize money from racetracks, all to the detriment and risk of the health and well-being of the racehorses.
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ROBINSON, 46, of Tampa, Florida and IZHAKI, 45, of Manalapan, New Jersey, each pled guilty to one count of conspiring to unlawfully introduce and receive with the intent to redistribute for pay or otherwise adulterated and misbranded drugs in interstate commerce, and to misbrand drugs in interstate commerce. This offense carries a maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Acting U.S. Attorney Strauss praised the outstanding investigative work of the FBI New York Office’s Eurasian Organized Crime Task Force and its support of the Bureau’s Integrity in Sports and Gaming Initiative. Ms. Strauss also thanked the New Jersey Attorney General’s Office, the New York State Police, and the New York City Police Department for their support of this investigation, and the Food and Drug Administration and Drug Enforcement Administration for their assistance and expertise.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Sarah Mortazavi, Benet J. Kearney, and Andrew C. Adams are in charge of the prosecution.
Two Individuals Charged with Fraudulently Filing for Unemployment InsuranceRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, Michael C. Mikulka, Special Agent-in-Charge of the New York Regional Office of the Department of Labor, Office of Inspector General (“DOL-OIG”), Patrick J. Freaney, Deputy Special Agent in Charge of the New York Field Office of the United States Secret Service (“Secret Service”), and Roberta Reardon, Commissioner of the New York Department of Labor, announced today the unsealing of a Complaint charging CHRISTOPHER FERRERA and ASHLEY BOURDIER with operating a scheme to fraudulently file for unemployment insurance under the names of other people. FERRERA and BOURDIER were arrested this morning and will be presented and arraigned later today before U.S. Magistrate Judge Katharine H. Parker.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Christopher Ferrera and Ashley Bourdier fraudulently applied for and received unemployment benefits by using the identities of other people. Thanks to the work of our law enforcement partners, the defendants are now facing prosecution for their alleged crimes.”
DOL-OIG Special Agent-in-Charge Michael C. Mikulka said: “Investigating fraud involving the Unemployment Insurance Program is an important part of the mission of the U.S. Department of Labor Office of Inspector General, particularly now when our nation is providing billions of dollars in unemployment benefits to American workers in need due to the economic effects of the COVID-19 pandemic. We will continue to work with our law enforcement partners to vigorously investigate unemployment insurance fraud.”
Secret Service Deputy Special Agent in Charge Patrick J. Freaney said: “The U.S. Secret Service remains dedicated to working with our partners in combatting identity theft and financial fraud. These alleged criminal actions have a lasting effect on the victims by undermining their most basic sense of security by stealing their identities to perpetrate financial crimes. I would like to commend the investigative efforts of the New York Department of Labor and the Office of the Inspector General of the U.S. Department of Labor in working with the U.S. Secret Service in bringing today’s charges.”
New York Department of Labor Commissioner Roberta Reardon said: “Unemployment Insurance fraud is something that we fight every day. However, for these criminals to use a pandemic for their personal gain while millions of New Yorkers legitimately need this assistance is even more despicable. I applaud the work of all of our law enforcement partners including the Office of the Inspector General of the U.S. Department of Labor and the U.S. Secret Service for helping to keep money out of the hands of these thieves. We will continue to work with them to combat unemployment insurance fraud and hold these criminals accountable.”
As alleged in the Complaint unsealed today in Manhattan federal court[1]:
From March 2020 through August 2020, CHRISTOPHER FERRERA and ASHLEY BOURDIER engaged in a scheme to obtain unemployment insurance by fraudulently filing for benefits using the names and social security numbers of more than 25 other people. As a result of their scheme, FERRERA and BOURDIER received over $200,000 of unemployment insurance benefits from at least three different states.
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FERRERA, 25, of the Bronx, New York, and BOURDIER, 27, of New York, New York, are each charged with conspiring to commit wire fraud, which carries a maximum sentence of 20 years in prison. FERRERA is also charged with aggravated identity theft, which carries a mandatory two-year consecutive sentence. 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 work of DOL-OIG, the Secret Service, and the New York Department of Labor.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Thomas S. Burnett is 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 below constitute only allegations, and every fact described should be treated as an allegation.
Former Lewisboro Town Justice Sentenced to Six Months in Prison for Tax EvasionRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced today that MARC A. SEEDORF, a Carmel attorney, was sentenced in White Plains federal court to six months in prison for tax evasion. SEEDORF previously pled guilty before U.S. District Judge Cathy Seibel, who imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “Marc Seedorf, a member of the judiciary and former Assistant District Attorney, knew well his obligations under the law to file income tax returns and pay tax when due. Instead, he chose to conceal assets and provide false information to the IRS. For his admitted crime, Seedorf will now serve a six-month prison sentence and be compelled to pay his unpaid taxes.”
According to the allegations contained in the Information to which SEEDORF pled guilty, court filings, and statements made in public court proceedings:
During the relevant time period of 2009 through October 2019, SEEDORF was a Town Justice for the Town of Lewisboro, New York, and an Administrative Law Judge for Westchester County. SEEDORF also received income from the private practice of law.
SEEDORF did not file U.S. Individual Income Tax Returns for the tax years 2005 through 2015, despite being required to do so. As a result of the income SEEDORF earned from 2005 through 2008, he incurred a federal income tax liability of approximately $323,000, including interest and penalties (“SEEDORF’s 2005 Through 2008 Tax Liability”). As a result of the income SEEDORF earned from 2009 through 2013, he incurred a federal income tax liability of approximately $164,000, including interest and penalties (“SEEDORF’s 2009 Through 2013 Tax Liability”).
In early August 2012, SEEDORF received $1,524,116 in connection with the settlement of a civil lawsuit. At SEEDORF’s request, the law firm that represented SEEDORF in the lawsuit (“Law Firm-1”) deposited the settlement proceeds into its attorney trust account, to be disbursed to SEEDORF at an unspecified later date. In the following years, SEEDORF instructed Law Firm-1 to disburse portions of the settlement proceeds to accounts other than his personal bank account, including his law firm’s operating account, his law firm’s attorney trust account, and his brother-in-law’s personal account, in order to disguise the source of funds he used to make payments to the IRS and other creditors, and the existence of the remainder of the settlement proceeds.
From January 2010 through June 2013, the IRS attempted to collect SEEDORF’s 2005 Through 2008 Tax Liability, including by mailing letters to SEEDORF and requesting documents and records from SEEDORF. SEEDORF failed to provide any records to the IRS or make any payment toward SEEDORF’s 2005 Through 2008 Tax Liability.
In June 2013, after the IRS initiated a process to place a levy upon an investment account held by SEEDORF, he instructed Law Firm-1 to wire $400,000 of the settlement proceeds to his own law firm’s attorney trust account, from which he then paid his outstanding 2005 Through 2008 Tax Liability. During a conversation with an IRS Revenue Officer concerning the source of these funds, SEEDORF falsely stated that he had borrowed the funds from his own law firm’s trust account.
During a December 2014 IRS interview, an IRS Revenue Agent asked SEEDORF whether he had received any non-taxable income during the period from 2009 through 2013. During the interview, SEEDORF never disclosed the 2012 law suit settlement or the existence of the more than $540,000 of settlement proceeds that remained in Law Firm-1’s attorney trust account at that time.
In all, SEEDORF caused the IRS to incur losses of over $200,000, including penalties and interest.
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In addition to the prison term, Judge Seibel ordered SEEDORF, 64, of South Salem, New York, to serve three years of supervised release, and to pay a fine in the amount of $55,000. SEEDORF has already paid $207,219 in restitution to the IRS.
Ms. Strauss praised the outstanding work of IRS Criminal Investigation in this case.
This case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorney Jeffrey C. Coffman is in charge of the prosecution.
International Fugitive and Disbarred Attorney Charged in over $5 Million Cryptocurrency 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Complaint in Manhattan federal court charging RANDY CRAIG LEVINE, a/k/a “Viktor Lapin,” a/k/a “Andre Santiago Santos Galindo,” a/k/a “Alexander Martinez Lavrov,” a/k/a “Alexander Kozlov,” a/k/a “Hristo Danielov Marinov,” and PHILIP REICHENTHAL with commodities fraud, wire fraud, and money laundering offenses. As alleged, LEVINE induced others to send millions of dollars to REICHENTHAL, who was at the time a licensed attorney, to fund the purchase of Bitcoin after falsely representing that he intended to sell large quantities of Bitcoin to buyers. REICHENTHAL, who was purportedly acting as an escrow agent for the transactions, then sent a substantial portion of the money to LEVINE, before any Bitcoin was provided by LEVINE to investors. Neither LEVINE nor REICHENTHAL ever provided any Bitcoin or refunded the investors’ money.
LEVINE, a U.S. citizen, fled the United States in or about 2005 after learning that he was under investigation for passport fraud and that his residence had been searched. On or about May 19, 2005, a federal grand jury sitting in the Southern District of Florida returned an indictment charging LEVINE with passport fraud and perjury. In 2018, LEVINE was arrested in Guatemala with a Russian passport containing the alias “Viktor Lapin.” In June 2020, he was arrested in Austria with a Bulgarian passport containing the alias “Alexander Koslov.” Extradition proceedings are pending.
REICHENTHAL was arrested today in Homestead, Florida, and will be presented later today before United States District Judge Jacqueline Becerra in the Southern District of Florida.
Acting Manhattan U.S. Attorney Audrey Strauss said: “Randy Levine and Philip Reichenthal allegedly engaged in a scheme to take over $5 million in investor funds under the pretense of offering cryptocurrency for sale. In reality, when investors’ funds were transferred to Reichenthal, a licensed attorney at the time, for ‘escrow’ at Levine’s behest, the two allegedly pocketed the money. They never completed the Bitcoin transactions promised to their victim investors. Today’s arrest of Philip Reichenthal ensures that he and his co-defendant, Randy Levine, will face justice for this alleged scheme.”
FBI Assistant Director-in-Charge Sweeney said: “As alleged, Levine and Reichenthal operated two fraudulent schemes involving Bitcoin transactions. In both cases, investors wired money to the defendants to fund the purchase of Bitcoin. In neither case did these purchases actually take place. The money was funneled, as alleged, to overseas bank accounts controlled by Levine. While the charges brought today against Levine and Reichenthal are fairly detailed and laden with allegations of complex criminal activity, the truth is much more simple: they were con artists who finally got caught in the act.”
As alleged in the Complaint unsealed today in Manhattan federal court:[1]
The charges against LEVINE and REICHENTHAL involve two fraudulent schemes. In the first fraudulent scheme, in approximately June and July 2018, LEVINE induced another individual, the principal of a purported cryptocurrency escrow firm (“Individual-1”), to wire to REICHENTHAL over $3 million of funds from an over-the-counter cryptocurrency broker (“Company-1”) to fund the purchase of Bitcoin after falsely telling Individual-1 that LEVINE would sell thousands of Bitcoin, when in truth and in fact, LEVINE never intended to sell Bitcoin. After receiving the $3 million, REICHENTHAL, in turn, wired over $2 million to bank accounts in Guatemala held in the name of one of LEVINE’s aliases. LEVINE then lied to Individual-1 for days about why the deal had not worked out, the status of the purported Bitcoin, and the location of Company-1’s money, which was never returned.
In the second fraudulent scheme, from approximately February 2019 to May 2019, LEVINE induced a Florida resident involved in brokering Bitcoin transactions (“Individual-2”) to cause investors to send to REICHENTHAL over $2 million of the investors’ money to fund the purchase of Bitcoin. Again, LEVINE told Individual-2 that LEVINE would sell Bitcoin, when in truth and in fact, LEVINE never had any intention of selling Bitcoin to the investors. After receiving the funds from the investors, REICHENTHAL, in turn, sent over $1.9 million to bank accounts in Mexico controlled by LEVINE; the money was then wired to a bank account in Russia held in the name of one of LEVINE’s aliases. LEVINE then lied to Individual-2 and an investor (“Investor-1”) about the status of the investors’ funds, which were never returned. After Individual-2 sought the return of the funds, LEVINE sent one electronic message threatening to “bring [Individual-2] into all My Legal Problems here in Guatemala including Money Laundering as I have open investigation a d [sic] I will alert the American Authorities you were involved in my operations before just to stick it up your a**.”
In connection with the above transactions, LEVINE used, among other things, various false aliases to communicate with the individuals sending funds to REICHENTHAL and foreign bank accounts held in his false names. REICHENTHAL used bank accounts held in the name of his law firm and an attorney trust account to receive the funds and the pass them to LEVINE, before he or investors received the Bitcoin, contrary to REICHENTHAL’s and LEVINE’s promises.
On or about October 31, 2019, the Supreme Court of the State of Florida granted REICHENTHAL’s own petition for voluntary disciplinary revocation of his bar license after approximately 12 attorney disciplinary charges were filed against him related to his “receipt of approximately $2,125,000.00 in escrow funds and subsequent failure to disburse in accordance with the escrow agreement,” as stated in the court documents.
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LEVINE, 53, formerly of Coral Springs, Florida, and REICHENTHAL, 76, of Homestead, Florida, are each charged with one count of conspiring to commit commodities fraud, which carries a maximum term of 5 years in prison, one count of conspiring to commit wire fraud, which carries a maximum sentence of 20 years in prison, two counts of commodities fraud, each of which carries a maximum sentence of 10 years in prison, two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison, and one count of money laundering, which carries a maximum sentence of 10 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 a judge.
Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and also thanked the Commodity Futures Trading Commission and the Florida Office of Financial Regulation’s Bureau of Financial Investigations for their assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jordan Estes and Drew Skinner are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Bridgeport Police Chief and Personnel Director Charged with Fraud, False Statements in Connection with City’s Hiring of the Police ChiefRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, Acting Under Authority Conferred by 28 U.S.C. § 515, and David Sundberg, Special Agent-in-Charge, New Haven Division, Federal Bureau of Investigation (“FBI”), announced the arrest of ARMANDO J. PEREZ, the Chief of Police of the City of Bridgeport, Connecticut (the “City”), and DAVID DUNN, the City’s acting personnel director, for defrauding the City by rigging the 2018 police chief examination, mandated by the City’s Charter, to ensure PEREZ would be selected for the position. PEREZ and DUNN were also charged with making false statements to federal agents in the course of the investigation. Both defendants are expected to appear before U.S. Magistrate Judge William I. Garfinkel in Bridgeport federal court this afternoon.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Chief Perez and Personnel Director Dunn schemed to rig the purportedly impartial and objective search for a permanent police chief to ensure the position was awarded to Perez, and then repeatedly lied to federal agents in order to conceal their conduct. Bridgeport’s citizens and police officers deserve leaders with integrity who are committed to enforcing, not breaking, the law, and we thank the FBI for their partnership in investigating and uncovering the scheme alleged.”
FBI Special Agent-in-Charge David Sundberg said: “I would like to express my deepest gratitude to the members of the United States Attorney’s Offices in both the Southern District of New York as well as Connecticut for their professionalism and invaluable assistance in this case. Today’s arrest of city officials including a high ranking, long-time law enforcement officer is a stark reminder that the betrayal of public trust and community members by a public servant is not only unethical but often illegal. We recognize these arrests are not a reflection on the Bridgeport Police Department as a whole, but it is our responsibility to root out injustice and corruption by any and all elected and appointed officials entrusted to protect and serve with honor. We at the FBI will continue to aggressively pursue all those engaged in matters of public corruption throughout Connecticut.”
According to the allegations contained in the Complaint unsealed upon the defendants’ arrest, and publicly available information:[1]
The Scheme to Rig the City of Bridgeport’s Police Chief Exam
The charges alleged in the Complaint arise from a criminal scheme to rig the City’s search for a new Bridgeport Police Department (“BPD”) chief in 2018. During the course of this scheme, PEREZ – who was serving as the acting BPD chief at the time – conspired with DUNN, who is and was at that time the City’s acting personnel director, to deceive the City by secretly rigging the supposedly independent search process for a new BPD chief to ensure that PEREZ was ranked as one of the top three candidates and could therefore be awarded a five-year contract to serve as the BPD chief.
More specifically, in or about February 2018, the City commenced a search to fill the position of permanent Chief of Police. Under the City’s Charter, the City was required to conduct an “open and competitive examination” to determine the top three scoring candidates for the position, from which the mayor could then choose. DUNN, in his role as the personnel director, oversaw the police chief examination process, and retained an outside consultant (“Consultant-1”) to assist with developing and carrying out the exam. DUNN and PEREZ then manipulated that examination process in multiple ways: DUNN stole confidential examination questions and related information developed by Consultant-1, and provided those materials to PEREZ, including by email; DUNN had Consultant-1 tailor the examination scoring criteria to favor PEREZ; PEREZ enlisted two BPD officers to secretly draft and write PEREZ’s written exam; and DUNN attempted to influence a panelist, tasked with ranking the candidates in the last stage of the exam, to ensure that PEREZ was scored as one of the top three candidates.
As a result of the scheme, the City was deceived into ranking PEREZ among the top three candidates, which rendered him eligible for the permanent police chief position. The mayor ultimately offered the position to PEREZ, and the City, under the assurance that PEREZ had been appointed in accordance with the City Charter, entered into a five-year contract with PEREZ, the terms of which included a payout of more than $300,000 to PEREZ for accrued leave.
False Statements by PEREZ and DUNN
PEREZ and DUNN were each voluntarily interviewed in connection with the FBI’s investigation. In an attempt to conceal their conduct, during those interviews they both lied to FBI agents about facts material to the criminal investigation. PEREZ provided false and misleading information about the assistance DUNN and others had provided him in connection with the examination process, including his requests to a BPD officer to sneak into headquarters to retrieve stolen confidential information provided by DUNN. DUNN falsely denied requesting an exam panelist ensure that PEREZ was scored as one of the top three candidates.
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PEREZ, 64, of Trumbull, Connecticut, and DUNN, 72, of Stratford, Connecticut, are each charged with one count of wire fraud and one count of conspiracy to commit wire fraud, each of which carries a maximum penalty of 20 years in prison. PEREZ is also charged with two counts of false statements to federal investigators, and DUNN is charged with one count of false statements to federal investigators, each of which carries a maximum penalty 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 a judge.
Ms. Strauss praised the outstanding work of the FBI and the Special Agents of the U.S. Attorney’s Office.
The case is being prosecuted by the Office’s Public Corruption Unit and White Plains Division. Assistant U.S. Attorneys Eli J. Mark and Jeffrey C. Coffman, and Assistant U.S. Attorney Jonathan N. Francis of the U.S. Attorney’s Office for the District of Connecticut, are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitutes only allegations, and every fact described therein should be treated as an allegation.
Mexican Drug Traffickers Charged with Drug Trafficking Crime Based on Seizure of More Than Three Tons of CocaineRead the Press Release
Audrey Strauss, Acting U.S. Attorney for the Southern District of New York, Raymond P. Donovan, Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), Keith M. Corlett, Superintendent of the New York State Police (“NYSP”), Peter C. Fitzhugh, Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced that RAYMUNDO MONTOYA-LÓPEZ, ABRAHAM ALFONSO GARCÍA-MONTOYA, and FELIZARDO DÍAZ-HERNANDEZ were charged in a criminal complaint in Manhattan federal court with conspiring to import almost three tons of cocaine into the United States. The charge arises from a September 1, 2020, seizure by Mexico’s Secretaría de Marina (the “Mexican Navy”) of approximately 2,960 kilograms of cocaine off the coast of the Mexican state of Quintana Roo.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, these defendants are responsible for the attempted importation of more than three tons of cocaine into the United States. Thanks to the work of the DEA and the Mexican Navy, the shipment was interdicted and the defendants are in custody and facing federal prosecution.”
DEA Special Agent in Charge Raymond P. Donovan said: “Law enforcement thwarted cartel plans to saturate the American drug market with cocaine by intercepting over three tons of cocaine heading towards American towns. This international enforcement operation has saved lives and reemphasized law enforcement’s commitment to keeping America safe from drug trafficking, drug abuse, and violent crime.”
HSI New York Special Agent in Charge Peter C. Fitzhugh said: “Cartels continue to operate with no regard for laws or human life, trafficking tons of deadly narcotics across the border and using bribery and intimidation to further their reach with government officials. With HSI’s continued partnership with DEA’s Strike Force, three more alleged drug trafficking defendants will now face justice and three tons of cocaine will not reach our communities.”
State Police Superintendent Keith M. Corlett said: “The combined efforts of federal, state and local law enforcement, along with authorities in Mexico, have put this operation out of business and disrupted the transport of thousands of kilos of cocaine to our streets. This case continues our commitment and partnership to identify, arrest and prosecute anyone who tries to sell these dangerous drugs in our communities.”
Police Commissioner Dermot Shea said: “This case is another illustration of our joint, ongoing responsibilities in eradicating international drug trafficking. Our NYPD officers, working with our law enforcement partners and federal prosecutors, follow the facts anywhere in the world to achieve justice, in this case interdicting nearly three tons of cocaine off the coast of Mexico.”
As alleged in the Complaint unsealed in federal court[1]:
On or about September 1, 2020, aircraft from the Mexican Navy located and began tracking a boat traveling northwest through the Caribbean Sea toward the Mexican city of Chetumal and the village of Mahahual. Shortly thereafter, the Mexican Navy intercepted the boat approximately 85 nautical miles off the coast of Quintana Roo, and boarded and searched it. During the search, the Mexican Navy found and arrested MONTOYA-LÓPEZ, GARCÍA-MONTOYA, and DÍAZ‑HERNANDEZ. The Mexican Navy also found and seized approximately 2,960 kilograms of cocaine.
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MONTOYA-LÓPEZ, 45, GARCÍA-MONTOYA, 31, and DÍAZ‑HERNANDEZ, 39, all of Sinaloa, Mexico, are charged with conspiring to import cocaine into the United States, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.
Ms. Strauss praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, the DEA’s Mérida Resident Office, and Mexico’s Secretaría de Marina. The Strike Force is housed at the DEA’s New York Division and includes agents and officers of the DEA; the New York City Police Department; the New York State Police; Immigration and Customs Enforcement – Homeland Security Investigations; the U. S. Internal Revenue Service Criminal Investigation Division; the Bureau of Alcohol, Tobacco, Firearms and Explosives; U.S. Customs and Border Protection; U.S. Secret Service; the U.S. Marshals Service; New York National Guard; the Clarkstown Police Department; U.S. Coast Guard; Port Washington Police Department; and New York State Department of Corrections and Community Supervision.
The case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael K. Krouse, Stephanie Lake, Daniel G. Nessim, Benjamin Woodside Schrier, and Kyle A. Wirshba are in charge of the prosecution.
The charge contained in the Complaint is merely an allegation, 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 and statements and filings in court set forth herein, constitute only allegations, and every fact described herein should be treated as an allegation as to the defendants charged in the Complaint.
Former Obstetrician/Gynecologist Robert Hadden Charged in Manhattan Federal Court with Sexually Abusing PatientsRead 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced that ROBERT HADDEN was arrested this morning and charged with enticing and inducing six victims to travel interstate to engage in illegal sexual activity. The indictment unsealed today alleges that from at least in or about 1993, up to and including at least in or about 2012, HADDEN enticed and induced dozens of victims, including minors, to travel to his medical offices in New York, New York, at least in part for the purpose of subjecting them to unlawful sexual abuse. HADDEN is expected to be presented before U.S. Magistrate Judge Robert W. Lehrburger this afternoon. The case is assigned to U.S. District Judge Richard M. Berman.
Acting U.S. Attorney Audrey Strauss said: “As alleged, between 1993 and 2012, Robert Hadden sexually abused dozens of women and girls during Ob/Gyn examinations at his medical offices in Manhattan. Hadden allegedly used the examinations of his victims for his own sexual gratification, abusing dozens of victims over a nearly 20-year period, including multiple minor girls, one of whom Hadden had himself delivered. The allegations show that Hadden acted as a predator in a white coat. He allegedly used the cover of conducting medical examinations to engage in sexual abuse that he passed off as normal and medically necessary, when it was neither normal nor necessary – it was criminal. I want to thank and commend the brave women who were willing to come forward to tell us what happened to them, without whom these charges could not have been brought.”
FBI Assistant Director William F. Sweeney Jr. said: “The abusive behavior alleged here took place over the course of nearly two decades, which means there could be many victims out there we have not heard from. We are asking anyone seeing this information to reach out to us. We want you to know FBI special agents, NYPD detectives, analysts, victim specialists, and prosecutors investigating this case are here for each and every one of you, and we are your advocates. It is important to remember nothing Dr. Hadden has done was, or ever will be, your fault. We see time and time again that voices matter, and those who have stepped forward have empowered others to do the same. If you have been victimized by Robert Hadden in any way, or have any additional information about his alleged illegal behavior, please call us at 1-800-CALL-FBI, or reach out to us at www.tips.fbi.gov.”
If you believe you are a victim of the sexual abuse perpetrated by Robert Hadden, please contact the FBI at 1-800-CALL FBI, and reference this case.
According to the Indictment[1] unsealed today in Manhattan federal court:
Over more than a decade, ROBERT HADDEN sexually abused dozens of female patients, including multiple minors, under the guise of conducting purported gynecological and obstetric examinations at HADDEN’s medical offices and at hospitals in New York, New York.
From at least 1993 through at least 2012, HADDEN enticed and induced multiple victims to travel to his medical offices in New York, at least in part for the purpose of subjecting them to unlawful sexual abuse. HADDEN used his position as a medical doctor at Columbia University to make or to attempt to make his victims believe that the sexual abuse he inflicted on them was appropriate and medically necessary. HADDEN encouraged his victims to return to see him and often directed his victims to schedule follow-up visits on timelines he set. As a result, some of his victims attended many appointments with HADDEN over the course of multiple years, at which HADDEN repeatedly abused them. HADDEN caused multiple victims to return to appointments with him to be further sexually abused, knowing that in order to do so many of his victims would travel to HADDEN’s offices in Manhattan from or through other states.
As alleged, HADDEN abused dozens of patients through a process that entailed developing a relationship with his victims and causing them to trust him, before engaging in a course of increasingly abusive conduct, which HADDEN attempted to mask under the guise of legitimate medical care. HADDEN frequently created opportunities to be alone with his victims. Among other things, HADDEN invited his victims to meet with him alone in his office, sent nurses and medical assistants out of the examination room for periods of time, and/or intentionally failed to tell nurses and medical assistants when he was going into examination rooms, so that he could be alone with his victims.
After developing or attempting to develop a rapport with his victims, HADDEN then began to engage in a course of physical sexual abuse of his victims. In the case of many victims, HADDEN’s conduct became increasingly abusive over time. The abusive sexual conduct included, among other things, HADDEN conducting excessively long and sexualized breast exams that involved caressing or groping a victim’s breasts, and pinching, twisting, or otherwise manipulating a victim’s nipples; conducting two breast exams per appointment; conducting pelvic exams during which HADDEN used his hands to touch a victim’s clitoris, labia, vagina, and/or anus without a valid medical purpose; and conducting pelvic exams during which HADDEN licked a victim’s vagina. HADDEN also frequently brought up inappropriate and medically irrelevant sexual topics without prompting from his patients.
As alleged, HADDEN enticed and coerced six particular victims, including a minor victim, to travel to New York, New York, from or through another state to engage in illegal sexual activity.
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ROBERT HADDEN, 62, of Englewood, New Jersey, is charged with six counts of enticing and inducing individuals to travel interstate to engage in illegal sexual activity, each of which carries a maximum sentence of 20 years in prison. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by a judge.
Ms. Strauss praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Maurene Comey, Jessica Lonergan, and Lara Pomerantz are in charge of the prosecution.
The charges contained in the Indictment are merely accusations. 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 therein should be treated as an allegation. The defendant is presumed innocent unless and until proven guilty.
Carmel Attorney Sentenced to 18 Months in Prison for Tax Evasion and Failure to Pay over Payroll TaxesRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced today that FRANCIS J. O’REILLY, a Carmel attorney, was sentenced in White Plains federal court to 18 months in prison for committing tax evasion and failing to pay over payroll taxes for the tax year 2015 as part of a long-running tax fraud scheme that cost the U.S. Treasury over $800,000, including penalties and interests. O’REILLY previously pled guilty before U.S. Magistrate Judge Lisa Margaret Smith. U.S. District Judge Kenneth M. Karas, who accepted O’REILLY’s guilty plea, imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “Francis O’Reilly, an attorney for three decades, knew his obligations under the law to pay over payroll taxes and to report and pay income tax when due. Having admitted his crimes, O’Reilly will now pay the consequences in jail time.”
According to the allegations contained in the Information to which O’REILLY pled guilty, court filings, and statements made in public court proceedings:
In or about 1989, O’REILLY was admitted to practice law in New York State. At all relevant times, O’REILLY was a self-employed attorney who maintained a law practice in Putnam County, New York, that specialized in, among other things, bankruptcy, foreclosure defense, and criminal defense.
O’REILLY operated his law practice as a sole proprietorship and exercised control over its financial affairs. In particular, O’REILLY was responsible under federal law for collecting, truthfully accounting for, and paying over payroll taxes to the Internal Revenue Service (“IRS”) for his employees. Instead of fulfilling this responsibility, O’REILLY engaged in a decades-long scheme to defraud the IRS of the payroll taxes that were due and owing for his law practice. Between 1997 and 2018, O’REILLY failed to pay over a total of approximately $155,771 in payroll taxes, resulting in a liability of approximately $232,283 after interest and penalties.
In addition to failing to pay over payroll taxes, O’REILLY also engaged in substantial personal tax evasion. Between 2013 and 2017, O’REILLY withdrew a total of approximately $481,673 in untaxed funds from his attorney trust account for personal use, none of which he reported on his tax returns for those years. In addition to substantially underreporting his income and tax liabilities, O’REILLY failed to pay even those taxes that he did report, accruing large unpaid liabilities. In total, during the tax years 2007 through 2018, O’Reilly evaded approximately $566,027 in personal federal income taxes, including interest and penalties.
In or about late 2016, in an effort to settle with the IRS, O’REILLY submitted an offer in compromise to the IRS proposing to settle at least approximately $691,561 in outstanding tax liabilities for merely $12,400. In the 2016 offer in compromise, which O’REILLY signed under penalty of perjury, O’REILLY made several material misstatements and omissions regarding his income and assets. Among other things, O’REILLY’s offer in compromise: (a) failed to disclose the existence of O’REILLY’s attorney trust account, from which, as described above, O’REILLY drew substantial income; (b) failed to disclose real property and land that O’REILLY owned in Socorro County, New Mexico; and (c) failed to disclose a 2010 Lincoln vehicle that O’REILLY had recently purchased for approximately $16,000.
In all, O’REILLY caused the IRS to incur losses of over $800,000, including penalties and interest.
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In addition to the prison term, Judge Karas ordered O’REILLY, 62, of Danbury, Connecticut, to serve two years of supervised release, and to pay restitution to the IRS in the amount of $801,969, which represents O’REILLY’s unpaid tax liabilities, as well as certain penalties and interest, relating to his personal income taxes for the calendar years 2007 through 2018, payroll taxes for the calendar years 1997 through 2018, and Federal Unemployment Tax Act (FUTA) taxes for the calendar years 1998 through 2017.
Ms. Strauss praised the outstanding work of IRS Criminal Investigation in this case.
This case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution.
New York Hedge Fund Founder Arrested and Charged with Fraud, Extortion, and Obstruction of Justice in Connection with Neiman Marcus BankruptcyRead 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced today that DANIEL KAMENSKY, the founder and manager of New York-based hedge fund Marble Ridge Capital (“Marble Ridge”), was charged in a Complaint in Manhattan federal court with securities fraud, wire fraud, extortion, and obstruction of justice. KAMENSKY’s alleged criminal acts occurred in connection with his scheme to pressure a rival bidder to abandon its higher bid for assets in connection with Neiman Marcus’s bankruptcy proceedings so that Marble Ridge could obtain those assets for a lower price. KAMENSKY then attempted to persuade the rival bidder to cover up the scheme. KAMENSKY was arrested today and is expected to be presented before Magistrate Judge James L. Cott this afternoon.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Daniel Kamensky disregarded his fiduciary responsibility to unsecured creditors of Neiman Marcus – and broke the law – when he attempted to coerce a competitor to withdraw a higher bid for assets of the bankruptcy estate. As further alleged, acknowledging the illegality of his actions, Kamensky then attempted to obstruct an investigation by trying to persuade the competitor to change his account of the coercion, telling the competitor that otherwise ‘this is going to the U.S. Attorney’s Office.’ As today’s charges show, Kamensky was right about that.”
FBI Assistant Director-in-Charge William F. Sweeney said: “As alleged, Kamensky intentionally violated his fiduciary duty as a member of the Official Committee of Unsecured Creditors in the Neiman Marcus bankruptcy by preventing the sale of securities to an investment bank so he could acquire the same securities at a significantly lower price for his own fund. In a conversation with an employee of the investment bank, Kamensky went as far as to say, ‘Maybe I should go to jail.’ Today, we’ve removed the ‘maybe,’ and forced him to answer for his conduct.”
As alleged in the Complaint unsealed today in Manhattan federal court:[1]
DANIEL KAMENSKY was the principal of Marble Ridge, a hedge fund with assets under management of more than $1 billion that invested in securities in distressed situations, including bankruptcies. Prior to opening Marble Ridge, KAMENSKY worked for many years as a bankruptcy attorney at a well-known international law firm, and as a distressed debt investor at prominent financial institutions.
The Neiman Marcus Bankruptcy
Neiman Marcus, an American chain of luxury department stores with stores located across the United States, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) in May 2020. At the outset of the bankruptcy, Marble Ridge, through KAMENSKY, applied to be on the Official Committee of Unsecured Creditors (the “Committee”) and was thereafter appointed to be a member of the Committee. As a member of the Committee, KAMENSKY had a fiduciary duty to represent the interests of all unsecured creditors as a group.
During the bankruptcy process, the Committee had negotiated with the owners of Neiman Marcus to obtain certain securities, known as MyTheresa Series B Shares (the “MYT Securities”), and ultimately, the Committee was successful in coming to a settlement to obtain 140 million shares of MYT Securities for the benefit of certain unsecured creditors of the bankruptcy estate. In July 2020, KAMENSKY was negotiating with the Committee for Marble Ridge to offer 20 cents per share to purchase MYT Securities from any unsecured creditor who preferred to receive cash, rather than MYT Securities, as part of that settlement.
KAMENSKY’s Fraudulent Scheme
On July 31, 2020, KAMENSKY learned that a diversified financial services company headquartered in New York, New York (the “Investment Bank”) had informed the Committee that it was interested in bidding a price between 30 and 40 cents per share – substantially higher than KAMENSKY’s bid – to purchase the MYT Securities from any unsecured creditor who was interested in receiving cash.
That afternoon, KAMENSKY sent messages to a senior trader at the Investment Bank (“IB Employee-1”) telling him not to place a bid, and followed those messages up with a phone call with IB Employee-1 and a senior analyst of the Investment Bank (“IB Employee-2,” and collectively the “Employees”). During that call, KAMENSKY asserted that Marble Ridge should have the exclusive right to purchase MYT Securities, and threatened to use his official role as co-chair of the Committee to prevent the Investment Bank from acquiring the MYT Securities. KAMENSKY also stated that Marble Ridge had been a client of the Investment Bank in the past but that if the Investment Bank moved forward with its bid, then Marble Ridge would cease doing business with the Investment Bank.
The Investment Bank thereafter decided to not make a bid to purchase MYT Securities, and informed the legal adviser to the Committee of its decision. The Investment Bank further told the legal adviser they made that decision because KAMENSKY – a client of the Investment Bank – had asked them not to.
Advisers to the Committee informed counsel for Marble Ridge of their call with the Employees, and after speaking with KAMENSKY, counsel for Marble Ridge falsely informed the advisers that KAMENSKY had not asked the Employees not to bid, but instead had told them to place a bid only if they were serious. Later that evening, KAMENSKY contacted IB Employee-1 and attempted to influence what IB Employee-1 would tell others, including the Committee and law enforcement, about KAMENSKY’s attempt to block the Investment Bank’s bid for the MYT Securities. KAMENSKY said at the outset of the call, in substance, “this conversation never happened.” During the call, KAMENSKY asked IB Employee-1 to falsely say that IB Employee-1 had been mistaken and that KAMENSKY had actually suggested that the Investment Bank bid only if it were serious, and made comments including the following: “Do you understand…I can go to jail?” “I pray you tell them that it was a huge misunderstanding, okay, and I’m going to invite you to bid and be part of the process.” “But I’m telling you…this is going to the U.S. Attorney’s Office. This is going to go to the court.” “[I]f you're going to continue to tell them what you just told me, I'm going to jail, okay? Because they're going to say that I abused my position as a fiduciary, which I probably did, right? Maybe I should go to jail. But I'm asking you not to put me in jail.”
During a subsequent interview with the Office of the United States Trustee, which was conducted under oath and in the presence of counsel, KAMENSKY stated that his calls to IB Employee-1 were a “terrible mistake” and “profound errors in lapses of judgment.”
After this series of events, Marble Ridge resigned from the Committee and has advised its investors that it intended to begin winding down operations and returning investor capital.
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KAMENSKY, 47, of Roslyn, New York, is charged with one count of fraud in the offer or sale of securities, which carries a maximum sentence of five years in prison, one count of wire fraud, which carries a maximum sentence of 20 years in prison, one count of extortion and bribery in connection with a bankruptcy, which carries a maximum sentence of five years in prison, and one count of obstruction of justice, 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 defendant will be determined by the judge.
Ms. Strauss praised the work of the FBI. Ms. Strauss further thanked the Office of United States Trustee and the Securities and Exchange Commission for their cooperation and assistance in this investigation. She added that the FBI’s investigation is ongoing.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Richard Cooper and Daniel Tracer are in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Disbarred Attorney Charged in White Plains Federal Court for Stealing 9/11 Victim Compensation FundsRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, and Kenneth R. Dieffenbach, Special Agent in Charge of the Fraud Detection Office of the Department of Justice Office of the Inspector General (“DOJ-OIG”), announced today the unsealing of a Complaint charging a disbarred attorney with theft of government funds. GUSTAVO L. VILA, the defendant, allegedly stole approximately $1 million that the Department of Justice’s 9/11 Victim Compensation Fund had awarded to the defendant’s client, a 9/11 first responder. The defendant was arrested today and presented in White Plains federal court before United States Magistrate Judge Paul E. Davison.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Gustavo Vila stole money awarded to his client – an NYPD officer and 9/11 first responder – by the 9/11 Victim Compensation Fund. Vila allegedly lied to his client, telling the client for more than three years that the money Vila stole had yet to be released by the Fund. Further, Vila lied to his client about his standing, continuing to hold himself out as an attorney even after he had been disbarred. Now Gustavo Vila has been charged with theft of government funds.”
DOJ-OIG Fraud Detection Office Special Agent in Charge Kenneth R. Dieffenbach said: “Vila allegedly attempted to profit off of the suffering of a retired NYPD officer who risked his life at Ground Zero. Because of Vila’s alleged greed, the victim never received about $1 million he was awarded from the 9/11 Victims Compensation Fund.”
As alleged in the Complaint unsealed today in White Plains federal court[1]:
In the wake of the September 11 terrorist attacks, Congress created the September 11th Victim Compensation Fund (“VCF”) to provide compensation with federal government funds to any individual who suffered physical harm or was killed as a result of the terrorist attacks, or as a result of the debris removal efforts that took place in the immediate aftermath of those attacks. The original VCF operated from 2001-2004. President Obama and President Trump reactivated the VCF, authorizing it to operate through October 2016, and December 2020, respectively. Claimants seeking compensation from the VCF were authorized to work with an attorney and have the attorney, on the claimant’s behalf, submit a claim to, and receive the claimant’s award from, the VCF. An attorney’s fees were limited to 10% of a VCF award.
From at least in or about 2012 through at least in or about 2019, GUSTAVO L. VILA, the defendant, represented a retired New York City Police Department Officer (“Victim-1”) in connection with Victim-1’s claim for compensation from VCF. Victim-1 was diagnosed with, and suffered from, serious, life-threatening medical conditions, including cancer, as a result of rescue and recovery work he performed at Ground Zero. Throughout his representation of Victim-1, VILA held himself out as an attorney to Victim-1 and to VCF, despite the fact that in 2015, VILA was disbarred.
In or about May 2013, GUSTAVO L. VILA, the defendant, submitted a claim to VCF on behalf of Victim-1. VILA also submitted forms to the VCF authorizing the VCF to deposit Victim-1’s compensation award directly into a bank account controlled by VILA’s law firm (the “Bank Account”). On or about September 13, 2016, the VCF authorized an award to Victim-1 of approximately $1,030,622.04.
On or about October 12, 2016, the VCF deposited the full amount of Victim-1’s award into the Bank Account. At that point, VILA was required to distribute all of that money, less 10% for his purported attorney’s fees, to Victim-1. VILA, however, did not distribute any of that money to Victim-1 or otherwise inform Victim-1 about this deposit. Rather, VILA allegedly kept almost the entire amount of that award for himself and used that money for his own personal benefit, including to pay his own taxes. From in or about October 2016 to in or about February 2020, VILA falsely represented to Victim-1 that the VCF had not yet released the majority of Victim-1’s VCF award, when in fact, the entire award had been released for Victim-1’s benefit in October 2016.
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VILA, 62, of Yorktown Heights, New York, is charged with one count of theft of government funds, in violation of Title 18, United States Code, Sections 641 and 2, which carries a maximum sentence of 10 years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of DOJ-OIG’s Fraud Detection Office.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Sarah L. Kushner is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Former United Nations Employee Charged with Making False Statements to Cover up Sexual AssaultsRead 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 today that KARIM ELKORANY, a former communications specialist with the United Nations (“UN”) in Iraq, was charged in an Indictment in Manhattan federal court with two counts of making false statements to special agents of the FBI in an effort to conceal his drugging and sexual assault of multiple women while he worked for the UN. ELKORANY was arrested in New Jersey today and is expected to be presented before Magistrate Judge James L. Cott this afternoon. The case is assigned to District Judge Naomi Reice Buchwald.
Acting Manhattan U.S. Attorney Audrey Strauss said: “Karim Elkorany, a former United Nations communications specialist, was accused of furtively drugging and sexually assaulting several women. When questioned by the FBI, Elkorany compounded his alleged unconscionable conduct by making false statements to the special agents investigating the assaults. Thanks to the diligence of the FBI, Elkorany now faces serious time in an American federal prison. We urge any individuals who may have information concerning Elkorany or any similar conduct to please contact the FBI at 1-800-CALL- FBI or tips.fbi.gov.”
FBI Assistant Director William F. Sweeney Jr. said: “Investigated by UN officials for allegedly drugging and sexually assaulting a woman in Iraq in 2016, Elkorany caught the eye of the FBI. Elkorany’s conduct, as detailed in today’s charges, is abhorrent, and the false statements made to the FBI Special Agents conducting this investigation are federal offenses. Our investigation continues, and if anyone has information about Elkorany, please contact us at 1-800-CALL- FBI or via our tipline at tips.fbi.gov.”
According to the Indictment unsealed today in Manhattan federal court and publicly available information:[1]
Since at least in or about 2005 up to at least in or about April 2018, ELKORANY worked in international aid, development, and/or foreign relations. From in or about October 2013 up to in or about April 2016, ELKORANY worked for the UN Children’s Fund in Iraq. From in or about July 2016 up to in or about April 2018, ELKORANY worked as a Communications Specialist for the UN in Iraq.
In or about November 2016, ELKORANY drugged and sexually assaulted a woman (“Victim-1”) in Iraq, where he was stationed while working for the UN. Victim-1 had food and alcoholic beverages with ELKORANY at a restaurant, after which ELKORANY brought Victim-1 to his apartment. While at ELKORANY’s apartment, Victim-1 was rendered unconscious. Victim-1 regained consciousness for brief periods, during which she observed ELKORANY sexually assaulting her but was physically unable to stop him. ELKORANY, among other things, put his penis in Victim-1’s mouth and anally penetrated Victim-1.
In or around December 2016, Victim-1 reported the sexual assault to the UN. The UN initiated an investigation, through which ELKORANY was notified of the substance of Victim-1’s allegations against him.
Federal agents subsequently uncovered evidence that ELKORANY had engaged in a pattern of similar conduct involving other women. In each instance, ELKORANY drugged the victim before sexually assaulting or attempting to sexually assault the victim while the victim was unconscious or partially conscious. In particular, between in or around 2009 and in or around 2016, ELKORANY sexually assaulted or attempted to sexually assault at least five victims after the victims were rendered unconscious after consuming alcoholic beverages prepared by ELKORANY. When some of the victims regained consciousness, some or all of their clothing had been removed. In some instances, after they awoke, ELKORANY informed the victims, in substance and in part, that they had sexual intercourse, oral sex, and/or anal sex with him. In some instances, when or after the victims regained consciousness, the victims experienced genital and anal discomfort and pain.
On or about November 3, 2017, special agents working with the New York Field Office of the FBI conducted a voluntary interview of ELKORANY outside of his residence in New Jersey. Agents conducting the interview identified themselves and informed ELKORANY that they were investigating, among other things, his interactions with Victim-1. During that interview, ELKORANY, who expressed familiarity with the nature and substance of the allegations made by Victim-1 to the UN, stated that the allegations Victim-1 had made to the UN were false. ELKORANY also stated that he had not used drugs with Victim-1 or provided Victim-1 with any drugs.
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ELKORANY, 37, of West Orange, New Jersey, is charged with two counts of making false statements to federal law enforcement agents, 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 the judge.
Acting U.S. Attorney Strauss praised the outstanding work of the FBI. Ms. Strauss also thanked the United States Department of State and the UN for their assistance, and noted that the investigation is ongoing. Any individuals who believe they have information concerning ELKORANY or any similar conduct should contact the FBI at 1-800-CALL- FBI or tips.fbi.gov.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Daniel C. Richenthal, Amanda L. Houle, and Lara Pomerantz 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 Indictment and the descriptions of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Acting U.S. Attorney Announces Extradition of Dominican Citizen for Narcotics Trafficking Through Sham Internet PharmacyRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Susan A. Gibson, the Special Agent in Charge of the New Jersey Division of the Drug Enforcement Administration (“DEA”), and James Buthorn, the Inspector in Charge of the New Jersey Office of the United States Postal Inspection Service (“USPIS”), announced today that JOSE FRANCISCO GUZMAN-CABRERA, a citizen of the Dominican Republic, was extradited yesterday from the Dominican Republic. GUZMAN-CABRERA is charged with conspiracy to distribute controlled substances, including oxycodone, hydrocodone, the fentanyl analogue p-fluoroisobutyryl fentanyl, and the synthetic opioid U-47700, distribution of controlled substances over the Internet, and conspiracy to commit money laundering, in connection with a large-scale drug distribution operation purporting to be an online pharmacy. GUZMAN-CABRERA was arrested on July 3, 2020, in the Dominican Republic, and was presented today before U.S. Magistrate Judge James L. Cott. GUZMAN-CABRERA’s case is assigned to U.S. District Judge Sidney H. Stein.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Jose Francisco Guzman-Cabrera was the kingpin of a drug trafficking organization that distributed dangerous opioids to individuals throughout the United States through a website purporting to be an online pharmacy. Thanks to the outstanding investigative work of the DEA and USPIS, Guzman-Cabrera is now in United States custody and facing prosecution in this District.”
DEA Special Agent in Charge Susan A. Gibson said: “This investigation reinforces the dangers of purchasing narcotics through the internet. Mr. Guzman-Cabrera may have felt he was safe allegedly operating his drug trafficking organization from a foreign country, but great investigative work led to his arrest and extradition to the United States to face justice.”
USPIS Inspector in Charge James Buthorn: “As alleged, Guzman-Cabrera put citizens across the United States in harm’s way through his criminal syndicate, intentionally disregarding people’s safety. No border will stop the United States Postal Inspection Service from bringing alleged criminals like Guzman-Cabrera to justice. We are proud of our partnerships both domestic and international, as well as our technological and analytical advancements in the recent years that are bringing positive results, making cases like this possible. Illicit narcotics traffickers, utilizing the open web or dark web, should know we are coming for you. I would also like to stress to the public the need to research your online pharmaceutical vendors, ensuring the medicines you order are safe. I commend the agents and inspectors on the successful outcome of this case.”
According to the allegations in the Indictment unsealed today in Manhattan federal court,[[1]] other court filings, and statements made during court proceedings:
Law enforcement agents began investigating an online pharmacy website (the “Pharmacy Website”) following an overdose death of a victim in Boise, Idaho, on or about March 17, 2017, whose death was caused by elevated levels of multiple prescription opioids as well as fentanyl. The victim’s computer showed that he had repeatedly ordered painkillers from the Pharmacy Website, paying thousands of dollars for these drugs. The subsequent investigation revealed that the Pharmacy Website was selling pills to customers located throughout the United States, and that GUZMAN-CABRERA led the drug trafficking organization that operated the Pharmacy Website. In the course of the investigation, undercover law enforcement agents conducted multiple purchases of controlled substances from the Pharmacy Website. The substances purchased by undercover law enforcement agents included oxycodone and hydrocodone.
The investigation has revealed that in some cases, customers purchased what they believed to be prescription drugs such as alprazolam or oxycodone from the Pharmacy Website, but instead received pills containing other substances. In 2018, law enforcement agents searched a residence in New Jersey that the Pharmacy Website used as a distribution center, and seized approximately 100,000 pills, including pills containing the fentanyl analogue p-fluoroisobutyryl fentanyl and pills containing U-47700, both of which are powerful synthetic opioids that have no recognized medical use in the United States.
As alleged, GUZMAN-CABRERA, from at least 2013 through 2018, was the head of the drug trafficking organization that operated the Pharmacy Website. GUZMAN-CABRERA, who was based in the Dominican Republic, coordinated the purchase of pills and tablets from sources overseas, and shipped these drugs to co-conspirators who operated drug distribution centers located in the United States. After customers placed orders for drugs on the Pharmacy Website, GUZMAN-CABRERA directed his co-conspirators to mail the drugs to these customers. The drug trafficking organization then sent the proceeds from the sales, totaling millions of dollars, from the United States to the Dominican Republic through a variety of means, including money remitters, money couriers, and wire transfers between United States and Dominican Republic-based shell company bank accounts.
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GUZMAN-CABRERA, 41, of the Dominican Republic, has been charged with one count of conspiracy to distribute controlled substances, one count of distribution of controlled substances over the Internet, and one count of conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the DEA’s New Jersey Division, its Boise Division, and its Santo Domingo Country Office, and the USPIS. She also thanked the Dominican Government’s National Directorate for Drug Control (DNCD) and the United States Marshals Service for their assistance in the case, as well as the U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division for its significant assistance in securing the defendant’s extradition from the Dominican Republic.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorney Thane Rehn is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment and charges set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Herbalife Nutrition Ltd. Agrees to Pay over $122 Million to Resolve FCPA CaseRead the Press Release
Herbalife Nutrition Ltd. (Herbalife), a U.S.-based publicly traded global nutrition company, has agreed to pay total penalties of more than $122 million to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act (FCPA). The resolution arises out of Herbalife’s scheme to falsify books and records and provide corrupt payments and benefits to Chinese government officials for the purpose of obtaining, retaining, and increasing Herbalife’s business in China. This includes a criminal penalty of over $55 million and approximately $67 million to be paid to the U.S. Securities and Exchange Commission (SEC) in a related matter.
Herbalife entered into a deferred prosecution agreement with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of New York in connection with a criminal information filed today in the Southern District of New York charging Herbalife with one count of conspiracy to violate the books and records provision of the FCPA.
“By engaging in a decade-long scheme to falsify its books and records to conceal corrupt and other improper payments to Chinese officials and state-owned entities, Herbalife misrepresented important information made available to investors,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “The integrity of our financial markets depends on the timely and accurate disclosure of material information about companies’ operations. Today’s resolution reflects the department’s ongoing commitment to combating international corruption and ensuring that investors can trust the accuracy of the financial statements of publicly traded companies.”
“As admitted in the deferred prosecution agreement entered into today, Herbalife approved the extensive and systematic corrupt payments to Chinese government officials over a 10-year period to promote and expand Herbalife’s business in China,” said Acting U.S. Attorney Audrey Strauss of the Southern District of New York. “Moreover, in an effort to conceal this widespread corruption scheme, Herbalife maintained false accounting records to mischaracterize these improper payments as permissible business expenses. In addition to admitting its criminal conduct, Herbalife has agreed to pay combined penalties of more than $123 million. This case signifies this Office’s commitment to ensuring that companies operating in the United States do not gain an unfair advantage through corruption and illegal bribes of foreign officials.”
According to its admissions, between 2007 and 2016, Herbalife knowingly and willfully conspired with others in a scheme to falsify its books and records and provide corrupt payments and benefits to Chinese government officials. Herbalife carried out the scheme for the purpose of obtaining, retaining, and increasing Herbalife’s business in China by, among other things, (1) obtaining and retaining certain direct selling licenses for its wholly-owned subsidiaries in China (Herbalife China); (2) improperly influencing certain Chinese governmental investigations into Herbalife China’s compliance with Chinese laws; and (3) improperly influencing certain Chinese state-owned and state-controlled media for the purpose of removing negative media reports about Herbalife China.
For example, in late 2006 through early 2007, during the time period that Herbalife China’s application for its first direct selling license was pending, Herbalife China provided corrupt payments and benefits to Chinese government officials, including government officials responsible for awarding that direct selling license, and falsely recorded and booked those corrupt expenses. Around the same time period, an officer and high-level executive of Herbalife suggested to a high-level executive of Herbalife China that Herbalife China personnel falsify expense reimbursement documents in connection with entertainment of Chinese government officials.
Thereafter, Herbalife continued to provide improper payments and benefits to Chinese government officials. Herbalife also continued to falsely record certain improper payments and benefits as “travel and entertainment expenses” and to maintain false Sarbanes-Oxley sub-certification letters in Herbalife’s books, records, and accounts.
As part of the agreement, Herbalife agreed to continue to cooperate with the U.S. government in any ongoing or future criminal investigations concerning Herbalife, its executives, employees, or agents. In addition, under the agreement, Herbalife agreed to enhance its compliance program and to report to the government on the implementation of its enhanced compliance program.
The government reached this resolution with Herbalife based on a number of factors, including the failure to timely disclose the conduct that triggered the investigation; the nature and seriousness of the offense, which spanned approximately a decade and involved high level employees; the lack of an effective compliance program at the time of the misconduct; and credit for the company’s cooperation. Herbalife also engaged in remedial measures, including terminating and disciplining individuals who orchestrated the misconduct, adopting heightened controls and anti-corruption protocols, and significantly increasing the resources devoted to compliance.
The criminal monetary penalty for Herbalife reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range because of Herbalife’s full cooperation with the government’s investigation.
In a related matter with the SEC, Herbalife agreed to pay the SEC disgorgement and prejudgment interest totaling approximately $67 million.
The FBI’s New York Field Office investigated the case. Trial Attorney Jason Manning of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Joshua A. Naftalis and Scott A. Hartman of the U.S. Attorney’s Office for the Southern District of New York are prosecuting the case.
The department appreciates the significant cooperation provided by the SEC in this case. The Justice Department’s Office of International Affairs provided assistance.
The Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal-fraud/foreign-corrupt-practices-act.
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.
Herbalife Agrees to Pay $123 Million to Resolve Foreign Corrupt Practices Act CaseRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York (“SDNY”), and Acting Assistant Attorney General Brian C. Rabbitt of the Criminal Division of the United States Department of Justice (“DOJ”) announced today the filing of criminal charges against HERBALIFE NUTRITION, LTD. (“HERBALIFE”), a multinational corporation headquartered in Los Angeles, for conspiring to violate the books and records provisions of the Foreign Corrupt Practices Act (“FCPA”). The charges arise out of a decade-long scheme by HERBALIFE to falsify books and records and provide corrupt payments and benefits to Chinese government officials for the purpose of obtaining, retaining, and increasing HERBALIFE’s business in China. In connection with the filed charges, SDNY and DOJ entered into a deferred prosecution agreement (“DPA”) with HERBALIFE. Pursuant to the DPA, HERBALIFE admitted to participating in the charged conspiracy and will pay a criminal fine of $55,743,093.
Acting U.S. Attorney Audrey Strauss said: “As admitted in the deferred prosecution agreement entered into today, Herbalife approved the extensive and systematic corrupt payments to Chinese government officials over a 10-year period to promote and expand Herbalife’s business in China. Moreover, in an effort to conceal this widespread corruption scheme, Herbalife maintained false accounting records to mischaracterize these improper payments as permissible business expenses. In addition to admitting its criminal conduct, Herbalife has agreed to pay combined penalties of more than $123 million. This case signifies this Office’s commitment to ensuring that companies operating in the U.S. do not gain an unfair advantage through corruption and illegal bribes of foreign officials.”
Acting Assistant Attorney General Brian C. Rabbitt said: “By engaging in a decade-long scheme to falsify its books and records to conceal corrupt and other improper expenditures, Herbalife misrepresented the information available to investors. Today’s resolution reflects the department’s ongoing commitment to combating corruption and ensuring that investors can trust the accuracy of the financial statements of publicly traded companies.”
According to the allegations contained in the criminal Information, which was filed today in Manhattan federal court, the statement of facts set forth in the DPA, and other publicly available information:
HERBALIFE conducts business operations in China through a group of wholly owned subsidiaries based in China (collectively, “Herbalife China”). By 2016, Herbalife China was responsible for approximately $860 million, or approximately 20 percent, of HERBALIFE’s worldwide annual net sales, which exceeded $4 billion. In China, to engage in direct selling – selling a company’s products through independent sales representatives – Chinese law required a company to obtain a direct selling license from national authorities as well as local authorities for each province in which a company intended to engage in direct selling. From March 2007 through 2016, Herbalife China obtained licenses to engage in direct sales in 28 provinces.
Yanliang Li, a/k/a “Jerry Li,” was the director of sales and/or sales vice president at Herbalife China from in or about 2004 through in or about December 2007, and then the managing director of Herbalife China from in or about December 2007 through in or about April 2017. From in or about December 2012 through in or about February 2017, Li also held the title of senior vice president at HERBALIFE. Hongwei Yang, a/k/a “Mary Yang,” was a high-level executive at Herbalife China and the head of external affairs from in or about 2006 through in or about April 2017.
Beginning in or about at least 2007 through in or about 2016, HERBALIFE, through Li, Yang, and others, engaged in a scheme to falsify books and records and provide corrupt payments and benefits to Chinese government officials, including officials of Chinese government agencies and a state-owned media outlet, for the purpose of obtaining, retaining, and increasing HERBALIFE’s business in China by, among other things, (1) obtaining and retaining certain of Herbalife China’s direct selling licenses; (2) improperly influencing certain Chinese governmental investigations into Herbalife China’s compliance with Chinese laws applicable to its business; and (3) improperly influencing certain Chinese state-owned and state-controlled media for the purpose of removing negative media reports about Herbalife China.
During the course of the scheme, in order to conceal these improper payments and benefits, HERBALIFE, through Li, Yang, and others, knowingly and willfully conspired and agreed with others to maintain false accounting records that did not accurately and fairly reflect the transactions and dispositions of HERBALIFE’s assets, by, among other things, falsely recording certain improper payments and benefits as “travel and entertainment expenses” and maintaining false Sarbanes Oxley sub-certification letters in HERBALIFE’s books, records, and accounts.
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In a related matter with the Securities and Exchange Commission (“SEC”), HERBALIFE agreed to pay to the SEC disgorgement and prejudgment interest totaling approximately $67,313,497.
In November 2019, the Government unsealed related criminal charges against Li and Yang, both of whom remain at large. See United States v. Li and Yang, 19 Cr. 760 (VSB).
Ms. Strauss praised the outstanding work of the Federal Bureau of Investigation and the U.S. Department Justice’s Office of International Affairs of the Department’s Criminal Division, 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 and the FCPA Unit of the Fraud Section of DOJ’s Criminal Division. Assistant United States Attorneys Joshua A. Naftalis and Scott A. Hartman, and Trial Attorney Jason Manning of the FCPA Unit, are in charge of the prosecution.
Acting U.S. Attorney Announces Extradition of British Citizen for Operating an International Money Laundering and Fraud NetworkRead 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced that HABEEB AUDU, a/k/a “Dickson,” a dual citizen of the United Kingdom and Nigeria, was extradited today from the United Kingdom. AUDU was charged with participation in a series of fraud schemes from at least in or about 2013 until at least April 2019, involving the theft and laundering of more than $2 million. AUDU was arrested in London, England, on June 26, 2019, on a provisional arrest warrant, and is the fourth defendant charged in this case. AUDU is expected to be presented on Monday, August 31, before U.S. Magistrate Judge James L. Cott. AUDU’s case is assigned to U.S. District Judge Katherine Polk Failla.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Habeeb Audu played a key role in an international fraud conspiracy that victimized businesses and individuals by using stolen identities and social engineering to access victims’ bank accounts, and by engaging in business email compromise schemes. Thanks to the FBI and our international partners, including the Italian National Police, Audu is now in U.S. custody and facing charges in this District.”
FBI Assistant Director William F. Sweeney Jr. said: “Today’s indictment outlines the alleged fraudulent conduct of Habeeb Audu and other conspirators who, over the course of nearly six years, robbed the bank accounts of both individuals and businesses here in the United States, sometimes from locations nearly halfway across the world. Using traditional spoofing techniques and business email compromise schemes, these crimes collectively brought in more than $2 million in proceeds. While today’s charges bring about a victory in this case, let it be a warning to the public to remain extra vigilant with respect to their personal and professional finances. The market is unfortunately rife with this type of crime.”
According to the allegations in the Indictment unsealed today[1]:
From at least 2013 through in or about 2018, AUDU and various other conspirators (collectively, the “Conspirators”), located in countries including the United States, Canada, Italy, the United Kingdom, and the United Arab Emirates, were involved in a scheme to fraudulently access individuals’ and corporations’ bank accounts and to conduct financial transactions using those bank accounts without the knowledge or authority of the accounts’ legitimate owners (the “Bank Scheme”). As part of the Bank Scheme, the Conspirators placed thousands of calls to various United States banks, holding themselves out as legitimate accountholders of particular targeted bank accounts and using the stolen personal identifying information belonging to those accountholders. Using a particular telephone number “spoofing” service, and voice-altering technology, the Conspirators would deceive bank representatives into believing that the Conspirators were actual accountholders. In so doing, they convinced multiple U.S. banks to, among other things: move money from a victim’s savings account to the victim’s checking account (so that the Conspirators could more easily access the funds and conduct unauthorized transactions); falsely note on the account that the accountholder was traveling abroad (making the bank less likely to void suspicious international transactions made by the Conspirators); have “replacement” credit cards mailed to international addresses controlled by the Conspirators (whereupon the Conspirators could use them to make unauthorized purchases); and authorize foreign purchases made by the Conspirators.
AUDU, from at least December 2018 through April 2019, was also involved in separate schemes to defraud United States-based businesses and banks by means of business email compromise schemes (the “BEC Fraud Schemes”). For example, AUDU defrauded an Ohio-based restaurant chain (the “Restaurant Victim”) into wiring nearly $2 million to a bank account controlled by AUDU’s co-conspirators (the “AUDU Account”). He did so by tricking the Restaurant Victim into believing that one of its legitimate vendors had changed bank accounts to the AUDU Account, such that payments for the vendor’s services were made to the AUDU Account. These funds were thereafter quickly withdrawn from the AUDU Account and dispersed to other accounts controlled by AUDU and his co-conspirators.
Thereafter, in connection with an FBI undercover operation, AUDU and others each agreed, for a substantial fee, to launder moneys that they believed to be fraud proceeds, through bank accounts controlled by AUDU and his co-conspirators. In doing so, AUDU and his co-conspirators agreed to conceal the nature of those purportedly fraudulent proceeds.
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AUDU, 53, of the United Kingdom and Nigeria, is charged with one count of conspiracy to commit bank and wire fraud, which carries a maximum sentence of 30 years in prison; four counts of conspiracy to commit money laundering and money laundering, each of which carries a maximum of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison, to be served consecutively to any other sentence. 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.
Other defendants charged in this case include Abdulai Kennedy Saaka, a/k/a “Kenny,” of Atlanta, Georgia, who pled guilty to one count of money laundering conspiracy in January 2020; Alade Kazeem Sodiq, a/k/a “Eluku,” a citizen of the United Arab Emirates, whose case remains pending; and Dominic Francis Labiran, a citizen of the United Kingdom, who remains at large.
Ms. Strauss praised the outstanding investigative work of the FBI. She also thanked United States Customs and Border Protection, Italian judicial law enforcement authorities, including the Prosecutor of the Republic of Naples and the Servizio Centrale Operativo of the Italian National Police, the Metropolitan Police Service, London, United Kingdom, and the United Kingdom’s Crown Prosecution Service for their assistance in this case. The U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division provided significant assistance in securing the defendant’s extradition from the United Kingdom.
The prosecution of this case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Kiersten A. Fletcher, Jonathan E. Rebold, 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.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
United States Settles Suit Against Two Additional Responsible Parties for the Release of Mercury in the Village of Rye BrookRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, and Peter D. Lopez, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed a civil lawsuit against CYTEC INDUSTRIES, INC. (“Cytec”) and KEYSPAN GAS EAST CORPORATION d/b/a NATIONAL GRID (“National Grid”) (collectively, the “Defendants”), and has simultaneously filed a consent decree settling the lawsuit. In the complaint, brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675 (“CERCLA”) – commonly known as the Superfund statute – the United States alleged that the Defendants arranged for the disposal or treatment of mercury by Port Refinery, Inc. (“Port Refinery”), a mercury refining business in the Village of Rye Brook, New York, which led to releases of mercury into the environment. Through the lawsuit, EPA sought to collect the costs that it has incurred since April 2004 in connection with its clean-up of mercury at the Port Refinery Superfund Site (the “Site”) in the Village of Rye Brook in Westchester County, New York. The consent decree, which provides for a combined payment of $142,653 by the Defendants, has been lodged with the District Court for a period of at least 30 days, after which it will be submitted for the Court’s approval.
Acting United States Attorney Audrey Strauss said: “Both Cytec and National Grid contributed to contamination in a residential community by arranging for the treatment or disposal of toxic mercury, and now they are each paying a share of the costs they have imposed on the community. This Office will continue to hold responsible parties accountable for their share of the costs at the Site.”
Regional Administrator Peter D. Lopez said: “These companies sent mercury-containing materials to this site where they were improperly handled, resulting in mercury being released into the environment and putting people in the area at risk. Thankfully, EPA was able to take action to address the risk, and this settlement holds the companies accountable, ensuring that taxpayers don’t bear the full burden of the cleanup at this site.”
As alleged in the complaint filed yesterday in White Plains federal District Court, each of the Defendants arranged for the sale and transport of used or scrap mercury, or mercury-containing products, directly or indirectly to Port Refinery. Port Refinery then processed these materials as part of a mercury refining business it operated out of a residence in Rye Brook, New York. Port Refinery’s treatment and processing of the scrap mercury sent by the Defendants and other parties led to extensive releases of mercury, a hazardous substance, requiring two separate clean-up actions by EPA. In connection with the second clean-up, which began in 2004, EPA has incurred costs at the Site for a variety of investigative and removal activities, including, among other things, excavating and disposing of more than 9,300 tons of mercury-contaminated soil from the Site.
In the consent decree filed yesterday, the Defendants admit and accept responsibility for the following:
- EPA has determined that from the 1970s through the early 1990s, Port Refinery engaged in, among other things, the business of mercury reclaiming, refining, and processing.
- Port Refinery operated in the Village of Rye Brook out of a two-story garage bordered by private residences on its south, east, and west sides.
- EPA has determined that Port Refinery took virtually no environmental precautions or safety measures during its mercury refinement process.
- EPA has determined that Port Refinery released a significant amount of mercury into the environment, contaminating the Site.
- EPA has determined that mercury from the Defendants’ mercury-containing products was comingled at the Site and contributed to the mercury released into the environment.
- Defendants delivered materials containing scrap mercury to Port Refinery during its period of operations.
Pursuant to the consent decree, the Defendants will pay a total of $142,653 in costs incurred by EPA, consisting of $93,076 to be paid by Cytec, and $49,577 to be paid by National Grid.
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This lawsuit is the United States’ fifth lawsuit against responsible parties to recover clean-up costs for the second clean-up at the Site. Prior to this settlement, the United States had recovered $827,229 from other responsible parties. The United States is continuing to pursue its claims against additional potentially responsible parties.
The consent decree will be lodged with the District Court for a period of at least 30 days before it is submitted for the Court’s approval, to provide public notice and to afford members of the public the opportunity to comment on the consent decree.
This case is being handled by the Office’s Environmental Protection Unit. Assistant U.S. Attorney Anthony J. Sun is in charge of the case.
Final Mafia Member in 2017 Takedown Sentenced to Life in Prison for Murder, Racketeering, and Other CrimesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that STEVEN L. CREA, the Underboss of the Luchese Family, was sentenced today to life in prison, a $400,000 fine, and the forfeiture of $1 million following his conviction for the 2013 murder of Michael Meldish, conspiracy to commit racketeering, and other felonies. A jury convicted CREA and three co-defendants on November 15, 2019, following a six-week trial before U.S. District Judge Cathy Seibel, who also imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “Steven L. Crea – the Underboss of the Luchese Family – is the last of a dozen made men arrested in 2017 to be sentenced for his crimes. For his role in the 2013 murder of Michael Meldish and other crimes, Crea will now spend the rest of his life behind bars. Thanks to the outstanding investigative work of the FBI and NYPD, we continue our commitment to render La Cosa Nostra a thing of the past.”
According to the evidence presented at trial, the admissions of defendants who pled guilty, and other court documents:
STEVEN L. CREA was the Underboss, or second-in-command, of the Luchese Family of La Cosa Nostra, one of the “Five Families” that constitute the Mafia in the New York City area. From 2000 to his arrest in 2017, CREA helped lead the Luchese Family, which made millions of dollars in profit from crimes committed by the Family’s members and associates in New York City, Westchester, Long Island, New Jersey, and elsewhere. In 2013, CREA helped orchestrate the murder of Michael Meldish.
In May 2017, charges were filed against 12 members of the Luchese Family, including the Acting Boss, Underboss, Consigliere, four captains, and five soldiers, for their commission of a wide array of crimes with the Mafia from at least in or about 2000 up to and including in or about 2017. With the exception of one captain who died before his case was resolved, every Luchese Family member charged in this case either pled guilty or was convicted at trial. With CREA’s sentencing today, all have now been sentenced by Judge Seibel. Eight Mafia associates were also charged. All subsequently pled guilty or were convicted at trial, and seven have now been sentenced. The defendants were convicted of being leaders, members and associates of the Mafia, and committing crimes including the murder of Michael Meldish; three attempted murders – including the attempted murder of a former witness against the Mafia; multiple assaults; trafficking oxycodone, cocaine, and other drugs; extortion; millions of dollars in fraud against a public hospital in the Bronx; loansharking; operating illegal gambling businesses; and other crimes. A chart containing the ages, residency information, convictions, and sentences of the defendants is attached.
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Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the New York City Police Department, Homeland Security Investigations, the Waterfront Commission of New York Harbor, and the U.S. Bureau of Prisons.
The case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Scott Hartman, Hagan Scotten, Jacqueline Kelly, Celia V. Cohen, and Alexandra N. Rothman are in charge of the prosecution.
DEFENDANT
AGE
CITY OF RESIDENCE
CHARGES OF CONVICTION
SENTENCE
Madonna, Matthew
84
Incarcerated
Racketeering conspiracy, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, aiding and abetting use of a firearm to commit murder
Life in prison
Crea, Steven L.
73
Crestwood, NY
Racketeering conspiracy, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, aiding and abetting use of a firearm to commit murder
Life in prison, $400,000 fine,
$1 million forfeiture
Londonio, Christopher
46
Incarcerated
Racketeering conspiracy, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, aiding and abetting use of a firearm to commit murder, conspiracy to distribute narcotics
Life in prisonCaldwell, Terrence
62
Incarcerated
Racketeering conspiracy, murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, use of a firearm to commit murder, attempted murder in aid of racketeering, use of a firearm during a crime of violence
Life in prisonDatello, Joseph
69
Staten Island, NY
Racketeering conspiracy
168 months' imprisonment
Crea, Steven D.
48
New Rochelle, NY
Racketeering conspiracy, conspiracy to commit murder in aid of racketeering, attempted assault with a deadly weapon in aid of racketeering
156 months' imprisonment, $50,000 fine
Bruno, Vincent
36
Incarcerated
Attempted murder in aid of racketeering, racketeering conspiracy
136 months' imprisonment
Vaughan, Brian
54
Matawan, NJ
Racketeering conspiracy
84 months' imprisonment
O’Connor, Richard
66
Staten Island, NY
Conspiracy to distribute narcotics
72 months' imprisonment
Garcia, Carmine
Deceased
Hawthorne, NJ
Racketeering conspiracy, conspiracy to commit assault in aid of racketeering
60 months' imprisonment, $250,000 fine
DiNapoli, Joseph
84
Bronx, NY
Racketeering conspiracy
52 months' imprisonment, $250,000 fine
Castelucci, John
60
Staten Island, NY
Racketeering conspiracy
37 months' imprisonment, $150,000 fine
Maffucci, James
72
New York, NY
Extortion, Extortionate extension of credit
37 months' imprisonment
Corso, Tindaro
59
Staten Island, NY
Racketeering conspiracy
30 months' imprisonment, $10,000 fine
Venice, Joseph
59
Yonkers, NY
Racketeering conspiracy
18 months' imprisonment, $10,000 fine
Cassano, Paul
41
Yonkers, NY
Conspiracy to commit assault in aid of racketeering
18 months' imprisonment
Camilli, Robert
63
Briarcliff Manor, NY
Extortionate extension of credit
One year supervised release; $35,000 fine
Incatasciato, John
45
Elmsford, NY
Extortionate collection of credit
Two years' supervised release; 100 hours' community service
California Mother and Son Arrested for Operating A $5 Million Mortgage Modification FraudRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced today that EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ, mother and son, of Orange County, California, were arrested and charged with wire fraud offenses in connection with a fraudulent foreclosure rescue scheme that took in more than $5 million in prohibited advance fees from thousands of financially distressed homeowners.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Eva Christine Rodriguez and Sergio Lorenzo Rodriguez preyed on vulnerable homeowners at risk of foreclosure by making false and misleading promises that they knew they would not or could not keep. They allegedly continued to do so even after they were barred from the debt relief industry by a federal court in California. They now face serious criminal charges.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Loan Modification Scams are a cruel fraud targeting very desperate homeowners faced with losing their homes. While a loan modification may appear to be a lifeline, these scams often become a nightmare. This is allegedly what happened to victims who did business with Eva and Sergio Rodriguez. Postal Inspectors remain on alert for fraud scams targeting consumers, bringing fraudsters to justice worldwide.”
According to the Complaint[1] unsealed today in Manhattan federal court:
From approximately March 2014 through April 2018, EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ (the “Defendants”) owned and/or managed a series of mortgage modification companies through which they perpetrated a scheme to defraud and attempt to defraud financially distressed consumers who were facing or were at imminent risk of foreclosure through deceptive marketing practices. Those companies were National Servicing Center, American Home Servicing Center, National Advocacy Center, National Advocacy Group, and Capital Home Advocacy Center (collectively, the “Companies”). Among other ways, the Defendants charged desperate homeowners thousands of dollars in prohibited advance fees by tricking them into believing that they had been pre-approved by their lender or servicer for a mortgage modification; falsely represented prohibited advance fees to be closing costs or other non-prohibited costs; fraudulently claimed that the Companies achieved success rates of 95 percent or higher for mortgage modifications; and made empty promises of a no-risk money back guarantee. As a result of their intentional misrepresentations, and misrepresentations that they encouraged their subordinates to make, the Defendants induced thousands of homeowners to pay an aggregate of more than $5 million in prohibited advance fees to the Companies, including a large number of consumers who were ultimately denied mortgage modifications or who received modification offers that were less favorable than they had been led to expect at the time they paid advance fees.
In February 2018, the Federal Trade Commission brought a civil lawsuit against EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ, among others, in federal court in Santa Ana, California. That civil action resulted first in a temporary restraining order and then a permanent injunction barring EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ from marketing and selling all debt relief products and services. As alleged in the Complaint, the Defendants flouted those judicial orders by having a relative create another mortgage modification company named 1st Premier Asset Solutions, which the Defendants operated using aliases and some of the same deceptive practices.
EVA CHRISTINE RODRIGUEZ and SERGIO LORENZO RODRIGUEZ will be presented in federal court in Santa Ana later today.
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EVA CHRISTINE RODRIGUEZ, 65, of Laguna Hills, California, and SERGIO LORENZO LAWRENCE, 46, of Laguna Niguel, California, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud. Each count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Ms. Strauss praised the investigative work of the USPIS and thanked the Federal Trade Commission and the United States Trustee for Region 5 for their assistance.
This case is being handled by the Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Sarah Lai is in charge of the prosecution.
If you believe you are a potential victim of this fraud, please contact Postal Inspector Brandy King-Gonzalez of the USPIS at [email protected], or (212) 330-5252.
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.
Acting U.S. Attorney Announces Federal Charges and International Operation to Dismantle Online Piracy GroupRead 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 the New York Field Office of Homeland Security Investigations (“HSI”), and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced today the unsealing of indictments charging UMAR AHMAD a/k/a “Artist,” GEORGE BRIDI, and JONATAN CORREA, a/k/a “Raid,” with copyright infringement, and as to BRIDI, wire fraud, for their involvement in the Sparks Group, an international piracy group involved in illegally distributing movies and television shows on the Internet. BRIDI, a citizen of the United Kingdom, was arrested on Sunday in Cyprus on an INTERPOL Red Notice based on the U.S. criminal charges. The United States will seek BRIDI’s extradition to stand trial in the United States. CORREA was arrested yesterday in Olathe, Kansas, where he will be presented in federal court. AHMAD, a citizen of Norway, remains at large. The case is assigned to United States District Judge Richard M. Berman.
In coordination with law enforcement authorities in 18 other countries and supported by Eurojust and Europol, dozens of servers controlled by the Sparks Group were taken offline today around the world, including in North America, Europe, and Asia. The Sparks Group utilized these servers to illegally store and disseminate copyrighted content to members around the globe.
Acting U.S. Attorney Audrey Strauss said: “As alleged, the defendants were members of an international video piracy ring that was sophisticated and widespread. The group allegedly circumvented copyright protections on nearly every movie released by major production studios, as well as television shows, and distributed them by way of a worldwide network of servers. Thanks to the efforts of HSI, the Postal Inspection Service, Eurojust, Europol, and our law enforcement partners in 18 countries on three continents, key members of this group are in custody, and the servers that were the pipeline for wholesale theft of intellectual property are now out of service.”
HSI Special Agent-in-Charge Fitzhugh said: “As alleged, Sparks Group members reproduced and disseminated hundreds of movies and television shows prior to their retail release date, including nearly every movie released by major production studios, causing millions of dollars in losses to the film and television industry. This investigation shows – in high definition – that despite the online platform and international nature of this scheme, we are committed to stop those who use the cyber world for illicit gain. HSI New York’s El Dorado Task Force, in collaboration with the U.S. Postal Inspection Service, leveraged their global network of law enforcement partners to shut down this criminal organization’s cyber piracy network and arrest those allegedly responsible.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Copyright criminals have come a long way from bootlegging movies in local theaters and selling inferior quality videos and DVD’s on the streets of New York City for $5.00. The movies and TV shows allegedly stolen by these defendants not only represent a body of work ripped off from those who spent years developing their craft and working their way to stardom, but deprives the studios and actors of the fruits of their labor.”
Ladislav Hamran, President of Eurojust, said: “This case is an excellent example of what can be achieved if we work together across borders and continents. Thanks to the long-standing partnership between the U.S. and the European authorities, we managed to deal a significant blow to online piracy. My sincere congratulations go out to all countries involved in yesterday’s joint action day.”
According to the allegations contained in the Indictments[[1]] unsealed yesterday in Manhattan federal court:
Between 2011 and the present, UMAR AHMAD a/k/a “Artist,” GEORGE BRIDI, JONATAN CORREA, a/k/a “Raid,” and others known and unknown were members of the Sparks Group, a criminal organization that disseminated on the Internet movies and television shows prior to their retail release date, including nearly every movie released by major production studios, after compromising the content’s copyright protections.
In furtherance of its scheme, the Sparks Group fraudulently obtained copyrighted DVDs and Blu-Ray discs from wholesale distributors in advance of their retail release date by, among other things, making various misrepresentations to the wholesale distributors concerning the reasons that they were obtaining the discs prior to the retail release date.
Sparks Group members then used computers with specialized software to compromise the copyright protections on the discs, a process referred to as “cracking” or “ripping,” and to reproduce and encode the content in a format that could be easily copied and disseminated over the Internet. They thereafter uploaded copies of the copyrighted content onto servers controlled by the Sparks Group, where other members further reproduced and disseminated the content on streaming websites, peer-to-peer networks, torrent networks, and other servers accessible to the public. The Sparks Group identified its reproductions by encoding the filenames of reproduced copyrighted content with distinctive tags, and also uploaded photographs of the discs in their original packaging to demonstrate that the reproduced content originated from authentic DVDs and Blu-Ray discs.
AHMAD and BRIDI arranged for discs to be picked up, mailed, or delivered from distributors located in Manhattan, Brooklyn, and New Jersey to other members of the Sparks Group, including CORREA, prior to their official release date. AHMAD, BRIDI, and CORREA then reproduced, and aided and abetted the reproduction of, these discs by using computer software that circumvented copyright protections on the discs and reproducing the copyrighted content for further distribution on the Internet.
The Sparks Group has caused tens of millions of dollars in losses to film production studios.
* * *
AHMAD, 39, BRIDI, 50, and CORREA, 36, are each charged with copyright infringement conspiracy, which carries a maximum penalty of five years in prison. BRIDI is also charged with wire fraud conspiracy, which carries a maximum penalty of 20 years in prison, and conspiracy to transport stolen property interstate, which carries a maximum penalty of five years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Ms. Strauss praised the outstanding work of HSI and USPIS. She also thanked Europol and Eurojust as well as law enforcement authorities in the following countries for their assistance in the investigation: Canada, Cyprus, Czech Republic, Denmark, France, Germany, Italy, Republic of Korea, Latvia, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, and the United Kingdom.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Andrew K. Chan, Mollie Bracewell, and Christy Slavik are in charge of the prosecution. The U.S. Department Justice’s Office of International Affairs (OIA) of the Department’s Criminal Division provided significant and ongoing assistance with facilitating the execution of dozens of mutual legal assistance requests in 18 different countries necessary for taking down servers and gathering evidence. OIA also provided critical support in working with Eurojust and Europol in planning the coordinated operation yesterday.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the texts of the Indictments and the description of the Indictments set forth herein constitute only allegations and every fact described should be treated as an allegation.
Acting U.S. Attorney Announces Extradition of Ghanaian National for Multimillion-Dollar Fraud Scheme Involving Business Email Compromises and Romance Scams Targeting ElderlyRead 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 Jonathan D. Larsen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that DEBORAH MENSAH, a Ghanaian citizen, was extradited from the Republic of Ghana (“Ghana”) to the United States on August 21, 2020. MENSAH was arrested on January 16, 2020, in Accra, Ghana for charges in connection with a fraud conspiracy based in Ghana involving the theft of over $10 million through business email compromises and romance scams that targeted the elderly from at least in or about 2014 through in or about 2018. MENSAH is the eighth defendant charged in the case. MENSAH was presented this morning in Manhattan federal court before U.S. Magistrate Judge Debra Freeman. MENSAH’s case is assigned to U.S. District Judge Denise L. Cote.
Acting Manhattan U.S. Attorney Audrey Strauss said: “Deborah Mensah is alleged to have been a participant in a conspiracy that resulted in the theft of millions of dollars from businesses and vulnerable individuals across the United States, and the laundering of that money through a network of bank accounts in the Bronx to co-conspirators in Ghana. Now she is in the United States and facing charges under U.S. law.”
FBI Assistant Director William F. Sweeney Jr. said: “Ms. Mensah may have believed hiding in Ghana protected her from facing justice for her alleged role in this scheme. She now knows the FBI’s reach is global through our formidable network of law enforcement partners. Others should take heed – we won’t go away simply because it may take time to go get you. If you break our laws, you will pay the price.”
IRS-CI Special Agent in Charge Jonathan D. Larsen said: “As alleged in the criminal complaint, Ms. Mensah’s desire for money drove her to prey upon the vulnerable in our society. Thanks to the financial expertise of IRS-CI special agents working side-by-side with our law enforcement partners, the long arm of the law caught up to Ms. Mensah in Ghana, and she will now face the consequences of her alleged actions.”
According to allegations in the Complaint and the Indictment and other filings in the case[1]:
From at least in or about 2014 through in or about 2018, MENSAH was a member of a criminal enterprise (the “Enterprise”) based in Ghana that committed a series of business email compromises and romance scams against individuals and businesses located across the United States, including in the Southern District of New York.
The objective of the Enterprise’s business email compromise fraud scheme was to trick and deceive businesses into wiring funds into accounts controlled by the Enterprise. First, members of the Enterprise created email accounts with slight variations of email accounts used by employees of a victim company or third parties engaged in business with a company to “spoof” or impersonate those employees or third parties. These fake email accounts were specifically designed to trick other employees of the company with access to the company’s finances into thinking the fake email accounts were authentic. The fake email accounts were used to send instructions to wire money to certain bank accounts and also included fake authorization letters for the wire transfers that contained forged signatures of company employees. By using this method of deception, the Enterprise sought to trick the victims into transferring hundreds of thousands of dollars to bank accounts the victims believed were under the control of legitimate recipients of the funds as part of normal business operations, when in fact the bank accounts were under the control of members of the Enterprise, including MENSAH.
The Enterprise conducted the romance scams by using electronic messages sent via email, text messaging, or online dating websites that deluded the victims, many of whom were vulnerable older men and women who lived alone, into believing the victim was in a romantic relationship with a fake identity assumed by members of the Enterprise. Once members of the Enterprise had gained the trust of the victims using the fake identity, they used false pretenses, such as a shipment of gold or receiving a portion of an investment, to cause the victims to wire money to bank accounts the victims believed were controlled by their romantic interests, when in fact the bank accounts were controlled by members of the Enterprise. At times, the members of the Enterprise also used false pretenses to cause the victims to receive funds into the victims’ bank accounts, which, unbeknownst to the victims, were fraud proceeds, and to transfer those funds to accounts under the control of members of the Enterprise. The members of the Enterprise, posing as the romantic interest of the victims, also introduced the victims to other individuals purporting to be, for example, consultants or lawyers, who then used false pretenses to cause the victims to wire money to bank accounts controlled by members of the Enterprise.
MENSAH and her co-conspirators received or otherwise directed the receipt of over $10 million in fraud proceeds from victims of the Enterprise in bank accounts that she and other members of the Enterprise controlled in the Bronx, New York. Some of these bank accounts were opened using fake names, stolen identities, or shell companies in order to avoid detection and hide the true identities of the members of the Enterprise controlling those accounts. Once MENSAH received the fraud proceeds in bank accounts under her control, she withdrew, transported, and laundered those fraud proceeds to other members of the Enterprise, including those located in Ghana. MENSAH also used the name and identity of another person to withdraw or otherwise direct the withdrawal of stolen funds.
* * *
MENSAH, 33, a citizen of Ghana, is charged with one count of conspiracy to commit wire fraud, one count of wire fraud, and one count of conspiracy to commit money laundering, which each carry a maximum sentence of 20 years in prison; one count of receipt of stolen money, which carries a maximum sentence of 10 years in prison; one count of conspiracy to receive stolen money, which carries a maximum sentence of five years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison to be served 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 defendant will be determined by the judge.
Other defendants in this case who have been sentenced include Muftau Adamu, a/k/a “Muftau Adams,” a/k/a “Muftau Iddrissu,” 32, of the Bronx, New York, who was sentenced to 51 months in prison on June 7, 2019; Prince Nana Aggrey, 45, of the Bronx, New York, who was sentenced to 30 months in prison on May 10, 2019; and Assana Traore, 41, of the Bronx, New York, who was sentenced to 15 months in prison on October 8, 2019. Adamu and Aggrey each pled guilty to one count of conspiracy to commit wire fraud, and Traore pled guilty to one count of conspiracy to receive stolen money. Each of the defendants was sentenced by Judge Cote.
Any businesses or individuals who believe they may have been the victim of a business email compromise or a romance scam or have information regarding such crimes should file a complaint with the FBI’s Internet Crime Complaint Center (“IC3”) at https://www.ic3.gov or contact their local FBI office.
Ms. Strauss praised the outstanding investigative work of the FBI and IRS-CI. Ms. Strauss also thanked the United States Marshals Service, the FBI Legal Attaché in Accra, Ghana, U.S. Customs and Border Protection, the Office of the Attorney-General & Ministry of Justice of Ghana, and Ghana’s Economic and Organised Crime Office, for their assistance in this case. The U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division provided significant assistance in securing the defendant’s extradition from Ghana.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Sagar K. Ravi and Mitzi Steiner are in charge of the prosecution.
The charges contained in the Complaint and 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 Complaint and Indictment and the descriptions of the Complaint and Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Acting Manhattan U.S. Attorney Announces Securities and Wire Fraud Charges Against Founder and Former CEO of Pharmaceutical CompanyRead 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 that SEPEHR SARSHAR was charged this morning with securities fraud and other fraud offenses in connection with SARSHAR’s scheme to provide inside information to his friends and family so they could trade in the securities of a pharmaceutical company SARSHAR founded and of which he was a member of the board of directors.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Sepehr Sarshar, aware of an impending tender offer for his company, tipped off friends and a close relative, enabling them to reap nearly three-quarters of a million dollars in illegal profits. My Office and the FBI remain resolute in our commitment to policing and prosecuting insider trading.”
FBI Assistant Director William F. Sweeney Jr. said: “It seems intuitive that material nonpublic information should never be shared with the public, or traded on, prior to shareholder knowledge. Still, time and time again we see where those privy to a company’s inside information pass it on to family and friends. As alleged today, Sepehr Sarshar, a founder and board member of Auspex Pharmaceuticals, Inc., tipped off his own inner circle to an anticipated tender offer for the company. His associates traded on this information, and profited by the hundreds of thousands. Upsetting the market balance in this way puts all investors at a disadvantage. I think the message here is pretty clear – insider trading is risky business, and it’s a crime that’s typically met with hefty fines or significant jail time.”
According to the Complaint[1] unsealed today Manhattan federal court:
Between in or about January 2015 and March 2015, SARSHAR, a founder, former chief executive officer, and member of the board of directors of Auspex Pharmaceuticals, Inc. (“Auspex”), misappropriated material nonpublic information (“MNPI”) from Auspex relating to an anticipated tender offer for Auspex by Teva Pharmaceutical Industries Ltd. (“Teva”). SARSHAR passed that MNPI on to friends and family – including a college friend, his then girlfriend, another long-time friend, and a close family relative (collectively, the “Associates”) – so they could execute profitable securities trades based on that MNPI, and otherwise caused the Associates to execute trades based on the MNPI he misappropriated. In turn, the Associates’ trading in the shares of Auspex generated an aggregate of more than approximately $700,000 in illicit profits.
To conceal his illegal scheme, SARSHAR later lied to the Financial Industry Regulatory Authority (“FINRA”) in an investigation conducted by FINRA into insider trading in Auspex securities during the period preceding Teva’s tender offer for Auspex. Among other things, SARSHAR falsely stated that he could recall no contact with two of the Associates during the period preceding the tender offer whereas, in truth and in fact, SARSHAR had substantial communications with those individuals, including regarding the forthcoming tender offer.
SARSHAR will be presented later today in federal court in San Diego.
* * *
SARSHAR, 53, of Encinitas, California, is charged with one count of securities fraud, one count of wire fraud, and one count of fraud in connection with a tender offer. The securities fraud count carries a maximum sentence of 25 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The fraud in connection with a tender offer count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the investigative work of the FBI and thanked the Philadelphia Regional Office of the SEC, which has filed civil charges against SARSHAR in a separate action. She added that the FBI’s investigation is ongoing.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Elisha J. Kobre and Martin Bell are in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations and every fact described should be treated as an allegation.
Leaders of ‘We Build the Wall’ Online Fundraising Campaign Charged with Defrauding Hundreds of Thousands of DonorsRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Field Office of the United States Postal Inspection Service (“USPIS”), announced the unsealing of an indictment charging BRIAN KOLFAGE, STEPHEN BANNON, ANDREW BADOLATO, and TIMOTHY SHEA for their roles in defrauding hundreds of thousands of donors in connection with an online crowdfunding campaign known as “We Build the Wall” that raised more than $25 million. The defendants were arrested this morning. KOLFAGE will be presented today before U.S. Magistrate Judge Hope T. Cannon in the Northern District of Florida. BANNON will be presented today in the Southern District of New York. BADOLATO will be presented today before U.S. Magistrate Judge Thomas Wilson in the Middle District of Florida. SHEA will be presented today before U.S. Magistrate Judge Kristen L. Mix in the District of Colorado. The case is assigned to U.S. District Judge Analisa Torres in the Southern District of New York.
Acting U.S. Attorney Audrey Strauss said: “As alleged, the defendants defrauded hundreds of thousands of donors, capitalizing on their interest in funding a border wall to raise millions of dollars, under the false pretense that all of that money would be spent on construction. While repeatedly assuring donors that Brian Kolfage, the founder and public face of We Build the Wall, would not be paid a cent, the defendants secretly schemed to pass hundreds of thousands of dollars to Kolfage, which he used to fund his lavish lifestyle. We thank the USPIS for their partnership in investigating this case, and we remain dedicated to rooting out and prosecuting fraud wherever we find it.”
Inspector-in-Charge Philip R. Bartlett said: “The defendants allegedly engaged in fraud when they misrepresented the true use of donated funds. As alleged, not only did they lie to donors, they schemed to hide their misappropriation of funds by creating sham invoices and accounts to launder donations and cover up their crimes, showing no regard for the law or the truth. This case should serve as a warning to other fraudsters that no one is above the law, not even a disabled war veteran or a millionaire political strategist.”
According to the Indictment[1] unsealed today in Manhattan federal court:
Starting in approximately December 2018, BRIAN KOLFAGE, STEPHEN BANNON, ANDREW BADOLATO, and TIMOTHY SHEA, and others, orchestrated a scheme to defraud hundreds of thousands of donors, including donors in the Southern District of New York, in connection with an online crowdfunding campaign ultimately known as “We Build The Wall” that raised more than $25 million to build a wall along the southern border of the United States. In particular, to induce donors to donate to the campaign, KOLFAGE repeatedly and falsely assured the public that he would “not take a penny in salary or compensation” and that “100% of the funds raised . . . will be used in the execution of our mission and purpose” because, as BANNON publicly stated, “we’re a volunteer organization.”
Those representations were false. In truth, KOLFAGE, BANNON, BADOLATO, and SHEA received hundreds of thousands of dollars in donor funds from We Build the Wall, which they each used in a manner inconsistent with the organization’s public representations. In particular, KOLFAGE covertly took for his personal use more than $350,000 in funds that donors had given to We Build the Wall, while BANNON, through a non-profit organization under his control (“Non-Profit-1”), received over $1 million from We Build the Wall, at least some of which BANNON used to cover hundreds of thousands of dollars in BANNON’s personal expenses. To conceal the payments to KOLFAGE from We Build the Wall, KOLFAGE, BANNON, BADOLATO, and SHEA devised a scheme to route those payments from We Build the Wall to KOLFAGE indirectly through Non-Profit-1 and a shell company under SHEA’s control, among other avenues. They did so by using fake invoices and sham “vendor” arrangements, among other ways, to ensure, as KOLFAGE noted in a text message to BADOLATO, that his pay arrangement remained “confidential” and kept on a “need to know” basis.
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KOLFAGE, 38, of Miramar Beach, Florida, BANNON, 66, of Washington, D.C., BADOLATO, 56, of Sarasota, Florida, and SHEA, 49, of Castle Rock, Colorado, are each charged with one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering, each of which carries a maximum penalty of 20 years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the USPIS and the Special Agents of the United States Attorney’s Office for the Southern District of New York. She also thanked the U.S Attorney’s Office for the Northern District of Florida for their assistance.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Nicolas Roos, Alison G. Moe, and Robert B. Sobelman are in charge of the prosecution.
The charges contained in the Indictment are merely accusations. 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 therein should be treated as an allegation.
Nine Individuals Charged with Bank Fraud, Aggravated Identity TheftRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Philip Bartlett, Inspector-in-Charge of the New York Division of the United States Postal Inspection Service (“USPIS”), and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced charges against SAIBO SIDIBEH, MOUKHAMED FALL, MAMADY DANFAKHA, ALHANSA HYDARA, MAMADOU DIALLO, DEMBA DIAKITE, MOHAMMED SABALY, BANGALY DOUMBIA, and ABUBACKR DANSO for their involvement in a bank fraud scheme involving the deposit of more than $700,000 of fraudulent checks and the subsequent withdrawal of funds. SIDIBEH, FALL, HYDARA, and DANSO were arrested on August 12, 2020, and presented before U.S. Magistrate Judge Ona T. Wang. DANFAKHA, DIALLO, DIAKITE, and DOUMBIA were arrested this morning and are expected to be presented later today before U.S. Magistrate Judge Stewart D. Aaron in Manhattan federal court. SABALY remains at large.
As alleged in the criminal Complaint[1] unsealed today in Manhattan federal court:
Between at least July 2018 and at least August 2019, SAIBO SIDIBEH, MOUKHAMED FALL, MAMADY DANFAKHA, ALHANSA HYDARA, MAMADOU DIALLO, DEMBA DIAKITE, MOHAMMED SABALY, BANGALY DOUMBIA, and ABUBACKR DANSO engaged in a scheme to defraud banks by depositing fraudulent, forged, or altered checks into the bank accounts of third parties at ATMs in the Bronx, Manhattan, and elsewhere. Before the bank realized that a check was invalid, the defendants withdrew the funds, typically by purchasing postal money orders. In total, the defendants deposited more than $700,000 in fraudulent checks.
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A chart containing the names, charges, and penalties for 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 the defendants will be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the USPIS and the NYPD.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Andrew A. Rohrbach 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.
Count
Charge
Defendant(s)
Maximum/minimum penalties
1
Conspiracy to commit bank fraud
18 U.S.C. § 1349
MOUKHAMED FALL,
MAMADY DANFAKHA,
MAMADOU DIALLO,
ALHASANA HYDARA,
DEMBA DIAKITE
30 years
2
Bank fraud
18 U.S.C. §§ 1344 and 2
MOUKHAMED FALL,
MAMADY DANFAKHA,
MAMADOU DIALLO,
ALHASANA HYDARA,
DEMBA DIAKITE
30 years
3
Aggravated identity theft
18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2
MOUKHAMED FALL,
MAMADY DANFAKHA,
MAMADOU DIALLO,
ALHASANA HYDARA,
DEMBA DIAKITE
Mandatory two-year consecutive sentence
4
Bank fraud
18 U.S.C. §§ 1344 and 2
MOHAMMED SABALY
30 years
5
Aggravated identity theft
18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2
MOHAMMED SABALY
Mandatory two-year consecutive sentence
6
Bank fraud
18 U.S.C. §§ 1344 and 2
SAIBO SIDIBEH
30 years
7
Aggravated identity theft
18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2
SAIBO SIDIBEH
Mandatory two-year consecutive sentence
8
Bank fraud
18 U.S.C. §§ 1344 and 2
BANGALY DOUMBIA
30 years
9
Aggravated identity theft
18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2
BANGALY DOUMBIA
Mandatory two-year consecutive sentence
10
Bank fraud
18 U.S.C. §§ 1344 and 2
ABUBACKR DANSO
30 years
11
Aggravated identity theft
18 U.S.C. §§ 1028A(a)(1), 1028A(b), and 2
ABUBACKR DANSO
Mandatory two-year consecutive sentence
[1] As the introductory phrase signifies, the text of the Complaint and the description of the Complaint set forth herein are only allegations, and every fact described should be treated as an allegation.
Four Individuals Charged with $19 Million Fraudulent Invoicing Scheme Targeting Amazon’s Vendor SystemRead the Press Release
Audrey Strauss, the 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 the indictment and arrest today of YOEL ABRAHAM, HESHL ABRAHAM, ZISHE ABRAHAM, and SHMUEL ABRAHAM, who are brothers, on charges of engaging in a scheme to systematically defraud Amazon.com, LLC, (“Amazon”), an online retailer and e-commerce platform. Through the course of the scheme, the defendants manipulated Amazon’s vendor system in attempts to fraudulently induce Amazon to pay for goods that Amazon had not ordered. In executing the scheme, the defendants fraudulently attempted to obtain at least approximately $32 million and successfully obtained at least approximately $19 million. YOEL ABRAHAM, HESHL ABRAHAM, ZISHE ABRAHAM, and SHMUEL ABRAHAM were arrested this morning and will be presented and arraigned later today before U.S. Magistrate Judge Stewart D. Aaron. The case is assigned to U.S. District Judge Ronnie Abrams.
Acting Manhattan U.S. Attorney Audrey Strauss said: “The indictment alleges that Yoel, Heshl, Zishe, and Shmuel Abraham came up with a new twist on an old trick, but the use of complex technology did not hide the simple fact that the defendants were bilking Amazon for goods they never provided. The more our economic life moves online, the more we must ensure the integrity of our digital markets, which my Office is committed to doing.”
HSI Special Agent-in-Charge Peter C. Fitzhugh said: “The four charged today allegedly attempted to defraud Amazon out of tens of millions of dollars though a sophisticated and layered fraudulent invoicing scheme. Invoice fraud is not a victimless crime. Millions of dollars in lost revenue negatively impacts a company’s ability to provide cost effective services to legitimate customers who use the vendor’s platform. HSI works closely with our private partners to ensure that this type of fraud is mitigated, and those criminals are prosecuted for their actions.”
According to the Indictment unsealed today in Manhattan federal court:[1]
The defendants, who purportedly operated wholesale businesses, opened vendor accounts with Amazon to sell the company small quantities of goods. By accepting a purchase order, the defendants agreed to supply specific goods, at specific prices, in specific quantities. Instead, they manipulated Amazon’s vendor system, and then, in the most egregious iteration of the scheme, invoiced the company for substitute goods at grossly inflated prices and excessive quantities. The defendants frequently shipped and invoiced for more than 10,000 units of an item when Amazon had requested, and the defendants had agreed to ship, fewer than 100.
The defendants communicated about the scheme, extended help and advice to one another, and helped one another evade detection using an encrypted group texting chain on WhatsApp, a messaging application. For example, on or about May 1, 2018, YOEL ABRAHAM, the defendant, stated to the group “I’m so in the mood to fuck Amazon,” and asked “Did anyone try to overship and make a million profit in a week?” ZISHE ABRAHAM, the defendant, asked how YOEL ABRAHAM would do it (“Come in [sic] how to do it?”). SHMUEL ABRAHAM, the defendant, offered his advice on how to carry out such a large fraudulent transaction, noting he “didn’t tried this yet but tried already different things and it worked.” SHMUEL ABRAHAM cautioned, however, “[j]ust make sure you have another account. But you can fuck them a lot. When it’s to [sic] big numbers fast they will lock you out.” ZISHE ABRAHAM, the defendant, also offered his thoughts on how best to perpetrate such a large overshipment.
Once Amazon detected the pattern of fraudulent overshipping, it suspended the vendor accounts engaged in the fraud; in response, the defendants tried to open other vendor accounts and disguise their identities by registering them in fake names, using different email addresses, and using virtual private servers (“VPSs”) to obfuscate their connection to previously suspended accounts and frustrate Amazon’s ability to detect and mitigate their fraudulent activity. For instance, on or about November 1, 2018, the defendants discussed that Amazon’s increasing enforcement was going to force them to give up the fraudulent invoicing scheme altogether and go into a legitimate line of business (YOEL ABRAHAM: “This shit is massed up, looks like will have to build a legit business”). They also discussed new ways to evade detection and how to continue to perpetrate the fraud (YOEL ABRAHAM: “Open account under dummy names and they can go look for no one.” ZISHE ABRAHAM: “Yup need to do that. . . . The problem the first accounts was under real names.”). A few days later, HESHL ABRAHAM circulated a link to a “VPS company I use now. . . . This is how I know because they linked both of my vendor accounts.”).
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YOEL ABRAHAM, 28, of Suffern, New York, HESHL ABRAHAM, 32, of Spring Valley, New York, ZISHE ABRAHAM, 30, of Spring Valley, New York, and SHMUEL ABRAHAM, 24, of Airmont, New York, are each charged with conspiracy to commit wire fraud, wire fraud, and money laundering. Wire fraud and wire fraud conspiracy carry a maximum sentence of 20 years in prison, and money laundering carries a maximum sentence of 10 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 work of the Department of Homeland Security, Homeland Security Investigations, the New York City Police Department, U.S. Customs and Border Protection, the Rockland County Sheriff’s Department, and the Waterfront Commission of New York Harbor, and thanked Amazon for its cooperation with the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Jilan J. Kamal is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations and every fact described should be treated as an allegation.
Operators of Global Cryptocurrency Ponzi Scheme and Attorney Charged with Fraud and Money LaunderingRead 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 the unsealing of an indictment charging PABLO RENATO RODRIGUEZ, GUTEMBERG DOS SANTOS, SCOTT HUGHES, CECILIA MILLAN, 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.
The case has been assigned to U.S. District Judge George B. Daniels. RODRIGUEZ and HUGHES are expected to be presented today before U.S. Magistrate Judge John Early of the Central District of California, MILLAN is expected to be presented today before U.S. Magistrate Judge L. Patrick Auld of the Middle District of North Carolina, and AGUILAR is expected to be presented today before U.S. Magistrate Judge Christine A. Nowak of the Eastern District of Texas. DOS SANTOS was arrested in Panama City, Panama, and is pending extradition to the United States.
Acting United States Attorney Audrey Strauss said: “As alleged, the defendants put a modern-day spin on an age-old investment scam, promising extraordinary rates of guaranteed return on phantom investments in cryptocurrencies. Thanks to HSI, the defendants are in custody and facing serious criminal charges.”
HSI Special Agent-in-Charge Peter C. Fitzhugh said: “Those arrested today have not only been charged with running a multimillion-dollar cryptocurrency investment fraud and money laundering ring, but also for allegedly spending their victim’s money on luxury cars, jewelry, and homes. These alleged fraudsters pulled out all the stops to sell their scheme to their victims with enticing recruitment events, then shamelessly used proceeds of their scheme to recruit additional victims through even more aggressive and lavish marketing pitches. As today’s arrests show, HSI New York’s El Dorado Task Force investigates financial crimes of every type, and will stop those who prey on unsuspecting investors who entrust their hard-earned savings to so-called financial advisors. Those who violate this trust for their personal gain will face consequences for their actions.”
According to the allegations in the Superseding Indictment unsealed today: [1]
RODRIGUEZ, DOS SANTOS, HUGHES, MILLAN, 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 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, 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, 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 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, 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.
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RODRIGUEZ, 37, of Irvine, California, DOS SANTOS, 45, of Panama City, Panama, and MILLAN, 37, of Greensboro, North Carolina, are each 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. HUGHES, 44, of Newport Beach, California, is charged with one count of conspiracy to commit bank fraud and one count of conspiracy to commit money laundering. AGUILAR, 55, of Plano, Texas, is charged with one count of conspiracy to commit wire fraud.
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 sentencings of the defendants 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 Securities and Exchange Commission 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 Indictment and the description of the Superseding Indictment set forth herein constitute only allegations and every fact described should be treated as an allegation.
Acting Manhattan U.S. Attorney Announces Charges in $7 Million Scheme to Defraud Loan Programs 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, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Kevin Kupperbusch, Special Agent-in-Charge of the Eastern Region Office of the Inspector General of the U.S. Small Business Administration (“SBA”), and Jonathan D. Larsen, Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the arrest of SHENG-WEN CHENG, a/k/a “Justin Cheng,” a/k/a “Justin Jung,” a Taiwanese national residing in New York, New York, for a fraudulent scheme to obtain over $7 million in government-guaranteed loans designed to provide relief to small businesses during the novel coronavirus/COVID-19 pandemic. In connection with loan applications for relief available from the Paycheck Protection Program (“PPP”) and the Economic Injury Disaster Loan (“EIDL”) Program, CHENG used the identities of other individuals to falsely represent to the SBA and five financial institutions that companies controlled by him had a total of over 200 employees and paid $1.5 million in monthly wages, when, in fact, his companies appear to have a total of no more than 14 employees. Of the approximately $2.8 million in PPP loan proceeds that CHENG has received to date, CHENG transferred over $880,000 abroad, withdrew approximately $360,000 in cash and/or cashier’s checks, and spent over $275,000 on personal expenses. CHENG was charged with several counts of fraud, including major fraud against the United States, wire fraud, and bank fraud, as well as one count of aggravated identity theft for forging the electronic signature of a payroll company employee in payroll documents provided to financial institutions. CHENG was arrested this morning and will be presented later today before U.S. Magistrate Judge Stewart D. Aaron.
Acting U.S. Attorney Audrey Strauss said: “At a time when so many small businesses and their employees are facing dire financial straits, Sheng-Wen Cheng allegedly saw not an emergency lifeline but a gravy train. As alleged, Cheng fraudulently applied for over $7 million in government-guaranteed loans under programs designed to provide relief for small businesses financially strapped by the COVID-19 pandemic. Cheng allegedly lied to the Small Business Administration and several financial institutions about ownership of his companies, the number of people the companies employed, and how any loan proceeds would be applied, and he used forged and fraudulent documents in the process. Of the nearly $3 million he actually received, Cheng allegedly transferred nearly $1 million to overseas accounts, and spent nearly $300,000 on personal luxury items such as an 18-carat gold Rolex, a $17,000-a-month luxury condo, and a Mercedes. The paid vacation ended with his arrest this morning.”
FBI Assistant Director William F. Sweeney Jr said: “While small business owners throughout the country sought loans from the Paycheck Protection Program in order to pay employee wages and maintain basic business functions, Justin Cheng, a self-proclaimed ‘serial entrepreneur,’ acquired more than $3 million in financial relief, which he then used for personal benefit, as alleged today. True entrepreneurs who have been trying to keep their businesses afloat during these trying times are directly affected by this type of fraud, while the taxpaying citizens of this country are indirectly impacted by all those who siphon money illegitimately from this multibillion-dollar program. This isn’t the first case of SBA fraud we’ve seen, and it won’t be the last, but rest assured those who try to buck the system will be met with federal criminal charges wherever and whenever possible.”
SBA Special Agent-in-Charge Kevin Kupperbusch, said: “This is a critical time for our nation’s small businesses. Our Office will continue to combat fraud schemes that involve SBA’s programs for personal gain and greed. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”
IRS-CI Special Agent in Charge Jonathan D. Larsen said: “As alleged in the criminal complaint, Mr. Cheng fraudulently took advantage of programs meant to help those in need during a world-wide pandemic. IRS-CI will continue to prioritize investigations where criminals seek to steal money from well-deserving citizens amidst this ongoing public health crisis.”
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. The CARES Act also expanded the separate EIDL Program, which provided small businesses with low-interest loans that can provide vital economic support to help overcome the temporary loss of revenue they are experiencing due to COVID-19. To qualify for an EIDL Program loan under the CARES Act, the applicant must have suffered “substantial economic injury” from COVID-19.
CHENG, a Taiwanese national who entered the United States on a student visa, is a self-proclaimed “serial entrepreneur” who earned a Bachelor’s Degree from Pennsylvania State University (“Penn State”). From at least in or about April 2020 through at least on or about August 13, 2020, CHENG appears to have used the identities of other individuals to submit online applications to the SBA and at least five financial institutions for a total of over $7 million in government-guaranteed loans through the SBA’s PPP and EIDL Program for several companies controlled by CHENG, namely Alchemy Finance, Inc., Alchemy Guarantor LLC d/b/a “Celer Offer,” Celeri Network, Inc., Celeri Treasury LLC, and Wynston York LLC (collectively, the “Cheng Companies”). In connection with these loan applications, CHENG represented, among other things, that other individuals were the sole owners of the Cheng Companies and that the Cheng Companies together had over 200 employees and paid a total of approximately $1.5 million in wages to those employees on a monthly basis. In fact, however, the Cheng Companies appear to have a total of no more than 14 employees.
In order to support the false representations in the loan applications about the number of employees at and the wages paid by the Cheng Companies, CHENG submitted fraudulent and doctored tax records that were never actually filed with the IRS, and payroll records containing the forged electronic signature of a payroll company employee. CHENG also submitted a payroll summary for one of his companies that listed the names of more than 90 purported employees, several of whom are current and former athletes, artists, actors, and public figures. For example, the list of purported employee names included a co-anchor on Good Morning America, a former National Football League player, and a prominent Penn State football coach who is now deceased.
Based on the fraudulent PPP loan applications submitted by CHENG, a total of more than $3.7 million in PPP loans were approved for the Cheng Companies and approximately $2.8 million in PPP loan proceeds were deposited into bank accounts solely controlled by CHENG as of on or about August 13, 2020. Based on bank records received to date, instead of using the PPP loan proceeds for payroll costs, mortgage interest, rent, and/or utilities for the purported Cheng Companies as required by the PPP, CHENG used a portion of the $2.8 million in loan proceeds he received as follows:
- A total of at least approximately $881,000 in PPP loan proceeds was transferred to accounts of different individuals and entities located at banks based in Taiwan, the United Kingdom, South Korea, and Singapore.
- A total of at least approximately $360,000 in PPP loan proceeds appears to have been withdrawn in cash and/or cashier’s checks.
- A total of at least approximately $279,000 in PPP loan proceeds was spent on personal expenses, including the purchase of an 18-carat gold Rolex watch for approximately $40,000, rent and move-in fees for a $17,000 per month luxury condominium for CHENG, approximately $50,000 of furnishings for CHENG’s condominium, at least approximately $80,000 toward the purchase of a 2020 S560X4 Mercedes, and purchases totaling approximately $37,000 at Louis Vuitton, Chanel, Burberry, Gucci, Christian Louboutin, and Yves Saint Laurent.
- A total of at least approximately $160,000 in PPP loan proceeds was transferred to Alchemy Marketplace, another company owned and controlled by CHENG, in international accounts.
* * *
CHENG, 24 of New York, New York, is charged with one count of bank fraud, one count of wire fraud, and one count of making false statements to a bank, each of 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; one count of making false statements, which carries a maximum sentence of five years in prison; one count of making false statements to the SBA, which carries a maximum sentence of two years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison to be served consecutively to any other sentence imposed. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Any businesses or individuals who believe they may have been a victim in this investigation or have information regarding this investigation should call the FBI at 1-800-CALL-FBI (225-5324).
Ms. Strauss praised the investigative work of the FBI, SBA-OIG, and IRS-CI, and noted that the investigation remains ongoing. Ms. Strauss also thanked U. S. Customs and Border Protection and the New York State Department of Labor for their assistance with the investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
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 Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
R. Kelly’s Manager Charged with Placing Threatening Call to Manhattan TheaterRead 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 that DONNELL RUSSELL, manager of music recording artist Robert Sylvester Kelly, better known as “R. Kelly,” was charged in two counts with threatening physical harm by interstate communication, and conspiracy to do the same, for placing a threatening phone call to a theater in Manhattan to prevent the December 4, 2018, screening of a docuseries exploring allegations of R. Kelly’s sexual abuse of minor girls and adult women. RUSSELL is expected to make his initial appearance later today before U.S. Magistrate Judge Ona T. Wang.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Donnell Russell used threats of violence to stop a screening of a docuseries devoted to exploring allegations of sexual abuse against women and minor girls by the recording artist R. Kelly. By allegedly threatening a shooting at the theater, Russell prevented the screening, which was attended by a number of R. Kelly’s alleged victims. Threats of gun violence aimed at intimidating and silencing victims of sexual abuse are unlawful as well as unacceptable. We are committed to aggressively investigating and prosecuting such crimes.”
FBI Assistant Director William F. Sweeney Jr. said: “It defies logic that a threat like the one alleged here could stop victims from speaking about their alleged abuse. The violence Mr. Russell allegedly threatened succeeded in shutting down one airing of the documentary, but he was unable to silence the women featured in the film. Each and every day, we do everything in our power to make sure victims of sexual abuse have the opportunity to be heard, and will continue to do so regardless of those who allegedly use violence as a means to stop them.”
According to the allegations contained in the Complaint[1] unsealed today in Manhattan federal court and publicly available documents:
DONNELL RUSSELL, then-manager for R. Kelly, participated in a coordinated effort, including through the use of threats of violence, to prevent the screening in December 2018 of a multi-part documentary or “docuseries” entitled “Surviving R. Kelly” at NeueHouse, a theater in New York, New York (the “Screening”). The docuseries explores allegations that R. Kelly engaged in abusive sexual relationships with minor girls and adult women.
Throughout the day of the Screening, RUSSELL, who was located in Chicago, Illinois, worked with, among others, another individual associated with R. Kelly (“CC-1”) who was in New York the day of the Screening, to draft correspondence to an executive at the Lifetime television channel discouraging the executive from airing the docuseries. Additionally, RUSSELL admitted that he sent NeueHouse a “cease and desist” letter to stop the Screening from going forward. When that failed to stop the Screening, RUSSELL attempted to contact various law enforcement agencies in and around the theater, seemingly in a further effort to disrupt the Screening. RUSSELL contacted a NeueHouse employee directly, via a landline associated with RUSSELL’s home address in Chicago, to threaten that there was a person in the theater with a gun prepared to shoot up the Screening (the “Threat Call”). After receiving the Threat Call, the NeueHouse employee called 911. NeueHouse cancelled the Screening and evacuated the theater.
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RUSSELL, 45, of Chicago, Illinois, is charged with one count of conspiracy to threaten physical harm by interstate communication and one count of threatening physical harm by interstate communication, each of which carries a maximum penalty of five years in prison. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI and Special Agents with the United States Attorney’s Office for the Southern District of New York.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Peter J. Davis and Lara Pomerantz 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.
Three Additional Members of Money Laundering Ring ChargedRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Patrick Freaney, Deputy Special Agent in Charge of the New York Field Office of the United States Secret Service (“Secret Service”), William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Troy Miller, Director of New York Field Operations for United States Customs and Border Protection (“CBP”), announced today the unsealing of a Superseding Indictment charging SUNDAY OKORO, COLLINS ENEH, and IKECHUKWU ELENDU with money laundering and bank fraud schemes. The case has been assigned to United States District Judge Denise L. Cote. SUNDAY OKORO will be presented before a United States Magistrate Judge in the Middle District of Georgia tomorrow and IKECHUKWU ELENDU will be presented before a United States Magistrate Judge in the Northern District of California tomorrow. A third defendant, COLLINS ENEH, remains at large. A prior Indictment in the case charged 11 additional defendants.
Acting U.S. Attorney Audrey Strauss said: “As alleged, three more defendants have been implicated in a conspiracy to launder the criminal proceeds of schemes to defraud corporate and individual victims of multiple millions of dollars. Thanks to the efforts of the Secret Service, the FBI, CBP, and Special Agents of my Office, the defendants face federal charges.”
Secret Service Deputy Special Agent in Charge Patrick Freaney said: “The U.S. Secret Service is committed to working with our law enforcement partners to combat cyber-enabled fraud. The continued success of this investigation is the result of this collaborative effort and highlights the relentless investigative pursuit by the U.S. Secret Service and our partners as we address the ever evolving threat posed by cyber-crime.”
FBI Assistant Director William F. Sweeney Jr. said: “The threat of a business email compromise is a cyber iceberg that will inflict serious losses on a victim company. This type of cyber threat is a constant hazard lurking below the surface to every business, regardless of its size, and many cannot sustain the damage it will cause. Companies small and large should continue to educate their workforce on cyber threats. Well done to the investigative teams involved in bringing today’s charges.”
CBP Director of New York Field Operations Troy Miller said: “U.S. Customs and Border Protection is proud of the expertise we provide in support of investigations that result in the takedown of criminal enterprises. It is through interagency partnerships and collaborative efforts, like the one leading to today’s arrests, that law enforcement successfully combats today’s criminal organizations.”
According to the allegations in the Superseding Indictment unsealed today in federal court:[1]
From at least in or about March 2018 up to and including at least in or about January 2020, OKORO, ENEH, and ELENDU conspired to launder the proceeds of at least seven business email compromise schemes and one romance scheme in which corporate, organizational, and individual victims were fraudulently induced to send over $10 million to bank accounts controlled by members of the conspiracy, in the mistaken belief that those accounts belonged to the intended recipients of the funds. Members of the conspiracy received the victim funds by opening bank accounts in the names of the intended recipients, transferred the funds through additional accounts to hide the origin and fraudulent nature of the proceeds, and ultimately transferred most of those proceeds to foreign bank accounts or withdrew them in cash.
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OKORO, ENEH, and ELENDU are each charged with one count of conspiracy to commit money laundering, which carries a maximum term of 20 years in prison, and one count of conspiracy to commit bank fraud, which 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 sentencings of the defendants would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI, the Secret Service and its Electronic Crimes Task Force, CBP, and 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 Attorneys Jun Xiang and Kevin Mead are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Defendant
Age
Hometown
Charges
SUNDAY OKORO
41
Jonesboro, GA
Money laundering conspiracy; bank fraud conspiracy
COLLINS ENEH
32
Long Beach, CA
Money laundering conspiracy; bank fraud conspiracy
IKECHUKWU ELENDU
41
San Leandro, CA
Money laundering conspiracy; bank fraud conspiracy
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment and the description of the Superseding Indictment set forth herein constitute only allegations and every fact described should be treated as an allegation.
Brooklyn Residents Charged with Arson of an NYPD Vehicle in ManhattanRead 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 Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), and Daniel A. Nigro, Commissioner of the New York City Fire Department (“FDNY”), announced today the arrest of COREY SMITH and ELAINE CARBERRY in connection with their destruction of a marked NYPD Homeless Outreach Unit van in Greenwich Village in Manhattan. SMITH and CARBERRY were arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate Ona T. Wang later today.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Corey Smith and Elaine Carberry deliberately set fire to an NYPD van, then minutes later returned to the vehicle and – once again using an accelerant – ensured its complete destruction. Thanks to the NYPD, the Fire Department, and the ATF, there was not further damage to life or property. The defendants are now in custody.”
ATF Special Agent-in-Charge John B. DeVito said: “These defendants, as alleged, set fire to a marked NYPD van under the cover of darkness, endangering the lives of all New Yorkers. ATF and our partners in the Arson and Explosives Task Force remain dedicated to seeking justice against those intent on using fire as a weapon.”
Police Commissioner Dermot Shea said: “Setting a police car on fire endangers police officers, firefighters, and nearby residents and properties. These organized efforts are not a form of protest, they are crimes. They cost the taxpayer and damage the cause of those engaged in legitimate protest. I commend the hard work of our detectives in this case together with our law enforcement and city partners, the United States Attorney for the Southern District of New York, the Bureau of Alcohol, Tobacco & Firearms, and the New York Fire Department.”
Fire Commissioner Daniel A. Nigro said: “Deliberately setting fires to damage property or harm others has no place in our city, or anywhere. The act of arson endangers the lives of New Yorkers and all first responders. I commend the excellent teamwork of our Fire Marshals, the NYPD, and ATF to apprehend those who needlessly destroy property and risk the lives of others.”
According to the allegations in the Complaint[1]:
On July 15, 2020, at approximately 4:35 a.m., using ignitable liquid, SMITH and CARBERRY set on fire a marked NYPD Homeless Outreach Unit van on the northwest corner of 12th Street and University Place. More specifically, as surveillance footage shows, at approximately 4:37 a.m., the NYPD van ignited in flames, and CARBERRY and SMITH walked away from the NYPD van. As they walked away, SMITH handed CARBERRY what appeared to be a bottle, which CARBERRY put in her purse. Minutes later, CARBERRY handed SMITH a bottle from her purse, and SMITH again walked towards the NYPD van, with CARBERRY following behind. Shortly after SMITH approached the NYPD van the second time, a larger fire appeared to ignite. CARBERRY and SMITH again walked away from the NYPD van, and SMITH again handed CARBERRY an object that appeared to be a bottle, which CARBERRY put in her purse.
An analysis of the materials found in the NYPD van confirmed the presence of an accelerant. The FDNY ultimately confirmed that the fire was deliberately set as an act of arson, resulting in the complete destruction of the NYPD van.
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SMITH, 24, of Brooklyn, New York, and CARBERRY, 36, of Brooklyn, New York, are each charged with one count of conspiracy to commit arson and one count of arson, each of which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the New York City Arson and Explosion Task Force of the ATF, the NYPD, and the FDNY.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Christy Slavik 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.
Texas Man Sentenced to Two Years in Prison for Participation in Multimillion-Dollar Business Email Compromise SchemeRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that JOSHUA IKEJIMBA, a/k/a “Johnson Ifeanyi Gbono,” a/k/a “Alfred Henshaw,” a/k/a “Peterson Kamara Lawson,” a/k/a “Ganiru Paul Thompson,” pled guilty and was sentenced in Manhattan federal court today for conspiring to commit wire fraud as part of a wide-ranging, international business email compromise (“BEC”) syndicate. IKEJIMBA was sentenced to 24 months in prison by U.S. District Judge Jesse M. Furman.
Acting U.S. Attorney Audrey Strauss said: “As he admitted in court today, Joshua Ikejimba played a key role in an international business email compromise conspiracy. For his admitted crime, Ikejimba will serve a two-year prison sentence and be compelled to make restitution to the victims of his fraud.”
According to the allegations in the Indictment, other court filings, and statements made during court proceedings:
During the relevant time period, IKEJIMBA, his co-defendants, and others engaged in a fraudulent BEC scheme that deceived numerous victims, including international companies, individuals, and an intergovernmental organization headquartered in New York City, into diverting payments to bank accounts controlled by the syndicate.
The defendants executed this fraudulent scheme by, among other things, obtaining fraudulent passports in false names, registering and incorporating shell companies, and opening fake bank accounts at various banks throughout the United States. A substantial number of victims were tricked by fake emails and fraudulent wiring instructions into sending funds to the syndicate’s bank accounts, and those amounts were then withdrawn by members of the conspiracy and dissipated. During the period from about 2016 through about July 2018, it appears the defendants obtained approximately $8 million by defrauding numerous victims.
IKEJIMBA had a multi-faceted role in the BEC scheme, which included using fraudulent identities and false identification documents to open bank accounts; using those accounts to receive funds from victims; and forming a shell corporation to launder hundreds of thousands of dollars in additional fraud proceeds, principally by purchasing or depositing cashier’s checks that represented stolen funds. Through his participation in the scheme, IKEJIMBA was personally responsible for receiving and laundering approximately $1.25 million in fraud proceeds.
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IKEJIMBA, 25, of Houston, Texas, pled guilty to, and was sentenced on, one count of conspiracy to commit wire fraud. In addition to the 24-month prison term, IKEJIMBA was sentenced to three years of supervised release. IKEJIMBA was further ordered to forfeit $1,250,766.03, and to pay restitution to his victims in the amount of $1,238,748.93.
Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation. The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Olga I. Zverovich and Jarrod L. Schaeffer are in charge of the prosecution.
Manhattan Man Sentenced to 15 Years in Prison for Attempting to Provide Material Support to Terrorist OrganizationRead the Press Release
The Department of Justice announced today that Jesus Wilfredo Encarnacion, a/k/a “Jihadistsoldgier,” “Jihadinhear,” “Jihadinheart,” “Lionofthegood,” was sentenced to 15 years in prison for attempting to provide material support to Lashkar e-Tayyiba (LeT), a Pakistan-based designated foreign terrorist organization responsible for multiple high-profile attacks, including the infamous Mumbai attacks in November 2008. In addition, Encarnacion was sentenced to a lifetime term of supervised release. Encarnacion pleaded guilty on Jan. 22, 2020, before United States District Judge Ronnie Abrams, who also imposed today’s sentence.
“Unfortunately, individuals continue to attempt to travel to foreign countries to support terrorist organizations. Encarnacion’s sentence reflects the seriousness with which the justice system takes these efforts,” said Assistant Attorney General for National Security John C. Demers. “The National Security Division remains committed to identifying and holding accountable those who seek to join and support designated foreign terrorist organizations.”
“Jesus Encarnacion plotted to travel abroad, to join and train with Lashkar e-Tayyiba, infamous worldwide for the jihadist murder of innocent civilians, and to carry out shootings, bombings, and beheadings in behalf of that terrorist organization,” said Acting U.S. Attorney Audrey Strauss for the Southern District of New York. “Thanks to the FBI, the NYPD, and the Joint Terrorist Task Force, Encarnacion has been sentenced to a lengthy prison term for his crime.”
According to the criminal complaint, indictment, other court filings, and statements during court proceedings:
In November 2018, Encarnacion expressed his desire to join a terrorist group in an online group chat, where he met another individual (CC-1). CC-1 introduced Encarnacion to an individual who, unbeknownst to CC-1 or Encarnacion, was in fact an undercover FBI employee (UC-1). Encarnacion repeatedly expressed, in the course of recorded communications through a social media service with CC-1 and through an encrypted messaging service with UC-1, his allegiance to and support for LeT, which, since approximately 2001, has been designated as a Foreign Terrorist Organization by both the United States Secretary of State and the Immigration and Nationality Act.
Over several months, Encarnacion discussed his desire and plans to join LeT overseas so that he could receive training and participate in violent acts of terrorism. For example, Encarnacion told UC-1 that he was “ready to kill and die in the name of Allah” and sought UC-1’s assistance to help Encarnacion travel abroad to serve as an “executioner” for LeT, stating, “I want to execute. I want to behead. Shoot.” Encarnacion further stated that he aspired to commit terrorist attacks (“a bombing and shooting”) in the United States, but lacked “guidance” and “guns” to do so.
By early 2019, Encarnacion and UC-1 agreed on a plan that Encarnacion believed would allow him to join LeT in Pakistan. Encarnacion told UC-1 that he had made arrangements to travel to a particular city in Europe (the “European City”), as the first step in traveling to Pakistan to join LeT. Encarnacion purchased an airline ticket for a flight scheduled to depart on Feb.7, 2019, from John F. Kennedy International Airport (JFK Airport) to the European City. On Feb. 7, 2019, Encarnacion traveled to JFK Airport, where he was arrested by the FBI after he attempted to board that flight.
In addition to the prison term, Encarnacion was also sentenced to serve a life term of supervised release.
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 New York City Police Department. Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division, as well as the New York Office of U. S. Customs and Border Protection.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener are in charge of the prosecution, with assistance from Bridget Behling of the National Security Division’s Counterterrorism Section.