Southern District of New York

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Jonathan D. Larsen, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that JAMEEN WALKER was arrested yesterday in Manhattan, and charged with making a false claim, subscribing to false tax returns, and theft of government funds in connection with WALKER’s repeated filing of false tax returns claiming multimillion-dollar tax refunds based on fictitious income and withholdings.  WALKER will be presented today before United States Magistrate Judge Ona Wang.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Jameen Walker filed multiple false tax returns, both corporate and individual, ultimately defrauding the IRS out of nearly $7 million.  Now he will have to answer for his alleged crimes.  

IRS-CI Special Agent-in-Charge Larsen said:  “Identifying refund fraud schemes is a priority for IRS-Criminal Investigation.  I want honest taxpayers to know that we are committed to holding those accountable that choose to defraud the government.  Mr. Walker’s allegedly false claims for millions of dollars in fraudulent refunds should be considered an attack on the tax system and the general public who believe in it and follow the rules, and we take these allegations very seriously.”

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

Between 2016 and 2018, WALKER repeatedly filed tax returns with the Internal Revenue Service (the “IRS”) falsely claiming that a corporation he controlled had paid him millions of dollars and withheld millions of dollars in federal taxes.  WALKER then fraudulently sought large federal tax refunds based on those claims.     

In 2016, WALKER filed multiple Forms 1040 (“U.S. Individual Income Tax Return”)   falsely claiming that Stallings Empire Corporation paid him $19.7 million, of which $14.6 million had been withheld.  In fact, Stallings Empire Corporation did not withhold or pay any money in federal taxes on behalf of WALKER or any other employee.  Nevertheless, based on the false claims in his Forms 1040, WALKER sought a federal tax refund of more than $6.8 million. 

Though the IRS did not issue that refund, WALKER continued to file fraudulent returns.  In 2018 and 2019, WALKER filed multiple false Forms 941 (“Employer’s Quarterly Federal Tax Return”) and 941-X (“Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund”) for Stallings Empire Corporation for tax year 2018.  In each, WALKER falsely claimed that Stallings Empire Corporation had paid millions of dollars and withheld commensurately large amounts.  In early 2019, WALKER filed a Form 1040 for tax year 2018, claiming more than $16 million in income, $12.2 million in withholdings, and seeking a multimillion-dollar refund.  Based on this false tax return, the IRS ultimately issued a tax refund check to WALKER for more than $6.9 million.  In August 2019, WALKER deposited that refund check at a bank in the Bronx, New York, and proceeded to withdraw and spend in excess of $85,000 before the bank restricted his account.      

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WALKER, 46, of New York, New York, is charged with one count of making a false claim, which carries a maximum penalty of five years in prison, three counts of subscribing to a false tax return, each of which carries a maximum penalty of three years in prison, and one count of theft of government funds, which carries a maximum penalty of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Ms. Strauss praised the outstanding investigative work of IRS-CI and the Special Agents of the U.S. Attorney’s Office for the Southern District of New York in this case.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Katherine Reilly and Dina McLeod 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.

 

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[1] As the introductory phase 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.

Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that GUSTAVO L. VILA, a disbarred lawyer in Westchester County, pled guilty today in White Plains federal court to stealing government funds.  VILA’s plea results from his theft of approximately $1 million that the Department of Justice’s 9/11 Victim Compensation Fund (“VCF”) had awarded to the defendant’s client, a 9/11 first responder. 

VILA was arrested on September 3, 2020, and pled guilty today before U.S. District Judge Vincent L. Briccetti. 

Acting U.S. Attorney Audrey Strauss said:  “As he admitted today, Gustavo Vila stole money awarded by the 9/11 Victim Compensation Fund to his client, an NYPD officer and 9/11 first responder, and falsely told the client for more than three years that the stolen money had yet to be released by the Fund.  Now Gustavo Vila awaits sentencing for his crime.”

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

In the wake of the September 11 terrorist attacks, Congress created the 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 to 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, VILA 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, VILA 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 $1,030,622.04 for life-threatening illnesses that the client sustained from rescue and recovery work he performed as a police officer at Ground Zero.

On or about October 12, 2016, the VCF deposited the full amount of Victim-1’s award – over $1 million – into the Bank Account.  At that point, VILA was required to distribute all of that money, less 10 percent for his purported attorney’s fees, to Victim-1.  VILA, however, did not inform Victim-1 about this deposit, and kept 90 percent of the award – $927,559.84 – for himself.  VILA used the money he stole 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, pled guilty to one count of theft of government funds, which carries a maximum sentence of 10 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 would be determined by the judge.

VILA will be sentenced on February 5, 2021.

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.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Michael Montanez, the Special Agent-in-Charge of the Newark Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that BILAL SALAJ, an operator of a construction business, pled guilty to conspiracy to defraud the IRS, tax evasion, and failure to pay over payroll taxes.  SALAJ pled guilty before U.S. Magistrate Judge Ona T. Wang.

Acting U.S. Attorney Audrey Strauss said:  “As he admitted in court today, Bilal Salaj defrauded the IRS by evading both payroll taxes for his business and personal income taxes.  To carry out the scheme, Salaj lied to his own accountant and caused false tax returns to be filed with the IRS.  Now he awaits sentencing for his crimes.”

IRS-CI Special Agent-in-Charge Michael Montanez said:  “When Mr. Salaj made the decision to evade paying taxes for himself and his business, he also made the decision to cheat every honest hardworking taxpayer.  Today’s guilty plea should send a strong deterrent message that IRS-Criminal Investigation will vigorously pursue those individuals who attempt to cheat our nation’s tax system.”

According to the allegations contained in the Information to which SALAJ pled guilty and statements made in court:

At all relevant times, BILAL SALAJ, a citizen and resident of the United States, operated a construction business in Manhattan.  Initially, SALAJ was the record owner of the business, but in approximately July 2014, SALAJ began operating the business under a new entity that, on paper, was wholly owned by a third party (“Individual-1”), who worked for SALAJ in the construction business.  Despite this purported change in ownership, SALAJ continued to exercise principal control and decision-making authority over the business and its financial affairs.  In particular, SALAJ was a responsible person under federal law for collecting, truthfully accounting for, and paying over payroll taxes to the IRS.

Between at least in or about 2014 and in or about June 2019, SALAJ devised and perpetrated a scheme to evade a substantial portion of both the payroll taxes for the construction business and SALAJ’s personal income taxes for the period 2014 through 2018.  During this period, SALAJ cashed, and caused Individual-1 to cash, approximately $3.2 million in business checks payable to the construction company at check cashing facilities in Manhattan, instead of depositing them into the company’s operating bank account.  SALAJ and Individual-1 used a portion of the proceeds from the cashed checks to pay cash wages to employees of the construction business, and spent most of the rest on personal expenses.  SALAJ did not withhold or pay over to the IRS any payroll taxes on the cash wages paid to the employees, and did not report to the IRS or pay any personal income taxes on the cash income he realized through the cashed checks.  As part of the tax evasion scheme, SALAJ fraudulently withheld from his accountant any records relating to the cashed business checks, and thereby caused false tax returns to be filed with the IRS.  The tax evasion scheme, including relevant conduct, resulted in a tax loss to the IRS of approximately $952,778.

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SALAJ, 55, of Morganville, New Jersey, pled guilty to one count of conspiracy to defraud the IRS, one count of tax evasion, and one count of failure to pay over payroll taxes, each of which carries a maximum sentence of five years in prison.  As part of the plea agreement, SALAJ has agreed to pay restitution to the IRS in the amount of $952,778.  Sentencing is scheduled for March 3, 2021, at 2:00 p.m., before U.S. District Judge P. Kevin Castel.

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 work of IRS Criminal Investigation in this case.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John B. DeVito, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), and Daniel A. Nigro, the Commissioner of the New York City Fire Department (“FDNY”), announced today the arrest of SHAWN JENKINS in connection with his attempted arson of police vehicles in the Bronx, New York.  JENKINS was arrested on October 28, 2020, and will be presented in the Manhattan federal court later today before U.S. Magistrate Ona T. Wang.

Acting U.S. Attorney Audrey Strauss stated:  “Shawn Jenkins allegedly threw a glass bottle containing a lit wick with gas accelerant at an NYPD vehicle in the Bronx.  Jenkins’s alleged actions – causing an adjacent vehicle to be damaged – are as reckless as they are misguided.  There is never an acceptable time or situation to attempt to damage the property of law enforcement professionals who serve to protect the public, and this case is emblematic of our resolve to bring anyone who does so to justice.” 

ATF Special Agent-in-Charge John B. DeVito said:  “As alleged, Jenkins brazenly and deliberately fire-bombed a marked NYPD vehicle without regard for human life or property. The New York Arson and Explosives Task Force will be relentless in bringing to justice those who use fire as a weapon in order to ensure a safer community for all New Yorkers.”

NYPD Commissioner Dermot Shea said:  “Peaceful assembly and speech are protected and valued by the NYPD. But the kind of violence alleged in this case endangers lives and threatens everyone’s constitutional right to peacefully protest and we commend our federal partners for bringing justice for acts society can never tolerate.”

NYFD Commissioner Daniel A. Nigro said:  “Arson is a dangerous, potentially deadly act that needlessly puts lives in danger and destroys property. Any act of arson will be vigorously investigated by our Fire Marshals and their partners in law enforcement.  Thanks to the excellent teamwork by our Bureau of Fire Investigation, the NYPD and the ATF, a suspect has been arrested for this senseless crime.”

According to the allegations in the Complaint[1]:

On June 1, 2020, at approximately 11:30 p.m., JENKINS approached two NYPD vehicles located in front of the NYPD 42nd Precinct in the Bronx, New York.  JENKINS threw a glass bottle containing a wick that was lit with a gas accelerant at the NYPD vehicles.  The incendiary device hit the ground short of its intended target and spread a fire, damaging an adjoining vehicle, which is privately owned by an NYPD officer.

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JENKINS, 33, of the Bronx, New York, is charged with one count of attempted arson, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the Strategic Explosive and Arson Response 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 Mitzi Steiner 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.

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[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.

 

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[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.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Kathy A. Michalko, Special Agent in Charge of the New York Field Office of the United States Secret Service (“Secret Service”),  Phillip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), and New York Police Department Commissioner Dermot Shea, announced the unsealing today of a criminal Indictment and Complaint charging 19 defendants with conspiracy to steal government funds, conspiracy to commit bank fraud, and aggravated identity theft.  Twelve defendants were arrested yesterday and today in the Southern and Western Districts of New York and Northern District of Georgia, and were to be presented yesterday and today in those districts’ federal courts.  Seven defendants remain at large.

Acting U.S. Attorney Audrey Strauss said: “As alleged, these defendants engaged in schemes to steal millions of dollars by cashing fraudulent checks and stolen postal money orders, falsifying their identities, and taking advantage of multiple national financial institutions.  They must be held accountable for their brazen conduct.” 

USSS Special Agent-in-Charge Kathy A. Michalko said:  “The success of this case is the result of the partnerships between the New York City Police Department, the U.S. Postal Inspection Service and the U.S. Secret Service.   The ability to leverage our combined expertise to detect, identify, and disrupt organized groups is vital to protect the integrity of our financial system.”

USPIS Chief Postal Inspector Phillip R. Bartlett said: “The accused allegedly participated in an unsophisticated, low-tech crime, involving the deposit of stolen checks and postal money orders into bank accounts they controlled. They engaged in this criminal enterprise to allegedly rip-off the government and unsuspecting financial institutions across the country. Gangs like these are opportunists and use any means to lie and steal for profit. Although the alleged crimes occurred months ago, Postal Inspectors and their law enforcement partners have put an end to their thieving evil ways and their day of reckoning has finally arrived.”

NYPD Commissioner Dermot Shea said: “As the kind of crime alleged in this indictment moves into new frontiers of identity theft and financial fraud, the NYPD remains vigilant to stop it. I commend our federal partners and the United States Attorney’s Office for the Southern District of New York for leading us to justice in this case.”

According to the allegations contained in the Indictment and Complaint:[1]

From January 2019 up to an including the present, defendants AHMAD AKBAR, a/k/a “Meech,” TYRELL BEECHER, a/k/a “Shae,” CHRISTOPHER BOVAIN, a/k/a “Cleko,” WINNIS BRITO, a/k/a “Flaco,” DARNELL GREEN, a/k/a “Nellz,” DOMINIQUE GREEN, a/k/a “Domo,” MAURICE HARGROW, a/k/a “Moe Tally,” CHARLES HEWITT, a/k/a “Young Cee,” KEVIN LEWIS, a/k/a “Mula,” JAMA MOHAMOUD, a/k/a “JFK Jay,” JAVIAN MOORE, a/k/a “Julio,” JORDAN RUSSELL, a/k/a “J Rozay,” DEVON SMITH, GEORGE THOMPSON, LOUIS WILLIAMS, ISAIAH WISE FORDHAM, a/k/a “ZayBands,” and JAHNICO HARVEY conspired to defraud the United States by cashing postal money orders that had been stolen from post offices in Manhattan, the Bronx, Brooklyn, Queens, Long Island, New Jersey, and Arkansas.  The postal money orders cashed by the members of the conspiracy originated from 18 post offices. In total, more than 15,000 postal money orders have been stolen from those 18 post offices. At a face value of up to $1,000 per postal money order, the theft results in a potential loss to the USPS of up to $15 million.

From at least in or around January 2018, up to and including the present, defendants TYRELL BEECHER, a/k/a “Shae,” CHRISTOPHER BOVAIN, a/k/a “Cleko,” WINNIS BRITO, a/k/a “Flaco,” DONTA DOUGLAS, DOMINIQUE GREEN, a/k/a “Domo,” MAURICE HARGROW, a/k/a “Moe Tally,” CHARLES HEWITT, a/k/a “Young Cee,” KEVIN LEWIS, a/k/a “Mula,” JAMA MOHAMOUD, a/k/a “JFK Jay,” JAVIAN MOORE, a/k/a “Julio,” JORDAN RUSSELL, a/k/a “J Rozay,” JONATHAN SHORTT, LOUIS WILLIAMS, ISAIAH WISE FORDHAM, a/k/a “ZayBands,” and JAHNICO HARVEY defrauded multiple national banks by recruiting collusive accountholders who allowed members of the conspiracy to deposit fraudulent checks into their bank accounts and by withdrawing money from the collusive bank accounts after banks made available funds associated with the fraudulent check deposits to the account, but before the banks discovered that the checks were fraudulent and would not clear.

All of the defendants charged in the bank fraud conspiracy, as well as AKBAR and SMITH, have also been charged with aggravated identity theft.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Emily A. Johnson, Kaylan E. Lasky, and Ashley C. Nicolas are in charge of the prosecution.

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

 

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

The Department of Justice announced the unsealing of a federal indictment charging Haji Najibullah, a/k/a “Najibullah Naim,” a/k/a “Abu Tayeb,” a/k/a “Atiqullah”  with six counts related to the 2008 kidnapping of an American journalist and two Afghan nationals.  Najibullah, 44, was arrested and transferred to the United States from Ukraine to face the charges in the indictment.    Najibullah will be presented today before U.S. Magistrate Judge Ona T. Wang.  The case is assigned to U.S. District Judge Katherine Polk Failla.

“Najibullah is charged with taking an American journalist and others hostage in Afghanistan in November 2008.  Journalists risk their lives bringing us news from conflict zones, and no matter how much time may pass, our resolve to find and hold accountable those who target and harm them and other Americans will never wane,” said Assistant Attorney General for National Security John C. Demers.  “The defendant, like many others before and surely others to come, will now face justice in an American courtroom.”

Acting U.S. Attorney Audrey Strauss said:  “Nearly 12 years ago, the defendant arranged to kidnap at gunpoint an American journalist and two other men, and held them hostage for more than seven months,” said Acting U.S. Attorney for the Southern District of New York Audrey Strauss.   “The prosecution of Haji Najibullah shows that law enforcement will never stop in our mission to hold accountable those who commit violent crimes against American citizens.”         

“Whether someone commits a violent act against an American citizen here at home or overseas, we’ll never stop aggressively pursuing charges against them and, when necessary, seeking their transfer to U.S. custody,” said FBI Assistant Director-in-Charge of the New York Office of the FBI William F. Sweeney Jr.  “Najibullah’s reprehensible actions over a decade ago earned him a flight to the U.S. yesterday. Today he arrived in U.S. federal court to face our justice system.”

“The FBI, along with our partners, continue to work tirelessly in the pursuit of justice and to hold accountable those who are responsible for the kidnapping and hostage taking of U.S. citizens abroad,” said Assistant Director Jill Sanborn of the FBI's Counterterrorism Division.  “We remain steadfast in our obligation to see justice served, regardless of the how long it may take or where those individuals are located. This investigation and resulting indictment reflects the FBI’s perseverance and commitment to the victims of these heinous acts – We never forget, and we never give up.”

“Haji Najibullah’s alleged kidnapping of a United States journalist and two Afghan nationals was a crime against America, a crime against the freedom of the press, and against the integral work of shining a light on important international affairs,” said Police Commissioner Shea.  “While today’s federal indictment reflects events that occurred a dozen years ago, it shows once again that the FBI-NYPD Joint Terrorism Task Force and all of our law enforcement partners will wait as long and go as far as it takes to bring justice.”

According to the Indictment:[1]

On or about Nov. 10, 2008, Najibullah and his co-conspirators, armed with machineguns, kidnapped an American journalist (Victim-1) and two Afghan nationals who were assisting Victim-1 (Victim-2 and Victim-3) at gunpoint in Afghanistan.  Approximately five days later, on or about Nov. 15, 2008, Najibullah and his co-conspirators forced the three hostages to hike across the border from Afghanistan to Pakistan, where Najibullah and his co-conspirators detained the hostages.  For the next seven months, Najibullah and his co-conspirators held the hostages captive in Pakistan.

During their captivity, Najibullah and his co-conspirators forced the victims to make numerous calls and videos seeking help.  For example, on or about Nov. 19, 2008, while in Pakistan, Najibullah and a co-conspirator (CC-1) directed Victim-1 to call his wife in New York.  In addition, Najibullah and his co-conspirators made the victims create at least three videos in which they begged for help while surrounded by masked guards armed with machineguns.  In one of the videos, Victim-1 — the American journalist — was forced to beg for his life while a guard pointed a machinegun at Victim-1’s face.         

Najibullah, 44, of Afghanistan is charged with hostage taking, conspiracy to commit hostage taking, kidnapping, conspiracy to commit kidnapping, and two counts of using and possessing a machinegun in furtherance of crimes of violence.  Each of the six counts of the indictment carry a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Ms. Strauss and Mr. Demers praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force.  They also thanked the New York and New Jersey Port Authority Police, the Counterterrorism Section of the Department of Justice’s National Security Division, the Legal Attaché Office/U.S. Embassy Kyiv and the FBI's Counterterrorism Division for its assistance with this investigation, as well as the Ukrainian authorities and the Office of International Affairs of the Justice Department’s Criminal Division for their assistance in the extradition.

This prosecution is being handled by the Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Sam Adelsberg, Sidhardha Kamaraju, and Michael Kim Krouse are in charge of the prosecution, with assistance from Trial Attorney Jennifer Burke of the Counterterrorism Section.

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

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[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.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John C. Demers, Assistant Attorney General for National Security, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, Police Commissioner of the City of New York (“NYPD”), announced the unsealing of a federal indictment charging HAJI NAJIBULLAH, a/k/a “Najibullah Naim,” a/k/a “Abu Tayeb,” a/k/a “Atiqullah,” with six counts related to the 2008 kidnapping of an American journalist and two Afghan nationals.  NAJIBULLAH was arrested and transferred to the United States from Ukraine to face the charges in the indictment.  NAJIBULLAH will be presented today before U.S. Magistrate Judge Ona T. Wang.  The case is assigned to U.S. District Judge Katherine Polk Failla.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, nearly 12 years ago, the defendant arranged to kidnap at gunpoint an American journalist and two other men, and held them hostage for more than seven months.  The prosecution of Haji Najibullah shows that law enforcement will never stop in our mission to hold accountable those who commit violent crimes against American citizens.”          

Assistant Attorney General for National Security John C. Demers said:  “Najibullah is charged with taking an American journalist and others hostage in Afghanistan in November 2008.  Journalists risk their lives bringing us news from conflict zones, and no matter how much time may pass, our resolve to find and hold accountable those who target and harm them and other Americans will never wane.  The defendant, like many others before and surely others to come, will now face justice in an American courtroom.”

FBI Assistant Director William F. Sweeney Jr. said:  “Whether someone commits a violent act against an American citizen here at home or overseas, we’ll never stop aggressively pursuing charges against them and, when necessary, seeking their transfer to U.S. custody.  Najibullah’s alleged reprehensible actions over a decade ago earned him a flight to the U.S. yesterday.  Today he arrived in U.S. federal court to face our justice system.”

Police Commissioner Dermot Shea said:  “Haji Najibullah’s alleged kidnapping of a United States journalist and two Afghan nationals was a crime against America, a crime against the freedom of the press, and against the integral work of shining a light on important international affairs. While today’s federal indictment reflects events that occurred a dozen years ago, it shows once again that the FBI-NYPD Joint Terrorism Task Force and all of our law enforcement partners will wait as long and go as far as it takes to bring justice.”

According to the Indictment:[1]

On or about November 10, 2008, NAJIBULLAH and his co-conspirators, armed with machineguns, kidnapped an American journalist (“Victim-1”) and two Afghan nationals who were assisting Victim-1 (“Victim-2” and “Victim-3”) at gunpoint in Afghanistan.  Approximately five days later, on or about November 15, 2008, NAJIBULLAH and his co-conspirators forced the three hostages to hike across the border from Afghanistan to Pakistan, where NAJIBULLAH and his co-conspirators detained the hostages.  For the next seven months, NAJIBULLAH and his co-conspirators held the hostages captive in Pakistan.

During their captivity, NAJIBULLAH and his co-conspirators forced the victims to make numerous calls and videos seeking help.  For example, on or about November 19, 2008, while in Pakistan, NAJIBULLAH and a co-conspirator (“CC-1”) directed Victim-1 to call his wife in New York.  In addition, NAJIBULLAH and his co-conspirators made the victims create at least three videos in which they begged for help while surrounded by masked guards armed with machineguns.  In one of the videos, Victim-1 – the American journalist – was forced to beg for his life while a guard pointed a machinegun at Victim-1’s face.         

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NAJIBULLAH, 42, of Afghanistan, is charged with hostage taking, conspiracy to commit hostage taking, kidnapping, conspiracy to commit kidnapping, and two counts of using and possessing a machinegun in furtherance of crimes of violence.  Each of the six counts of the Indictment carries a maximum sentence of life 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 a judge.

Ms. Strauss and Mr. Demers praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force.  They also thanked the New York and New Jersey Port Authority Police, the Counterterrorism Section of the Department of Justice’s National Security Division for its assistance with this investigation, as well as the Ukrainian authorities and the Office of International Affairs of the Justice Department’s Criminal Division for their assistance in the arrest and transfer of the defendant.

This prosecution is being handled by the Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Sam Adelsberg, Sidhardha Kamaraju, and Michael Kim Krouse are in charge of the prosecution, with assistance from Trial Attorney Jennifer Burke of the Counterterrorism Section.

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

 

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[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.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that SAJID JAVED, an owner and operator of a number of pharmacies in the New York City area, was sentenced to 30 months in prison for using his pharmacies to submit more than $7.1 million in fraudulent claims to Medicare and Medicaid.  JAVED previously pled guilty to one count of conspiracy to commit health care fraud before U.S. District Judge Vernon S. Broderick, who imposed today’s sentence.

Acting U.S. Attorney Audrey Strauss said:  “Sajid Javed fraudulently billed Medicare and Medicaid more than $7 million for drugs that were never actually dispensed, inducing others to forego their prescription medications in return for kickbacks.  Javed contributed to the multibillion-dollar theft of federally funded public health care subsidies.”

According to the Complaint, the Superseding Information to which JAVED pled guilty, court filings, and statements made in public court proceedings:

While owning and operating a number of pharmacies located in Brooklyn and Queens, JAVED conducted a multimillion-dollar scheme to defraud Medicare and Medicaid programs by seeking reimbursement for prescription drugs that were not distributed to customers.  Specifically, from January 2013 through December 2014, JAVED obtained more than $7.1 million in reimbursements from Medicare and Medicaid for prescription drugs that his pharmacies never actually dispensed to customers.  JAVED defrauded Medicare and Medicaid into providing him with these reimbursements by obtaining prescriptions from other individuals, who were willing to forego delivery of the medications in exchange for a share of the reimbursed proceeds, in the form of kickbacks.  JAVED offered to pay, and did actually pay, kickbacks in furtherance of this scheme.

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In addition to the prison term, Judge Broderick sentenced JAVED, 49, of Fresh Meadows, Queens, to three years of supervised release and ordered JAVED to make court-ordered restitution in the amount of $6,040,451.32 to Medicare and $1,150,562.16 to Medicaid, and imposed forfeiture in the amount of $7,191,013.48.

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and the Department of Health and Human Services, Office of the Inspector General.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Christopher J. DiMase is in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today the settlement of a tax refund lawsuit brought by insurance and financial services company AMERICAN INTERNATIONAL GROUP, INC. (“AIG”) involving seven cross-border financial transactions that the United States asserted were abusive tax shelters designed to generate bogus foreign tax credits that AIG improperly attempted to use to reduce its tax liabilities in the United States.  AIG filed this tax refund lawsuit in 2009, seeking to recover disallowed foreign tax credits and other taxes related to the 1997 tax year.  The United States obtained overwhelming evidence that these transactions lacked any meaningful economic substance, were devoid of any legitimate business purpose, and instead were designed solely to manufacture hundreds of millions of dollars in tax benefits to which AIG was not entitled.  According to the terms of the settlement, approved yesterday by United States District Judge Louis L. Stanton, AIG agreed that all foreign tax credits that AIG claimed for the 1997 tax year and all later tax years for these same transactions, totaling more than $400 million, would be disallowed in their entirety.  AIG further agreed to pay a 10% tax penalty.

Acting U.S. Attorney Audrey Strauss said:  “AIG created an elaborate series of sham transactions that were designed to do nothing – and in fact did nothing – other than generate hundreds of millions of dollars in ill-gotten tax benefits for AIG.  Our system of taxation is built upon the premise that all citizens and corporations must pay the taxes they owe, no more and no less.  People and companies who game that system to avoid paying their fair share of taxes undermine public trust in our tax laws.  We will continue to be vigilant in holding accountable those who use economically empty transactions to avoid paying their taxes.”

As alleged in filings in Manhattan federal court:

During the mid-1990s, AIG Financial Products Corp. (“AIG-FP”), a wholly-owned subsidiary of AIG, designed, marketed, and entered into seven cross-border structured finance transactions with various foreign banks.  These complicated transactions, involving hundreds of agreements, numerous shell companies, and intricate cash flows, had no economic substance but rather exploited differences in U.S. and foreign tax laws to create profits from U.S. tax benefits.  In particular, the transactions generated more than $400 million in foreign tax credits that AIG used to reduce its U.S. tax liabilities.  The U.S. has a worldwide tax system that taxes companies on income earned abroad, but also grants credits for foreign taxes paid.  AIG, was able to turn a profit by obtaining credits from the U.S. Treasury for foreign taxes it did not actually pay in full.  AIG obtained more than $61 million in foreign tax credits during the 1997 tax year alone, the tax year resolved by the settlement. 

In 2008, the Internal Revenue Service (“IRS”) issued a Notice of Deficiency to AIG that, among other things, disallowed the foreign tax credits AIG had claimed in connection with the seven transactions and asserted a 20% tax penalty.  In 2009, after paying the deficiency, AIG filed a lawsuit against the United States in Manhattan federal court challenging the IRS’s determination and demanding a refund.  In response, the United States asserted that the IRS had correctly disallowed the tax benefits because the transactions had no economic substance, a basic requirement for seeking tax benefits. 

According to the terms of the Settlement, AIG agreed that all foreign tax credits that AIG claimed in connection with the seven cross-border transactions that were the subject of the litigation would be disallowed in full for the 1997 tax year and all subsequent tax years during which the transactions were operating, totaling more than $400 million.  AIG further agreed to pay a 10% penalty.  The settlement allows AIG to retain certain income expense deductions relating to six of the transactions that were structured as borrowings, as well as remove certain amounts related to the transactions from its taxable income.  In addition, the settlement resolves certain of AIG’s tax refund claims unrelated to the cross-border transactions stemming from AIG‘s restatement of its publicly filed financials.

The Acting U.S. Attorney thanked the Tax Division of the Department of Justice, as well as the IRS Office of Chief Counsel, including Jill Frisch, Matthew Avon, Jackie Levinson, Barbara Felker, and Michael Gilman, for all of their assistance throughout the litigation.

The case is being handled by the Office’s Tax and Bankruptcy Unit.  Assistant U.S. Attorneys Pierre Armand, Talia Kraemer, Jennifer Jude, and Charles Jacob, and former Assistant U.S. Attorneys Nicolas Boeving, Arastu Chaudhry, John Clopper, Joseph Cordaro, Caleb Hayes-Deats, and Bertrand Madsen, handled the case.

Acting United States Attorneys Audrey Strauss and Seth DuCharme announced today that Assistant United States Attorneys (AUSAs) will lead the efforts of their Offices in connection with the Justice Department’s nationwide Election Day Program for the upcoming November 3, 2020, general election.  AUSA Erik Paulsen has been appointed to serve as the District Election Officer (DEO) for the Eastern District of New York, and David J. Kennedy has been appointed to serve as the DEO for the Southern District of New York.  In their capacity as DEOs, these AUSAs are responsible for overseeing the Districts’ handling of complaints of election fraud and voting rights concerns in consultation with Justice Department Headquarters in Washington.

Acting United States Attorneys Audrey Strauss and Seth DuCharme said:  “Every citizen must be able to vote without interference or discrimination and to have that vote counted without it being stolen because of fraud.  The Department of Justice will always act appropriately to protect the integrity of the election process.”

The Department of Justice has an important role in deterring election fraud and discrimination at the polls, and combating these violations whenever and wherever they occur.  The Department’s long-standing Election Day Program furthers these goals and also seeks to ensure public confidence in the integrity of the election process by providing local points of contact within the Department for the public to report possible election fraud and voting rights violations while the polls are open through Election Day.

Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, impersonating voters, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input.  It also contains special protections for the rights of voters, and provides that they can vote free from acts that intimidate or harass them.  For example, actions of persons designed to interrupt or intimidate voters at polling places by questioning or challenging them, or by photographing or videotaping them, under the pretext that these are actions to uncover illegal voting, may violate federal voting rights law.  Further, federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice (where voters need assistance because of disability or illiteracy).

The franchise is the cornerstone of American democracy.  We all must ensure that those who are entitled to the franchise exercise it if they choose, and that those who seek to corrupt it are brought to justice. 

In order to respond to complaints of election fraud or voting rights concerns during the voting period that ends on November 3, 2020, and to ensure that such complaints are directed to the appropriate authorities, the Acting United States Attorneys said that their Offices will be available to receive complaints at the following numbers on Tuesday, November 3, 2020:

(646) 369-4739  (for Manhattan, Bronx, Dutchess, Orange, Putnam, Rockland, Sullivan, and Westchester counties) and  

(718) 254-7000  (for Brooklyn, Queens, Staten Island, Nassau, and Suffolk counties)

In addition, the FBI will have special agents available in each field office and resident agency throughout the country to receive allegations of election fraud and other election abuses on Election Day.  The local FBI field office can be reached by the public at (212) 384-1000.

Complaints about possible violations of the federal voting rights laws can be made directly to the Civil Rights Division in Washington, DC, by phone at 800-253-3931 or by complaint form at https://civilrights.justice.gov/.

Please note, however, in the case of a crime of violence or intimidation, please call 911 immediately and before contacting federal authorities.  State and local police have primary jurisdiction over polling places, and almost always have faster reaction capacity in an emergency.

The Acting United States Attorneys also noted that the following additional telephone numbers are available on Election Day for citizens to call for routine inquiries, such as where to vote or how late the polls are open, or to register complaints that may concern violations of New York State election laws:

IN NEW YORK CITY

City Board of Elections

Main Office  (866) 868-3692; TTY #: 212-487-5496

IN COUNTIES OUTSIDE NEW YORK CITY

County Boards of Elections

Dutchess                                 (845) 486-2473

Nassau                                     (516) 571-8683

Orange                                    (845) 360-6500

Putnam                                    (845) 808-1300

Rockland                                 (845) 638-5172

Suffolk                                    (631) 852-4500

Sullivan                                   (845) 807-0400

Westchester                             (914) 995-5700

Acting United States Attorneys Strauss and DuCharme said:  “Ensuring free and fair elections depends in large part on the cooperation of the American electorate.  It is imperative that those who have specific information about discrimination or election fraud make that information available to my Office, the FBI, or the Civil Rights Division.”

Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that VANCE COLLINS, a/k/a “Big AK,” and RAMON RAMIREZ, a/k/a “Obendy,” were found guilty of hiring gang members to murder an individual believed to be having an affair with RAMIREZ’s wife.  COLLINS was also convicted of possessing a firearm after having been convicted of a felony.  COLLINS and RAMIREZ were convicted yesterday after a five-day trial before U.S. District Judge P. Kevin Castel.

Acting U.S. Attorney Audrey Strauss said:  “Vance Collins and Ramon Ramirez tried to arrange for a murder.  Now, in the first criminal trial in this District since the outbreak of the COVID-19 pandemic, the defendants stand convicted and will face punishment for their crimes.”

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

In around 2017, RAMIREZ learned that his wife was having an affair with another man (the “Victim”).  RAMIREZ enlisted COLLINS, a high-ranking gang leader, to hire someone to kill the Victim.  COLLINS turned to a member of his gang, who in turn enlisted another gang member, and those two gang members took steps to locate and surveil the Victim, intending to shoot or stab the Victim to death.  One night in October 2018, the two hitmen encountered the Victim at the Victim’s home; however, the presence of another person thwarted their plan.  One of the hitmen was arrested shortly thereafter, and the Victim was not killed.  During his arrest, COLLINS was found to be in possession of three firearms, including one that he and one of the hitmen had acquired to use in the plot to kill the Victim.

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Count One charged the defendants with conspiracy to commit murder for hire in violation of 18 U.S.C. § 1958, and Count Two charged the defendants with murder for hire in violation of 18 U.S.C. §§ 1958 and 2.  Count Three charged defendant COLLINS with possessing a firearm after having been convicted of a felony.  Each charge carries a maximum penalty of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

The defendants are scheduled to be sentenced by Judge Castel on February 10, 2021.

Ms. Strauss praised the outstanding investigative work of the FBI Westchester County Safe Streets Task Force, which comprises agents and task force officers from the FBI, Bureau of Alcohol, Tobacco, Firearms and Explosives, United States Probation Office, New York State Police, New York City Police Department, Mount Vernon Police Department, Yonkers Police Department, Greenburgh Police Department, Peekskill Police Department, Westchester County Police Department, and the Westchester County District Attorney’s Office. 

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Jamie Bagliebter, Adam Hobson, Frank Balsamello, Christopher Brumwell, and Celia Cohen are in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that CRAIG ZABALA, the chairman, chief executive officer, and president of Concorde Group Holdings Inc. (“Holdings”), pled guilty before U.S. District Judge J. Paul Oetken to conspiracy to commit securities fraud and wire fraud stemming from a scheme to defraud investors in Holdings, a purported merchant banking firm.  Among other illicit activity, ZABALA fraudulently induced at least 17 investors to invest at least approximately $4.38 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. 

Acting U.S. Attorney Audrey Strauss said:  “Craig Zabala admitted in court that he defrauded investors of more than $4 million through a purported financial services firm he controlled.  Zabala lied to investors about how much money had been raised, who had invested, how close the firm was to an IPO, and how he would use investors’ money – most of which he took for his own use or to pay off investors in Ponzi-like fashion.”

According to the allegations in the Complaint, the Information filed today, and other proceedings in this case:           

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 17 investors out of at least approximately $4.38 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 $4.38 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.

*                *                *

ZABALA, 68, pled guilty to one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum sentence of five years in prison.  The charge also carries a maximum fine of $250,000, or twice the gross gain or loss from the offenses.  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.  ZABALA also agreed to forfeit $4,380,000 and to pay restitution in the amount of $4,380,000.  ZABALA is scheduled to be sentenced by Judge Oetken on February 5, 2021 at 11:00 a.m.

Ms. Strauss praised the outstanding work of the United States Postal Inspection Service’s New York Division, and also thanked the SEC and Financial Industry Regulatory Authority for their 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.

Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that THERYN JONES, a/k/a “Ty,” a/k/a “Old Man Ty,” a/k/a “Tyballa,” and ARIUS HOPKINS, a/k/a “Scrappy,” a/k/a “Scrap,” were sentenced today to life in prison following their conviction for the January 2, 2014 murder of Shaquille Malcolm.  A jury convicted JONES and HOPKINS on December 18, 2019, following a two-week trial before U.S. District Judge Lewis A. Kaplan, who also imposed today’s sentences.   

Acting U.S. Attorney Audrey Strauss said:  “Jones and Hopkins were responsible for the murder of 20-year-old Shaquille Malcolm over six years ago in a Bronx apartment lobby.  Now they have been sentenced to serve the rest of their lives in federal prison for this heinous crime.”

According to the evidence presented during the trial:

THERYN JONES was a high-ranking leader within the Mac Balla gang and the leader of a large-scale drug trafficking organization that distributed crack cocaine out of a residential building in the Allerton section of the Bronx.  Because Malcolm and others were encroaching on JONES’s drug territory, JONES directed HOPKINS and another person to murder Malcolm.  On January 2, 2014, HOPKINS shot Shaquille Malcolm multiple times in the lobby of an apartment building located at 2818 Bronx Park East in the Bronx, New York.  Malcolm died at the scene. 

For their participation in the Malcolm murder, JONES, 43, and HOPKINS, 25, of the Bronx, New York were each convicted at trial of using a firearm to commit murder in furtherance of a drug trafficking crime, and murder while engaged in a conspiracy to distribute 280 grams and more of crack cocaine.

*                      *                      *

Ms. Strauss praised the outstanding investigative work of the NYPD.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Michael K. Krouse, Danielle R. Sassoon, Margaret Graham, and Jessica Fender are in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that MARC LAWRENCE pled guilty to securities fraud and wire fraud in connection with his role as a senior executive of a number of corporate entities (collectively referred to as “Downing”) that were operated as a Ponzi-like scheme.  LAWRENCE solicited millions of dollars from Downing investors through materially false and misleading statements regarding, among other things, Downing’s use of investor proceeds, sources of funding, financial condition and ability to pay salaries to employee-investors, and portfolio companies.  LAWRENCE pled guilty before U.S. District Judge Alvin K. Hellerstein.  LAWRENCE’s co-defendant, David Wagner, the chief executive officer of Downing, previously pled guilty to securities fraud and wire fraud before Judge Hellerstein on September 21, 2020.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “As he admitted in court, Marc Lawrence and his co-defendant swindled employee-investors of their purported venture capital firm.  They fraudulently induced employee-investors to hand over more than $8 million that was supposed to be invested in profitable business operations.  The firm was a sham, and employee-investor funds were used to pay personal expenses or pay off other investors in Ponzi-like fashion.  Now Lawrence 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.

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LAWRENCE, 66, of St. Petersburg, Florida, 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, LAWRENCE agreed to forfeit $150,000 in United States currency and pay restitution of $4,550,000 to victims of his criminal conduct.  

LAWRENCE will be sentenced by Judge Hellerstein on February 1, 2021, at 2:30 p.m. 

Ms. Strauss praised the outstanding 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 in the investigation. 

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.  

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that VLADIMIR ZISKIND was sentenced today in Manhattan federal court to 28 months in prison for participating in a scheme to use false statements to promote and sell worthless stock in various companies.  ZISKIND pled guilty on October 9, 2019, to one count of securities fraud and one count of securities fraud conspiracy before U.S. District Judge Vernon S. Broderick, who also imposed today’s sentence.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “Vladimir Ziskind heartlessly preyed on innocent investors – many of them elderly – who believed they were investing in a promising IPO or other time-sensitive lucrative investment, when in fact they were being fleeced by Ziskind and his co-conspirators.  As this prosecution and today’s sentence reflect, this kind of predatory fraud will not be tolerated.”

According to the allegations contained in the Complaint, the Indictment, and statements made in related court filings and proceedings:[1]

For several years, ZISKIND and his co-defendants operated a fraudulent scheme in which a salesman named “Mike Palmer” would call elderly persons on the phone and offer them what he claimed was a time-sensitive opportunity to buy stock in certain companies.  In fact, there was no “Mike Palmer,” and the salesman was actually ZISKIND or co-defendant Kevin Weinzoff, who were taking turns using the fake alias.  The purported time-sensitive investment opportunity was also fabricated by the defendants, as the companies in which they solicited investments were actually companies under their control.  In one intercepted phone call conversation, ZISKIND described to co-defendant Keith Orlean, the chief executive officer of the company, his strategy for a successful investor sales pitch as: “You ram it down their fucking throat.”  In another intercepted call between ZISKIND and Orlean, upon learning that a particular victim investor died, ZISKIND remarked: “I knew I should have pulled the last $10,000 out of him.”  

The most recent version of the defendants’ phony sales pitch included false representations about an impending initial public offering, or “IPO,” for their company, Digital Donations Technologies, Inc.  For example, in April 2018, ZISKIND assured a victim investor that “our company is doing great,” that the company had an offer for an IPO valued at approximately $300 million, and that Orlean was considering a private sale of the company for more than $1.5 billion.  In truth, however, the defendants knew that the company had little or no actual commercial value and that no such IPO or sale was taking place.  

The FBI estimates that since April 2014, the defendants have convinced more than approximately 50 elderly persons to purchase stock in companies controlled by one or more of  the defendants based on false representations.  During the scheme, the defendants solicited more than $2 million in stock purchases from victims.

In addition to a prison term, ZISKIND, 52, of Brooklyn, New York, was sentenced to 3 years of supervised release, and ordered to pay a forfeiture money judgment in the amount of $732, 018.

Keith Orlean was previously sentenced to a prison term of 32 months.  Kevin Weinzoff, who previously pled guilty, awaits sentencing.

Ms. Strauss praised the outstanding work of the FBI.

The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Robert L. Boone and Andrew Thomas are in charge of the case.

 

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[1] As for the defendants who have pled not guilty, the description of the charges set forth herein constitute only allegations.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced the unsealing of a Superseding Indictment charging three members of the 59 Brims gang with racketeering, narcotics, and firearms offenses. 

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Robert Baley, Augustus Ingram, and Quaveon Ross participated in the activities of a violent gang, conspired to sell significant quantities of heroin, fentanyl, and crack cocaine, and unlawfully possessed firearms.  Now they face significant charges in federal court.  We commend our partners at the NYPD and HSI for their outstanding work on this ongoing investigation.  This Office, working with our law enforcement partners, continues its efforts to prosecute gun violence in New York City.”

NYPD Commissioner Dermot Shea said:  “Gang violence puts all of us in peril – not simply the vicious gang members.  I commend our NYPD detectives and our law enforcement partners for using all of our lawful tools to ensure that the New Yorkers we serve can live free from the threat of it.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “HSI and NYPD continue to relentlessly dismantle violent gangs in the New York Metro area.  The gangsters we take off the street are responsible for numerous murders, deadly drug distribution, and senseless violence throughout our communities.  As alleged, we cut the 59 Brims at their roots, arresting the ‘Godfather’ of New York.  This was the culmination of the systematic and successful indictment of the entire 59 Brims’ top leadership across all 5 boroughs.  Our agents and officers have done outstanding work during the course of this investigation and I applaud their tireless commitment to public safety.”

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

ROBERT BALEY, a/k/a “Dead Eye,” AUGUSTUS INGRAM, a/k/a “Elevator,” and QUAVEON ROSS, a/k/a “Bullet,” are members of the 59 Brims gang, a criminal organization whose members engaged in, among other activities, acts involving murder, robbery, fraud, and the distribution of controlled substances. 

The 59 Brims operate in and around Manhattan, the Bronx, Queens, and Brooklyn, New York.  Members of the 59 Brims engaged in a series of violent disputes with rivals of the 59 Brims, including those within the 59 Brims who were deemed disloyal.  During these disputes, members and associates of the 59 Brims committed multiple murders, shootings, robberies, and assaults against their rivals and against fellow members of the 59 Brims.  Members of the 59 Brims sold heroin, fentanyl, crack cocaine, and marijuana, and committed, or attempted to commit, acts of violence to protect and expand their narcotics business.

Today’s Superseding Indictment follows initial charges brought in February 2020 against 18 members and associates of the 59 Brims gang, who were charged with racketeering, narcotics, and firearms offenses, including murder and attempted murder. 

*                *                *

BALEY, 43, of Brooklyn, New York, was arrested on October 15, 2020, in Scranton, Pennsylvania.  INGRAM, 49, of New York, New York, was arrested on October 14, 2020, in New York, New York.  ROSS, 23, of New York, New York, remains at large.  This case is assigned to United States District Judge George B. Daniels.

A chart containing the charges and maximum 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 NYPD and HSI.  Ms. Strauss also praised the New York City Department of Correction, Correction Intelligence Bureau, and the Bronx District Attorney’s Office for their assistance in the investigation.  Ms. Strauss also thanked the Pennsylvania State Police - Bureau of Criminal Investigations - North East and South Central Drug Enforcement Divisions and Blooming Grove Barracks for their assistance in the arrest of Baley.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Michael D. Longyear, Jacob Warren, Adam S. Hobson, and Peter J. Davis 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.

COUNT

DEFENDANT(S)

MAX. TERM OF IMPRISONMENT

Count One: Conspiracy to Commit Racketeering (18 U.S.C. § 1962(d))

All Defendants

Life imprisonment

 

Count Two: Conspiracy to Distribute Controlled Substances (21 U.S.C. § 846)

All Defendants

 

Life imprisonment; Mandatory Minimum Sentence of 10 years

Count Three: Possession of a Firearm in Furtherance of a Drug Trafficking Crime (18 U.S.C. §§ 924(c)(1)(A)(i) and 2)

All Defendants

Life Imprisonment; Mandatory Minimum Sentence of 5 years

 

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[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.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that the United States has settled two related federal Fair Housing Act (“FHA”) lawsuits against ATLANTIC DEVELOPMENT GROUP, LLC (“ATLANTIC”).  Under the settlement, ATLANTIC has agreed to make retrofits at 71 rental buildings in the Bronx, Manhattan, and Westchester County, which together contain more than 6,000 affordable units as well as several hundred market-rate apartments.  ATLANTIC also agreed to provide $600,000 to compensate aggrieved persons and pay a $30,000 civil penalty.  Additionally, ATLANTIC agreed to establish procedures to ensure that its future residential development projects will comply with the accessibility requirements of the FHA.  The settlement was approved today by U.S. District Judge Lewis J. Liman. 

Acting U.S. Attorney Audrey Strauss said:  “The Fair Housing Act protects people with disabilities from being treated as second-class citizens when it comes to housing.  This right applies equally to residents in affordable housing as to those living in luxury high-rises.  Today’s settlement is part of this Office’s long-standing effort to fulfill the FHA’s promise of accessibility for people with disabilities and a reminder to real estate developers that we will continue to enforce the FHA’s accessibility requirements vigorously.”

The FHA’s accessible design and construction provisions require multifamily housing complexes constructed after January 1991 to have basic features accessible to persons with disabilities.  The settlement with ATLANTIC is the 17th settlement reached by this Office with developers and architects to remedy inaccessible housing in this District.  It was reached after the Court denied in its entirety ATLANTIC’s motion to dismiss.

According to the allegations in the complaints in the two FHA cases, a recurring pattern of inaccessible conditions exists at ATLANTIC’s rental buildings, including excessively high thresholds at building entrances and entrances to common use areas, ramps that lack handrails on both sides, common use bathrooms that lack grab bars and pipe insulation, excessively high thresholds at entrances to individual apartments and within the apartments, and bathrooms in individual apartments that lack sufficient clear floor space for people who use wheelchairs.   ATLANTIC admitted in the court-ordered settlement stipulation that features in the common use areas of their buildings, as well as in their buildings’ apartment interiors, did not meet the specifications set forth in the Fair Housing Accessibility Guidelines, Design Guidelines for Accessible/Adaptable Dwellings.

Under the settlement, ATLANTIC agreed to make retrofits to the public and common use areas as well as the individual units at its 71 rental buildings to improve accessibility at those buildings.  The settlement also requires ATLANTIC to establish procedures to ensure FHA compliance at its future development projects, including to retain an FHA compliance consultant to assess the design documents and conduct site visits to identify non-compliant conditions.  In addition, ATLANTIC agreed to institute policies and training to ensure that its employees and agents will comply with the FHA’s accessibility requirements.

Finally, the settlement requires ATLANTIC to provide $600,000 to compensate aggrieved persons.  Aggrieved persons may be entitled to monetary compensation from the fund created through today’s settlement.  Aggrieved individuals may include those who:

• Were discouraged from living at one of Atlantic’s rental buildings because of the lack of accessible features;
• Have been hurt in any way by the lack of accessible features at one of Atlantic’s rental buildings;
• Paid to have an apartment at one of Atlantic’s rental buildings made more accessible to persons with disabilities; or
• Otherwise were discriminated against on the basis of disability at one of Atlantic’s rental buildings as a result of inaccessible design and construction.

Any individual who may be entitled to compensation can file a claim by using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, or by sending a written claim to:

• U.S. Attorney’s Office, Southern District of New York      
• 86 Chambers Street, 3rd Floor                      
• New York, New York 10007      
• Attention: Chief, Civil Rights Unit

Finally, ATLANTIC agreed to pay a civil penalty of $30,000.

The case is being handled by the Office’s Civil Rights Unit.  Assistant U.S. Attorneys Li Yu, Jacob Lillywhite, Steven Kochevar, and David J. Kennedy are in charge of the case.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Phillip R. Bartlett, the Inspector in Charge of the New York Division of the United States Postal Inspection Service (“USPIS”), and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced that CHUKWUEMEKA OKPARAEKE, a/k/a “Emeka,” pled guilty to distributing U-47700, a controlled substance analogue of AH-7921; importing 100 grams and more of acryl fentanyl, a controlled substance analogue of fentanyl, from Hong Kong; and making false statements to prosecutors and investigators regarding the proceeds of his offenses.  OKPARAEKE pled guilty today in White Plains federal court before U.S. Magistrate Judge Paul E. Davison.  The case is assigned to U.S. District Judge Nelson S. Román.

Through his guilty plea, OKPARAEKE admitted that in November 2016, he sold U-47700 to an individual (the “Victim”), who died from an overdose after using the drug.  OKPARAEKE further admitted that his narcotics offenses involved 9.044 kilograms of acryl fentanyl, 6.957 kilograms of U-47700, 1.159 kilograms of furanyl fentanyl, an analogue of fentanyl, and 12 grams of 4-ANPP.  As part of his guilty plea, OKPARAEKE agreed to forfeit 680.60963624 bitcoins – approximately $7,298,000 – in proceeds generated by his illicit narcotics sales.

Acting U.S. Attorney Audrey Strauss said:  “As he admitted today, Chukwuemeka Okparaeke peddled highly addictive, and in one case lethal, opioids over the darknet.  He also lied to agents and prosecutors about the whereabouts of more than $7 million in bitcoin proceeds from his illegal sales.  Now Okparaeke will forfeit those illicit proceeds, and he awaits sentencing for his crimes.”

Postal Inspector in Charge Phillip R. Bartlett said:  “This case represents the tragic impact of fentanyl and other illicit narcotics in this country.  Mr. Okparaeke used the anonymity of the darknet to peddle his narcotics believing he would be shielded from arrest and prosecution.  Postal Inspectors want to remind criminals there is no place you can hide when you use the U.S. Mail to facilitate your illegal activity.  We will spare no resource to find you, arrest you, and bring you to justice for your illegal deeds.”

HSI Special Agent-in-Charge Peter C. Fitzhugh said:  “This investigation identified Okparaeke as a darknet marketplace vendor responsible for the sale of highly addictive and deadly narcotics which resulted in a fatal overdose.  The anonymity most seek by using the darknet did not shield Okparaeke, who is now facing the consequences of his actions.  One overdose, one life taken, is one too many.  To those who try to hide on the darknet while profiting off ruined lives, you will be found, you will be arrested, and you will be prosecuted.”

According to the allegations in the Superseding Information, Complaint, other court filings, and statements made during public court proceedings:

From at least July 2016 through March 2017, OKPARAEKE imported kilogram-quantities of fentanyl analogues, including acryl fentanyl and furanyl fentanyl, and other synthetic opioids, including U-47700, from Hong Kong and China into the United States.  To transact with customers and coordinate his narcotics sales, OKPARAEKE used a darknet website known as AlphaBay Market (“AlphaBay”), accessible only through a special software program that allows users to mask their identities and anonymize their internet traffic.  Under the AlphaBay vendor name “Fentmaster,” OKPARAEKE engaged in more than 7,000 sales of synthetic opioids, which he shipped to customers throughout the United States using the U.S. Postal Service.  OKPARAEKE paid a commission on each of his narcotics sales to the administrators of AlphaBay.  In total, OKPARAEKE’s narcotics trafficking generated more than $7 million in illicit proceeds.

In November 2016, OKPARAEKE sold three grams of U-47700 to the Victim, an 18-year-old living in Vancouver, Washington, in an AlphaBay transaction.  The Victim used the drugs purchased from OKPARAEKE and died in a U-47700 overdose on November 10, 2016.  Prior to his death, the Victim researched Fentmaster online.  On November 6, 2016, the Victim sent a friend a text message saying that he had purchased drugs from Fentmaster.  The Victim subsequently left a review on OKPARAEKE’s AlphaBay vendor page confirming that he had received the drugs.

OKPARAEKE – who attended medical school before he began selling synthetic opioids on AlphaBay – used extensive measures to conceal his identity, including software to encrypt his internet traffic and communications sent from his cellphone.  Using alter egos, he boasted online about his exploits as a darknet drug trafficker, offered advice to other drug dealers, and published a short story describing his criminal activities and his strategies for evading law enforcement.  In January 2017, Customs and Border Protection (“CBP”), in conjunction with HSI and USPIS, intercepted several packages containing kilogram quantities of fentanyl analogues that OKPARAEKE had imported from Hong Kong.  Subsequently, in March 2017, law enforcement searched a drug premises OKPARAEKE maintained in Kearny, New Jersey.  During the search, law enforcement seized more than 10 kilograms of U-47700, acryl fentanyl, and furanyl fentanyl, as well as a quantity of 4-ANPP and approximately 82 mailing envelopes containing smaller amounts of those substances that OKPARAEKE had packaged for distribution to his customers.

On September 15, 2020, OKPARAEKE met with representatives of the U.S. Attorney’s Office for the Southern District of New York and USPIS.  During that meeting, OKPARAEKE falsely represented that approximately 680 bitcoins – more than $7 million – generated by his narcotics sales on AlphaBay were not in his possession and control.  In addition, OKPARAEKE falsely claimed that a third party had stolen the bitcoin from him through hacking and other unauthorized access to OKPARAEKE’s electronic accounts.  OKPARAEKE subsequently surrendered the 680 bitcoins to USPIS and agreed to forfeit those proceeds as part of his plea agreement.

*                *                *

OKPARAEKE, 31, of Middletown, New York, pled guilty to one count of distributing U-47700, a controlled substance analogue of AH-7921, which carries a maximum sentence of 20 years in prison; one count of importing 100 grams and more of acryl fentanyl, a controlled substance analogue of fentanyl, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life imprisonment; and one count of making false statements in a matter within the executive branch of the Government of the United States, which carries a maximum sentence of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

OKPARAEKE is scheduled to be sentenced by Judge Román on December 17, 2020, at 10:30 a.m.

Ms. Strauss praised the outstanding efforts of USPIS, HSI, CBP, the Federal Bureau of Investigation, the Fairfax County, Virginia, Police Department, the Virginia Office of the Attorney General, the Middletown Police Department, and the Vancouver, Washington, Police Department for their investigative work and ongoing support and assistance with the case. 

The case is being prosecuted by the Office’s White Plains Division.  Assistant United States Attorneys Gillian Grossman, Olga Zverovich, and Sagar Ravi are in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced the successful conclusion of the United States’ long-running investigation into Westchester County Jail (the “Jail”) under the Civil Rights of Institutionalized Persons Act (“CRIPA”).  After conducting an investigation and issuing a Findings Letter in January 2016, the United States entered into an agreement with Westchester County regarding the Jail’s use of force against inmates, its use of isolation as a method of discipline for minors incarcerated at the jail, and its provision of inadequate medical and mental health care to inmates.  The Agreement required the appointment of an independent Monitor to ensure that the Jail complied with the agreement.  The Monitor’s most recent compliance report concluded that the Jail is in full compliance with every provision of the Agreement, and recommends its termination.  Today, the United States accepts the Monitor’s recommendation, agrees to terminate the Agreement, and commends the Jail on its achievement.

Acting U.S. Attorney Audrey Strauss said:  “Since the commencement of our investigation in 2007, Westchester County Jail has worked steadily and in good faith to implement sweeping reforms that have significantly improved the treatment of inmates at the facility.  The Jail is a completely transformed institution, having implemented every provision of the agreement and even creating policies and programs that go beyond what the agreement requires.  At every step along the way, the Jail’s leadership and staff have been a willing partner in creating lasting reforms that have significantly improved the quality of life for inmates and detainees within the facility.  I commend Westchester County Jail for its efforts.”

The Jail, located in Valhalla, New York, houses pretrial detainees and sentenced inmates.  The Jail also housed minors before the State of New York enacted “Raise the Age” in October 2018, prohibiting minors from being housed in adult corrections facilities.  The final minor housed in the Jail was transferred to a juvenile facility on November 8, 2019.    

The successful conclusion of the Agreement between the United States and the Jail resolves a long-running investigation into the Jail.  In 2009, the United States issued a letter setting forth the Government’s findings regarding constitutional violations at the Jail.  Key findings included that the Jail had failed to adequately protect inmates from physical harm caused by inappropriate and excessive force used by staff and failed to provide adequate medical and mental health care, particularly with respect to minors housed in isolation in the punitive segregation unit, all resulting in unconstitutional living conditions. 

Following extensive negotiations between the Government and Westchester County, on November 24, 2015, the parties entered into an Agreement with an effective date of January 1, 2016.  The Agreement contains 25 provisions with 82 sub-provisions relating to protection from harm, medical care, mental health care, and minors.  The Agreement requires the Jail to take measures designed to ensure that its use of force is not excessive and consistent with the law; to implement appropriate policies and practices concerning review of all uses of force, training of staff, and supervision of inmates; and to improve the provision of medical and mental health care for both minors and adults.  In addition, the Agreement mandates the appointment of an independent Monitor to assist the County in achieving compliance with the provisions of the Agreement, to make reports concerning the status and progress of compliance, and to provide the County with technical assistance to comply with the provisions of the Agreement.  Finally, the Agreement provides for termination once the United States agrees that the County is in substantial compliance with all provisions and has maintained substantial compliance with all provisions for 24 months.

Since the Agreement was enacted, the United States and the Monitor have had full access to the Jail and its records, staff and inmates.  The Monitor has issued nine bi-annual compliance reports, reviewing the Jail’s non-, partial-, or substantial-compliance with each of the provisions in the Agreement, noting where the Jail has succeeded and where the Jail must improve.  In the ninth and most recent compliance report, the Monitor determined that the Jail had achieved substantial compliance with each and every provision, and had maintained such substantial compliance for at least a 24-month period.  Accordingly, consistent with the terms of the Agreement, the Monitor recommended its full termination. 

The Jail has been transformed since the initiation of the Government’s investigation.  For example, use of force incidents have plummeted and continued to decrease significantly each reporting period.  Indeed, potential use of force incidents are de-escalated and resolved without resorting to any use of force the vast majority of the time – recently, more than 80% of the time.  Moreover, staff are now consistently and routinely trained in de-escalation tactics; use of force incidents are immediately reviewed; and staff are swiftly disciplined for any deviation from reporting requirements and de-escalation procedures.  Mental health care and medical care has likewise improved dramatically, and the Jail has placed particular emphasis on rehabilitative care for inmates with mental health issues, instead of focusing on purely punitive measures.

The Jail has also implemented changes beyond what was required by the Agreement.  For example, in a joint venture with Legal Aid of Westchester County, the Jail opened a Legal Aid office within the facility, allowing inmates frequent access to legal resources.  In addition, the Jail partnered with Westchester County Social Services to embed staff in the jail for discharge planning, which allows inmates to plan for their lives after being released from custody.  Indeed, the Jail has focused extensively on rehabilitation and reentry and provides a number of programming options to inmates, including culinary, civil engagement, and college programs, as well as a nationally-recognized parenting program, “Parenting, Prison and Pups,” which pairs female inmates with foster dogs and garnered a National Jefferson Award.  And on November 18, 2018, The Obama Foundation announced that Westchester County Jail, in partnership with the Nepperhan Community Center of Yonkers and the City of Yonkers, was selected as one of only ten nationwide winners – and the only one with ties to a jail or prison population – of the Foundation’s My Brother’s Keeper Community Alliance Challenge as one of the National Impact Communities awardees for its job readiness program. 

The Jail’s leadership has been instrumental in making these changes.  Ms. Strauss praised the work of Westchester County Executive George Latimer, Westchester County Department of Corrections Commissioner Joseph Spano, Westchester County Department of Corrections First Deputy Commissioner Louis A. Molina, and the entire staff at Westchester County Jail.  Acting U.S. Attorney Strauss also praised the work of the Monitor, David Bogard, and his team at Pulitzer/Bogard & Associates.

The case is being handled by the Office’s Civil Rights Unit.  Assistant U.S. Attorney Ellen Blain is charge of the case.

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 Arnold Amthor, Chief of the City of Newburgh Police Department, announced that ALBERTO RIVERA, a Newburgh resident, was arrested this morning and charged with possession with intent to distribute narcotics, possessing a firearm during and in relation to a drug trafficking crime, and being a felon in possession of a firearm in connection with an incident that occurred in the City of Newburgh on October 1, 2020.  RIVERA will be presented before United States Magistrate Judge Paul E. Davison in White Plains federal court later today.

Acting U.S. Attorney Audrey Strauss said:  “Thanks to the quick work of a City of Newburgh detective, Alberto Rivera was apprehended while allegedly illegally in possession of a firearm and carrying illegal narcotics.  Working with the City of Newburgh Police Department and the FBI, we have now charged Rivera with serious federal crimes.”

FBI Assistant Director William F. Sweeney Jr. said:  “The community of Newburgh has faced its share of crime, and those who wish to live there peacefully don’t need another reminder of the long list of threats posed by illegal guns and drugs.  Rivera was already on parole for unrelated crimes, the conditions of which he was in violation on the night an on-duty detective noticed him while on patrol.  In an effort to escape arrest, he allegedly tossed the backpack he was carrying, and the contents along with it, aside. Unfortunately for him, that’s not how this works.  Federal charges don’t get tossed to the side, and the penalties they carry are usually pretty severe.”

City of Newburgh Police Chief Arnold Amthor said:  “We commend the excellent work of the detective who arrested Alberto Rivera.  As alleged, Rivera was illegally in possession of a gun at the time.  This department is committed to making the City of Newburgh safer, and to working with the FBI and federal prosecutors to do so where appropriate.”

According to the allegations contained in the Complaint[1]:

On October 1, 2020, around 1:24 p.m., a City of Newburgh detective, who was familiar with RIVERA and knew a warrant had been issued for RIVERA for absconding on parole, spotted RIVERA riding a bicycle on Broadway in the City of Newburgh.  When the detective stopped his vehicle in RIVERA’s path, RIVERA fled the scene, tossing a backpack containing a firearm and large quantity of narcotics as he ran from the detective.  The detective gave chase and apprehended RIVERA in the backyard of a nearby pizzeria.  Detectives recovered the backpack from the same backyard.

*                *                *

RIVERA, 25, of Newburgh, New York, is charged with one count of possession with intent to distribute narcotics, which carries a maximum sentence of 20 years in prison; one count of carrying a firearm during and in relation to a drug trafficking crime, which carries a mandatory minimum sentence of five years in prison; and one count of being a felon in possession of a firearm, which carries a maximum sentence of 10 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 City of Newburgh Police Department and the Federal Bureau of Investigation.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Jennifer Ong 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.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that LARRY WHITE, a/k/a “L.O.,” pled guilty today in Manhattan federal court to participating in a racketeering enterprise known as Bully Gang, setting two cars on fire in Manhattan on January 14, 2019, committing multiple armed robberies, and committing a shooting on June 3, 2017, in Manhattan.  U.S. District Judge Jed S. Rakoff accepted the defendant’s guilty plea.

Acting U.S. Attorney Audrey Strauss said:  “Today, Larry White admitted to a brazen and dangerous crime spree in New York City, including armed robberies, an arson, firearms offenses, and his active participation in a dangerous gang.  We continue our daily work with our law enforcement partners to keep our communities safe and to vigorously investigate acts of violence committed by gang members.”

As alleged in the Indictment and statements made in open court:

Bully Gang was a criminal enterprise involved in committing armed robberies throughout New York City.  As admitted today in open court today, White personally participated in multiple armed robberies in furtherance of Bully Gang, set two cars on fire in Manhattan, and shot a victim on June 3, 2017, in Manhattan. 

*               *               *

WHITE, 33, of New York, New York, pled guilty to participating in a racketeering enterprise, which carries a statutory maximum sentence of 20 years in prison; Hobbs Act robbery, which carries a statutory maximum sentence of 20 years in prison; brandishing a firearm in furtherance of a crime of violence, which carries a statutory maximum sentence of life in prison, and a mandatory minimum sentence of seven years in prison to run consecutively to any other term of imprisonment; being a felon in possession of a firearm, which carries a statutory maximum sentence of 10 years in prison; and arson, which carries a statutory maximum sentence of 20 years in prison, and a mandatory minimum sentence of five years in prison. 

WHITE is scheduled to be sentenced on January 28, 2021.

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 New York City Police Department and Homeland Security Investigations.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Michael Longyear, Jacob Warren, Andrew Chan, and Paralegal Specialist Claudia Hernandez are in charge of the prosecution.

Audrey Strauss, 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”), and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced today that DIMITRIOS LYMBERATOS, the operator of a Queens pharmacy, has been charged with obstruction of justice for arranging for a package containing white powder, later identified as cocaine, to be sent to the home address of a DEA Diversion Investigator who was investigating LYMBERATOS’s pharmacy.  LYMBERATOS surrendered to the DEA this morning and will be presented before United States Magistrate Judge Barbara Moses in Manhattan federal court later today.

Acting U.S. Attorney Audrey Strauss said:  “When Dimitrios Lymberatos learned his pharmacy was under investigation by the DEA, he allegedly took sinister action against a Diversion Investigator assigned to his case.  Lymberatos allegedly sought to interfere with the investigation through intimidation, by sending cocaine to the Investigator’s home, potentially causing physical harm.  Lymberatos’s misguided message was received loud and clear – and he now faces the possibility of a lengthy prison term for his potentially harmful attempt to obstruct law enforcement.”

DEA Special Agent in Charge Raymond P. Donovan said:  “Today’s arrest is another example to the public that pharmacy owners can set out to do harm with ill intent.  One of our own Diversion Investigators was allegedly targeted simply for doing their job, and as such, Mr. Lymberatos’s alleged actions were completely unconscionable.  Thankfully, due to the diligent work of our Tactical Diversion Squads, he will be brought to justice.” 

NYPD Commissioner Dermot Shea said:  “I want to commend the officers, detectives, federal agents, and prosecutors who worked together to investigate the dangerous acts alleged in these charges.”

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

LYMBERATOS is the operator of a pharmacy in Queens, New York.  Beginning in or about November 2019, the DEA, led by a DEA Diversion Investigator, conducted an overt regulatory investigation into the pharmacy, which had the effect of delaying the issuance of the pharmacy’s registration to dispense controlled substances.  LYMBERATOS responded to the investigation of his pharmacy by taking steps to obstruct the investigation, including hiring a private investigator to obtain the Diversion Investigator’s home address, and then causing to be mailed to the Diversion Investigator’s home a greeting card containing a white powdery substance, which law enforcement later determined to be cocaine.  Upon receiving the package with white powder, the Diversion Investigator immediately notified law enforcement, which responded to the scene, and the Diversion Investigator was taken to the hospital for toxicology screening.  LYMBERATOS caused the package to be sent to the Diversion Investigator in order to interfere with and obstruct the pending investigation into his pharmacy by threatening the Diversion Investigator, deliberately causing the Diversion Investigator to fear for her physical safety, and seeking to create trouble for the Diversion Investigator by causing her to come into possession of an illegal controlled substance. 

*                      *                      *

LYMBERATOS, 34, of Queens, New York, is charged with one count of obstruction of justice and one count of conspiracy to obstruct justice.  Each charge carries a maximum penalty of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Ms. Strauss praised the outstanding investigative work of the DEA’s New York Tactical Diversion Squad, which comprises agents and officers from the DEA, the New York City Police Department, the New York State Police, New York State Department of Financial Services, New York National Guard, New York City Department of Investigation, and New York State Department of Health Bureau of Narcotics Enforcement.  Ms. Strauss also praised the outstanding work of the Organized Crime Drug Enforcement Task Force (“OCDETF”) New York Strike Force Tactical Diversion Squad.  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.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Jacob R. Fiddelman and Kedar S. Bhatia 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.

 

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[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.

Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that RICHARD CASTRO, a/k/a “Chemsusa,” a/k/a “Chems_usa,” a/k/a “Chemical_usa,” a/k/a “Jagger109,” was sentenced to 210 months in prison today for participating in a conspiracy to distribute carfentanil, fentanyl, and a fentanyl analogue over the “dark web,” including on AlphaBay and Dream Market, and for laundering the proceeds of his narcotics trafficking.  CASTRO also was ordered to forfeit more than $4 million in criminal proceeds.  CASTRO previously pled guilty before U.S. District Judge Denise L. Cote, who imposed today’s sentence.

Acting U.S. Attorney Audrey Strauss said:  “For several years, Richard Castro used the dark web to sell prolific quantities of powerful opioids, including fentanyl and carfentanil.  Castro’s drugs put lives in danger virtually every day – including the lives of the postal carriers who unknowingly delivered his product.  Today’s lengthy sentence sends a clear message about this type of dangerous conduct.”

According to the allegations in the Indictment to which RICHARD CASTRO pled guilty, public court filings, and statements made in court:

From November 2015 through March 2019, CASTRO conspired to distribute carfentanil, fentanyl, and phenyl fentanyl (an analogue of fentanyl).  Fentanyl is a synthetic opioid that is significantly stronger than heroin, and carfentanil is a fentanyl analogue that is approximately 100 times stronger than fentanyl.  For most of the conspiracy, CASTRO and a co-conspirator dealt drugs over the dark web, using the monikers “Chemsusa,” “Chems_usa,” and “Chemical_usa.”  CASTRO was an operator of these online monikers and the leader of this conspiracy.  On one dark web marketplace, Dream Market, CASTRO boasted that he had completed more than 3,200 transactions on other dark web markets, including more than 1,800 on AlphaBay.  The customer feedback for “Chemsusa” included, “Extremely potent and definitely the real Carf,” as well as “The Carfent is unbelievably well synthesized, keep up the amazing work.” 

In June 2018, CASTRO, using the “Chemsusa” moniker, informed his customers that he was moving his business off dark web marketplaces and would accept purchase requests for narcotics only via encrypted email.  To learn the off-market email address, “Chems_usa” required willing customers to pay a fee.  An undercover law enforcement officer paid this fee, obtained the encrypted email address, and placed multiple orders with CASTRO.  CASTRO’s co-defendant, Luis Fernandez, shipped narcotics on behalf of the conspiracy, including from New York City. 

CASTRO’s customers paid him in bitcoin.  CASTRO laundered his narcotics proceeds in several ways, including by funneling millions of dollars through his bitcoin wallets and by buying approximately 100 quadrillion Zimbabwe bank notes, among other valuables.

In March 2019, law enforcement searched CASTRO’s residence in Windermere, Florida.  During this search, officers found, among other things, nine firearms, including an AR-15 assault rifle, and two safes that secured private keys to multiple bitcoin wallets.  CASTRO also had several cars, including a Lamborghini and a Tesla. 

*                *                *

In addition to his prison term, CASTRO, 37, of Windermere, Florida, was sentenced to five years of supervised release and ordered to forfeit $4,156,198.18.

CASTRO’s co-conspirator, Luis Fernandez, was previously sentenced to 151 months in prison and four years of supervised release, and was ordered to forfeit $269,623.

Ms. Strauss praised the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the New York City Police Department for their outstanding investigative work.  Ms. Strauss also thanked the Internal Revenue Service and the Orange County, Florida, Sheriff’s Office for their assistance in this case.

This matter is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Michael D. Neff, Aline R. Flodr, and Ryan B. Finkel are in charge of the prosecution.

Audrey Strauss, 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 JEFFREY HASTINGS, the former chief executive officer and chairman of the board of directors of SAExploration Holdings, Inc. (“SAEX” or the “Company”), a publicly traded seismic data company based in Houston, Texas, with securities fraud, wire fraud, and related offenses for his role in a scheme to fraudulently and materially inflate the publicly reported revenue of SAEX by tens of millions of dollars, in 2015 and 2016, and also for misappropriating millions of dollars from the Company.  HASTINGS was arrested on September 11, 2020, in Anchorage, Alaska, on a complaint (the “Complaint”) and presented before a magistrate judge in the District of Alaska on September 15, 2020.  The case is assigned to U.S. District Judge Gregory H. Woods. 

Acting Manhattan U.S. Attorney Audrey Strauss said:  “Jeffrey Hastings, the former CEO and chairman of the board of SAEX, and his co-conspirators, allegedly schemed to inflate the company’s revenue, thereby making the company appear more profitable than it was.   Hastings and his co-conspirators then stole money from SAEX to line their own pockets.  Thanks to the assistance of the FBI, Hastings’s trail of deceit has come to an end, and he now faces multiple fraud charges.”

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Hastings and his co-conspirators stole approximately $12 million from SAEX.  They used a series of shell companies, and a company they claimed was independent from SAEX, to fraudulently inflate SAEX’s revenue, including by round-tripping millions of dollars stolen from SAEX.  Hastings and his co-conspirators used the rest of the stolen money, approximately $5 million, to pad their own pockets.  Today’s Indictment shows that illegal business dealings, even by a company’s highest executive, will be faced with intense scrutiny.” 

According to the allegations contained in the Complaint and the Indictment:[1]

At all times relevant to the Indictment until August 2016, HASTINGS was the executive chairman of the board of directors of SAEX.  After August 2016, HASTINGS served as both the chairman of the board of directors and the chief executive officer (“CEO”) of SAEX until he separated from the company in August 2019.  SAEX was a publicly traded seismic data acquisition company headquartered in Houston, Texas, that traded under the symbol “SAEX” on the NASDAQ.  SAEX provided land- and marine-based seismic acquisition services, including program design, planning, and permitting, camp services, survey, drilling, recording, and processing.  Seismic data is used by oil and gas companies to identify and analyze drilling prospects and maximize successful drilling.

From at least in or about October 2015 through at least in or about May 2019, HASTINGS, together with the then chief financial officer and general counsel of SAEX (“CC-1”), the founder, and at various times the president, CEO, and chief operating officer of SAEX (“CC-2”), and the then executive vice president of operations at SAEX (“CC-3”), devised and carried out a scheme to defraud SAEX and the investing public by artificially and materially inflating SAEX’s reported revenue by making it appear that Alaskan Seismic Ventures, LLC (“ASV”) was an independent and reliable source of tens of millions of dollars of revenue. 

In February 2015, HASTINGS and CC-1 discussed finding a way for SAEX to take advantage of certain tax credits offered by the State of Alaska to seismic data library companies, to offset the costs of exploring for oil and gas in Alaska (the “Alaska Tax Credits”).  The board of SAEX was opposed to operating its own data library company because of concerns about the ability to ensure payment to SAEX for seismic data, including through the monetization of Alaska Tax Credits, among other reasons.  To avoid the appearance that SAEX was operating a data library company that licensed data to third parties, HASTINGS and CC-1 set up ASV, to purport to operate as an independent customer purchasing seismic data from SAEX and licensing it to third parties.  HASTINGS recruited an acquaintance to serve as the owner and sole employee of ASV.  In truth and in fact, and as hidden from investors, ASV was not independent and could not pay SAEX for its seismic data. 

After setting up ASV, HASTINGS and CC-1 created and caused to be created a number of shell companies (the “Shell Companies”) for the purpose of secretly transferring funds from SAEX into ASV.  One of the Shell Companies, Global Equipment Solutions (“Global Equipment”), was purportedly an equipment rental company from which SAEX rented seismic acquisition equipment.  In truth and in fact, and as HASTINGS and his co-conspirators well knew, SAEX did not rent any equipment from Global Equipment and did not owe Global Equipment any money.  The co-conspirators took steps to make the payments from SAEX to Global Equipment appear legitimate to others at SAEX; for example, CC-1 drafted a lease agreement between SAEX and Global Equipment, and CC-3 caused fake purchase orders to be created that purported to show expenses incurred by SAEX as a result of renting equipment from Global Equipment.

By the end of 2015, SAEX had recorded on its books approximately $12 million in payables to Global Equipment.  HASTINGS and his co-conspirators ultimately routed approximately $5.8 million of SAEX’s funds through Global Equipment, and the other Shell Companies, to ASV.  That money then went from ASV back to SAEX to pay outstanding receivables.  The fact that these funds originated with SAEX was not disclosed to investors.  HASTINGS and his co-conspirators referred to this portion of the scheme as “round-tripping.”     In addition, HASTINGS and CC-1 took more than $5 million of the funds that SAEX transferred to Global Equipment for their own use, including making payments to CC-2 and CC-3, among others.   

*                      *                      *

HASTINGS, 62, of Anchorage, Alaska, and British Columbia, Canada, is charged with one count of conspiracy to commit securities fraud and make false statements in annual and quarterly SEC reports, which carries a maximum sentence of five years in prison, one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of securities 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 investigative work of the FBI and also thanked the Securities and Exchange Commission, which has filed a civil enforcement action against the defendant, for its assistance in the investigation.

The case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Christine I. Magdo, Robert L. Boone, and Gina Castellano 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.

 

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and New York Police Department Commissioner Dermot Shea, announced that JEMFFORD PEREZ, a Manhattan resident, was arrested this morning and charged with being a felon in possession of ammunition in connection with a shooting that occurred in the Tribeca neighborhood of Manhattan on September 27, 2020. PEREZ was presented before United States Magistrate Gabriel W. Gorenstein in Manhattan federal court today.

Acting U.S. Attorney Audrey Strauss said: “On a typically tranquil Sunday of last month, the streets of Tribeca were disrupted with the alarming sound of gunfire, as Jemfford Perez is alleged to have recklessly fired four shots in broad daylight at an individual who was thankfully not struck.  Thanks to the outstanding investigative work of the N.Y.P.D, Perez now faces serious prison time for his alleged potentially deadly conduct which put innocent lives at risk.”

NYPD Commissioner Dermot Shea said: “We applaud our NYPD detectives and partners in the U.S. Attorney’s Office for the Southern District for answering this unacceptable crime with swift and strong consequences.”

According to the allegations contained in the Complaint[1]:

On September 27, 2020, around 4:56 p.m., PEREZ was outside near 155 Franklin Street in Tribeca, when an individual arrived at the same location and parked his vehicle on the street. PEREZ armed himself, approached the individual, and opened fire four times at close range while an individual stood next to his vehicle, though the individual was not struck by the gunfire. PEREZ then fled the scene.

*   *   *

PEREZ, 24, of Manhattan, New York is charged with one count of being a felon in possession of ammunition, which carries a maximum sentence of 10 years in prison. The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Ms. Strauss praised the outstanding investigative work of the NYPD.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Andrew Jones is in charge of the prosecution.

The charge contained in the complaint is merely an accusation, and the defendant is presumed innocent unless and until proven guilty.

 

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[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.

 

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that physical therapist HATEM BEHIRY was sentenced today by U.S. District Judge Lorna G. Schofield to 24 months in prison for his participation in a $30 million scheme to defraud Medicare and the New York State Medicaid Program (“Medicaid”).  Between 2007 and late 2012, on a regular basis, BEHIRY falsely pretended to provide physical therapy services to patients, and falsified medical records in a fraudulent scheme to bill Medicare and Medicaid for non-existent services.  BEHIRY and a co-defendant physician, Paul J. Mathieu, were convicted in May 2019, following a six-week trial, on charges of health care fraud, wire fraud, mail fraud, conspiracy to commit those offenses, and conspiracy to make false statements in connection with a federal health care program.

Acting U.S. Attorney Audrey Strauss said:  “At a time when our medical system may be more important than ever, today’s sentence sends an unambiguous message that those who cheat Medicare and Medicaid will be held accountable.  Corrupt health care professionals who defraud Medicare and Medicaid betray their medical training, their professions, their patients, and the taxpayers.  These taxpayer-funded programs are designed to provide essential medical services to the elderly and the needy, not to enrich corrupt therapists and other fraudsters.”

According to the evidence presented at trial and other public documents:

Between 2007 and 2013, Aleksandr Burman – who is currently serving a 10-year prison term for his participation in this scheme – owned and operated six medical clinics in Brooklyn (the “Clinics”) that fraudulently billed Medicare and Medicaid approximately $30 million for medical services and supplies that were not provided, were provided without regard to medical necessity, or were otherwise fraudulently billed.  As part of this scheme, three medical doctors – Mathieu, Mustak Y. Vaid, and Ewald J. Antone, all of whom have been convicted and sentenced in this case – falsely posed as the owners of the Clinics.  The doctors did so by, among other things, signing various fraudulent documents that falsely represented to banks, Medicare, Medicaid, and others that they were the owners of the clinics. 

Mathieu, Vaid, and Antoine also came weekly to the clinics, where they signed stacks of false and fraudulent medical charts and billing documents for patients that they had not seen, and issued referrals for unnecessary testing, occupational therapy, and physical therapy.

BEHIRY participated in the scheme almost from its inception, in 2007, until late 2012. BEHIRY regularly signed medical records to be used in fraudulent billing, in which he falsely claimed to have provided physical therapy services that he did not in fact provide.  Generally, BEHIRY provided no physical therapy services at all to patients, engaging instead in brief pro forma conversations with the patients, and then completing paperwork that was used to bill Medicare and Medicaid for roughly an hour of physical therapy services.  Typically, patients were told that they had to remain in the clinic for nearly an hour – which they often did by simply watching television in a waiting room for much of that time, and sometimes receiving massages or making unsupervised use of exercise machines (activities that are not billable to Medicare or Medicaid as physical therapy).

In addition, BEHIRY oversaw a group of other physical therapists, whom he arranged to bring to the Clinics to bill fraudulently for physical therapy services that were not in fact provided.

All told, Medicare and Medicaid paid more than $5 million for purported physical therapy services billed under BEHIRY’s name.  As part of the scheme, more than $800,000 was transferred from the Clinics to BEHIRY’s own company.

BEHIRY is the eleventh defendant to be sentenced in this and Burman’s related case.  Mathieu, who was convicted at trial with BEHIRY, was sentenced on December 11, 2019, to four years in prison.  The other defendants, each of whom pled guilty, include:  Aleksandr Burman, who was sentenced in a related case on May 8, 2017, to 10 years in prison; Marina Burman, the former wife of Aleksandr Burman and the owner of a related medical supply company, sentenced on May 17, 2018, to three years in prison; Mustak Y. Vaid, a physician sentenced on August 1, 2018, to 18 months in prison; Ewald J. Antoine, a physician sentenced on August 21, 2018, to a year and a day in prison; Asher Oleg Kataev, a Burman business partner, sentenced on May 31, 2018, to three years in prison; Alla Tsirlin, a Clinic office manager, sentenced on June 5, 2018, to a year and a day in prison; and Edward Miselevich and Ivan Voychak, Burman partners who jointly ran a related ambulette company, sentenced on June 12 and July 19, 2018, to three years in prison each.

*                *                *

In addition to the prison term, BEHIRY, 52, of Brooklyn, New York, was sentenced to three years of supervised release.  Judge Schofield also ordered BEHIRY to pay restitution of $5,757,661 and forfeiture of $808.975.

Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the Office of the Inspector General of the U.S. Department of Health and Human Services, and the New York State Office of the Medicaid Inspector General (“OMIG”).

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys David Raymond Lewis, Stephen J. Ritchin, and Timothy V. Capozzi are in charge of the prosecution.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, today announced that Assistant U.S. Attorney Andrew E. Krause has been appointed to serve as a United States Magistrate Judge.  He will sit in White Plains.

AUSA Krause has served in the Office’s Civil Division for eight years, and serves as the Division’s Senior Litigation Counsel and Professional Responsibility Officer.  In those capacities, he has led the Division’s training efforts and supervision of civil trials, served as a resource for Civil Division AUSAs, and has litigated an extensive docket of complex affirmative and defensive matters.  Before joining the Office, AUSA Krause had six years of private-sector legal experience, and served as law clerk to former Southern District Judge Stephen C. Robinson in White Plains.  He is a graduate of Harvard Law School and Yale University.

AUSA Krause has represented the United States and its agencies and employees in varied cases, often among the Office’s most sensitive and difficult matters.  Among these, he has defended lawsuits challenging the actions of regulatory agencies; brought affirmative environmental enforcement lawsuits on behalf of the United States; pursued False Claims Act recoveries arising from fraud against the government; and handled numerous sensitive matters, including constitutional and tort claims against the federal government and its employees. 

            Acting U.S. Attorney Audrey Strauss said:  “I am extremely pleased and excited that Andrew Krause has been selected to serve as a Magistrate Judge in this District.  Andrew has been an outstanding AUSA throughout his time in the Office, both in handling his own cases with integrity and skill, and in providing invaluable assistance and counsel to colleagues.  I am confident that with his intellect, integrity, and profound sense of fairness, Andrew will be a terrific Magistrate Judge.”

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced that ANTHONY YOUNG, a/k/a “Royalty,” was sentenced today to 20 years in prison for conspiring to sex traffic minor victims.  YOUNG’s sentence was imposed by United States District Judge Sidney H. Stein, before whom he previously pled guilty to one count of conspiracy to sex traffic minor victims.  As part of his plea, YOUNG acknowledged that he conspired to traffic two minor females.

Acting U.S. Attorney Audrey Strauss said:  “In violation of federal criminal law, Anthony Young had sex with two minors and further sexually abused and exploited them by directing them to engage in commercial sex, keeping the proceeds for himself.  For his callous and abusive conduct, Young has been sentenced to 20 years in prison.”

FBI Assistant Director William F. Sweeney Jr. said:  “Luring children into the sex trade, and then physically abusing those children, is beyond contemptible. Now that Mr. Young is thankfully bound for a federal prison cell, he’ll no longer be able to abuse our most vulnerable population.  Our FBI/NYPD Child Exploitation and Human Trafficking Task Force members do extremely difficult and emotionally draining work each day, but saving even one child from being victimized by a predator provides some light at the end of a very dark tunnel.  Please call us at 1-800-CALL-FBI if you know anyone who may need our help.”

Commissioner Dermot Shea said:  “Today’s sentencing underscores the importance of our work to stop anyone who would sexually abuse and exploit minors.  I commend our FBI/NYPD Child Exploitation and Human Trafficking Task Force, and all of our law-enforcement partners, for working tirelessly to seek justice and for helping these victims get the services they need.”

According to the Indictment and other court documents filed in Manhattan federal court:

YOUNG worked with others to lure two minor females, who had not yet turned 16 years old, into the commercial sex trade on the pretense of romance.  More than 10 years older than his victims, YOUNG had sex with them, took sexually suggestive pictures of them, advertised them for commercial sex, and told them how much they should charge for commercial sex acts. YOUNG arranged for his victims to be transported to various hotels to engage in commercial sex acts, and then he kept all the proceeds from these sex acts for himself.   

*                      *                     *

In addition to his prison sentence, YOUNG, 34, was sentenced to 10 years of supervised release.

Ms. Strauss praised the outstanding investigative work of the FBI and the New York City Police Department (“NYPD”), and in particular, the FBI-NYPD Child Exploitation and Human Trafficking Task Force.  She also thanked the Kings County District Attorney’s Office, the New York City Department of Correction, and the New York City Human Resources Administration for their assistance in this matter.  

The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Rushmi Bhaskaran and Sarah Mortazavi are in charge of the prosecution.

Audrey Strauss, Acting United States Attorney for the Southern District of New York, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that ARMANDO J. PEREZ, the former Chief of Police of the City of Bridgeport, Connecticut (the “City”), and DAVID DUNN, the City’s former acting personnel director, pled guilty today to defrauding the City by rigging the 2018 police chief examination in order to ensure PEREZ would be selected for the position, and to making false statements to federal agents in the course of the investigation.  PEREZ and DUNN pled guilty before U.S. District Judge Kari A. Dooley in Bridgeport federal court this morning.

Acting U.S. Attorney Audrey Strauss said:  “As they have now admitted, former Chief Perez and former 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.  Today’s pleas are a significant step in ensuring that Bridgeport’s citizens and police officers have leaders with integrity who are committed to enforcing, not breaking, the law.”   

According to the allegations contained in the Complaint, the Informations, publicly available information, court filings, and statements made during the plea proceedings:

The Scheme to Rig the City of Bridgeport’s Police Chief Exam

The charges 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 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.

*                *                *

PEREZ, 64, of Trumbull, Connecticut, and DUNN, 73, of Stratford, Connecticut, each pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum penalty of five years in prison; and one count of making false statements to federal investigators, which carries a maximum penalty of five years in prison.

PEREZ is scheduled to be sentenced by Judge Dooley on January 4, 2021, and DUNN is scheduled to be sentenced by Judge Dooley on January 11, 2021.

The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentences of PEREZ and DUNN will be determined by the Court.

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.             

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that RICHARD LIRIANO was sentenced yesterday to 30 months in prison for engaging in a scheme to use malicious software programs, including a program known as a “keylogger,” on dozens of his coworkers’ computers at a New York City-area hospital, secretly obtaining user names and passwords to his victims’ personal email and other accounts, and using that unauthorized access to steal private and confidential files.  Using his victims’ stolen credentials, LIRIANO repeatedly compromised their password-protected online accounts, and accessed their sensitive personal photographs, videos, and other private documents.  LIRIANO’s sentence was imposed by United States District Judge Lewis A. Kaplan.

Acting U.S. Attorney Audrey Strauss said:  “For approximately five years, Richard Liriano used his computer skills and abused the trust placed in him as an information technology professional at a New York hospital to spy on his coworkers and steal personal information from them.  Liriano’s disturbing crimes not only grossly violated the privacy of his coworkers but jeopardized the integrity of computers housing vital healthcare and patient information, costing his former employer hundreds of thousands of dollars to remediate.  He will now be held accountable.”

According to the allegations in the Information to which LIRIANO pled guilty, a prior Indictment filed against LIRIANO, as well as statements made during the sentencing and other proceedings in the case: 

From at least in or about 2013, up to and including at least in or about 2018, LIRIANO misused administrative access provided to him as an information technology employee at a New York City-area hospital (“Hospital-1”), to log in to employee accounts, and copy other employees’ personal documents, including tax records and personal photographs, onto his own workspace computer for his own personal use. 

To further his efforts to steal personal information from Hospital-1’s employees, LIRIANO, used various malicious programs that he installed on Hospital-1’s computer systems without authorization, to steal the user names and passwords of his primarily female co-workers.  One of these programs is known as a keylogger, which surreptitiously recorded and sent victim employees’ keystrokes to LIRIANO, such as the usernames and passwords those employees entered to access their personal web-based email accounts.  Through the course of this conduct, LIRANO stole usernames and passwords for at least approximately 70 email accounts belonging to Hospital-1 employees or persons associated with those employees (the “Compromised Accounts”). 

LIRIANO then used those stolen usernames and passwords to log into the Compromised Accounts and obtain unauthorized access to other password-protected email, social media, photographs, and online accounts to which the Compromised Accounts were registered.  Among other things, LIRIANO conducted searches for sexually explicit photographs and videos in the Compromised Accounts.  

LIRIANO’s computer intrusions into Hospital-1’s computer networks caused over $350,000 in losses to Hospital-1, which include the expenses that Hospital-1 incurred to remediate the damage that LIRIANO caused to its computer networks.

*                      *                      *

In addition to the prison term, LIRIANO, 34, of the Bronx, New York, was sentenced to three years of supervised release.  LIRIANO was also ordered to pay restitution of $351,850.25.           

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and thanked the New York City Police Department for its assistance.  

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

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that four members of the “Jack Boyz” street gang have been sentenced in connection with the October 30, 2018, shooting of an off-duty NYPD officer and other Bronx violence.  NAZAE BLANCHE, a/k/a “Zae,” was sentenced yesterday to 14 years in prison.  Previously, LEON SMALLS, a/k/a “Smoove,” was sentenced on August 27, 2020, to 15 years in prison; PATRICK AVILA, a/k/a “Pat,” was sentenced on September 24, 2020, to 12 years in prison; and JALEN COLDS, a/k/a “Jay Gunz,” was sentenced on September 29, 2020, to 16 years in prison.  All four defendants were sentenced by United States District Judge Valerie E. Caproni.  Each defendant previously pled guilty to using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence, which firearm was discharged or brandished, in violation of Title 18, United States Code, Section 924(c).   

Acting U.S. Attorney Audrey Strauss said:  “From 2017 through 2019, Leon Smalls, Patrick Avila, Jalen Colds, and Nazae Blanche, all members of the Jack Boyz gang, engaged in senseless violence against their gang rivals in the Bronx.  Now they face significant prison time for their actions.  We thank the NYPD for its outstanding work on this case.”

According to allegations in the Indictment and other documents filed in federal court, as well as statements made in public court proceedings:

The Jack Boyz is a criminal enterprise involved in committing numerous acts of violence, including shootings, in and around the Bronx.  Members and associates of the Jack Boyz engage in violence to retaliate against rival gangs, to promote the standing and reputation of the Jack Boyz, and to protect the gang’s narcotics business.  Members and associates of the Jack Boyz enrich themselves by committing robberies and selling drugs.

On October 30, 2018, SMALLS, AVILA, COLDS, BLANCHE, and others engaged in a shootout with gang rivals, during which a nearby off-duty police officer was shot.  In addition to this shooting, the defendants each engaged in other acts of violence in the Bronx and Manhattan from 2017 through 2019.  As part of their plea agreements, the defendants pled guilty to these additional violent acts.  In total, these defendants pled to participating in four additional Bronx shootings in 2017 and 2018, as well as a Manhattan assault and robbery in 2019.  Multiple victims were injured during these incidents. 

*                      *                     *           

Ms. Strauss praised the outstanding investigative work of the New York City Police Department. 

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jamie Bagliebter, Michael Longyear, and Mathew Andrews are in charge of the prosecution.

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 GREGG BRIE, a White Plains financial adviser, was arrested this morning and charged with securities fraud and wire fraud arising out of his embezzlement of more than $640,000 from two victims who had entrusted money to him for investment.  BRIE will be presented before United States Magistrate Judge Paul E. Davison in White Plains federal court later today.

Acting U.S. Attorney Audrey Strauss said:  “As alleged, Gregg Brie stole money so he could live a lavish lifestyle.  This Office is committed to rooting out fraudulent investments in order to preserve the integrity of our capital markets.”

FBI Assistant Director William F. Sweeney Jr. said:  “The charges today allege that Gregg Brie is an embezzler.  If you trusted Mr. Brie to invest your money, and believe you might be an additional victim of his actions, we urge you to call us at 1-800-CALL-FBI.”

According to the allegations contained in the Complaint[1]:

BRIE embezzled funds from two victims, both of whom lived in his White Plains apartment complex.  He advised his first victim, a disabled man on a fixed income and confined to a wheelchair, to buy shares in Alaska Air Group, Inc.  Bank records show that this victim gave BRIE more than $480,000.  BRIE told his victim that he had opened accounts for him at a brokerage firm and that his stock had increased in value to approximately $8 million.  When the victim asked for his money, BRIE told him that his accounts were frozen because the stockbrokers had done something “sketchy” in order to buy the shares at a lower price.  When the victim attempted to contact the brokerage firm, BRIE told him that he would “murder [him]” if the victim attempted to contact the firm again.  BRIE repeated this threat at least two more times, noting that he meant his threats to be taken “literally, not metaphorically.”

According to written loan agreements drafted by BRIE, the second victim made three loans to BRIE in a total amount of approximately $157,000 “for the purpose of producing and distributing a proprietary, composite unimold commode for use within indigent venues of the African nation of Uganda.” 

The FBI’s analysis of bank accounts controlled by BRIE showed that BRIE spent the money he obtained from his two victims primarily on credit cards and a Mercedes Benz lease.  The evidence showed that there was no brokerage account.

*                      *                      *

BRIE, 53, of White Plains, New York, faces a maximum sentence of 25 years in prison on the securities fraud count and 20 years in prison on the wire fraud count. 

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.

The criminal case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys James McMahon and Shiva Logarajah are in charge of the prosecution.

 

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[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.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that JON BARRY THOMPSON, a/k/a “J. Barry Thompson,” the principal of a cryptocurrency escrow company, pled guilty today in Manhattan federal court to commodities fraud.  THOMPSON’s guilty plea results from his involvement in a scheme to defraud a company of over $3 million.  In June and July 2018, THOMPSON made false promises to the company to induce it to send THOMPSON’s company over $3 million for Bitcoin that THOMPSON never had and that the investing company never received.   

THOMPSON was arrested on July 25, 2019, and pled guilty today before U.S. District Judge Edgardo Ramos.   

Acting Manhattan U.S. Attorney Audrey Strauss said:  “As he admitted today, Jon Barry Thompson fraudulently induced a company to send him more than $3 million, which the company understood would be used for the purchase of Bitcoin with ‘no risk.’  While Thompson had pledged not to part with the company’s money until he had possession of the Bitcoin, in fact Thompson sent the money to a third party without first receiving the Bitcoin, and the money was never recovered.”

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

THOMPSON claimed in promotional materials that his cryptocurrency escrow company, Volantis Escrow Platform LLC, and the related company Volantis Market Making LCC (collectively “Volantis”), “minimize[d] settlement default risk” in cryptocurrency transactions.  THOMPSON claimed that because Volantis acted as a custodian of assets for “both sides of the transaction, there is no risk of default.” 

 In June and July 2018, THOMPSON made false statements to a company (“Company-1”) to induce Company-1 to send Volantis over $3 million to fund the purchase of Bitcoin for Company-1.  THOMPSON falsely assured Company-1 that THOMPSON would act as an escrow and that Company-1’s money could not be lost.  In particular, THOMPSON told Company-1 that the transaction would take place through an “atomic swap process” after THOMPSON had custody of both the Bitcoin and Company-1’s cash.  THOMPSON falsely represented that he would not transfer Company-1’s cash to the seller until he had the Bitcoin in hand.  Based on these fraudulent representations, Company-1 wired THOMPSON $3.25 million.  THOMPSON then wired over $3 million of Company-1’s money to a third-party entity without first receiving any of the Bitcoin in hand.  After taking Company-1’s money, THOMPSON lied for days about the status of the transaction and the location of Company-1’s Bitcoin and money, which was never returned. 

*                      *                      *           

THOMPSON, 49, of Easton, Pennsylvania, pled guilty to one count of commodities fraud.  This charge carries a maximum term of 10 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.

THOMPSON will be sentenced on January 7, 2021, at 10:00 a.m.  

Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and also thanked the U.S. Commodity Futures Trading Commission for its 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.

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 the indictment of Arthur Hayes, Benjamin Delo, Samuel Reed, and Gregory Dwyer, charging the four with violating the Bank Secrecy Act and conspiring to violate the Bank Secrecy Act, by willfully failing to establish, implement, and maintain an adequate anti-money laundering (“AML”) program at the Bitcoin Mercantile Exchange or “BitMEX.”  The case is assigned to United States District Judge John G. Koeltl.  REED was arrested in Massachusetts this morning, and will be presented in federal court there.  HAYES, DELO, and DWYER remain at large.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “With the opportunities and advantages of operating a financial institution in the United States comes the obligation for those businesses to do their part to help in driving out crime and corruption.  As alleged, these defendants flouted that obligation and undertook to operate a purportedly ‘off-shore’ crypto exchange while willfully failing to implement and maintain even basic anti-money laundering policies.  In so doing, they allegedly allowed BitMEX to operate as a platform in the shadows of the financial markets.  Today’s indictment is another push by this Office and our partners at the FBI to bring platforms for money laundering into the light.”  

FBI Assistant Director William F. Sweeney Jr. said:  “As we allege here today, the four defendants, through their company’s BitMEX crypto-currency trading platform, willfully violated the Bank Secrecy Act by evading U.S. anti-money laundering requirements.  One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut.’  Thanks to the diligent work of our agents, analysts, and partners with the CFTC, they will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time."

According to the allegations in the Indictment[1]:

HAYES, DELO, and REED founded BitMEX in or about 2014, and DWYER became BitMEX’s first employee in 2015 and later its head of business development.  BitMEX, which has long serviced and solicited business from U.S. traders, was required to register with the Commodity Futures Trading Commission (“CFTC”) and to establish and maintain an adequate AML program.  AML programs ensure that financial institutions, such as BitMEX, are not used for illicit purposes, including money laundering.  

Despite those obligations, HAYES, DELO, REED, and DWYER knew by no later than in or about September 2015 that, because BitMEX served U.S. customers, it was required to implement an AML program that included a “know your customer” or “KYC” component, but chose to flout those requirements.  Indeed, each of the defendants knew of customers residing in the United States who continued to access BitMEX’s trading platform through at least in or about 2018, and that BitMEX policies nominally in place to prevent such trading were toothless or easily overridden to serve BitMEX’s bottom line goal of obtaining revenue through the U.S. market without regard to U.S. regulation.  While knowing of BitMEX’s obligation to implement AML and KYC programs because BitMEX was serving U.S. customers, HAYES, DELO, REED, and DWYER took affirmative steps purportedly designed to exempt BitMEX from the application of U.S. laws such as AML and KYC requirements.  For example, the defendants caused BitMEX and its parent corporations formally to incorporate in the Seychelles, a jurisdiction they believed had less stringent regulation and from which they could still serve U.S. customers without performing AML and KYC.  Indeed, in or about July 2019, HAYES bragged that the Seychelles was a more friendly jurisdiction for BitMEX because it cost less to bribe Seychellois authorities – just “a coconut” – than it would cost to bribe regulators in the United States and elsewhere. 

*                *                *

HAYES, 34, of Buffalo, New York and Hong Kong, DELO, 36, of the United Kingdom and Hong Kong, REED, 31, of Massachusetts, and DWYER, 37, of Australia and Bermuda, are each charged with one count of violating the Bank Secrecy Act, and one count of conspiring to violate the Bank Secrecy Act, each of 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 investigative work of the FBI’s New York Money Laundering Investigation Squad, and the assistance of the FBI’s Boston, Milwaukee, and Minneapolis Field Offices.  Ms. Strauss also thanked the attorneys and investigators at the CFTC for offering their expertise in the development of this investigation.

The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Jessica Greenwood and Samuel Raymond are in charge of the prosecution. 

 

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[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.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that DAVID HARDY, a/k/a “Mooka,” MARQUIS COLLIER, JERMAINE HUGHLEY, a/k/a “Blacks,” and SINCERE SAVOY, a/k/a “Bitty,” pled guilty to participating in the murder of Shamoya McKenzie, a 13-year-old innocent bystander.  HARDY pled guilty today, COLLIER pled guilty on August 14, 2020, HUGHLEY pled guilty on September 10, 2020, and SAVOY pled guilty on September 1, 2020.  All four defendants will be sentenced by United States District Judge Nelson S. Román, to whom the case is assigned.

Acting U.S. Attorney Audrey Strauss said:  “On December 31, 2016, David Hardy, Marquis Collier, Jermaine Hughley, and Sincere Savoy shot at a rival gang member, injuring him and killing 13-year-old Shamoya McKenzie, cutting short her young and promising life.  Now all four of them face significant time in prison for their participation in senseless gun violence.”

According to allegations in the Indictment and other documents filed in federal court, as well as statements made in public court proceedings: 

Between 2007 and 2017, in the Southern District of New York and elsewhere, HARDY, COLLIER, HUGHLEY, and SAVOY were members of a racketeering enterprise known as the “Goonies.”  In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of the Goonies committed, conspired, attempted, and threatened to commit acts of violence, including murder, attempted murder, and robbery; they conspired to distribute and possess with the intent to distribute narcotics; and they obtained, possessed, and used firearms, including by brandishing and firing them. 

The Goonies have been engaged in a long-standing and violent feud with several rival Mount Vernon street gangs, including, among others, the “Boss Playa Family,” the “Get Money Gangstas,” the “Gunnas,” and the “Much Better Gang,” among others.  On December 31, 2016, HARDY, COLLIER, HUGHLEY, and SAVOY attempted to murder a rival gang member in broad daylight by firing multiple shots at him in the vicinity of Tecumseh Avenue and Third Street in Mount Vernon, New York.  The rival gang member suffered gunshot wounds but survived.  One of the bullets, however, missed the intended target and struck in the head and killed 13-year-old Shamoya McKenzie, who was in the front passenger seat of a car that happened to be driving past the shooting location. 

*                *                *

HARDY, 25, pled guilty to one count of using a firearm in connection with the murder of Shamoya McKenzie in aid of racketeering and one count of using a firearm in connection with an assault with a dangerous weapon in aid of racketeering for committing a separate shooting in furtherance of the Goonies.  Together, the crimes carry a maximum penalty of life in prison, and a mandatory minimum sentence of 15 years in prison.

COLLIER, 28, pled guilty to one count of racketeering conspiracy and one count of discharging a firearm in connection with the murder of Shamoya McKenzie in aid of racketeering.  Together, the crimes carry a maximum penalty of life in prison, and a mandatory minimum sentence of 10 years in prison.

HUGHLEY, 27, pled guilty to one count of racketeering conspiracy and one count of discharging a firearm in connection with the murder of Shamoya McKenzie in aid of racketeering.  Together, the crimes carry a maximum penalty of life in prison, and a mandatory minimum sentence of 10 years in prison.

SAVOY, 23, pled guilty to one count of using a firearm in connection with the murder of Shamoya McKenzie in aid of racketeering, which carries a maximum penalty of life in prison, and a mandatory minimum sentence of five years in prison.

Ms. Strauss thanked the Westchester County District Attorney’s Office and praised the outstanding investigative work of the FBI’s Westchester County Safe Streets Task Force, which comprises agents and detectives from the FBI, Yonkers Police Department, Westchester County District Attorney’s Office, Westchester County Police Department, Peekskill Police Department, Mount Vernon Police Department, New York City Police Department, and U.S. Probation. 

The case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Anden Chow and Sarah Krissoff are in charge of the prosecution.

Ilan Graff, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, and Timothy D. Sini, Suffolk County District Attorney, announced today the return of an indictment charging JAMES CAHILL, CHRISTOPHER KRAFT, PATRICK HILL, MATTHEW NORTON, WILLIAM BRIAN WANGERMAN, KEVIN MCCARRON, JEREMY SHEERAN, a/k/a “Max,” ANDREW MCKEON, and ROBERT EGAN with racketeering, fraud, and bribery offenses, in connection with their acceptance of payments in their roles as current and former union officials to corruptly influence labor-management relations in the construction industry.  SCOTT ROCHE and ARTHUR GIPSON are charged with fraud and bribery offenses.  The defendants are current and former union officials with Local 638 of the Enterprise Association of Steamfitters (“Local 638”) and Local Union 200 of the United Association of Journeyman and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada (“Local 200”).  CAHILL is the president of the New York State Building and Construction Trades Council (the “NYS Trades Council”), which represents over 200,000 unionized construction workers, and a member of the executive council for the New York State American Federation of Labor and Congress of Industrial Organizations (the “NYS AFL-CIO”).  As alleged, since in or around October 2018, the defendants agreed to accept dozens of bribes, totaling over $100,000, in exchange for which they used their authority to corruptly influence the construction industry at the expense of labor unions and their members. 

All of the defendants were arrested yesterday afternoon or earlier today and will be presented this afternoon before United States Magistrate Judge Robert W. Lehrburger.  The case is assigned to Chief United States District Judge Colleen McMahon.

Attorney for the United States Ilan Graff said:  “As alleged, the defendants exploited their labor organization positions to line their own pockets.  They did so at the expense of the unions and their members by accepting bribes to favor non-union employers and corruptly influence the construction trade.  Today’s indictment reflects our commitment to rooting out corruption and bringing to justice those who abuse positions of power out of personal greed.  We thank the Suffolk County District Attorney’s Office for their partnership in this case.”

Suffolk County District Attorney Timothy D. Sini said:  “As alleged in today’s indictment, these union officials – who purported to be the ones looking out for workers and their rights – were in fact engaged in an enterprise of corruption at the expense of the hardworking men and women they claimed to represent. This was a complete betrayal of these unions and their membership. Our two-year wiretap investigation uncovered a shocking level of greed and corruption, and the investigation is very much ongoing. I want to thank the U.S. Attorney’s Office for the Southern District of New York for partnering with my office on this investigation and for working with us to hold these alleged bad actors accountable in federal court.”

According to the allegations in the Indictment:

JAMES CAHILL, CHRISTOPHER KRAFT, PATRICK HILL, MATTHEW NORTON, WILLIAM BRIAN WANGERMAN, KEVIN MCCARRON, JEREMY SHEERAN, a/k/a “Max,” ANDREW MCKEON, and ROBERT EGAN, are members of an enterprise (the “Enterprise”) comprising current and former officials of Local 638, a union with jurisdiction over pipe fitting in New York City and Long Island.  The Enterprise was a criminal organization whose members agreed to engage in, among other activities, honest services fraud, receipts of bribes as labor union officials, and unlawful receipt of payments to labor organizations.  Members of the Enterprise conspired to accept cash bribes, as well as bribes in the form of “loans” that were never repaid, free meals and drinks, free labor on personal property, and purchases of home appliances.  Since in or around October 2018, the defendants accepted dozens of bribes, totaling over $100,000.

JAMES CAHILL was the leader of the Enterprise.  In addition to being president of the NYS Trades Council and a member of the NYS AFL-CIO’s executive council, CAHILL is also a former business agent of Local 638, and a former international representative of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada.  As the Enterprise’s leader, CAHILL influenced Local 638’s elections and installed loyal associates into official positions within Local 638.  CAHILL initiated several Local 638 officials into the Enterprise so they could accept bribes and expand their influence.  For example, after CAHILL brought defendant PATRICK HILL into the Enterprise as a union official who would – and did – accept bribes, CAHILL told a non-union employer from whom CAHILL and HILL had received bribes (“Employer-1”): “Here’s the thing.  I give you Paddy [HILL].  But if Paddy fucks up and does stupid things, you have to tell me . . . I got my guys, I got the guys who come to me, and you know that, and everyone knows who comes to me.”  CAHILL told HILL, following HILL’s receipt of a bribe from Employer-1, “Welcome to the real world.”  NORTON similarly stated in a meeting at which NORTON, CAHILL, and HILL received bribes:  “The real world is the real world and there’s . . . always wiggle room as long as everyone . . . understands each other, and everyone’s taken care of.”

CAHILL and the other members of the Enterprise used their positions of power with respect to Local 638 to receive bribes in exchange for taking actions favorable to non-union employers, and exercising corrupt influence within the construction trade, all to the detriment of Local 638 and the union members’ interests.  For instance, in one meeting with Employer-1, CAHILL urged Employer-1, in sum and substance, not to sign with a union, but instead to “tell everyone to go fuck themselves” because “if you become union, you’ll have 12 fucking guys on your back.” 

All 11 defendants are also charged with participating in conspiracies to commit honest services fraud and violate the Taft-Hartley Act, based on, among other things, their agreement to accept bribes in exchange for acquiescing in the bidding and performing of construction work with non-union labor for plumbing and pipe fitting projects that would otherwise have potentially been awarded to companies whose employees were represented by Local 638 or Local 200.  

*                *                *

A chart containing the names, charges, and maximum 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.

Mr. Graff praised the outstanding investigative work of the Special Agents within the U.S. Attorney’s Office for the Southern District of New York and Investigators with the Suffolk County District Attorney’s Office, and noted that the investigation is ongoing.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Jason Swergold, Danielle Sassoon, and Jun Xiang, and Special Assistant U.S. Attorney Laura de Oliveira, are in charge of the prosecution.

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

Count

Charge

Defendants

Max. Penalty

Count One

Racketeering Conspiracy

18 U.S.C. § 1962(d)

JAMES CAHILL

 

CHRISTOPHER KRAFT

 

PATRICK HILL

 

MATTHEW NORTON

 

WILLIAM BRIAN WANGERMAN

 

KEVIN MCCARRON

 

JEREMY SHEERAN, a/k/a “Max”

 

ANDREW MCKEON

 

ROBERT EGAN

20 years’ imprisonment

Count Two

Honest Services Fraud Conspiracy

 

18 U.S.C. §§ 1343, 1346, and 1349

JAMES CAHILL

 

CHRISTOPHER KRAFT

 

PATRICK HILL

 

MATTHEW NORTON

 

WILLIAM BRIAN WANGERMAN

 

KEVIN MCCARRON

 

JEREMY SHEERAN, a/k/a “Max”

 

ANDREW MCKEON

 

ROBERT EGAN

 

SCOTT ROCHE

 

ARTHUR GIPSON

20 years’ imprisonment

Count Three

Conspiracy to Violate the Taft-Hartley Act

 

18 U.S.C. § 371

JAMES CAHILL

 

CHRISTOPHER KRAFT

 

PATRICK HILL

 

MATTHEW NORTON

 

WILLIAM BRIAN WANGERMAN

 

KEVIN MCCARRON

 

JEREMY SHEERAN, a/k/a “Max”

 

ANDREW MCKEON

 

ROBERT EGAN

 

SCOTT ROCHE

 

ARTHUR GIPSON

5 years’ imprisonment

 

 

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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.

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 LOUIS LLUBERES, a/k/a “Luis Lluberes,” MOISES LLUBERES, MARIA AGUILAR, a/k/a “Maria Hewitt,” and MARIA LOPEZ with conspiracy to commit wire and bank fraud, wire fraud, bank fraud, and conspiracy to commit money laundering stemming from their years-long scheme to fraudulently boost the revenues of their temporary staffing company (“Company-1”) and launder funds through a series of shell companies before mischaracterizing the money as collections from customers.  The scheme allowed Company-1 to fraudulently obtain more than $500 million on its line of credit from a U.S. bank (“Bank-1”) and supported the sale of Company-1 to a group of investors (the “Investor Group”) at a grossly inflated price.  LOUIS LLUBERES, MOISES LLUBERES, AGUILAR, and LOPEZ were arrested this morning in the Middle District of Florida, and will be presented this afternoon in that district.  The case is assigned to U.S. District Judge Vernon S. Broderick.

Acting U.S. Attorney Audrey Strauss said:  “Louis Lluberes, founder and former CEO of a temporary staffing company, and his three co-defendants, allegedly schemed to inflate the company’s receivables, thereby making the company appear far more profitable than it was.  As alleged, they were thus able to fraudulently exceed their bank’s credit limit, borrowing over $500 million, and ultimately sold the company at a vastly inflated price.  Thanks to the assistance of the FBI, Lluberes and his co-defendants now face multiple federal fraud charges.”

FBI Assistant Director William F. Sweeney Jr. said:  "Today's indictment details an alleged multimillion-dollar scheme in which the defendants fraudulently borrowed money from a major financial institution, funneled the money from a revolving line of credit through a series of shell companies, and dumped it back into the company, falsely representing those funds as business proceeds. They later manipulated the books by creating fraudulent invoices to boost the perceived value of the company before its sale to a private equity firm. These charges serve to remind everyone that illegal business dealings will be faced with intense scrutiny."

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

LOUIS LLUBERES founded Company-1 in 1995 and served as Company-1’s chief executive officer until March 2020.  Company-1 served as a staffing company, supplying other businesses with temporary and permanent labor.  MOISES LLUBERES, LOUIS LLUBERES’s brother, served as Company-1’s chief financial officer.  AGUILAR, MOISES LLUBERES’s romantic partner, and LOPEZ, LOUIS LLUBERES’s daughter, served in Company-1’s accounting department.

Company-1 had established a revolving line of credit with Bank-1.  Under the terms of the line of credit, Company-1 could only borrow up to a designated ratio of Company-1’s eligible accounts receivable (the “Borrowing Base”).  By its terms, invoices that had gone more than 90 or 120 days without being paid were no longer eligible to be considered as part of Company-1’s Borrowing Base.  Officials at Company-1, including MOISES LLUBERES and LOPEZ, were required to submit weekly financial reports to Bank-1, which included information on Company-1’s sales and collections, among other items, that allowed Bank-1 representatives to calculate Company-1’s Borrowing Base.

Beginning in or about 2017, after losing significant business from major clients, the defendants began creating fraudulent invoices (the “Fictitious Receivables”).  The Fictitious Receivables, which were recorded on Company-1’s books, created the appearance that Company-1 was engaged in more business and would be receiving more client payments than was the reality.  All told, the defendants created more than 2,000 Fictitious Receivables.  LOPEZ was responsible for recording the vast majority of Fictitious Receivables onto Company-1’s books.

Thus, by inflating Company-1’s Borrowing Base through the creation of Fictitious Receivables, Company-1 and the defendants were able to borrow more than $520 million from Bank-1.  Company-1 was not actually entitled to borrow these funds.

In order to perpetuate their fraud, the defendants utilized two shell companies (“Shell-1”) and (“Shell-2”) to launder Company-1 funds before transferring those funds back to Company-1 and mischaracterizing those funds as client collection payments. 

Between in or about September 2017 and in or about March 2020, Company-1 accounts transferred approximately $120 million in funds obtained from Company-1’s line of credit with Bank-1 to Shell-1’s bank account.  During the same time period, Shell-1 transferred approximately $119 million to Shell-2, constituting approximately 90% of all funds received by Shell-2.  And, during the same time frame, Shell-2 transferred approximately $129 million to Company-1’s collections account, where the defendants disguised the funds as client payments on outstanding invoices.

Once the misappropriated funds had been returned to Company-1’s collections account, LOPEZ and others applied those funds against aging accounts receivable, including the Fictitious Receivables.  This allowed Company-1 to maintain its Borrowing Base and continue borrowing from Bank-1. 

Beginning in or about 2017, the Investor Group initiated negotiations to acquire Company-1, and the Investor Group executed an agreement to purchase Company-1 (the “Purchase Agreement”) in May 2018.  In connection with the Purchase Agreement, LOUIS LLUBERES certified that financial records relied upon by the Investor Group and incorporated into the Purchase Agreement, including Company-1’s accounts receivable, were accurate and legitimate.  In reality, as reviewed by forensic accountants retained by Company-1, these records included approximately $56 million in Fictitious Receivables, which resulted in the Investor Group overvaluing Company-1’s enterprise value by approximately 430%. 

LOUIS LLUBERES was paid approximately $11.3 million on the day the Investor Group acquired Company-1.  LOUIS LLUBERES also received an additional approximately $6.2 million based, in part, on fraudulent representations to the Investor Group and Company-1.  In total, LOUIS LLUBERES made at least $17.5 million from the sale of Company-1 (the “Acquisition Payments”).

LOUIS LLUBERES transferred at least approximately $716,000 in the Acquisition Payments to MOISES LLUBERES and at least approximately $45,000 in the Acquisition Payments to LOPEZ.  The defendants further used the Acquisition Payments to acquire homes in Florida, Punta Cana in the Dominican Republic, precious metals, and other personal items.  LOUIS LLUBERES also transferred Acquisition Payments funds to a Tex-Mex restaurant operated by LOUIS LLUBERES and MOISES LLUBERES in the Dominican Republic.

In or about March 2020, Company-1 learned of LOUIS LLUBERES and MOISES LLUBERES’s fraud when an attorney retained by the brothers wrote a letter, dated March 30, 2020, disclosing “excessive billing” to Company-1’s customers in order to increase Company-1’s sales and allow Company-1 to draw more from its line of credit than Company-1 would otherwise be entitled to.  AGUILAR closed Shell-2’s bank account the same day that the LLUBERES brothers’ attorney submitted the letter to Company-1.  Company-1 fired the defendants after it was alerted to the fraudulent scheme. 

LOUIS LLUBERES, 58, of Windermere, Florida; MOISES LLUBERES, 56, of Winter Grove, Florida; AGUILAR, 37, of Winter Grove, Florida; and LOPEZ, 37, of Orlando, Florida, are charged with (1) conspiring to commit wire and bank fraud, which carries a maximum sentence of 30 years in prison; (2) wire fraud, which carries a maximum sentence of 30 years in prison; (3) bank fraud, which carries a maximum sentence of 30 years in prison; and (4) conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

*                      *                      *

Ms. Strauss praised the investigative work of the FBI.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Nicholas W. Chiuchiolo and Daniel G. Nessim are in charge of the prosecution.

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

 

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[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.

Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that PAUL A. RINFRET was sentenced in Manhattan federal court today to 63 months in prison for participating in a Ponzi scheme in which he obtained approximately $19 million in total from victims through a variety of lies and misrepresentations.  RINFRET pled guilty to one count of wire fraud and one count of securities fraud on October 8, 2019, before U.S. District Judge Gregory H. Woods, who also imposed today’s sentence.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “Today, Paul Rinfret was brought to justice for callously lying to investors.  Rinfret told investors his investment returns were excellent, when in fact he failed to invest investor funds as promised, generated losses when he did invest, and diverted the majority of investor funds to his personal use and to repay investors in a Ponzi-like fashion.  We will continue to aggressively pursue frauds like this one, which caused millions of dollars in losses, in order to preserve investor confidence in our capital markets.”

According to the allegations contained in the Complaint and the Indictment:           

From at least 2016 through 2019, RINFRET engaged in a scheme to defraud potential and actual investors in an entity called Plandome Partner s L.P. for his own personal gain and for the gain of his family members.  RINFRET offered potential investors the ability to invest in Plandome Partners through the purchase of limited partnership interests.  In soliciting investments, RINFRET falsely represented to potential and actual investors (the “Victims”) that he would use all of their investment funds to trade futures contracts tied to the Standard & Poor’s 500 index using a propriety trading algorithm he had developed, taking for himself a fee equivalent to 25% of the net profits on the trades. 

Through his fraudulent scheme, RINFRET obtained approximately $19 million in total from approximately six Victims on the false claim that he would utilize their investment funds for trading.  RINFRET’s lies and misrepresentations were varied and many.  For example, RINFRET claimed that Plandome Partners traded through certain brokerage accounts, one of which simply did not exist, and two of which were not open at a time when RINFRET claimed to be trading in those accounts. 

Further, RINFRET used only a small portion of the Victims’ invested funds to engage in actual trading.  Instead, RINFRET used most of the Victims’ money to purchase luxury goods and high-end vacation rentals for himself and family members.  For example, RINFRET used the Plandome Partners account to spend almost $50,000 on a luxury Hamptons vacation rental, more than $40,000 on jewelry, and tens of thousands of dollars on the event venue where his son held his engagement party. 

When RINFRET did actually engage in trading with Victims’ funds, he generated losses.  But, to prevent his Victims from seeking a return of their money, and to induce additional investments, RINFRET falsely reported excellent investment performance results to the Victims through false and fraudulent monthly account statements that RINFRET typically emailed to the Victims.  RINFRET also sent fabricated brokerage account statements to the Victims.  

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In addition to the prison term, RINFRET, 71, of Manhasset, New York, was sentenced to two years of supervised release, ordered to pay forfeiture in the amount of $20,268,268, and to pay $12,290,803 in restitution to his victims.           

Ms. Strauss praised the investigative work of Homeland Security Investigations and also thanked the Securities and Exchange Commission for its assistance in the investigation.

The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorney Robert L. Boone is in charge of the case. 

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that ANTHONY GUZZONE, a former Director of Global Construction at Bloomberg, LLC (“Bloomberg”), pled guilty today to charges of evading taxes on more than $1.45 million in bribes he received from building sub-contractors.  In related proceedings, co-conspirator Michael Campana, a subordinate construction manager at Bloomberg, was sentenced on July 24, 2020, by U.S. District Judge Denise L. Cote to 24 months in prison, for evading taxes on more than $420,000 in the same scheme.  In addition, Ronald Olson and Vito Nigro, two managers of a construction contractor that performed projects for Bloomberg, were separately charged in July 2020 for evading taxes on more than $1.4 million and $1.8 million, respectively, in bribes that they received in the same scheme.  Olson pled guilty to those charges on July 29, 2020, before U.S. District Judge P. Kevin Castel.[1]

Acting U.S. Attorney Audrey Strauss said:  “Bribery and tax evasion each impose hidden, unfair costs on the law-abiding public.  The sort of criminality admitted to by Anthony Guzzone imposes that burden widely, on customers, on employers, and on taxpayers.  Guzzone now awaits sentencing for his crime.”

According to the four criminal Informations filed in these federal cases, as well as other public documents and recent court proceedings:

Between 2010 and 2017, GUZZONE was the Director of Global Construction at Bloomberg, a global financial firm that was engaged in various building projects in New York City and elsewhere, while Olson and Nigro were executives at a construction contractor that performed projects for Bloomberg.  For most of that time, beginning in 2013, Campana was also a construction manager at Bloomberg.  Each of the defendants participated in a scheme to obtain bribes from construction sub-contractors, who paid kickbacks to the defendants in exchange for being awarded various construction contracts and sub-contracts performed for Bloomberg.

In all, the defendants are charged with failing to pay taxes, between 2010 and 2017, on bribes exceeding $5.1 million.  The defendants received such bribes in various forms, including millions of dollars in cash, as well as construction labor and materials for work on their individual homes and properties, and the direct payment of personal expenses.  Such personal expenses included charges related to Campana’s 2017 wedding, such as approximately $40,000 paid by sub-contractors to a catering hall in New Jersey, over $13,000 to a photography studio, and over $23,000 to a travel agent for airline tickets purchased in connection with Campana’s honeymoon.  Each of the defendants evaded federal income tax on this bribery income, by failing to declare it on income tax returns for various years between 2010 and 2017.

*                       *                      *

GUZZONE, 51, of Middletown, New Jersey, pled guilty today to a single count of tax evasion for the tax years 2010 through 2017.  GUZZONE is scheduled to be sentenced on January 7, 2021, at 2:00 p.m., before United States District Judge Lewis J. Liman. 

Olson, 53, of Massapequa, New York, pled guilty on July 29, 2020, to a single count of tax evasion for the tax years 2011 through 2017.

Nigro, 59, of Middletown, New Jersey, was charged on July 16, 2020, with a single count of tax evasion for the tax years 2011 through 2017.

The charges against GUZZONE, Olson, and Nigro each carry a maximum sentence of five years in prison, a maximum fine of $250,000 or twice the gross gain or loss from the offense, and an order of restitution.  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 judges.

Campana, 34, of Tuckahoe, New York, pled guilty to a tax evasion charge on November 26, 2019, for the tax years 2014 thought 2017, and was sentenced on July 24, 2020, to 24 months in prison, three years of supervised release, restitution of $155,000 in unpaid taxes (which he has repaid), and a fine of $10,000. 

Ms. Strauss praised the excellent work of the Internal Revenue Service.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney David Raymond Lewis, and Stanley J. Okula, Senior Litigation Counsel of the Tax Division of the Department of Justice, are in charge of the prosecution.  

 

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[1]  In addition, all four defendants have been charged in New York State Supreme Court for participating in the underlying bribery scheme. Nigro and Campana have pled guilty in that case and are awaiting sentencing.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Raymond P. Donovan, Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), announced that RICHARD MENDOZA was charged in an indictment with conspiring to distribute fentanyl on behalf of a drug trafficking organization.  MENDOZA was charged by complaint and arrested in Arizona on September 23, 2020, after law enforcement found approximately nine kilograms of fentanyl packaged and hidden inside of the exhaust system of the vehicle that MENDOZA was driving.  MENDOZA will be presented and arraigned at a later date upon his arrival in this district. 

According to the allegations in the Complaint and Indictment[1]:

Beginning in or about June, law enforcement identified RICHARD MENDOZA as an individual who was working to coordinate shipments of fentanyl to New York on behalf of a drug trafficking organization.  On or about September 16, 2020, law enforcement intercepted phone calls on which MENDOZA was preparing to receive a truck that had been pre-loaded with narcotics by other members of the drug trafficking organization.  On or about September 17, 2020, MENDOZA was the driver and sole occupant of a truck that was ultimately stopped and searched by law enforcement.  During the search, law enforcement found approximately nine kilograms of fentanyl that were packaged and hidden inside the vehicle’s exhaust system. 

*                      *                      *

MENDOZA, 50, of Desert Hot Springs, California, is charged with one count of conspiring to distribute fentanyl, which carries a mandatory minimum of 10 years in prison and a maximum sentence of life 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 would be determined by the judge.

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.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Peter J. Davis and Andrew A. Rohrbach are in charge of the prosecution.

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

 

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

 

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.

*                *                *

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.

 

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[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.

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.

*                      *                     *

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.

*                      *                     *

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.

 

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[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.

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. 

*                      *                      *

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.

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.

*                *                *

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.

 

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[1] The 108-month sentence includes the 13 months LONDONO-VELEZ was incarcerated in Colombia pending extradition.

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.

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. 

*                *                *

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.

 

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[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.

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. 

*                *                *

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.  

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[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.

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. 

*                *                *

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.

 

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[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.

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. 

*                *                *

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.

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.