Southern District of New York
Press releases recorded for this federal judicial district.
Manhattan Man Sentenced to 15 Years in Prison for Attempting to Provide Material Support to Terrorist OrganizationRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and John C. Demers, the Assistant Attorney General for National Security, announced today that JESUS WILFREDO ENCARNACION, a/k/a “Jihadistsoldgier,” “Jihadinhear,” “Jihadinheart,” “Lionofthegood,” was sentenced to 15 years in prison for attempting to provide material support to Lashkar e-Tayyiba (“LeT”), a Pakistan-based designated foreign terrorist organization responsible for multiple high-profile attacks, including the infamous Mumbai attacks in November 2008. ENCARNACION pled guilty on January 22, 2020, before U.S. District Judge Ronnie Abrams, who also imposed today’s sentence.
Acting Manhattan U.S. Attorney Audrey Strauss said: “Jesus Encarnacion plotted to travel abroad, to join and train with Lashkar e-Tayyiba, infamous worldwide for the jihadist murder of innocent civilians, and to carry out shootings, bombings, and beheadings on behalf of that terrorist organization. Thanks to the FBI, the NYPD, and the Joint Terrorism Task Force, Encarnacion has been sentenced to a lengthy prison term for his crime.”
Assistant Attorney General John C. Demers said: “Unfortunately, individuals continue to attempt to travel to foreign countries to support terrorist organizations. Encarnacion’s sentence reflects the seriousness with which the justice system takes these efforts. The National Security Division remains committed to identifying and holding accountable those who seek to join and support designated foreign terrorist organizations.”
According to the criminal Complaint, Indictment, other court filings, and statements during court proceedings:
In November 2018, ENCARNACION expressed his desire to join a terrorist group in an online group chat, where he met another individual (“CC-1”). CC-1 introduced ENCARNACION to an individual who, unbeknownst to CC-1 or ENCARNACION, was in fact an undercover FBI employee (“UC-1”). ENCARNACION repeatedly expressed, in the course of recorded communications through a social media service with CC-1 and through an encrypted messaging service with UC-1, his allegiance to and support for LeT, which, since approximately 2001, has been designated as a Foreign Terrorist Organization by both the United States Secretary of State and the Immigration and Nationality Act.
Over several months, ENCARNACION discussed his desire and plans to join LeT overseas so that he could receive training and participate in violent acts of terrorism. For example, ENCARNACION told UC-1 that he was “ready to kill and die in the name of Allah” and sought UC-1’s assistance to help ENCARNACION travel abroad to serve as an “executioner” for LeT, stating, “I want to execute. I want to behead. Shoot.” ENCARNACION further stated that he aspired to commit terrorist attacks (“a bombing and shooting”) in the United States, but lacked “guidance” and “guns” to do so.
By early 2019, ENCARNACION and UC-1 agreed on a plan that ENCARNACION believed would allow him to join LeT in Pakistan. ENCARNACION told UC-1 that he had made arrangements to travel to a particular city in Europe (the “European City”), as the first step in traveling to Pakistan to join LeT. ENCARNACION purchased an airline ticket for a flight scheduled to depart on February 7, 2019, from John F. Kennedy International Airport (“JFK Airport”) to the European City. On February 7, 2019, ENCARNACION traveled to JFK Airport, where he was arrested by the Federal Bureau of Investigation (“FBI”) after he attempted to board that flight.
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In addition to the prison term, ENCARNACION was also sentenced to serve a life term of supervised release.
Ms. Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the New York City Police Department, and over 50 other federal, state, and local agencies. Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division, as well as the New York Office of U. S. Customs and Border Protection.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener are in charge of the prosecution, with assistance from Bridget Behling of the National Security Division’s Counterterrorism Section.
Brooklyn Man Pleads Guilty in Manhattan Federal Court to Attempting to Provide Material Support to ISISRead the Press Release
The Department of Justice announced that Zachary Clark, a/k/a “Umar Kabir,” a/k/a “Umar Shishani,” a/k/a “Abu Talha,” pleaded guilty to attempting to provide material support to the Islamic State of Iraq and al-Sham (ISIS). Clark pled guilty today in Manhattan federal court before U.S. District Judge Naomi Reice Buchwald. Judge Buchwald is scheduled to sentence Clark on Feb. 9, 2021, at 12:00 p.m.
“Having pledged allegiance to ISIS, Clark provided specific instructions for how to conduct attacks in New York City, instructing others on knifing and bomb-making,” said Assistant Attorney General for National Security John C. Demers. “We must remain vigilant to the threat of terrorism. We must remain committed to identifying and holding accountable those who threaten our communities because of their support for foreign terrorist organizations.”
“As he admitted in court today, Zachary Clark pledged allegiance to ISIS and posted calls for attacks on the public and institutions in New York on encrypted pro-ISIS chatrooms,” said Acting U.S. Attorney Audrey Strauss for the Southern District of New York. “He also posted detailed instructions for carrying out those violent acts. Thanks to the Joint Terrorism Task Force, Clark’s efforts to incite deadly violence on behalf of ISIS have been silenced, and he now awaits sentencing for his crimes.”
“Today’s plea by Mr. Clark is yet one more example of the resolve of the FBI’s JTTF in New York, and our many law enforcement partners, to protect this city and our citizens from the danger of lone wolf attacks,” said FBI Assistant Director William F. Sweeney Jr. “Many thanks to all of our partners who work side by side with us every day to neutralize threats of this nature.”
According to the allegations in the indictment, complaint, other court filings, and statements made during court proceedings:
Clark pledged allegiance to ISIS twice, first in July 2019, to ISIS’s then-leader Abu Bakr al-Baghdadi, and then in October 2019, to ISIS’s new leader, Abu Ibrahim al-Sashemi al-Qurayshi, who ISIS promoted after al-Baghdadi’s death. Beginning in at least March 2019, Clark disseminated ISIS propaganda through, among other avenues, encrypted chatrooms intended for members, associates, supporters, and potential recruits of ISIS. Clark’s propaganda included, among other things, calls for ISIS supporters to commit lone wolf attacks in New York City. For example, on Aug. 3, 2019, Clark posted instructions about how to conduct such an attack, including directions on how to select an attack target, how to conduct preoperational surveillance, how to conduct operational planning, and how to avoid attracting law enforcement attention when preparing for and conducting the attack. On another occasion, Clark posted a manual entitled “Knife Attacks,” which stated, among other things, that discomfort at “the thought of plunging a sharp object into another person’s flesh” is “never an excuse for abandoning jihad” and that “[k]nives, though certainly not the only weapon for inflicting harm upon the kuffar [non-believers], are widely available in every land and thus readily accessible.” Clark urged the participants in encrypted chatrooms to attack specific targets, posting maps and images of the New York City subway system and encouraging ISIS supporters to attack those locations. Clark’s guidance also included posting a manual entitled “Make a bomb in the kitchen of your Mom,” which was issued by al-Qaeda in the Arabian Peninsula and included detailed instructions about constructing bombs using readily available materials.
Clark, 41, of Brooklyn, New York, pled guilty to one count of attempting to provide material support or resources to a designated foreign terrorist organization, namely, ISIS, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Assistant Attorney General Demers and Ms. Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state and local agencies. Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Gillian Grossman, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from the National Security Division’s Counterterrorism Section.
Brooklyn Man Pleads Guilty in Manhattan Federal Court to Attempting to Provide Material Support to ISISRead the Press Release
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 Field Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that ZACHARY CLARK, a/k/a “Umar Kabir,” a/k/a “Umar Shishani,” a/k/a “Abu Talha,” pled guilty to attempting to provide material support to the Islamic State of Iraq and al-Sham (“ISIS”). CLARK pled guilty today in Manhattan federal court before U.S. District Judge Naomi Reice Buchwald. CLARK is scheduled to be sentenced by Judge Buchwald on February 9, 2021, at 12:00 p.m.
Acting U.S. Attorney Audrey Strauss said: “As he admitted in court today, Zachary Clark pledged allegiance to ISIS and posted calls for attacks on the public and institutions in New York on encrypted pro-ISIS chatrooms. He also posted detailed instructions for carrying out those violent acts. Thanks to the Joint Terrorism Task Force, Clark’s efforts to incite deadly violence on behalf of ISIS have been silenced, and he now awaits sentencing for his crimes.”
Assistant Attorney General John C. Demers said: “Having pledged allegiance to ISIS, Clark provided specific instructions for how to conduct attacks in New York City, instructing others on knifing and bomb-making. We must remain vigilant to the threat of terrorism. We must remain committed to identifying and holding accountable those who threaten our communities because of their support for foreign terrorist organizations.”
FBI Assistant Director William F. Sweeney Jr. said: “Today’s plea by Mr. Clark is yet one more example of the resolve of the FBI’s JTTF in New York, and our many law enforcement partners, to protect this city and our citizens from the danger of lone wolf attacks. Many thanks to all of our partners who work side by side with us every day to neutralize threats of this nature.”
Police Commissioner Dermot Shea said: “The defendant, by trying to support a designated foreign terrorist organization, represents the way New York City remains a top terrorist target. I commend the work of the NYPD investigators, the FBI agents, and the prosecutors from the U.S. Attorney for the Southern District in bringing this case.”
According to the allegations in the Indictment, Complaint, other court filings, and statements made during court proceedings:
CLARK pledged allegiance to ISIS twice, first in July 2019, to ISIS’s then-leader Abu Bakr al-Baghdadi, and then in October 2019, to ISIS’s new leader, Abu Ibrahim al-Sashemi al-Qurayshi, whom ISIS promoted after al-Baghdadi’s death. Beginning in at least March 2019, CLARK disseminated ISIS propaganda through, among other avenues, encrypted chatrooms intended for members, associates, supporters, and potential recruits of ISIS. CLARK’s propaganda included, among other things, calls for ISIS supporters to commit lone wolf attacks in New York City. For example, on August 3, 2019, CLARK posted instructions about how to conduct such an attack, including directions on how to select an attack target, how to conduct preoperational surveillance, how to conduct operational planning, and how to avoid attracting law enforcement attention when preparing for and conducting the attack. On another occasion, CLARK posted a manual entitled “Knife Attacks,” which stated, among other things, that discomfort at “the thought of plunging a sharp object into another person’s flesh” is “never an excuse for abandoning jihad” and that “[k]nives, though certainly not the only weapon for inflicting harm upon the kuffar [non-believers], are widely available in every land and thus readily accessible.” CLARK urged the participants in encrypted chatrooms to attack specific targets, posting maps and images of the New York City subway system and encouraging ISIS supporters to attack those locations. CLARK’s guidance also included posting a manual entitled “Make a bomb in the kitchen of your Mom,” which was issued by al-Qaeda in the Arabian Peninsula and included detailed instructions about constructing bombs using readily available materials.
* * *
CLARK, 41, of Brooklyn, New York, pled guilty to one count of attempting to provide material support or resources to a designated foreign terrorist organization, namely, ISIS, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Ms. Strauss and Assistant Attorney General Demers praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state, and local agencies. Ms. Strauss also thanked the Counterterrorism Section of the Department of Justice’s National Security Division.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Gillian Grossman, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from Trial Attorneys Jason Denney and Chad Davis of the National Security Division’s Counterterrorism Section.
Cosmetic Surgeon and Cosmetic Surgery Practice Found Liable After Trial for Discriminating Against Individuals with Disabilities and Ordered to Pay $125,000 to Each VictimRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that SPRINGFIELD MEDICAL AESTHETIC P.C. d/b/a ADVANCED COSMETIC SURGERY OF NEW YORK (“ADVANCED COSMETIC”), and EMMANUEL O. ASARE, M.D. (“ASARE”), a plastic surgery practice and surgeon in that practice, were found by federal district judge Analisa Torres, after a bench trial, to have engaged in discrimination on the basis of disability in violation of Title III of the Americans with Disabilities Act of 1990 (“Title III of the ADA”). Specifically, Judge Torres concluded that ADVANCED COSMETIC, which has offices in Manhattan and Long Island, and ASARE, had an unlawful policy of denying services to individuals who are, or perceived to be, living with HIV, and applied that policy to unlawfully deny services to three prospective patients (the “Patients”) on the basis of their disability. The Court further concluded that ADVANCED COSMETIC and ASARE engaged in an unlawful practice of testing every preoperative patient for HIV, in violation of the ADA. Judge Torres awarded each of the three Patients $125,000 for emotional distress suffered as a result of ADVANCED COSMETIC’s and ASARE’s conduct, and imposed $15,000 in civil penalties. The Court also enjoined ADVANCED COSMETIC and ASARE from continuing to engage in practices that violate the ADA.
Acting U.S. Attorney Audrey Strauss said: “This verdict marks a significant victory in our continuing efforts to enforce the ADA and eliminate discriminatory practices against individuals living with HIV. The three patients who bravely testified at trial should not have had to suffer the discrimination they did when seeking medical services, and medical providers are reminded again that they are prohibited by law from treating individuals living with HIV differently from anyone else.”
Title III of the ADA prohibits discrimination by doctors, lawyers, hospitals, restaurants, retail stores, hotels, private transportation providers, and other private businesses and nonprofit organizations that provide services to the public. All of these entities are prohibited from excluding individuals with disabilities from their services and programs because they are living with a serious medical condition, such as HIV.
On May 6, 2015, the United States filed a Complaint in Manhattan federal court, alleging that ADVANCED COSMETIC and ASARE denied cosmetic surgery services to individuals living with HIV, in violation of the ADA. On February 10, 2016, one of the Patients filed an intervenor complaint alleging that ADVANCED COSMETIC and ASARE denied him cosmetic surgery services on the basis of his HIV status in violation of the ADA and the New York City Human Rights Law. At the bench trial held in October 2018, the Patients testified that they were denied services by ADVANCED COSMETIC and ASARE because they were either living with HIV, or, in the case of one Patient, perceived to be living with HIV. The Court’s findings of fact after trial included the following:
(1) Defendants refused cosmetic surgery services to the three Patients;
(2) Defendants did so when they became aware that each Patient was either living with HIV, potentially living with HIV, or living with HIV and taking antiretroviral drugs;
(3) Defendants tested the Patients without their consent in order to ascertain their HIV status; and
(4) each Patient suffered emotional distress as a result of Defendants’ actions.
The Court concluded that the above conduct violated the ADA. The Court further found that the testimony of the Patients detailed “severe psychological and emotional consequences of Defendants’ actions,” and awarded each Patient $125,000 in damages. The Court also awarded the United States $15,000 in civil penalties due in part to Defendants’ “troubling” practice of testing all prospective patients for HIV without their express consent. Finally, to prevent ADVANCED COSMETIC and ASARE from continuing to engage in unlawful practices, the Court permanently enjoined Defendants from (1) performing HIV testing on every patient as a routine practice, and (2) conducting HIV testing on any patient without the patient’s express consent.
This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Arastu Chaudhury and Lara K. Eshkenazi are in charge of the case.
Company President and Employee Arrested in Alleged Scheme to Violate the Export Control Reform ActRead the Press Release
Assistant Attorney General for National Security John C. Demers, Audrey Strauss, the Acting U.S. Attorney for the Southern District of New York, and Jonathan Carson, Special Agent in Charge of the New York Field Office of the U.S. Department of Commerce, Office of Export Enforcement (OEE), announced the arrests today of Chong Sik Yu, a/k/a “Chris Yu,” and Yunseo Lee. Yu and Lee are charged with conspiring to unlawfully export dual-use electronics components, in violation of the Export Control Reform Act, and to commit wire fraud, bank fraud, and money laundering. Yu and Lee were arrested this morning and are expected to be presented later today before U.S. Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court.
“The Department’s fight against illegal technology transfer to China is no more critical than in areas like those involved in this case — controlled items used in missile and nuclear technology,” said Assistant Attorney General for National Security John C. Demers. “We will do everything in our power to disrupt illegal exports like these that jeopardize our national security.”
“Chong Sik Yu and Yunseo Lee are accused of violating U.S. export laws by sending electronics components with military applications to Hong Kong and China,” said Acting U.S. Attorney Audrey Strauss. “Together with the Commerce Department and all of our law enforcement partners, we will continue to protect our national security by preventing dual-use technologies from being sent abroad without the required licenses.”
“A top priority of the Office of Export Enforcement is identifying and disrupting the illicit export of items to Hong Kong and China that undermine the national security of the United States,” said OEE Special Agent in Charge Jonathan Carson. “We will continue to work with our law enforcement partners using criminal prosecutions to keep the most dangerous goods out of the most dangerous hands.”
As alleged in the criminal Complaint,[1] unsealed today in Manhattan federal court:
Since at least 2019, a U.S. company named America Techma Inc. (ATI) has illegally exported electronic components from the United States to Hong Kong for apparent re-export to other countries, including China, in violation of the Export Control Reform Act of 2018 (ECRA). Pursuant to the ECRA controls, the Department of Commerce administers export-licensing and other requirements for the export of goods, software, and technologies from the United States to foreign countries. These requirements restrict the export of items that could make a significant contribution to the military potential of other nations or that could be detrimental to the foreign policy or national security of the United States. The Commerce Department identifies the most sensitive items subject to EAR controls on the Commerce Control List (CCL), which is categorized by Export Control Classification Number (ECCN).
Yu is ATI’s President, and Lee is an ATI Sales Representative. Yu and Lee worked together and with others to ship what they knew to be export-controlled items to Hong Kong and China. For instance, in June 2019, ATI obtained electronics components — which are export-controlled under the CCL for missile technology, nuclear nonproliferation, and anti-terrorism reasons —from a U.S. supplier (U.S. Supplier-1), and then sent those components to a trading company in Hong Kong (Hong Kong Trading Company-1). In January 2020, ATI attempted to send to Hong Kong Trading Company-1 several electronic components, which are export-controlled under the CCL for anti-terrorism, national security, regional stability, missile technology, nuclear nonproliferation, and anti-terrorism. After the January 2020 package was detained by law enforcement, Yu and Lee discussed methods for evading future law enforcement scrutiny by, for instance, transshipping packages through South Korea, and by using a separate company based in New Jersey (the “New Jersey Reshipper”) to send shipments to Hong Kong in an attempt to avoid customs scrutiny of ATI’s shipments.
For instance, on Feb. 12, 2020, Lee sent an email to another ATI customer located in Hong Kong (Hong Kong Company-2) stating that: “[W]e had delivery issue currently with customs, so we’ve decided to release all items to South Korea first and release to HK from Korea temporarily.” The next day, Lee received a response, which stated, in part, “Most of the items we buy from ATI are under ECCN restriction, so I guess ATI will stock in and release to [ATI’s branch in South Korea], and then ship to HK . . . am I correct?” Lee replied, “Yes you are right.”
On March 5, 2020, Lee responded to Hong Kong Company-2’s inquiry regarding whether ATI could sell certain components to China. Lee’s response, which copied Yu, stated: “We’ve sold” the requested parts “to China customer many times. . . But currently we have customs issue so we don’t know how to handle it. [W]e are thinking we release all controlled parts to South Korea first then release to HK from Korea[.]”
Hong Kong Trading Company-1 also advised ATI on steps to take in order to evade U.S. export controls. For instance, Hong Kong Trading Company-1 advised Yu and Lee to use a marker to cover ATI’s name on labels, to cover each component with an electro-static discharge (ESD) bag, to remove all original documentation from the package, and to use the New Jersey Reshipper to send the shipment. On March 14, 2020, Lee sent an email to Hong Kong Trading Company‑1, copying Yu, stating: “We will follow your direction like adjusting invoice or removed label. But we do not have responsible if it will have problem during the transit to you. But for sure, we will do everything what you want for preparing shipments. We just hope that there is no more detained package.”
In April 2020, ATI sent a package of components to Hong Kong Trading Company-1 using the New Jersey Reshipper. The package was inspected and detained by U.S. customs authorities. Consistent with Hong Kong Trading Company-1’s instructions, the components had been placed in ESD bags labeled with part numbers different from the actual part numbers. One of the components in the April 2020 shipment was export-controlled under the CCL for national security and anti-terrorism.
Financial and shipping records establish that ATI has had a long-standing relationship with Hong Kong Trading Company-1. Between August 2016 and July 2020, ATI shipped more than 200 packages to Hong Kong Trading Company-1. In the one-year period between May 2019 and June 2020, Hong Kong Trading Company-1 transferred over $800,000 into ATI’s bank account in the United States.
No one involved in any of these transactions obtained the licenses required under the ECRA to export these dual-use components.
Yu, 58, of Oradell, New Jersey, and Lee, 33, of Fort Lee, New Jersey, are charged with one count of conspiring to unlawfully export dual-use electronics components, which carries a maximum sentence of 20 years in prison, one count of conspiring to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiring 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 are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Assistant Attorney General Demers and Ms. Strauss praised the extraordinary investigative work of the U.S. Department of Commerce, Office of Export Enforcement, New York Field Office.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael K. Krouse and Michael D. Lockard are in charge of the prosecution, with assistance from Trial Attorney David Recker of the Counterintelligence and Export Control Section.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein are only allegations, and every fact described should be treated as an allegation.
Company President and Employee Arrested in Alleged Scheme to Violate the Export Control Reform ActRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John C. Demers, Assistant Attorney General for National Security, and Jonathan Carson, Special Agent in Charge of the New York Field Office of the U.S. Department of Commerce, Office of Export Enforcement (“OEE”), announced the arrests today of CHONG SIK YU, a/k/a “Chris Yu,” and YUNSEO LEE. YU and LEE are charged with conspiring to unlawfully export dual-use electronics components, in violation of the Export Control Reform Act, and to commit wire fraud, bank fraud, and money laundering. YU and LEE were arrested this morning and are expected to be presented later today before U.S. Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court.
Acting U.S. Attorney Audrey Strauss said: “Chong Sik Yu and Yunseo Lee are accused of violating U.S. export laws by sending electronics components with military applications to Hong Kong and China. Together with the Commerce Department and all of our law enforcement partners, we will continue to protect our national security by preventing dual-use technologies from being sent abroad without the required licenses.”
Assistant Attorney General for National Security John C. Demers said: “The Department’s fight against illegal technology transfer to China is no more critical than in areas like those involved in this case – controlled items used in missile and nuclear technology. We will do everything in our power to disrupt illegal exports like these that jeopardize our national security.”
OEE Special Agent in Charge Jonathan Carson said: “A top priority of the Office of Export Enforcement is identifying and disrupting the illicit export of items to Hong Kong and China that undermine the national security of the United States. We will continue to work with our law enforcement partners using criminal prosecutions to keep the most dangerous goods out of the most dangerous hands.”
As alleged in the criminal Complaint,[1] unsealed today in Manhattan federal court:
Since at least 2019, a U.S. company named America Techma Inc. (“ATI”) has illegally exported electronic components from the United States to Hong Kong for apparent re-export to other countries, including China, in violation of the Export Control Reform Act of 2018 (“ECRA”). Pursuant to the ECRA controls, the Department of Commerce administers export-licensing and other requirements for the export of goods, software, and technologies from the United States to foreign countries. These requirements restrict the export of items that could make a significant contribution to the military potential of other nations or that could be detrimental to the foreign policy or national security of the United States. The Commerce Department identifies the most sensitive items subject to Export Administration Regulations (“EAR”) on the Commerce Control List (“CCL”), which is categorized by Export Control Classification Number (“ECCN”).
YU is ATI’s president, and LEE is an ATI sales representative. YU and LEE worked together and with others to ship what they knew to be export-controlled items to Hong Kong and China. For instance, in June 2019, ATI obtained electronics components – which are export-controlled under the CCL for missile technology, nuclear nonproliferation, and anti-terrorism reasons – from a U.S. supplier (“U.S. Supplier-1”), and then sent those components to a trading company in Hong Kong (“Hong Kong Trading Company-1”). In January 2020, ATI attempted to send to Hong Kong Trading Company-1 several electronic components, which are export-controlled under the CCL for national security, regional stability, missile technology, nuclear nonproliferation, and anti-terrorism reasons. After the January 2020 package was detained by law enforcement, YU and LEE discussed methods for evading future law enforcement scrutiny by, for instance, transshipping packages through South Korea, and by using a separate company based in New Jersey (the “New Jersey Reshipper”) to send shipments to Hong Kong in an attempt to avoid customs scrutiny of ATI’s shipments.
For instance, on February 12, 2020, LEE sent an email to another ATI customer located in Hong Kong (“Hong Kong Company-2”) stating that: “[W]e had delivery issue currently with customs, so we’ve decided to release all items to South Korea first and release to HK from Korea temporarily.” The next day, LEE received a response, which stated, in part, “Most of the items we buy from ATI are under ECCN restriction, so I guess ATI will stock in and release to [ATI’s branch in South Korea], and then ship to HK . . . am I correct?” LEE replied, “Yes you are right.”
On March 5, 2020, LEE responded to Hong Kong Company-2’s inquiry regarding whether ATI could sell certain components to China. LEE’s response, which copied YU, stated: “We’ve sold” the requested parts “to China customer many times. . . But currently we have customs issue so we don’t know how to handle it. [W]e are thinking we release all controlled parts to South Korea first then release to HK from Korea[.]”
Hong Kong Trading Company-1 also advised ATI on steps to take in order to evade U.S. export controls. For instance, Hong Kong Trading Company-1 advised YU and LEE to use a marker to obscure ATI’s name on labels, to cover each component with an electro-static discharge (“ESD”) bag, to remove all original documentation from the package, and to use the New Jersey Reshipper to send the shipment. On March 14, 2020, LEE sent an email to Hong Kong Trading Company‑1, copying YU, stating: “We will follow your direction like adjusting invoice or removed label. But we do not have responsible if it will have problem during the transit to you. But for sure, we will do everything what you want for preparing shipments. We just hope that there is no more detained package.”
In April 2020, ATI sent a package of components to Hong Kong Trading Company-1 using the New Jersey Reshipper. The package was inspected and detained by U.S. customs authorities. Consistent with Hong Kong Trading Company-1’s instructions, the components had been placed in ESD bags labelled with part numbers different from the actual part numbers. One of the components in the April 2020 shipment was export-controlled under the CCL for national security and anti-terrorism.
Financial and shipping records establish that ATI has had a long-standing relationship with Hong Kong Trading Company-1. Between August 2016 and July 2020, ATI shipped more than 200 packages to Hong Kong Trading Company-1. In the one-year period between May 2019 and June 2020, Hong Kong Trading Company-1 transferred over $800,000 into ATI’s bank account in the United States.
No one involved in any of these transactions obtained the licenses required under the ECRA to export these dual-use components.
* * *
YU, 58, of Oradell, New Jersey, and LEE, 33, of Fort Lee, New Jersey, are each charged with one count of conspiring to unlawfully export dual-use electronics components, which carries a maximum sentence of 20 years in prison, one count of conspiring to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiring 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 are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Ms. Strauss praised the extraordinary investigative work of the New York Field Office of the Department of Commerce, Office of Export Enforcement. Ms. Strauss also thanked the Newark Field Offices of Homeland Security Investigations and U.S. Customs and Border Protection for their assistance in the investigation, as well as the Counterintelligence and Export Control Section of the Department of Justice’s National Security Division.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael K. Krouse and Michael D. Lockard are in charge of the prosecution, with assistance from Trial Attorney David Recker of the Counterintelligence and Export Control Section.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein are only allegations, and every fact described should be treated as an allegation.
Acting Manhattan U.S. Attorney Announces Agreement to Address New York City’s Ongoing Non-Compliance with Rikers Consent JudgmentRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that the United States has entered into an agreement (“Remedial Order”) with New York City and the New York City Department of Correction (“DOC”) to address ongoing non-compliance with core provisions of a Court-ordered Consent Judgment entered in October 2015 to reduce violence in NYC jails on Rikers Island and ensure the safety and well-being of inmates. The Remedial Order, which is subject to the final approval of the Court, requires DOC to implement operational reforms to fix systemic deficiencies that have continued to plague the jail system. Specifically, under the Remedial Order, DOC must adopt numerous new measures designed to reduce the unnecessary use of force against inmates, improve staff supervision, enhance the quality and timeliness of investigations into use of force incidents, ensure that correction officers are held accountable for their misconduct, and better manage and supervise the youngest inmates in custody. The independent federal monitor overseeing the Consent Judgment will assess compliance with the requirements of the Remedial Order.
Acting Manhattan U.S. Attorney Audrey Strauss said: “Five years ago, this Office entered into a groundbreaking, Court-enforceable agreement requiring the City and the Department of Correction to implement sweeping, comprehensive reforms to protect the constitutional rights of inmates and ensure their safety. As documented repeatedly through the federal monitor’s reports to the Court, the City and DOC have failed to fulfill core obligations under that agreement. While this Office recognizes that changing a decades-long culture of violence is not a simple task, the City and DOC must do better. By agreeing to adopt the measures set forth in this Remedial Order, they have taken a step in the right direction. This Office will continue to closely monitor the implementation of the required reforms and vigilantly enforce the requirements of the Remedial Order and the underlying Consent Judgment.”
In August 2014, after completing a multi-year investigation, this Office issued a report that concluded that “a deep-seated culture of violence is pervasive throughout the adolescent facilities at Rikers, and DOC staff routinely utilize force not as a last resort, but instead as a means to control the adolescent population and punish disorderly or disrespectful behavior.” The United States proceeded to join a class action lawsuit against the City, Nunez v. City of New York, which alleged that DOC engaged in a pattern and practice of using unnecessary and excessive force against inmates throughout the jail system. In October 2015, Judge Laura Taylor Swain entered a Consent Judgment requiring DOC to develop and implement myriad new practices, systems, policies, and procedures to reduce violence and the use of excessive and unnecessary force. The Consent Judgment is subject to the oversight of the Court and an independent federal monitor.
Notwithstanding these Court-mandated reforms, the frequency with which correction officers use force against inmates has increased dramatically since the Consent Judgment was entered, with the average monthly use of force rate increasing by more than 100% from 2016 to 2019. In recent bi-annual reports to the Court, the federal monitor has found the City and DOC to be in non-compliance with numerous key provisions of the Consent Judgment. For instance, in his report filed on May 29, 2020, the federal monitor found that DOC “continues to struggle to properly manage Staff’s use of force” and went on to conclude that “a pattern of unprofessional conduct and hyper-confrontational behavior by Staff, an overreliance on alarms and the Probe Team, misuse of OC spray [i.e., pepper spray], use of painful escort techniques, and improper use of head strikes have all plagued the agency’s use of force since the Effective Date [of the Consent Judgment].”
The Remedial Order requires DOC, among other things, to:
- Improve the level of supervision of Captains by substantially increasing the number of Assistant Deputy Wardens assigned to jails.
- Evaluate inmates who have been involved in a significant number of use of force incidents to determine whether their mental health needs are being adequately addressed, and whether existing security and management protocols are appropriate for these inmates.
- Develop a new protocol governing the composition and deployment of Facility Emergency Response Teams (i.e., probe teams) in order to minimize unnecessary or avoidable uses of force by staff.
- By the end of the year, complete all outstanding investigations into use of force incidents that have been pending for a lengthy period of time.
- Utilize a recently created unit of trained investigators to investigate all use of force incidents within 25 business days to determine whether staff violated the use of force policy, or whether further investigation is necessary.
- Consistently not exceed caseload targets approved by the federal monitor for investigators responsible for investigating use of force incidents.
- Impose immediate corrective action on staff for violations of the use of force policy when recommended by the federal monitor.
- Expedite the prosecution of disciplinary cases involving violations of the use of force policy by, among other things, ensuring that at least 50 cases are heard each month by the Office of Administrative Trials and Hearings (“OATH”).
- With respect to units housing 18-year-old inmates, improve the staff assignment system such that the same correction officers, Captains, and Assistant Deputy Wardens are consistently assigned to work in the same housing unit and on the same tour, to the extent feasible.
- With respect to units housing 18-year-old inmates, implement a system that includes a variety of short-term and long-term rewards and consequences to incentivize positive inmate behavior and sanction negative conduct.
While this Office remains extremely concerned with DOC’s ongoing failure to comply with core requirements of the Consent Judgment, the Office recognizes that the agency has made some significant improvements in other areas since the Consent Judgment became effective. For example, DOC has installed thousands of wall-mounted video surveillance cameras throughout the jails to ensure complete camera coverage; created and provided a wide range of new training programs for staff; developed a new computerized case management system to track a wide range of information relating to use of force incidents; eliminated the use of punitive segregation for inmates under the age of 22; and stopped housing youths under the age of 18 on Rikers Island.
This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Jeffrey K. Powell and Lara K. Eshkenazi are in charge of the case.
- Improve the level of supervision of Captains by substantially increasing the number of Assistant Deputy Wardens assigned to jails.
5 Defendants Indicted in Connection with Kidnapping, Narcotics, and Firearm OffensesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Peter C. Fitzhugh, Special Agent in Charge of Homeland Security Investigations (“HSI”) in New York, and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment charging MARIO REYNOSO-HICIANO, JOEL CABRERA, a/k/a “Gordo,” a/k/a “Oso,” VLADIMIR REYES, YUDITH REYNOSO-HICIANO, a/k/a “La Classica,” and PEDRO REYNOSO with kidnapping, narcotics, and firearm offenses. Three defendants were taken into custody earlier today and will be presented before U.S. Magistrate Judge Kevin Nathaniel Fox. A fourth defendant remains at large, and a fifth defendant is already in federal custody in connection with another matter and will be presented and arraigned at a later date. The case is assigned to U.S. District Judge Denise L. Cote.
Acting U.S. Attorney Audrey Strauss said: “As alleged, the defendants were involved in conspiracies to traffic in cocaine and/or to kidnap someone they believed had shortchanged them in a drug transaction. This case illustrates once again how drug trafficking and gun violence so often go hand-in-hand. Thanks to the efforts of HSI and the NYPD, people charged with violent crimes are in custody and facing federal charges.”
HSI Special Agent-in-Charge Peter C. Fitzhugh said: “The safety and well-being of New York City residents remains the primary focus of HSI and our partners. Today’s indictment alleging narcotics trafficking and kidnapping by the defendants, and use of a firearm by one of them, marks yet another positive step in ridding alleged criminals from our community. HSI’s continued collaboration with the NYPD to investigate violent crimes and dismantle criminal organizations will ensure the safe removal of guns, drugs and bad actors from our neighborhoods.”
NYPD Commissioner Dermot Shea said: “The illegal narcotics trade and associated violence alleged in this federal indictment are crimes that erode the fabric of city life. I commend our NYPD investigators, and federal partners, for their work in this successful case.”
According to the allegations in the Indictment[1]:
In or about May 2019, MARIO REYNOSO-HICIANO, JOEL CABRERA, and VLADIMIR REYES engaged in a conspiracy to distribute cocaine. A dispute arose between MARIO REYNOSO-HICIANO and another individual who had brokered the sale of cocaine (“Victim-1”) because MARIO REYNOSO-HICIANO believed that he had been paid less than the full negotiated purchase price for the cocaine.
As part of that dispute, MARIO REYNOSO-HICIANO, YUDITH REYNOSO-HICIANO, PEDRO REYNOSO, and others kidnapped Victim-1, tied him to a chair inside an apartment in the Bronx (“Apartment-1”), threatened to and did physically assault Victim-1, and demanded that Victim-1 provide information relating to the aforementioned cocaine transaction. Portions of the kidnapping were recorded with a cellphone by YUDITH REYNOSO-HICIANO.
In the early morning of May 31, 2019, CABRERA brandished and discharged a firearm in connection with the cocaine transaction that occurred the day before.
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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.
Ms. Strauss praised the outstanding investigative work of HSI and the NYPD.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Daniel H. Wolf and Alexander N. Li are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Narcotics distribution conspiracy
21 U.S.C. §§ 846, 841(b)(1)(B)
MARIO REYNOSO-HICIANO (age 35)
JOEL CABRERA (age 25)
VLADIMIR REYES (age 37)
40 years
Mandatory minimum of five years in prison
2
Kidnapping conspiracy
18 U.S.C. § 1201(c)
MARIO REYNOSO-HICIANO
YUDITH REYNOSO-HICIANO (age 41)
PEDRO REYNOSO (age 21)
Life
3
Kidnapping
18 U.S.C. §§ 1201(a)(1), 1201(d) and 2
MARIO REYNOSO-HICIANO
YUDITH REYNOSO-HICIANO
PEDRO REYNOSO
Life
4
Firearms offense
18 U.S.C. §§ 924(c)(1)(A)(i), 924(c)(1)(A)(ii), 924(c)(1)(A)(iiii), and 2
JOEL CABRERA
Life
Mandatory minimum of 10 years in prison
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Acting Manhattan U.S. Attorney Files Lawsuit Against Jewelry Importer and Settles Claims Against Its Former President for Fraudulently Underreporting Value of Jewelry to Evade Customs DutiesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Brenda Smith, Executive Assistant Commissioner for U.S. Customs and Border Protection’s (“CBP”) Office of Trade, and Troy Miller, Director, CBP Field Operations New York, announced today that the United States has filed a civil fraud lawsuit against ANAYA GEMS, INC. (“ANAYA GEMS”), a company that sold jewelry to retailers and was previously based in Long Island City, New York, and its former president, ANSHUL GANDHI (“GANDHI”), for defrauding the United States by falsely underreporting to CBP the value of jewelry imported from Hong Kong and Thailand, and thereby avoiding customs duties owed on the goods. Specifically, the Government alleges that ANAYA GEMS did not report the value of the diamonds contained in the jewelry, or grossly understated their value. The Hong Kong and Thailand companies that assembled the finished jewelry shipped to ANAYA GEMS used diamonds that were obtained from India-based companies owned, operated, and/or controlled by GANDHI’s family members.
Simultaneous with the filing of the lawsuit, the United States has resolved the claims against GANDHI pursuant to a settlement agreement approved today by U.S. District Judge Edgardo Ramos. Under the settlement, GANDHI will pay $415,000 to the United States and made admissions regarding his conduct and the company’s conduct. Specifically, GANDHI admitted that ANAYA GEMS routinely and knowingly underpaid customs duties for jewelry containing diamonds imported from Hong Kong and Thailand. The amount paid by GANDHI under the settlement is based on the Office’s assessment of his ability to pay based on the financial information he provided. ANAYA GEMS is no longer operating.
Acting U.S. Attorney Audrey Strauss said: “Anaya Gems and its former president engaged in a fraudulent scheme to short-change the Government of customs duties owed for imported jewelry by falsely reporting its value. Our Office will continue to hold companies, as well as their executives, accountable when they try to evade paying the legally required custom duties on imported goods.”
Executive Assistant Commissioner Brenda Smith said: “U.S. Customs and Border Protection maintains a zero-tolerance policy for trade fraud and other unfair trade practices that undermine the competitiveness of U.S. businesses. Our auditors, attorneys, and analysts in New York played an important role in this investigation, and I want to recognize their outstanding work. We are proud to partner with the U.S. Attorney’s Office to level the playing field for legitimate traders by steadfastly enforcing U.S. trade laws.”
CBP Field Operations Director Troy Miller said: “This case is a great example of CBP’s historical mission of protecting the revenue of the United States and coincides with the 231st anniversary of the creation of the United States Customs Service. I would like to thank our partners for their efforts in this priority trade enforcement action.”
The Complaint filed in Manhattan federal court alleges that from 2010 through 2017, ANAYA GEMS and GANDHI engaged in a scheme to fraudulently underpay customs duties on jewelry containing diamonds imported from Hong Kong and Thailand. They carried out this scheme by causing false representations to be made concerning the value of the jewelry on entry documents filed with CBP, and by submitting invoices that did not reflect the true value of the jewelry. ANAYA GEMS’ own records reflected the fraudulent scheme, showing the difference between the true values of the jewelry and the false values that were declared to CBP, as well as the duty that ANAYA GEMS would have been required to pay if it had lawfully reported the actual value of the jewelry. In many instances, upon receipt of a shipment of jewelry from Hong Kong or Thailand, an ANAYA GEMS employee would handwrite on the manufacturer’s receipt the actual value of the diamonds contained in the imported merchandise so that the company could track this information. ANAYA GEMS then provided its customs broker with the versions of these invoices without the handwriting – and without the actual value of the diamonds – and the customs broker submitted those invoices to CBP.
As part of the settlement approved today by Judge Ramos, GANDHI admits, acknowledges, and accepts responsibility for the following conduct:
- As the president of the company during the period relevant to the Government’s allegations, GANDHI was closely involved in managing the day-to-day operations of ANAYA GEMS.
- ANAYA GEMS imported jewelry containing diamonds (the “Jewelry”) from manufacturers based in Hong Kong and Thailand (collectively, the “Manufacturers”). The diamonds used in the Jewelry assembled by the Manufacturers were obtained from companies that shared common ownership with ANAYA GEMS, including India-based companies Antrix Diamond Exports, Ltd., Shubh Exports, and Netaya Jewels PVT Ltd. (collectively, the “Diamond Suppliers”). GANDHI’s family members, including his father, owned, operated and/or controlled the Diamond Suppliers.
- The Manufacturers used the diamonds provided by the Diamond Suppliers to create the finished Jewelry that was exported to ANAYA GEMS. The Manufacturers were not billed for, and did not pay for, the diamonds that they used to assemble the finished Jewelry.
- ANAYA GEMS routinely and knowingly underpaid customs duties for the Jewelry imported from Hong Kong and Thailand. The entry documents submitted by ANAYA GEMS for the Jewelry imported from Hong Kong and Thailand were false. ANAYA GEMS regularly and knowingly misrepresented the actual value of the Jewelry on entry documents filed by its customs broker with CBP by not including the value of the diamonds, or grossly understating the value of the diamonds, contained in the Jewelry.
- ANAYA GEMS also, through its customs broker, submitted to CBP inaccurate invoices to support the declared values, which omitted the value of the diamonds or grossly understated the value of the diamonds.
- GANDHI was involved in pricing the Jewelry for purposes of selling the merchandise to retailers. When calculating the prices to sell merchandise to retailers, GANDHI and ANAYA GEMS staff used the actual value of the pieces – including the value of the diamonds – as opposed to the values reported to CBP.
- GANDHI was aware of ANAYA GEMS’ obligation to report the accurate value of the imported Jewelry to the CBP, which included the full value of any diamonds included in the Jewelry. GANDHI knew that the invoices used by ANAYA GEMS’ customs broker to record the value of the merchandise declared on the entry summary forms did not include the full value of the diamonds contained in the Jewelry. GANDHI was aware that ANAYA GEMS did not accurately report the value of Jewelry imported from Hong Kong and Thailand and that this resulted in the underpayment of customs duties that were due and owing to the United States.
In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.
Ms. Strauss thanked U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations for their assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.
- As the president of the company during the period relevant to the Government’s allegations, GANDHI was closely involved in managing the day-to-day operations of ANAYA GEMS.
Manhattan U.S. Attorney Announces $2.775 Million Settlement of Medicaid Billing Fraud Case Against New York City and Computer Sciences CorporationRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Scott Lampert, the Special Agent in Charge for the New York Office of Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), announced today the entry of two settlements in a Medicaid billing fraud lawsuit against New York City (the “City”) and Computer Sciences Corporation (“CSC”). The settlements resolved allegations brought by the United States and the State of New York that defendants knowingly failed to take reasonable measures to obtain private insurance coverage before billing Medicaid for early intervention program (“EIP”) services, such as speech and physical therapy, for young children.
Under the settlements, which were approved yesterday by U.S. District Judge Jed S. Rakoff, the City and CSC agreed to pay a total sum of $2.775 million, with $1,585,435 being paid to the United States and the remaining amount to the State of New York. As part of the settlements, defendants admitted, acknowledged, and accepted responsibility for conduct that resulted in the City having received payments from Medicaid for EIP services that Medicaid would not otherwise have made pursuant to its payment regulations and procedures.
Acting U.S. Attorney Audrey Strauss said: “Medicaid covers vitally needed medical care for millions of people in New York. Compliance with billing requirements ensures the financial integrity of the Medicaid program. This Office is committed to holding recipients of Medicaid funding and their billing agents responsible for complying with these billing requirements.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “Millions of people in New York depend on Medicaid for vital services, and taxpayers across the state pay for that care. HHS-OIG will continue close cooperation with our State and Federal law enforcement partners to preserve this essential funding and ensure that it is used properly.”
As alleged in the complaint filed by the United States in September 2016, the City was responsible for paying for EIP services for young children in New York City and then was permitted to seek reimbursement from private insurers, Medicaid, and other funding sources. In 2007, the City retained CSC as its billing agent to submit EIP reimbursement claims. Although the City and CSC knew that Medicaid rules required them to take reasonable measures to obtain private insurance coverage before submitting EIP claims to Medicaid, they frequently ignored that billing requirement. For example, although the City knew that it received no response from private insurers for many EIP claims, the City and CSC failed to contact those insurers in a significant number of cases to follow up on the claims and determine the reason for the lack of a response. Instead, the City instructed CSC to treat those claims as having been denied by the private insurers and submit them to Medicaid using a code – known as “0Fill” – to indicate there was in fact no private insurance coverage.
In the two settlements, the City and CSC made numerous factual admissions. The City admitted, acknowledged, and accepted responsibility for, among others, the following conduct:
- the City was responsible for the provision of EIP services to eligible children in New York City, including preparing individualized family service plans, contracting with and paying treating providers such as audiologists and speech therapists who delivered EIP services, and seeking reimbursement for the EIP services provided to eligible children;
- in 2005, the City issued a request for proposal for a new fiscal agent for EIP, and a corporate predecessor of CSC responded to that request for proposal;
- between 2005 and 2007, the City and CSC engaged in discussions about the City’s expectations for CSC as the City’s EIP fiscal agent, during which the City advised CSC that when seeking reimbursement for EIP services for an eligible child with health coverage from both private insurance and Medicaid (“dual-eligible EIP beneficiaries”), the sequence of billing was to be: 1) private insurance, 2) Medicaid, and 3) EIP funds from New York State;
- in September 2007, the City and CSC signed a fiscal agent contract, after which CSC began developing systems and computer programs for the City; and
- from 2009 to 2012, the City received reports from CSC regarding instances where there had been no responses from private insurers for EIP claims involving dual-eligible beneficiaries; in a significant number of such cases, the City did not inquire with private insurers to determine the cause(s) for their lack of response, and did not direct CSC to so inquire.
CSC also admitted, acknowledged, and accepted responsibility for, among others, the following:
- in or about September 2010, CSC and the City discussed a plan to develop a procedure for designating claims as “denied” in CSC’s internal EIP database once those claims had been pending with private insurers for 90 days without an adjudication;
- the City approved that plan, and CSC proceeded to populate the claims that had received no response from private insurers after 90 days with the “denial” designation in its claims database;
- CSC also obtained permission from the City to submit those claims to Medicaid with the “0Fill” modifier – which, according to Medicaid’s claim submission guide, was to be used either for “when it is known that the primary payer or any other payer prior to Medicaid[] does not cover the services and so will not pay any amount towards the claim,” or for claims that “have been denied (the services were not covered) or were paid zero (the entire charge was adjusted, for example, applied to deductible) by any prior payer;” and
- as result, the City received payments from Medicaid for EIP services that Medicaid would not otherwise have made pursuant to its payment regulations and procedures.
These settlements arise from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allow private persons – known as “relators” – to file civil actions on behalf of the United States and share in any recovery.
Ms. Strauss praised the outstanding investigative work of the HHS-OIG, and she thanked the Medicaid Fraud Control Unit at the New York State Attorney General’s Office for its extensive collaboration in the investigation and litigation of this case.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Li Yu and Arastu Chaudhury are in charge of this case.
Former Construction Executive Pleads Guilty to Tax Evasion in Connection with Bribery SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that RONALD OLSON, a vice president and deputy operation manager for Turner Construction Company (“Turner”), pled guilty today to charges of evading taxes on more than $1.5 million in bribes he received from building sub-contractors. OLSON is scheduled to be sentenced on December 9, 2020, at 11:00 a.m., before United States District Judge P. Kevin Castel. In related proceedings, co-conspirator Michael Campana, a subordinate construction manager at Bloomberg, LLC (“Bloomberg”), was sentenced last Friday, July 24, 2020, by the Honorable Denise L. Cote to 24 months in prison, for evading taxes on more than $420,000 in the same scheme. In addition, two managers of a construction contractor – Anthony Guzzone and Vito NiGro – were respectively charged on July 14 and July 22, 2020, for evading taxes on more than $1.4 million and $1.8 million in bribes that they respectively received in the same scheme.[1]
Acting U.S. Attorney Audrey Strauss said: “When bribery is coupled with tax evasion, both the bribery victims and the taxpaying public are forced to bear the hidden, unfair costs of corruption. This investigation has resulted in charges of such conduct by four defendants, one of whom pled guilty today, one of whom previously pled guilty and was sentenced last week, and the other two of whom were charged earlier this month.”
According to the four criminal Informations filed in these federal cases, as well as other public documents and recent court proceedings:
Between 2011 and 2017, GUZZONE was a construction project manager for 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 Turner, which performed construction 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, as well as Super Bowl tickets worth almost $8,000 provided to GUZZONE. 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.
In connection with the underlying bribery scheme, the Manhattan District Attorney’s Office charged OLSON, CAMPANA, GUZZONE, NIGRO, and 10 others in December 2018 with numerous felonies, including charges of conspiracy, commercial bribery, and money laundering. On November 19, 2019, CAMPANA pled guilty in the State court case to money laundering in the third degree for his participation in the bribery scheme. (New York v. Guzzone, et al., case no. 04037-2018 (N.Y. Sup. Ct.), count 44). He is awaiting sentencing in that case, while the State charges remain pending against OLSON, GUZZONE, and NIGRO.
* * *
OLSON, 53, of Massapequa, New York, pled guilty today to a single count of tax evasion for the tax years 2011 through 2017. That charge carries 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 sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
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 last week, 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.
GUZZONE, 51, and NIGRO, 59, both of Middletown, New Jersey, were each charged in criminal informations, respectively on July 14 and 16, 2020, with a single count of tax evasion. The charges against GUZZONE pertained to the tax years 2010 through 2017, while the charges against NIGRO pertained to 2011 through 2017. Those charges 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.
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, Assistant Chief of the Criminal Appeals & Tax Enforcement Policy Section of the Tax Division of the Department of Justice, are in charge of the prosecution.
[1] In addition, all four defendants have been charged in New York State Supreme Court for their participation in the underlying bribery scheme, where CAMPANA has pled guilty in that case and is awaiting sentencing.
Acting U.S. Attorney Announces Arrest of 65-Year-Old Pastor for Receipt of Child PornographyRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest today of FRANCIS HUGHES. HUGHES, 65, a pastor at a religious institution in Queens, New York, is charged with receiving images of child pornography via text from a 15-year-old minor in Westchester, New York, with whom Hughes was engaging in sexually explicit text communications. HUGHES was arrested this morning and will be presented later today before U.S. Magistrate Judge Lisa Margaret Smith in White Plains federal court.
Acting U.S. Attorney Audrey Strauss said: “The allegations against Francis Hughes are chilling and frightening to any parent. A person who, by the nature of his profession, is presumed to be trustworthy allegedly victimized a child. Thanks to the FBI, Hughes now faces a serious federal charge.”
FBI Assistant Director William F. Sweeney Jr. said: “We expect adults, especially those in positions of trust like Francis Hughes, to protect our children, not victimize them. Sadly, these allegations demonstrate there are still predators out there who abuse this trust. If you or anyone you know may have been a victim of Rev. Hughes, we are asking you contact us at 1-800-CALL-FBI. If you are a parent or guardian, please take a moment to have a discussion with your children about protecting themselves and about how they can report the type of predatory behavior that is alleged here today.”
According to the Complaint[1] filed today in White Plains federal court:
On February 16, 2020, HUGHES communicated by text messages with a 15-year-old boy (“Minor-1”). During the course of the text communications, among other things, Minor-1 sent HUGHES three images of Minor-1’s penis. Upon receiving one of the images, HUGHES responded, among other things, “Yummmmm I will suck you so much” and “Make you cum.” During the communications, HUGHES told Minor-1 that he was a part-time college professor and a counselor.
There may be more victims of this alleged conduct. If you have information to report, contact the Federal Bureau of Investigation at 1-800-CALL-FBI.
* * *
HUGHES, 65, of Glendale, New York, is charged with one count of receipt and distribution of child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the efforts of the FBI and its Westchester County Safe Streets Task Force, and thanked the Greenburgh Police Department for its assistance. She added that the investigation is ongoing.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
The charge in the Complaint is merely an accusation and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
British Citizen Sentenced to Four Years in Prison for His Role in Fraudulent Investment Scheme Related to Co-Working BusinessRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that SAVRAJ GATA-AURA (“GATA-AURA”) was sentenced yesterday to four years in prison for participating in a scheme to defraud more than 800 investors of more than $40 million by making false and fraudulent representations about, among other things, the management, profitability, and operations of a co-working space company called Bar Works Inc. and related entities (“Bar Works”). GATA-AURA previously pled guilty to conspiracy to commit wire fraud before United States District Judge Jed S. Rakoff, who also imposed the sentence.
Acting U.S. Attorney Audrey Strauss said: “For more than a year-and-a-half, Savraj Gata-Aura lured hundreds of victims to invest approximately $40 million into a massive Ponzi scheme. He concealed from investors that Bar Works was run by Renwick Haddow, who has pled guilty for his role in this and another fraud scheme, instead listing the fictional CEO ‘Jonathan Black’ in offering documents. By the time the scheme collapsed, Gata-Aura had personally made close to $3 million from unsuspecting investors.”
According to the allegations contained in the Superseding Indictment filed against SAVRAJ GATA-AURA and statements made in related court filings and proceedings, including the trial of co-defendant James Moore:
From approximately September 2015 to June 2017, GATA-AURA partnered with Renwick Haddow, who is also a British citizen, in soliciting investments into Bar Works through material misrepresentations concerning, among other things, the identity of Bar Works’ management and the financial condition of that company. Previously, Haddow had been disqualified as a director of any U.K. company for eight years, and sued by the Financial Conduct Authority, a British regulator, for operating investment schemes through misrepresentations that lost investors substantially all of their money. These sanctions and lawsuit were publicized extensively online.
In order to conceal his role at Bar Works because of the negative publicity on the internet related to past investment schemes and government sanctions in the United Kingdom, Haddow adopted the alias “Jonathan Black.” Notwithstanding Haddow’s control over Bar Works, GATA-AURA and others knowingly distributed the Bar Works offering materials listing Black as the chief executive officer of Bar Works and claiming that Black had an extensive background in finance and past success with start-up companies. As GATA-AURA well knew, “Jonathan Black,” was an entirely fictitious person, created to mask Haddow’s control of Bar Works.
Among other things, GATA-AURA helped devise and distribute pitch materials that contained the misrepresentation, coordinated a substantial sales force to recruit investors knowing that the materials contained the falsehood, advised Haddow as to how to continue to conceal the truth concerning the identity of “Jonathan Black,” and affirmatively represented to sub-agents for investors that he was communicating with CEO “Jonathan Black.” GATA-AURA and his agent network were directly responsible for raising approximately $40 million from investors in Bar Works. GATA-AURA received in excess of $2.9 million in commissions out of victim funds for his participation in the scheme.
In sentencing GATA-AURA, Judge Rakoff remarked that the defendant “lied, cheated, and as a result many victims were left destitute or deprived of money that was important to them. . . . His primary motivation was greed.”
In addition to the prison term, GATA-AURA, 33, was sentenced to three years of supervised release. GATA-AURA was also ordered to pay forfeiture of $2,988,225. The Court will also enter a restitution order at a later date.
Renwick Haddow, 51, pled guilty on May 23, 2019, to one count each of wire fraud and wire fraud conspiracy relating to the Bar Works scheme, and one count each of wire fraud and wire fraud conspiracy relating to a separate investment scheme involving Bitcoins. Haddow’s sentencing is scheduled for October 23, 2020.
James Moore, 58, was convicted of one count of wire fraud and one count of wire fraud conspiracy for his participation in the scheme on June 7, 2019, following a week-long jury trial before Judge Richard M. Berman. Moore’s sentencing date is pending.
Ms. Strauss praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which has separately brought civil actions against GATA-AURA, Haddow, and Moore, for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Vladislav Vainberg and Martin S. Bell are in charge of the prosecution.
Leader and Members of Mob Family Sentenced to Life in Prison for Murder, Racketeering, and Other CrimesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that MATTHEW MADONNA, the Acting Boss of the Luchese Family, CHRISTOPHER LONDONIO, a soldier in the Luchese Family, and TERRENCE CALDWELL, an associate of the Luchese Family, were sentenced today to life in prison following their conviction for the 2013 murder of Michael Meldish, conspiracy to commit racketeering, and other felonies. A jury convicted MADONNA, LONDONIO, CALDWELL, and Steven L. Crea, the Underboss of the Luchese Family, on November 15, 2019, following a six-week trial before U.S. District Judge Cathy Seibel, who also imposed today’s sentences. CREA will be sentenced at a later date.[1]
Acting U.S. Attorney Audrey Strauss said: “Matty Madonna, Christopher Londonio, and Terrence Caldwell – respectively, the Acting Boss, a soldier, and an associate of the Luchese Family – were responsible for the execution-style murder of Michael Meldish seven years ago. Madonna ordered it, Londonio set it up, and Caldwell pulled the trigger. Now all three have been sentenced to serve the rest of their lives in federal prison. Thanks to the outstanding investigative work of the FBI and NYPD, we continue our commitment to render La Cosa Nostra a thing of the past.”
According to the evidence presented at trial, and other court documents:
Until his arrest in this case, MADONNA was the Acting Boss of the Luchese Family of La Cosa Nostra, one of the “Five Families” that constitute the Mafia in the New York City area. In 2013, MADONNA became displeased with Michael Meldish, a longtime organized crime associate who had refused to collect debts owed to MADONNA. MADONNA ordered Meldish killed. Acting under the orders of MADONNA and Crea, LONDONIO helped set up Meldish – a personal friend of LONDONIO’s – to be killed, and acted as the getaway driver for the murder. CALDWELL carried out MADONNA’s and Crea’s orders to kill Meldish. CALDWELL met Meldish and drove with him to a Bronx neighborhood to meet LONDONIO. As Meldish got out of his car, CALDWELL shot him once in the head, killing him instantly. CALDWELL then drove off with LONDONIO. For their participation in the Meldish murder, MADONNA, LONDONIO, and CALDWELL were each convicted at trial of conspiracy to commit murder in aid of racketeering, murder in aid of racketeering, and use of a firearm in furtherance of murder in aid of racketeering.
In addition, MADONNA, 84, of the Bronx, New York, LONDONIO, 45, of Hartsdale, New York, and CALDWELL, 61, of New York, New York, were also convicted of racketeering conspiracy; CALDWELL was convicted of attempted murder in aid of racketeering and discharging a firearm in furtherance of attempted murder in aid of racketeering arising out of his May 29, 2013, ambush of a member of the rival Bonanno Family in Manhattan; and LONDONIO was convicted of conspiracy to distribute narcotics.
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Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the New York City Police Department, Homeland Security Investigations, the Waterfront Commission of New York Harbor, and the U.S. Bureau of Prisons.
The case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Hagan Scotten, Celia V. Cohen, and Alexandra N. Rothman, were in charge of the trial and sentencings.
[1] Like MADONNA, LONDONIO, and CALDWELL, Crea is subject to a mandatory sentence of life in prison.
Acting U.S. Attorney Hails 30th Anniversary of the Americans with Disabilities ActRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, today hailed the 30th anniversary of the passage of the Americans with Disabilities Act of 1990 (“ADA”), which was signed into law by President George H.W. Bush on July 26, 1990. The ADA is a transformative law that prohibits discrimination on the basis of disability in places of public accommodation, including all hotels, restaurants, retail stores, theaters, health care facilities, convention centers, parks, and places of recreation (Title III), in all activities of state and local governments (Title II), and in employment (Title I). The ADA empowers the Department of Justice to investigate, litigate, and resolve complaints of discrimination as well as authorizing the Government to conduct compliance reviews of covered entities.
Acting U.S. Attorney Audrey Strauss said: “Since the passage of the ADA, this Office has taken a leading role in bringing major New York City landmarks into compliance with the ADA to improve access for people with disabilities. As we mark the 30th anniversary of this landmark civil rights law this weekend, and notwithstanding the limitations imposed by COVID, we continue to investigate and litigate significant ADA cases.”
Since the passage of the ADA in 1990, the U.S. Attorney’s Office has brought numerous New York City institutions into compliance with the ADA, through court-approved consent decrees and voluntary compliance agreements. Through hundreds of ADA cases, the Office has required places of public accommodation to eliminate barriers to access, alter or amend policies or procedures, and agree to welcome service animals. In addition, the Office has required state and local governments to make public services and facilities more accessible to people with disabilities and compelled state and local government employers who discriminated against people with disabilities to remedy their conduct and compensate victims. Major accomplishments include:
- THE VESSEL: On December 20, 2019, the Office entered into a voluntary compliance agreement with Related Companies, the developer of Hudson Yards, to increase the accessibility of New York City’s newest public landmark, the Vessel. Because the Vessel is a multi-story, open air structure composed of a network of interconnected stairways, it is inaccessible to individuals with mobility impairments. The settlement requires Related to install a one-of-a-kind platform lift, allowing individuals with disabilities, including those who use wheelchairs, to traverse the stairways and platforms at the top two levels of the Vessel, all on a single platform lift.
- NYC SUBWAYS: On March 6, 2019, the Office prevailed in a motion for partial summary judgment against the Metropolitan Transportation Authority and New York City Transit for their failure to install elevators during the renovation of the Middletown Road subway station in the Bronx. In a landmark decision, the court ruled that the ADA required the MTA to install elevators during the renovation of the station, without regard to cost, unless it was technically infeasible to do so.
- NEW YORK STATE DIABETES GUIDANCE: On May 30, 2017, the Office announced that it had resolved complaints filed by parents of children with diabetes that recently developed guidelines from the New York State Education Department (“NYSED”) interfered with their children’s diabetes treatment while in school, in violation of the ADA. The guidelines prompted schools to reject certain types of orders issued by physicians treating children with diabetes because the orders authorized parents and guardians to be involved in the adjustment of their child’s diabetes medication administered by the school healthcare team. NYSED agreed to amend the guidelines and provided a model form for physicians to use to authorize the involvement of parents and guardians in adjustment decisions where appropriate.
- NEDERLANDER THEATERS: On January 29, 2014, the Office entered into a Consent Decree with the Nederlander Organization, Inc., which owns and operates nine landmarked Broadway theaters: the Brooks Atkinson, the Gershwin, the Lunt Fontanne, the Marquis, the Minskoff, the Nederlander, the Neil Simon, the Palace, and the Richard Rodgers. Under the Consent Decree, the Nederlander Organization agreed to make these theaters accessible to people with disabilities in compliance with the ADA by providing accessible seating, restrooms, and other facilities.
- NYC RESTAURANTS INITIATIVE: In 2013, the Office announced that it had entered into two Consent Decrees with major New York City restaurants to improve compliance with the ADA, particularly with regard to entrances, seating, and restroom facilities. The restaurants were Rosa Mexicano, on January 30, 2013, and Carmine’s, on November 12, 2013. These resolutions were reached as part of the Office’s Restaurants Initiative, which investigated whether NYC’s top 50 Zagat-rated restaurants, some of which had more than one location, complied with the ADA. As a result of the Restaurants Initiative, the Office entered into Consent Decrees with five restaurants, voluntary compliance agreements with 20 restaurants, and letters of resolution with 26 restaurants.
- LINCOLN CENTER: On June 28, 2012, the Office announced a Consent Decree with Avery Fisher Hall, under which that theater agreed to install additional wheelchair and companion seating, renovate restrooms, and remove barriers to access, among other things, to make the venue more accessible to people with disabilities. Similarly, on January 13, 2011, the Office announced a Consent Decree with the Metropolitan Opera, under which the Opera agreed to install additional wheelchair and companion seating, renovate restrooms, and remove barriers to access, among other things, to make the venue more accessible to people with disabilities.
- TIMES SQUARE HOTELS INITIATIVE: On July 26, 2010, the Office marked the 20th anniversary of the ADA by announcing that as a result of a compliance initiative, it had entered into a number of voluntary compliance agreements with Times Square hotels to increase the accessibility of hotel rooms and common areas. As a result of the Hotels Initiative, the Office entered into Consent Decrees with five hotels, and voluntary compliance agreements with 41 hotels.
- YANKEE STADIUM: On April 14, 2009, the Office announced that it had completed its review of the new Yankee Stadium, resulting in an agreement with the Yankees to provide over 500 wheelchair spaces and 500 companion seats, accessible entrances, ticket windows, bars, lounges, restrooms, and other amenities. The Office had joined a lawsuit against the old Yankee Stadium for being inaccessible to people with disabilities; a Consent Decree resolving that suit and bringing the Stadium into closer compliance with the ADA was entered in December 1999.
- MADISON SQUARE GARDEN: On November 5, 2007, the Office entered into a comprehensive Consent Decree with Madison Square Garden, under which the Garden agreed for the first time to provide seating for people with disabilities at a variety of seating areas in the Garden. The Garden further agreed to pay a $55,000 penalty for operating out of compliance with the ADA.
- APOLLO THEATER: On June 28, 2005, the Office entered into a Consent Decree with the historic Apollo Theater, under which the theater, for the first time in its storied history, agreed to provide seating locations for wheelchair users and renovate its entrances, bathrooms, and other amenities so that they would be fully accessible to people with disabilities.
- SHUBERT THEATERS: On September 25, 2003, the Office entered into a Consent Decree with the Shubert Organization, Inc., which owns and operates 16 landmarked Broadway theaters: the Ambassador, the Barrymore, the Belasco, the Booth, the Broadhurst, the Broadway, the Cort, the Golden, the Imperial, the Longacre, the Lyceum, the Music Box, the Plymouth, the Royale, the Shubert, and the Winter Garden. Under the Consent Decree, the Shubert Organization agreed to make these theaters accessible to people with disabilities in compliance with the ADA by providing accessible seating, restrooms, and other facilities.
- RADIO CITY MUSIC HALL: On February 11, 1999, the Office entered into a Consent Decree with Radio City Music Hall, requiring it to provide a wide range of accessibility improvements, including 50 wheelchair and companion seats, 240 assistive listening devices, and accessible restrooms, concession stands, and bathrooms.
For more information about the 30th Anniversary of the ADA, please visit www.ada.gov.The Office’s Civil Rights Unit handles complaints of noncompliance with the ADA. Members of the public with a complaint relating to ADA compliance may use the following link to submit a complaint: https://www.justice.gov/usao-sdny/civil-rights
- THE VESSEL: On December 20, 2019, the Office entered into a voluntary compliance agreement with Related Companies, the developer of Hudson Yards, to increase the accessibility of New York City’s newest public landmark, the Vessel. Because the Vessel is a multi-story, open air structure composed of a network of interconnected stairways, it is inaccessible to individuals with mobility impairments. The settlement requires Related to install a one-of-a-kind platform lift, allowing individuals with disabilities, including those who use wheelchairs, to traverse the stairways and platforms at the top two levels of the Vessel, all on a single platform lift.
Vice President of Investment Firm Arrested for Running Multimillion-Dollar Ponzi Scheme Targeting Afghanistan-Based BankRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, Special Inspector General John F. Sopko, of the Special Inspector General for Afghanistan Reconstruction (“SIGAR”), and Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced today that NAIM ISMAIL, 60, a native of Afghanistan and a United States citizen, was arrested Wednesday evening in Los Angeles in connection with his participation in various investment schemes that defrauded victims of over $15 million.
The case has been assigned to U.S. District Judge Analisa Torres. ISMAIL is expected to be presented today before United States Magistrate Judge Alicia G. Rosenberg of the Central District of California.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, Naim Ismail defrauded investors of more than $15 million through false promises about how investors’ money would be invested and what kind of return they could expect on their investment. Now Ismail is in U.S. custody and facing serious federal charges.”
Special Inspector General John F. Sopko said: “Afghanistan is a country struggling to create strong financial institutions and a viable economy after decades of war. The last thing it needs is to have one of its banks victimized in a Ponzi scheme. This scheme also targeted many U.S. victims. I’m proud that SIGAR special agents and our partners at HSI, the FBI and the Southern District of New York are working hard to bring justice in this case.”
Special Agent-in-Charge Peter C. Fitzhugh said: “As alleged in the indictment which was unsealed today, Ismail defrauded individual and corporate victims out of approximately $15 million dollars. Investors were allegedly duped into investing large amounts of money for investment and real estate projects that did not exist. Instead of investing the money and delivering returns, Ismail allegedly engaged in a Ponzi s scheme to fund his own lavish lifestyle. The law enforcement partnerships under HSI New York’s El Dorado Task Force are integral in combatting complex financial frauds and it is with these continued partnerships that we are able to bring individuals like Ismail to justice, to hold him accountable for his criminal acts and seek restitution for the victims.”
According to the allegations in the Indictment unsealed today in Manhattan federal court,[1] and other publicly filed documents:
From February 2007 through July 2016, ISMAIL fraudulently induced individual and corporate victims – including the New York-based subsidiary of an Afghanistan-based bank – to loan large sums of money to entities operated by ISMAIL and others. ISMAIL did so by claiming that these funds would be used in a particular investment strategy as well as several real estate development projects. ISMAIL promised investors a generous fixed annual rate of return and promised to return the investors’ principal on a specified timeline. In fact, ISMAIL and his companies did not invest these funds as promised, nor did ISMAIL repay many of his victims. Instead, ISMAIL used investor funds to pay the so-called interest payments due to earlier investors in the scheme, as well as for his own personal expenses and investments.
During the course of the fraudulent scheme, ISMAIL deprived the scheme’s victims of over $15 million.
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ISMAIL, 60, most recently of Los Angeles, California, is charged with one count each of bank fraud, wire fraud affecting a financial institution, and conspiracy to commit bank and wire fraud. Each charge carries a maximum sentence of 30 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 work of SIGAR and HSI on this investigation. She also thanked the Federal Bureau of Investigation for their assistance in the investigation.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorneys Kiersten A. Fletcher and Jonathan E. Rebold are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Former Supervisory Committee Member of Municipal Credit Union Sentenced to 27 Months in Prison for EmbezzlementRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that Joseph Guagliardo, a/k/a “Joseph Gagliardo,” a former New York City Police Department (“NYPD”) officer and former member of the supervisory committee (the “Supervisory Committee”) of Municipal Credit Union (“MCU”), a non-profit financial institution, was sentenced today in Manhattan federal court to 27 months in prison for abusing his leadership position at MCU to embezzle more than $400,000. Guagliardo previously pled guilty to defrauding a federally insured credit union before U.S. District Judge Denise L. Cote, who imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “For years, Joseph Guagliardo betrayed the trust of MCU’s members, who elected him to supervise and protect MCU, by abusing his position to steal hundreds of thousands of dollars. Guagliardo did so with the complicity of the now imprisoned former CEO of the credit union, whom he provided with a steady stream of painkillers. Guagliardo will now serve a substantial prison sentence for his crime.”
According to the allegations contained in the Complaint, the Information, other filings in Manhattan federal court, statements made in court, and publicly available documents:
MCU is a non-profit financial institution headquartered in New York, New York, which is federally insured by the National Credit Union Administration (“NCUA”). MCU is the oldest credit union in New York State and one of the oldest and largest in the country, providing banking services to more than 500,000 members, and with more than $2.9 billion in member accounts, each of which is federally insured for at least $250,000 by the National Credit Union Share Insurance Fund, which is administered by the NCUA. Membership in MCU is generally available to employees of New York City and its agencies, employees of the federal and New York State governments who work in New York City, and employees of hospitals, nursing homes, and similar facilities located within New York State.
GUAGLIARDO is a former officer with the NYPD and a former Supervisory Committee member of MCU, a volunteer position. In or about 1993, GUAGLIARDO joined the Supervisory Committee, and remained in that position until he was removed from that position by the New York State Department of Financial Services on or about May 24, 2018, except for a brief period of time when he served as a member of MCU’s Board of Directors in or about 2008.
Under New York banking law, the Supervisory Committee’s duties included supervision of the actions of MCU’s Board of Directors and officers. MCU’s written conflict of interest policy, which was regularly distributed to Board members, Supervisory Committee members, and others, provided, among other things, that members of MCU’s “Board of Directors and Supervisory Committee may not do business with the Credit Union, either individually or as representative of any business entity.”
From 2009 through May 2018, in violation of MCU policy and his fiduciary duty as a member of the Supervisory Committee, GUAGLIARDO engaged in a scheme to obtain money from MCU to which he knew he was not entitled, and took steps to conceal his efforts. Among other things, GUAGLIARDO caused MCU to direct more than $250,000 to a security company created and controlled by GUAGLIARDO, but operated in another’s name, and then directed that money from that company be paid to him and to his family members. GUAGLIARDO also over-billed MCU more than $200,000 for purported web advertising services provided by a non-profit organization that GUAGLIARDO also controlled.
In addition, during substantially the same period in which GUAGLIARDO was committing these offenses, GUAGLIARDO unlawfully distributed controlled substances to the former chief executive officer of MCU, Kam Wong, in the form of prescription drugs, some of which were obtained from GUAGLIARDO’s spouse, who worked as a doctor affiliated with a public hospital, and some of which were obtained from a different doctor affiliated with the NYPD.
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In addition to his prison term, GUAGLIARDO, 63, of Brooklyn, New York, was sentenced to two years of supervised release, and was ordered to forfeit $425,514, and to pay $468,189 in restitution to MCU and a fine of $10,000.
Ms. Strauss praised the outstanding work of the Special Agents of the United States Attorney’s Office. Ms. Strauss also thanked the New York County District Attorney’s Office, the New York State Department of Financial Services, and the New York City Police Department Internal Affairs Bureau for their assistance. She noted that the investigation is ongoing.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Eli J. Mark and Daniel C. Richenthal are in charge of the prosecution, with assistance of Special Assistant U.S. Attorney Alona Katz from the New York County District Attorney’s Office.
Doctor Pleads Guilty in Manhattan Federal Court to Illegal Distribution of Oxycodone from Brooklyn ClinicRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Raymond Donovan, the Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), Leigh-Alistair Barzey, Special Agent in Charge of the Northeast Field Office of the U.S. Department of Defense - Office of Inspector General’s Defense Criminal Investigative Service (“DCIS”), and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced that DMITRY DONSKY, a doctor who practiced in New York, pled guilty today to an Information charging him with conspiring to illegally distribute large quantities of oxycodone from a medical clinic in Brooklyn, New York. DONSKY pled guilty before U.S. District Judge Paul A. Crotty in Manhattan federal court.
Acting U.S. Attorney Audrey Strauss said: “As he admitted in court today, Dmitry Donsky violated the oath of his profession and broke the law by peddling more than half a million oxycodone pills to ‘patients’ he knew had no medical need for them. Now he awaits sentencing for his crime.”
DEA Special Agent-in-Charge Raymond Donovan said: “Dr. Donsky’s plea is evidence that he knows the difference between right and wrong. As a trusted medical professional he betrayed his patients, their loved ones, and his community. I commend our law enforcement partners, and the Southern District of New York, for their diligent efforts identifying, investigating, and prosecuting this case.”
DCIS Special Agent in Charge Leigh-Alistair Barzey said: “The risks created by the improper prescription of oxycodone are well documented and tragically real. Today’s guilty plea is the result of a joint effort and demonstrates the DCIS’s ongoing commitment to work with the U.S. Attorney’s Office, the DEA, and other law enforcement partners, to protect U.S. military members and their dependents from the dangers posed by medical professionals who illegally prescribe oxycodone.”
NYPD Commissioner Dermot Shea said: “Our work here stopped a doctor who betrayed his oath to victimize vulnerable New Yorkers. The case highlights the NYPD’s continuing fight, with our law enforcement partners, against this ongoing epidemic.”
According to the allegations contained in the Information and statements made during today’s plea proceeding:
DONSKY, a licensed physician, practiced at a medical clinic in Brooklyn. From 2014 to 2019, despite specializing in internal medicine and pediatrics, DONSKY illicitly prescribed over 500,000 oxycodone 30-milligram pills to individuals he knew had no legitimate medical need for the pills. DONSKY often performed little or no physical examination on purported patients receiving the illicit oxycodone prescriptions. Patients received as many as 360 oxycodone 30-milligram pills each month, and several patients even received duplicate monthly prescriptions of oxycodone from DONSKY.
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DONSKY, 60, of Marlboro, New Jersey, pled guilty to one count of narcotics distribution conspiracy, 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.
DONSKY is scheduled to be sentenced by Judge Crotty on October 22, 2020.
Ms. Strauss praised the outstanding investigative work of DCIS and of the DEA’s New York Tactical Diversion Squad, which comprises agents and officers from the DEA, the NYPD, the New York State Police, New York State Department of Financial Services, New York National Guard, New York City Department of Investigation, and New York State Department of Health Bureau of Narcotics Enforcement. Ms. Strauss also thanked the U.S. Department of Health and Human Services - Office of Inspector General for its assistance.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Juliana N. Murray is in charge of the prosecution.
Acting Manhattan U.S. Attorney Announces $49 Million Settlement with Biotech Testing Company for Fraudulent Billing and Kickback PracticesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Regional Office of the U.S. Department of Health, Office of Inspector General (“HHS OIG”), Leigh-Alistair Barzey, Special Agent in Charge of the Northeast Field Office of the U.S. Department of Defense - Office of Inspector General’s Defense Criminal Investigative Service (“DCIS”), and Christopher Algieri, Special Agent in Charge of the Department of Veterans Affairs (“VA”), Office of Inspector General, Northeast Field Office (“VA OIG”), announced today a $49 million settlement with PROGENITY, INC. (“PROGENITY”), a San Diego-based biotechnology company that provides molecular and diagnostic tests. The settlement resolves claims that PROGENITY fraudulently billed federal healthcare programs for prenatal tests and provided kickbacks to physicians to induce to them to order PROGENITY tests for their patients. The Office’s lawsuit filed in Manhattan federal court alleges that PROGENITY overbilled Medicaid and the VA by fraudulently using a billing code that misrepresented the tests provided. The lawsuit further alleges that PROGENITY provided illegal kickbacks in the form of excessive “draw fees” to physicians, meals and happy hours for physicians and their staff, and the improper reduction or waiver of patient coinsurance and deductible payments.
Under the settlement approved today by U.S. District Judge Loretta A. Preska, PROGENITY will pay $19,449,316 to the United States to resolve the kickback claims and the Medicaid and VA fraudulent billing claims, and also makes extensive admissions regarding the company’s conduct. PROGENITY will also pay $13,150,684 to various states to resolve these claims. In addition, PROGENITY will pay $16.4 million to resolve similar fraudulent billing claims related to TRICARE and the Federal Employees Health Benefits Program through a separate civil settlement with the United States Attorney’s Office for the Southern District of California (“USAO SDCA”), and has entered into a Non-Prosecution Agreement with that office.
Acting U.S. Attorney Audrey Strauss said: “Progenity received millions of dollars from federal healthcare programs through its fraudulent billing and kickback schemes. The company misrepresented the tests it performed, and tried to get doctors to order Progenity tests by paying them excessive fees and providing meals and happy hours for them and their staff. Our Office will continue to hold healthcare providers accountable when they engage in fraud and other illegal conduct.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “Kickbacks and fraudulent billing schemes undermine the integrity of our healthcare system, compromise patient care, and increase the financial burden on taxpayers. Along with our law enforcement partners, HHS-OIG will continue to ensure that those billing federal health insurance programs do so in an honest manner.”
DCIS Special Agent in Charge Leigh-Alistair Barzey said: “Ensuring the integrity of TRICARE, the U.S. Defense Department's healthcare system for military members and their families, is top priority for the DCIS. This settlement agreement is the result of a joint effort and demonstrates the DCIS’s commitment to work with the USAO-SDNY and its law enforcement partners to investigate and prosecute kickbacks and other fraudulent schemes that impact TRICARE.”
VA-OIG Special Agent in Charge Christopher Algieri said: “VA OIG will vigorously pursue those who engage in unjust kickback and billing schemes, which generate profits at the expense of veterans and taxpayers. We appreciate the United States Attorney’s Office and our agency partners for this collaborative effort.”
As alleged in the Complaint filed in Manhattan federal court:
Fraudulent Billing
When submitting claims for payment, healthcare providers use Current Procedural Terminology (“CPT”) codes to identify the nature of the medical procedure or services rendered. Government healthcare payors rely on the CPT code to determine whether the procedure or service is covered, as well as the level of reimbursement. From March 2014 through April 2016, PROGENITY fraudulently used CPT code 88271 to seek reimbursement for noninvasive prenatal tests (“NIPTs”) that screen for genetic disorders and abnormalities when this code misrepresented the services PROGENITY actually provided. As a result, PROGENITY received payments for non-reimbursable tests, or received substantially higher payments than it was entitled to receive. PROGENITY knew that many patients did not meet the medical necessity criteria for NIPTs, and that it could circumvent those requirements by billing under the incorrect billing code.
Kickbacks
PROGENITY induced physicians to order PROGENITY tests by engaging in three kickback schemes. First, from January 2012 through March 2016, PROGENITY paid “draw fees” to physicians or physician offices for blood specimens collected for PROGENITY tests. These fees exceeded the fair market value of the services performed. The total draw fees paid to physicians depended on the volume of blood specimens collected, so physicians would receive more money if they ordered more PROGENITY tests.
Second, from 2012 through 2018, PROGENITY sales representatives provided food and alcohol to physicians and their staff at gatherings, including happy hours and birthday or holiday parties, that often involved little or no educational content. For the vast majority of the relevant period, PROGENITY did not limit or even monitor the total amount its sales representatives spent on a physician. One former sales representative spent $65,658 on meals and alcohol for physicians during a single year.
Third, from January 2012 through April 2018, to market its expensive tests, PROGENITY routinely reduced or waived coinsurance and deductible payments without making the required individualized determination of financial need or reasonable collection efforts. Sales representatives informed physicians and their staff, as well as patients, that PROGENITY would waive coinsurance and deductibles, or limit the patient’s payment to a certain maximum out-of-pocket amount. And PROGENITY had agreements with several physicians that it would not collect any payments from their patients.
As part of the settlement approved today by Judge Preska, PROGENITY admits, acknowledges, and accepts responsibility for the following conduct:
Miscoding:
- From March 2014 through April 2016, PROGENITY knowingly submitted false claims for payment to Medicaid and the VA by using CPT code 88271 to obtain reimbursement for NIPTs.
- PROGENITY improperly used CPT code 88271, which applies to fluorescence in situ hybridization (“FISH”) procedures, knowing that its genetic tests were cell-free DNA sequencing-based NIPTs that are not FISH procedures and that CPT code 88271 did not accurately represent the tests performed.
- As a result of fraudulently using CPT code 88721 and misrepresenting the type of test performed when submitting claims for payment to Medicaid and the VA for NIPTs, PROGENITY received payments for non-reimbursable tests, or received substantially higher payments than it was entitled to receive for the genetic testing services provided.
Kickbacks:
- From January 2012 through March 2016, PROGENITY knowingly made “draw fee” payments to physicians or physicians’ offices for the collection of blood specimens for PROGENITY tests performed on federal healthcare program beneficiaries. In total, PROGENITY paid over $1.7 million in draw fees during this period.
- The draw fees paid by PROGENITY exceeded the fair market value of the services performed when collecting blood specimens. PROGENITY frequently paid physicians $20 or more for each blood draw. PROGENITY paid dozens of physicians and physician offices thousands of dollars in above fair market draw fee payments during the relevant time period.
- From 2012 through 2018, PROGENITY knowingly provided meals and happy hours to physicians who ordered PROGENITY tests for federal healthcare program beneficiaries, as well to individuals who worked in physicians’ offices. The value of these meals and happy hours exceeded Stark Law limits. In total, PROGENITY expended millions of dollars on food and drinks for physicians and their staff during this period.
- During the vast majority of the relevant period, PROGENITY did not have effective systems in place to ensure that the company’s expenses for meals and happy hours for physicians and their employees complied with the Stark Law and the Anti-Kickback Statute. For example, PROGENITY did not (i) reliably track the amount it spent on meals and happy hours for physicians or their staff, (ii) maintain accurate sign-in sheets reflecting attendance at PROGENITY-sponsored gatherings, (iii) keep records of materials or topics that were discussed during PROGENITY-sponsored gatherings, and (iv) implement and enforce limits on the total nonmonetary compensation that could be provided to physicians.
- From January 2012 through April 2018, PROGENITY knowingly routinely reduced or waived federal healthcare program beneficiaries’ coinsurance and deductible payments without making the required individualized determinations of financial need or reasonable collection efforts. PROGENITY offered to reduce or waive coinsurance and deductible payments as part of its sales efforts.
In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act, which alleged that PROGENITY engaged in illegal kickback schemes. PROGENITY has also entered into a Corporate Integrity Agreement (“CIA”) with HHS-OIG. The CIA promotes compliance with the statutes, regulations, program requirements, and written directives of federal healthcare programs. Among other things, the CIA requires that for the next five years PROGENITY must retain an Independent Review Organization to annually review the accuracy of the company’s claims for services furnished to federal healthcare program beneficiaries and monitor its arrangements with other individuals and entities.
Ms. Strauss thanked HHS-OIG, VA-OIG, DCIS, USAO SDCA, and the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for their assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Jeffrey K. Powell and Kirti Vaidya Reddy are in charge of the case.
- From March 2014 through April 2016, PROGENITY knowingly submitted false claims for payment to Medicaid and the VA by using CPT code 88271 to obtain reimbursement for NIPTs.
Former Vice President of Teamsters Labor Union Sentenced to 18 Months in Prison for BriberyRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that JOHN ULRICH, the former vice president of International Brotherhood of Teamsters Local 812 (the “Union”) and former trustee of the Union’s employee health benefit plan (the “Plan”), was sentenced today in Manhattan federal court to 18 months in prison for soliciting tens of thousands of dollars in bribe payments from an executive with the Plan’s Third Party Administrator (the “TPA-1”) in exchange for using his influence to ensure the Union’s continued retention of TPA-1 as its Plan administrator. United States District Judge Analisa Torres imposed today’s sentence.
Acting U.S. Attorney Audrey Strauss said: “For years, John Ulrich betrayed the trust of the Union members who elected him in order to line his pockets with bribe money. For abusing his position of trust for his own financial benefit, Ulrich has been sentenced to federal prison.”
According to the allegations in the Indictment, other filings in Manhattan federal court, statements made in court and publicly-available documents:
The Union has more than approximately 3,000 members, and represents workers in the beverage industry throughout the New York metropolitan area. The Union’s members are covered by the Plan, which provides, among other things, life insurance, health insurance, dental, vision, and disability benefits to Union members and their families. As the Plan’s third-party administrator, TPA-1 processed health insurance claims for participants in the Plan. At all times relevant to the Indictment, ULRICH was a member and officer of the Union and a trustee of the Plan.
In or about 2013, ULRICH was experiencing financial difficulties, and solicited bribe payments from an executive with TPA-1 (“Executive-1”) of $5,000 per quarter in exchange for using his influence to maintain TPA-1 as the Plan’s third-party administrator. Before ULRICH solicited these bribes, the Plan had issued a request for proposals for a new third-party administrator, and TPA-1 was at risk of losing the Plan’s business. ULRICH told Executive-1 that ULRICH would use his influence with the Union to ensure that the Plan continued to use TPA-1 to administer the Union’s health care plan. Executive-1 agreed to make $5,000 quarterly payments to ULRICH, and began doing so. Subsequently, despite receiving multiple bids from other third-party administrators, the Plan continued to work with TPA-1.
In or about 2014, ULRICH demanded increased bribe payments from Executive-1. In part, ULRICH told Executive-1 that these increased bribe payments were needed for another trustee of the Plan, and Executive-1 began making such increased payments. On or about September 19, 2015, ULRICH again solicited additional bribe payments for this trustee. In an email of the same date, ULRICH referred to the bribe payments as “pizza,” and explained that the additional payments for the other trustee would be “good insurance” for them.
After a special board meeting convened by the Plan in February 2016, ULRICH was terminated as vice president and trustee of the Union and Plan, respectively. In total, ULRICH demanded, and Executive-1 paid, tens of thousands in bribes before ULRICH was removed from office.
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In addition to his prison term, ULRICH, 50, of Newburgh, New York, was sentenced to two years of supervised release, and was ordered to forfeit $55,000, and to pay restitution in an amount to be determined later. As a result of ULRICH’s conviction, for a period of 13 years he is prohibited from, among other things, being employed by a labor union or employee benefit plan, pursuant to 29 U.S.C. §§ 504 and 1111.
Ms. Strauss praised the Federal Bureau of Investigation, the U.S. Department of Labor Office of Inspector General, the U.S. Department of Labor Employee Benefits Security Administration, and the U.S. Department of Labor Office of Labor-Management Standards for their outstanding investigative work in this case.
This matter is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Eli J. Mark and Louis A. Pellegrino are in charge of the prosecution.
Statement of Acting U.S. Attorney Audrey Strauss on the Resentencing of Sheldon SilverRead the Press Release
“Twice convicted by unanimous juries for abusing his powerful state office to enrich himself, Sheldon Silver will now finally report to prison to begin serving a sentence that can begin to repair the harm his conduct caused to the people of this District and to their trust in local government. I commend the career prosecutors and agents who have seen this case through two trials and two appeals, ensuring that Silver’s crimes did not go unpunished and proving once again that this Office and our law enforcement partners will never stop pursuing corruption, without fear or favor, at all levels of government.”
Former Managers and Employees of Connecticut Insurance Firm Charged in $17 Million Scheme to Defraud Client Healthcare ExpensesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector in Charge of the New York Field Office of the United States Postal Inspection Service (“USPIS”), announced the arrests of ANTHONY RICCARDI, PATRICIA RICCARDI, ERIN VERESPY, and VANESSA BATTLE, former managers and employees of Employee Benefit Solutions LLC (“EBS”), for defrauding clients by misappropriating over $17 million in client funds intended for employee healthcare claims. ANTHONY RICCARDI, PATRICIA RICCARDI, and ERIN VERESPY appeared before Chief U.S. Magistrate Judge Paul E. Davison in White Plains federal court last week, and VANESSA BATTLE appeared before Judge Davison this morning.
Acting U.S. Attorney Audrey Strauss said: “As alleged in the criminal complaint, the defendants abused their positions as administrators of client healthcare plans for years by creating false and inflated invoices and then misappropriating millions of dollars for their own uses. As further alleged, the defendants sought to conceal this fraud by creating false bank statements and checks. Our Office will continue to work with our law enforcement partners to expose and prosecute egregious fraud schemes.”
Inspector in Charge Philip R. Bartlett said: “The magnitude and the level of the alleged dishonesty by these individuals is truly unfathomable. The defendants allegedly enriched themselves with money transferred to EBS intended for the payment of medical expenses. Once Postal Inspectors caught this case they swiftly uncovered the theft scheme and brought those allegedly responsible to justice for their criminal behavior.”
According to the allegations in the Complaint unsealed today[1]:
ANTHONY RICCARDI, PATRICIA RICCARDI, ERIN VERESPY, and VANESSA BATTLE are managers and employees of EBS, a company based in Wilton, Connecticut, that offered a variety of healthcare insurance-related services to clients. EBS, among other things, provided third party healthcare claims administration (“TPA”) services to clients that elected to “self-fund” (or self-insure) their employee healthcare plans. As a TPA, EBS would purportedly administer, process, and pay healthcare claims for its clients’ employees in exchange for an administrative fee.
Between at least 2015 and continuing through 2019, EBS represented an automobile dealership chain (“Company-1”) headquartered in Westchester County, New York. During this time period, EBS served as a TPA for Company-1’s self-funded employee healthcare program and purported to process and pay claims to medical providers that treated Company-1’s employees. To do this, EBS generated bimonthly “check register” invoices for Company-1 that listed all employee healthcare expenses from healthcare providers during that two-week period. EBS also administered a bank account on Company-1’s behalf for the express purpose of paying Company-1 healthcare claims. Company-1 would fund each check register by paying the invoiced amount, expecting that EBS would promptly pay the claims to the healthcare providers. During this time period, Company-1 transferred approximately $26 million to EBS for the payment of healthcare claims.
In reality, a significant amount of purported checks listed on the EBS “check register” invoices were never actually deposited by the healthcare providers. Instead, approximately $17.87 million in Company-1 healthcare payments were misappropriated, with the overwhelming majority simply transferred by EBS into its own operating account, where they were used for non-healthcare expenses by the defendants. For example, a review of bank records indicates that Company-1 healthcare funds were used by ANTHONY RICCARDI and PATRICIA RICCARDI to pay their home mortgage expenses, as well as a personal credit card account with expenses relating to boating and golf.
EBS, through the defendants, made decisions of what few Company-1 healthcare claims they did pay based on which healthcare providers were likely to complain if they did not receive payment, or if the claims were connected to Company-1 executives. PATRICIA RICCARDI and VERESPY, for example, discussed the timing of payments for Company-1 “VIPs” as well as a “Not VIP” claim that was nonetheless the subject of complaining phone calls.
The “check registers” sent to Company-1 also contained millions of dollars in fraudulent or inflated healthcare claims that were eventually paid by Company-1. Such efforts were directed by ANTHONY RICCARDI and assisted by BATTLE, who among other things, manually entered a majority of claims relating to a specific pharmacy network that were billed to Company-1, despite approximately $3 million of those claims being fictitious. Furthermore, on at least one occasion, BATTLE sent an auditor for Company-1’s insurance underwriter a series of pharmacy network claims that were billed to Company-1 despite being significantly inflated from the pharmacy network’s records.
The defendants also took steps to conceal their fraud from Company-1 by creating and sending manipulated and fabricated bank statements and checks to create the appearance that healthcare claims were being paid by EBS, when in reality they were not. In approximately January 2019, for example, ANTHONY RICCARDI sent multiple bank statements to Company-1 that purported to show healthcare claims being paid out from the account EBS created on Company-1’s behalf. Such bank statements were significantly altered from the actual bank statements and hid, for example, the millions of dollars that EBS transferred from the Company-1 account into the EBS operating account. BATTLE sent similar copies of the altered bank statements to an auditor for Company-1’s insurance underwriter. VERESPY and ANTHONY RICCARDI also exchanged emails showing the creation of altered bank statements on behalf of another client in or about 2018. Furthermore, on at least one occasion, ANTHONY RICCARDI sent Company-1 an image of an altered check to create the appearance that EBS was handling a delayed healthcare payment. In so doing, ANTHONY RICCARDI also emailed PATRICIA RICCARDI and BATTLE to ask whether they needed to “make more . . . checks.”
ANTHONY RICCARDI, 42, PATRICIA RICCARDI, 53, and VANESSA BATTLE, 65, each of New Canaan, Connecticut, and ERIN VERESPY, 49, of Trumbull, Connecticut, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of 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 outstanding investigative work of the U.S. Postal Inspection Service and the Special Agents of the United States Attorney’s Office. Ms. Strauss also thanked the U.S. Department of Labor, Employee Benefits Security Administration; U.S. Department of Labor, Office of Inspector General; and the United States Secret Service, which are assisting in the investigation, as well as the U.S. Attorney’s Office for the District of Connecticut.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Nicholas S. Bradley is in charge of the prosecution.
The charges in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Third Co-Founder of Cryptocurrency Company Pleads Guilty for Leading Role in ICO Fraud SchemeRead the Press Release
Ilan T. Graff, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that SOHRAB SHARMA, a/k/a “Sam Sharma,” pled guilty today before U.S. Magistrate Judge Robert W. Lehrburger to conspiring to commit securities fraud, wire fraud, and mail fraud in connection with a scheme to induce victims to invest more than $25 million dollars’ worth of digital funds in Centra Tech, Inc. (“Centra Tech”), a Miami-based company he co-founded and which purported to offer cryptocurrency-related financial products. SHARMA, a leader of the scheme, and his co-conspirators used material misrepresentations and omissions to solicit investors to purchase securities, in the form of digital tokens issued by Centra Tech, through, among other means, an initial coin offering (“ICO”) beginning in approximately July 2017. In connection with his plea agreement, SHARMA has also agreed to forfeit 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech based on fraudulent misrepresentations and omissions.
Mr. Graff said: “As he has now admitted, Sharma and his co-conspirators lured victims into investing digital currencies worth millions of dollars based on false claims about their company and its purported products. Sharma and his co-conspirators concocted a fake CEO, fake partnerships, and fake licenses. Fraud is fraud, whether it occurs in digital securities markets or over traditional exchanges, and Sharma now faces a federal sentence for his role in this fraudulent scheme.”
According to the Superseding Information, and other filings and statements at public court proceedings in the case:
In or about July 2017, SHARMA, along with co-defendants Raymond Trapani and Robert Farkas, founded a company called Centra Tech that claimed to offer cryptocurrency-related financial products, including a purported debit card, the “Centra Card,” that supposedly allowed users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payment cards. From approximately July 2017 through October 2017, SHARMA and his co-defendants solicited investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech (“Centra tokens” or “CTR tokens”), through, among other means, a so-called “initial coin offering” or “ICO.” As part of their fundraising efforts, SHARMA and his co-defendants in oral and written offering materials that were disseminated via the internet, represented: (a) that Centra Tech had an experienced executive team with impressive credentials, including a purported CEO named “Michael Edwards” with more than 20 years of banking industry experience and a master’s degree in business administration from Harvard University, (b) that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard, and (c) that Centra Tech had money transmitter and other licenses in 38 states, among other claims. Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens. In or about October 2017, at the end of Centra Tech’s fundraising efforts, those digital funds raised from victims were worth more than $25 million. At certain times in 2018, as the defendants’ fraud scheme was ongoing, those funds were worth more than $60 million.
The claims that SHARMA and his co-conspirators made to help secure these investments, however, were false. In fact, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team were fictional people who were fabricated to dupe investors, Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard, and Centra Tech did not have such licenses in a number of those states.
SHARMA and his co-defendants were well aware of the falsity of such claims. For example, with respect to Centra Tech’s purported CEO “Michael Edwards,” SHARMA text messaged Trapani and Farkas on or about July 29, 2017, that they “Need to find someone who looks like Michael,” “Team photos,” “He’s real lol,” “Everyone real,” “Except Jessica,” “And Mike.” Similarly, SHARMA later wrote during that same exchange: “Gonna kill both Ceo and her,” “Gonna say they were married and got into an accident.”
With respect to Centra Tech’s purported partnerships with Bancorp, Visa, and Mastercard, SHARMA engaged in a cellphone text message conversation with Trapani and Farkas on or about July 31, 2017, in which they discussed Centra Tech’s lack of actual partnerships with banks or credit card companies. Similarly, on or about September 29, 2017 – the date on which the United States Securities and Exchange Commission (the “SEC”) announced that it filed a civil complaint charging a company, among others, with defrauding investors in an unregistered offering of securities styled as an initial coin offering – SHARMA asked via a group text message conversation with Trapani and Farkas that they remove certain materials from Centra Tech’s website that contained “fufu,” or fake information, about Centra Tech’s purported relationship with Visa because, according to SHARMA, “I rather cut any fufu,” “Off right own,” “Now,” “Then worry,” “Anything that doesn’t exist current,” “We need to remove.” Later that day, SHARMA text messaged Trapani and Farkas: “I want a product page like [another company],” “Theirs is so nice.” Trapani wrote “Lol yeah no real product,” to which SHARMA responded “Yea but it doesn’t say much,” “And looks good,” “We don’t have a real product either right now,” “So I wanna tighten up ship asap.”
With respect to Centra Tech’s purported money transmitter and other licenses in 38 states, SHARMA had a text message conversation with Trapani and Farkas on or about August 30, 2017, about applying for state licenses that Centra Tech had previously represented it already held in 38 states. For example, SHARMA wrote in one message on or about August 30, 2017, to Trapani and Farkas: “Gotta apply for all licenses,” “Should I even say this.”
On or about May 2018 and October 2018, this Office and the Federal Bureau of Investigation (“FBI”) seized, pursuant to judicially authorized seizure warrants, 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech based on fraudulent misrepresentations and omissions.
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SHARMA, 29, pled guilty to one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit mail fraud, each of 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. SHARMA will be sentenced by U.S. District Judge Lorna G. Schofield on a date to be determined.
Mr. Graff praised the work of the FBI, and thanked the SEC for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Samson Enzer, Negar Tekeei, and Daniel Loss are in charge of the prosecution.
Managing Partner of Investment Advisory Firm Charged for over $100 Million Ponzi-Like Fraud SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of an Information charging DAVID HU, a managing partner and the chief investment officer of the New York-based investment advisory firm International Investment Group (“IIG”), with investment adviser fraud, securities fraud, and wire fraud offenses. As alleged, over a period of more than 10 years, HU perpetrated an over $100 million scheme to defraud investors in IIG’s funds, including by creating fictitious investments and overvaluing investments used to generate funds to pay off earlier investors in a Ponzi-like manner. HU was arrested today and was presented and arraigned before Magistrate Judge Robert W. Lehrburger. The case has been assigned to U.S. District Judge Alvin K. Hellerstein.
Acting Manhattan U.S. Attorney Audrey Strauss said: “As alleged, David Hu directed a multimillion-dollar, years-long scheme to defraud investors. Putting profit ahead of his fiduciary duties, Hu allegedly mismarked millions of dollars of loan assets to cover up millions in losses. Hu also created fake entities and loans, and falsified paperwork to deceive auditors and avoid detection. Now David Hu stands charged with federal crimes and faces time in federal prison.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, for nearly a decade, David Hu misled investors about the value of their investments, including the creation and sale of fictitious fund portfolios to raise capital to prop up his schemes. His alleged actions serve as an example of the lengths some will go to in these all-too-common fraud cases. The FBI is committed to investigating those who prey upon trusting individuals for their own personal gain.”
In a separate civil action, the U.S. Securities and Exchange Commission (“SEC”) today filed civil charges against HU.
As alleged in the Information and based on statements made in Manhattan federal court in this case:[1]
Background of IIG
HU and a co-conspirator (“CC-1”) founded IIG in 1994. HU was a managing partner and the chief investment officer of IIG. IIG, an SEC-registered investment adviser, provided investment management and advisory services, including for three private funds that it operated: (1) the IIG Trade Opportunities Fund N.V. (“TOF”), (2) the IIG Global Trade Finance Fund, Ltd. (“GTFF”), and (3) the IIG Structured Trade Finance Fund, Ltd. (“STFF”). IIG also advised the Venezuela Recovery Fund (“VRF”), a fund that managed the remaining assets of a failed Venezuelan bank (VRF, together with TOF, GTFF, and STFF, the “IIG Funds”). In March 2018, IIG reported to the SEC that it had approximately $373 million in assets under management.
IIG advertised itself as specializing in global trade financing, particularly in providing trade finance loans to small and medium-sized businesses. IIG’s principal investment advisory strategy, including with respect to the IIG Funds, was investing in trade finance loans that it also originated. Trade finance loans are used by small and medium-sized companies, typically exporters and importers, to facilitate international trade. IIG’s purported expertise was in trade finance loans to borrowers located in Central or South America, and in a variety of industries, with a stated focus on “soft commodities,” such as coffee, agriculture, fishing, and other food products. IIG’s trade finance loans were purportedly secured by collateral, such as the underlying traded goods, assets held by the borrowers, or expected payments by third parties.
Investments in TOF, STFF, and GTFF were marketed by IIG to institutional investors, such as pension funds, hedge funds, and insurers. In offering memoranda and communications with investors, IIG advertised strict risk controls, such as promises to use diligence to carefully select borrowers or issuers with trusted management and marketable assets, and portfolio concentration limits based on borrower, developing country, and industry.
IIG purported to value the trade finance loans in the IIG Funds on a regular basis. IIG and, in turn, HU, received a performance fee with respect to the IIG Funds, as well as a management fee, which was calculated as a percentage of the assets under management held in the Funds.
The Scheme
From approximately 2007 to 2019, HU conspired to defraud investors in IIG-managed funds by: (i) overvaluing distressed loans held by the IIG Funds, (ii) falsifying paperwork to create a series of fake loans that were classified, fraudulently, as positively performing loans, and to otherwise hide losses, (iii) selling overvalued and fake loans to a collateralized loan obligation trust and new private funds established and advised by IIG, and (iv) using the proceeds from those fraudulent sales to generate liquidity required to pay off earlier investors in a Ponzi-like manner.
The scheme HU participated in involved, among other things:
- Mismarking Defaulted Loans. HU and CC-1 caused IIG to mismark the value of multiple loans that had, in reality, defaulted (the “Defaulted Loans”). Instead of acknowledging the defaulted status of these loans, HU and CC-1 instead caused IIG to mark the Defaulted Loans at par plus accrued interest, even though HU and CC-1 knew that the borrowers’ default significantly impaired the true value of these loans. HU and CC-1 certified these false valuations and caused them to be reported to investors.
- Mismarking Distressed Loans. HU and CC-1 caused IIG to mismark multiple loans that were distressed (the “Distressed Loans”). These Distressed Loans included, for example, loans for which the borrowers had missed multiple scheduled payments. Even though HU and CC-1 knew that the non-performing status of the loans significantly impaired their true value, they nevertheless caused IIG to continue to mark the loans at par plus accrued interest.
- Creating Fictitious Loans. With respect to TOF, in order to hide the losses resulting from the Defaulted Loans, including from auditors reviewing TOF’s financials, HU and CC-1 removed the Defaulted Loans from the TOF portfolio, replacing them with tens of millions of dollars in fictitious loans to purported borrowers in foreign countries (the “Fake Loans”). HU and CC-1 also created or directed the creation of documents to keep in IIG’s files as purported documentation of the Fake Loans. To pass auditor scrutiny, HU and CC-1 also directed purported borrowers – sham foreign entities that were controlled by IIG’s business associates and that did not engage in actual business – to provide confirmations of the Fake Loans to auditors, including by arranging for TOF to pay a monthly fee to one purported borrower in exchange for providing false confirmations. In reality, these purported borrowers did not receive a loan from TOF, and were not expected to make any payments to TOF.
- Using a CLO Trust to Create Liquidity through Investments in Fraudulent Loans. In or about 2014, HU and CC-1 obtained approximately $220 million in bank financing to create a collateralized loan obligation trust (the “CLO Trust”), for which IIG served as an investment adviser. HU and CC-1 then engaged in various deceptive acts, using the CLO Trust, to hide TOF’s losses and generate liquidity for TOF, which was facing investor redemption requests and demands for repayment of loans that IIG had taken from international development banks. For example, in its capacity as investment adviser for the CLO Trust, IIG, through the efforts of HU and CC-1, caused the newly-created CLO Trust to purchase loans from the TOF portfolio, including Defaulted Loans, Distressed Loans, and Fake Loans, which generated liquidity for TOF. After the CLO Trust purchased loans in the TOF portfolio, IIG, through the efforts of HU and CC-1, generated additional liquidity by causing the CLO Trust to issue securitized debt instruments based on these loans, payable in various tranches to investors in the CLO Trust.
- Using the CLO Trust and Panamanian Shell Entities to Cover Up Losses. IIG, through the efforts of HU and CC-1, also caused the CLO Trust to create new fraudulent trade finance loans, and used those new fraudulent loans to cover up TOF’s losses. Specifically, HU caused the creation of shell entities domiciled in Panama (“Panamanian Shell Entities”) that were controlled by an IIG nominee. Then, HU caused the CLO Trust to enter into fake loan transactions with the Panamanian Shell Entities. HU caused the creation of fake promissory notes and other paperwork to conceal the fraudulent nature of the loans to the Panamanian Shell Entities. Finally, under the guise of the fake loan transactions with the Panamanian Shell Entities, the CLO Trust disbursed funds that HU and CC-1 diverted to TOF in order to pay off TOF’s various debts and obligations.
- Generating Liquidity By Selling Fraudulent Loans to Newly Created Funds Backed by a New Investor. In or about 2017, HU and CC-1 targeted a foreign institutional investor (“Institutional Investor-1”) to raise money for two new private IIG managed funds: GTFF and STFF. Institutional Investor-1 provided $70 million as the seed investment for GTFF, and, later, $130 million as the seed investment for STFF. HU and CC-1 caused GTFF and STFF to purchase at least approximately $100 million in fake, distressed, defaulted or otherwise fraudulent loans.
- Inducing a Retail Mutual Fund to Invest in a Fictitious $6 Million Loan. In or about December 2012, IIG became an investment adviser to an open-ended mutual fund marketed to retail investors (the “Retail Fund”). As an investment adviser to the Retail Fund, IIG made investment recommendations, including recommendations that the Retail Fund invest in trade finance loans originated by IIG. In or about February 2017, a borrower (the “Argentine Borrower”) had failed to pay the principal on an approximately $6 million loan (“Loan-1”) in which the Retail Fund had invested and which was nearing its maturity date. In or about March 2017, HU caused approximately $6 million to be transferred into an account associated with the Argentine Borrower from the account of a different borrower (“Borrower-1”), and further directed the funds from Borrower-1’s account to pay off the debt owed by the Argentine Borrower to the Retail Fund. To replace the funds from Borrower-1’s account that were used to make it appear as though the Argentine Borrower had repaid its debt to the Retail Fund, HU fraudulently induced the Retail Fund to invest in a new, fake $6 million loan to the Argentine Borrower (the “New Loan”). HU then directed that the proceeds from the fraudulently induced New Loan be transferred into Borrower-1’s account, effectively reimbursing the account for the earlier $6 million transfer to the Retail Fund. To further conceal the fraudulent nature of the New Loan, HU caused the creation of forged documents to make it appear as though the New Loan was a legitimate loan to the Argentine Borrower.
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DAVID HU, 62, of West Orange, New Jersey, is charged with one count of conspiracy to commit investment adviser fraud, securities fraud, and wire fraud, which carries a maximum sentence of five years in prison; one count of securities fraud, which carries a maximum sentence of 20 years in prison; and one count of wire fraud, 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 a judge.
Ms. Strauss praised the investigative work of the FBI and also thanked the SEC for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Drew Skinner and Negar Tekeei are in charge of the prosecution.
The charges contained in the Information 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 Information, and the description of the Information set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
- Mismarking Defaulted Loans. HU and CC-1 caused IIG to mismark the value of multiple loans that had, in reality, defaulted (the “Defaulted Loans”). Instead of acknowledging the defaulted status of these loans, HU and CC-1 instead caused IIG to mark the Defaulted Loans at par plus accrued interest, even though HU and CC-1 knew that the borrowers’ default significantly impaired the true value of these loans. HU and CC-1 certified these false valuations and caused them to be reported to investors.
Former Rikers Correctional Officer Pleads Guilty to Smuggling Contraband for InmatesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), announced today that JOSHUA ALBA pled guilty before United States Magistrate Judge Robert W. Lehrburger to one count of conspiring to commit honest services wire fraud, for his role in smuggling packages containing contraband to inmates detained at the Anna M. Kross Center (“AMKC”) on Rikers Island, in return for thousands of dollars in cash bribes.
Acting U.S. Attorney Audrey Strauss said: “As he has now admitted, Joshua Alba abused his authority as a correctional officer to smuggle contraband into a prison facility in return for cash bribes. Contraband smuggling schemes threaten the security of our prisons and jeopardize the safety of inmates and other guards, and my office will continue to aggressively pursue those correctional officers who betray their duties for the lure of easy money.”
FBI Assistant Director William F. Sweeney Jr. said: “Keeping illegal contraband out of our jails is an ongoing challenge for corrections officers. It’s hard to imagine why an insider on the job would assist with this process, the results of which put everyone in the facility at risk. There’s no excuse for this type of irresponsible and illegal behavior. Today’s arrest has effectively landed Alba on the other side of the law.”
DOI Commissioner Margaret Garnett said: “This former City Correction Officer allegedly used his access and influence to funnel contraband into Rikers Island in exchange for thousands of dollars in cash, according to the charges. This scheme isn’t original; it isn’t inventive, but it is dangerous for staff and inmates and must be acted on swiftly through rigorous investigation and prosecution. DOI thanks the Acting U.S. Attorney for the Southern District of New York and the New York Field Office of the FBI for their partnership in uncovering this alleged crime.”
According to allegations in the criminal complaint, the information, and other documents filed in federal court, as well as statements made in public court proceedings:
Rules and regulations promulgated by the New York City Department of Correction (“NYCDOC”) prohibit correction officers and other staff from introducing or delivering contraband into NYCDOC facilities, and provide that “[e]mployees shall not enter into any transaction with an inmate, nor carry, convey, or make accessible to an inmate within a facility/command any intoxicant, opiate, narcotic, or other contraband article, nor traffic with an inmate in any manner.”
As alleged in the Information and Complaint, and as he admitted today in court, at various points during the course of this scheme JOSHUA ALBA flouted those rules and regulations by agreeing to deliver contraband, including tobacco, to a particular inmate (“Inmate-1”), who was housed in the section of the AMKC to which ALBA typically was assigned during his tours of duty in return for cash bribes. ALBA obtained the contraband from an individual in the Bronx (“CC-1”), who arranged the deliveries in coded conversations with Inmate-1 that occurred over recorded prison phone calls. ALBA made these contraband deliveries from at least December 2018 until July 2019, in return for at least $5,000 in cash bribes.
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ALBA, 30, of Queens, New York, pled guilty to one count of conspiracy to commit honest services wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress, and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. ALBA is scheduled to be sentenced by United States District Judge Lorna G. Schofield on a date to be determined.
Ms. Strauss praised the outstanding investigative work of the FBI and DOI.
The prosecution of this case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Lara Pomerantz and Jarrod L. Schaeffer are in charge of the prosecution.
Acting U.S. Attorney Announces Consent Decree Resolving Claims That Owner of Manhattan Condominium Discriminated Against Tenant on the Basis of DisabilityRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that the United States has entered into a consent decree to settle a federal civil rights lawsuit brought by the United States against 111 EAST 88TH STREET PARTNERS (“111 PARTNERS”), for violating the Fair Housing Act. Specifically, the lawsuit alleges that 111 PARTNERS discriminated against a disabled, rent-controlled tenant (the “Tenant”) by refusing to permit the Tenant to live with an assistance animal to accommodate the Tenant’s disability, as a reasonable accommodation to defendant’s policies, and by interfering with the Tenant’s exercise of his rights under the Fair Housing Act.
Acting U.S. Attorney Audrey Strauss said: “This is yet another lawsuit brought to enforce the rights of tenants with disabilities to live with an assistance animal. With this resolution, we again emphasize that condominiums, cooperatives, landlords, and property managers are required by federal law to provide reasonable accommodations to people with disabilities.”
The Fair Housing Act makes it unlawful to discriminate in the terms and conditions of the sale or rental of, or to otherwise make unavailable or deny, a dwelling based on the prospective buyer or renter’s disability. The law also mandates that reasonable accommodations in rules, policies, practices, and services be provided when necessary to afford equal housing opportunities to persons with disabilities.
According to the allegations in the Amended Complaint filed in federal court:
111 Partners is the owner of certain units in a 61-unit condominium located in New York, New York, and the landlord of the rent-controlled apartment that the Tenant occupies in the building. The Tenant, now 58 years old, has resided in that apartment his entire life and has a long history of depression. In 2006, the Tenant adopted a dog to help alleviate his depression and requested a reasonable accommodation to defendant’s “no pets” policy to allow him to reside with his dog in the apartment. Defendant not only denied the request, but also initiated eviction proceedings against him. While those proceedings were underway, in spring 2015, the Tenant was diagnosed with End Stage Renal Disease, and his depression worsened. The Tenant promptly sought another reasonable accommodation to 111 Partners’ “no pets” policy to allow him to keep his dog in the apartment given the substantial emotional assistance the dog provided and the Tenant’s changed circumstances. 111 Partners constructively denied the request by requiring the onerous disclosure of detailed medical records and other information, despite the Tenant’s already well-substantiated request and defendant’s familiarity with his condition. In June 2017, after his dog died and during the pendency of this litigation, the Tenant again requested a reasonable accommodation to 111 Partners’ “no pets” policy to permit him to adopt another dog for emotional support, and once again, 111 Partners constructively denied the request – requiring extensive documentation despite the fact that the Tenant had continued to provide documents, expert opinions, medical records, and sworn testimony in support of his request.
Under the consent decree approved by U.S. District Court Judge Paul G. Gardephe on July 14, 2020, 111 PARTNERS must:
- Adopt a reasonable accommodation policy regarding requests for assistance animals;
- Comply with certain notice, training, and recordkeeping requirements to ensure that its employees are knowledgeable about and comply with the requirements of the Fair Housing Act;
- Allow the United States to monitor compliance with the consent decree;
- Dismiss all pending state court litigation against the Tenant, including the eviction proceedings commenced in 2006 regarding his request to keep an emotional support animal and termination proceedings commenced in 2019 regarding apartment conditions, and waive all claims to attorney’s fees and costs;
- Grant the Tenant a reasonable accommodation for the remainder of his tenancy, such that he can adopt and reside with a dog for as long as the Tenant lives in the apartment, without submitting any further reasonable accommodation requests.
The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorney Brandon Waterman is in charge of the case.
President of Law Enforcement Union Charged with Defrauding Union’s Annuity FundRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, William F. Sweeny Jr., Assistant Director-in-Charge, New York Division, Federal Bureau of Investigation (“FBI”), and Andriana Vamvakas, Northeastern Regional Director, U.S. Department of Labor Office of Labor-Management Standards (“DOL-OLMS”), announced the arrest of KENNETH WYNDER Jr., a former New York State Trooper and the president of the Law Enforcement Employees Benevolent Association (“LEEBA”), a labor union for law enforcement officers employed by the City of New York (the “City”), for defrauding union members by misappropriating money from LEEBA’s Annuity Fund. STEVEN WHITTICK, LEEBA’s treasurer and a police officer for New York City’s Department of Environmental Protection (“DEP”), was charged separately with obstructing the investigation into fraud in connection with LEEBA and the Annuity Fund and making false statements to federal agents. Both defendants are expected to appear before U.S. Magistrate Judge Robert W. Lehrburger in Manhattan federal court this afternoon.
Acting U.S. Attorney Audrey Strauss said: “Today we have charged two leaders of a union that represents local law enforcement officers for engaging in criminal conduct, something they and their membership are sworn to combat. As alleged, Kenneth Wynder abused his position as the union’s president and its annuity fund’s administrator and trustee to raid his members’ retirement accounts. As further alleged, Steven Whittick, the union’s treasurer, took repeated steps to obstruct a federal investigation aimed at uncovering those financial improprieties.”
FBI Assistant Director William F. Sweeny Jr. said: “As alleged, both law enforcement and civilian members of multiple city agencies had their retirement savings compromised by two individuals who prioritized their own financial well-being over that of the hardworking men and women who dedicated their livelihood to serving the public. Most people only get one chance to put aside enough money to last them into retirement. To think the money these individuals worked so hard for could allegedly be swindled by the very people who play a role in managing it is disturbing beyond belief. Today’s arrests bring us one step closer to making sure justice is served in this case.”
DOL-OLMS Northeastern Regional Director Andriana Vamvakas said: “Union officials are required to use the union’s funds only for legitimate purposes, not their own personal gain. Financial misappropriation by union officials not only breaks the law, it betrays the trust placed in them by their membership. OLMS was proud to work with its partners at the Office of the U.S. Attorney for the Southern District of New York and the Federal Bureau of Investigation in investigating this case.”
According to the allegations contained in the two Complaints unsealed in Manhattan federal court, publicly available information, and prior court filings:[1]
Law Enforcement Employees Benevolent Association and the Annuity Fund
LEEBA is a labor union that has acted as the collective bargaining representative principally for law enforcement personnel at various City agencies, and has entered into agreements on behalf of those law enforcement employees, including agreements for insurance and retirement benefits. The City agencies whose employees LEEBA represented included, at various times, the Department of Environmental Protection (“DEP”), the Department of Sanitation (“Sanitation”), and the Department of Transportation (“Transportation”).
The Annuity Fund is a LEEBA fund that received monthly contributions from the City for the benefit of LEEBA’s members, and maintained separate accounts for each fund member. These accounts were functionally similar to employer-sponsored 401(k) retirement accounts. Both WYNDER and WHITTICK were Trustees of the Annuity Fund and signatories to agreements that governed the fund. Under the relevant agreements and plans, the money in the Annuity Fund could be used for no purpose other than funding individual members’ retirement accounts and defraying reasonable administrative expenses of the Annuity Fund itself.
WYNDER
WYNDER, a former New York State Trooper, is the President of LEEBA and a member of LEEBA’s board of directors. WYNDER has also served as the Fund Administrator of the Annuity Fund and as a member of the board of trustees of the Annuity Fund, pursuant to which he owed a fiduciary duty to act in the best interests of the Annuity Fund and its account holders. WYNDER also was on the board of trustees of the LEEBA Welfare Fund (the “Welfare Fund,” and collectively with the Annuity Fund, the “LEEBA Funds”), which provided supplemental insurance benefits to its members. While occupying those positions, WYNDER centralized and controlled major decision-making authority for LEEBA and the LEEBA Funds, often acting without the proper approval of their respective boards of directors or trustees. WYNDER’s de facto dominance of LEEBA and the LEEBA Funds enabled him to make decisions in his own self-interest and contrary to the interests of the Annuity Fund and individual members.
WHITTICK
WHITTICK, a DEP police officer, is the Treasurer of LEEBA, and a member of the board of directors of LEEBA and the boards of trustees of the LEEBA Annuity Fund and the LEEBA Welfare Fund. As LEEBA’s Treasurer, WHITTICK had responsibility for LEEBA’s financial matters and accounts, arranging for LEEBA to pay its payroll through an outside payroll processing firm starting in 2016, as well as having signatory authority over LEEBA’s main operating bank account.
WYNDER’s Alleged Fraud Scheme
From at least in or about 2012 up to and including the date of this Complaint, WYNDER participated in a scheme to steal, embezzle, and misappropriate money from the Annuity Fund and individual members’ retirement accounts. Specifically, WYNDER made hundreds of thousands of dollars of fraudulent transfers from the Annuity Fund to LEEBA’s operating account, which he controlled, and regularly used the funds, once transferred from the Annuity Fund, to enrich himself at union members’ expense, including through unauthorized and excessive checks to himself and cash withdrawals for his own benefit. In addition, WYNDER caused the union to pay for various personal expenses such as a second residence, clothing, travel expenses, and the purchase of a personal automobile, all paid for by the union, and none of which were contemporaneously reported to the Internal Revenue Service (“IRS”), as required.
To accomplish this fraudulent scheme, WYNDER, acting in his capacity as the Annuity Fund’s Plan Administrator, repeatedly made false and misleading statements to a third-party retirement plan manager that served as the custodian for the Annuity Fund and the retirement accounts of individual union members, including through emails and faxes that WYNDER used to withdraw increasingly large sums of money from the Annuity Fund, effectively causing such withdrawals to be made from the retirement accounts of individual members. From in or about 2014 through in or about 2019, WYNDER caused the withdrawal of more than $500,000 from the individual retirement accounts that constitute the Annuity Fund, thereby wiping out the entire balance of certain members’ accounts. Without these improper withdrawals from the Annuity Fund, the LEEBA operating account would have been insolvent, and would have had insufficient funds to pay for WYNDER’s excessive checks to himself and cash withdrawals and the personal expenses he caused to be charged to that account.
In addition, throughout the duration of this scheme, WYNDER repeatedly made and approved false and misleading statements to LEEBA’s members and prospective members about how he was purportedly using and protecting their retirement accounts and the LEEBA Annuity Fund. WYNDER further concealed his scheme by causing LEEBA to fail to timely file mandatory reports and financial disclosures with the City and public reports to the Annuity Fund’s members, and by making false statements to the Annuity Fund’s auditors and accountants.
WHITTICK’s Alleged Obstruction of Justice
From at least in or about 2017 through in or about August 2019, while serving as LEEBA’s Treasurer, and after learning of the federal investigation into LEEBA’s finances including the embezzlement scheme described above, WHITTICK repeatedly lied to federal agents in an effort to obstruct that investigation. WHITTICK did so despite personal involvement in some of the financial improprieties with which WYNDER is charged. For example, as alleged, on at least two occasions, on or about February 1, 2018, and March 30, 2018, WHITTICK withdrew $16,000 in cash from a LEEBA bank account, and on each occasion deposited $15,000 cash into WYNDER’s personal bank account and $1,000 cash into WHITTICK’s own personal bank account.
After the FBI had executed a search warrant of LEEBA’s offices in September 2019, WHITTICK attempted to obstruct and to influence the ongoing federal investigation by making, in two different interviews with law enforcement agents, false statements about, among other subjects, cash withdrawals he made from LEEBA’s bank accounts, unauthorized withdrawals from LEEBA’s Annuity Fund and from members’ individual accounts, and LEEBA’s payment for certain travel and entertainment expenses for union officers, including WHITTICK and WYNDER.
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WYNDER, 56, of Stroudsburg, Pennsylvania, is charged with one count of wire fraud, which carries a maximum penalty of 20 years in prison.
WHITTICK, 50, of Kingston, New York, is separately charged with one count of obstruction of justice, which carries a maximum penalty of 20 years in prison, and two counts of false statements to federal investigators, each of which carries a maximum penalty of five years in prison.
The maximum potential sentences in these cases are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Ms. Strauss praised the outstanding work of the FBI and the Department of Labor OLMS. Ms. Strauss also thanked IRS-Criminal Investigations, the New York City Comptroller’s Office, and the New York City Department of Investigation for their assistance.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys David Raymond Lewis and Eli J. Mark are in charge of the prosecution.
The charges contained in the Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaints, and the description of the Complaints set forth herein, constitute only allegations, and every fact described therein should be treated as an allegation.
Acting Manhattan U.S. Attorney Announces Charges Against Nurse Practitioner for Illegally Distributing Oxycodone from Bronx ClinicRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, Raymond P. Donovan, the Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a criminal Complaint in Manhattan federal court charging PURIFICACION CRISTOBAL, a nurse practitioner who operated a medical clinic in the Bronx, New York, with illegally distributing large quantities of oxycodone. CRISTOBAL was taken into custody this morning and is expected to be presented before Magistrate Judge Sarah Netburn later today.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Purificacion Cristobal wrote prescriptions for highly addictive and potentially lethal opioids not based on medical necessity but on the payment of cash ‘gratuities’ by the ‘patients.’”
DEA Special Agent-in-Charge Raymond P. Donovan said: “This investigation reiterates that drug traffickers can hide in plain sight, as was allegedly done by Purificacion Cristobal, a nurse practitioner who worked at a medical clinic in the Bronx. Allegedly, Cristobal enabled opioid users by writing hundreds of unnecessary prescriptions, putting tens of thousands of oxycodone tablets into unsupervised hands. Law enforcement is committed to identifying drug traffickers at all levels to keep our communities safe from the dangers of drug abuse, drug addiction, and drug-related violence.”
NYPD Commissioner Dermot Shea said: “These charges represent an alleged betrayal of medicine and the law for an illegal profit. They highlight law enforcement’s ongoing commitment to investigate and prosecute anyone charged with illegally peddling opioids.”
According to the allegations in the Complaint unsealed today in Manhattan federal court:[[1]]
Since June 2019, PURIFICACION CRISTOBAL has illicitly diverted large quantities of oxycodone, unlawfully writing numerous prescriptions resulting in the distribution of tens of thousands of oxycodone pills to individuals she knew had no legitimate medical need for the pills. In exchange for these prescriptions, CRISTOBAL and her staff at the Bronx clinic received cash payments or “gratuities” from the purported patients.
As alleged in the Complaint, CRISTOBAL, a certified nurse practitioner, operated a medical clinic in the Bronx. Despite being certified to practice in psychiatry, family medicine, and pediatrics, CRISTOBAL regularly wrote more than 100 prescriptions for oxycodone per month, including prescriptions for some of the staff in her practice. In total, from January 2019 to June 2020, CRISTOBAL wrote over 1,700 prescriptions for oxycodone, accounting for over 140,000 oxycodone tablets.
As detailed in the allegations set forth in the Complaint, CRISTOBAL performed little to no physical examination on purported patients receiving oxycodone prescriptions. For example, on one occasion, without having performed any examination, CRISTOBAL asked a patient to choose which prescription drugs the patient preferred. On another occasion, CRISTOBAL prescribed oxycodone after confirming it was the patient’s “favorite” drug. CRISTOBAL even sometimes wrote prescriptions for oxycodone when the patients did not ever enter the clinic for a visit, so long as they paid the cash fees due for the illicit oxycodone.
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PURIFICACION CRISTOBAL, 73, of Lyndhurst, New Jersey, is charged with one count of participating in a conspiracy to illicitly distribute narcotics, which carries a maximum sentence of 20 years in prison. The maximum potential penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would 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 NYPD, the New York State Police, New York State Department of Financial Services, New York National Guard, New York City Department of Investigation, and New York State Department of Health Bureau of Narcotics Enforcement.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Jun Xiang and Kyle A. Wirshba are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Entrepreneur and Pharmaceutical Company Executive Sentenced for Role in International Insider Trading SchemeRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, announced that TELEMAQUE LAVIDAS, an entrepreneur and pharmaceutical company executive, was sentenced on July 2 to one year and one day in prison for his role in an international insider trading scheme. LAVIDAS was convicted after trial in January 2020 of insider trading offenses for stealing inside information that he obtained from his father, a member of the board of directors of a pharmaceutical company, and illegally tipping his close friend and co-defendant Georgios Nikas with that inside information. The sentence was imposed by United States District Judge Denise Cote.
Acting U.S. Attorney Audrey Strauss said: “Telemaque Lavidas was the pipeline for material nonpublic information he illegally relayed from his father to his friend, a scheme that earned its participants more than $15 million in illicit profits.”
According to the Superseding Indictment, evidence presented at trial, statements made in open court, and court filings:
By 2013, Athanase Lavidas, the father of TELEMAQUE LAVIDAS, was a prominent Greek businessman and was a member of the board of directors of Ariad Pharmaceuticals, Inc. (“Ariad”), a pharmaceutical company headquartered in Cambridge, Massachusetts, that developed and marketed a leukemia medication named Iclusig. In violation of his duties of confidentiality to Ariad, Athanase Lavidas provided TELEMAQUE LAVIDAS with tips about three major corporate developments at Ariad. On each of those occasions, TELEMAQUE LAVIDAS provided that inside information to his close friend Georgios Nikas so that Nikas could make timely, profitable trades ahead of Ariad’s public announcements.
The first tip was in October 2013, when Athanase Lavidas learned that the U.S. Food and Drug Administration (“FDA”) was concerned about adverse health issues for patients using a newly approved cancer drug called Iclusig. Athanase Lavidas contacted TELEMAQUE LAVIDAS to pass this secret information, and TELEMAQUE LAVIDAS passed that tip to Georgios Nikas, who had previously amassed a large long position in Ariad securities. After receiving the inside information from TELEMAQUE LAVIDAS, Nikas sold his Ariad securities and took a substantial short position. When Ariad publicly announced the patient safety issues, its stock declined by over 65% and Nikas made over $3.2 million in profits and avoided almost $800,000 in losses. Ariad discontinued sales of Iclusig later in October.
The second tip was in November and December 2013, when Athanase Lavidas learned that Ariad and the FDA were making significant progress toward returning Iclusig to the market. Athanase Lavidas passed this secret information to TELEMAQUE LAVIDAS, who in turn passed the tips to Georgios Nikas. Nikas bought Ariad securities based on these tips, and when Ariad publicly announced at the end of December that Iclusig was returning to the market, its stock rose and Nikas made over $1.3 million in profits.
The third tip was in July and August 2015, when Ariad received an unsolicited takeover offer from another pharmaceutical company. Again, Athanase Lavidas learned of the offer in his capacity as a board member, and informed TELEMAQUE LAVIDAS, who in turn passed the tip to Georgios Nikas. Nikas again bought Ariad securities based on this tip, and when a news article was published in late August reporting on the takeover offer, Ariad’s stock rose and Nikas made over $2 million in profits.
Nikas also passed the tips he received from TELEMAQUE LAVIDAS to a series of stock traders. In total, Nikas and the traders he tipped earned over $15 million in profits from the inside information that TELEMAQUE LAVIDAS provided.
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In addition to the prison term, LAVIDAS, 39, was ordered to pay restitution of $186,430.99 and a fine of $50,000.
Ms. Strauss praised the work of the Federal Bureau of Investigation and also thanked the Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Richard Cooper and Daniel Tracer are in charge of the prosecution.
Acting U.S. Attorney Announces Charges Against Leader and Members of Cross-Country Drug Trafficking OrganizationRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), announced today the unsealing of an Indictment charging JOSE SERGIO MARTINEZ-AGUILAR, a/k/a “Orejon,” a/k/a “Andy,” a/k/a “Pa,” VLADIMIR PULSTILINKOV, a/k/a “The Russian,” MIGUEL LOVOS, SEBASTIAN RAMOS, a/k/a “Nimo,” and RICARDO RUIZ-SALINAS with narcotics trafficking offenses based on their alleged participation in an international drug trafficking organization that distributed large quantities of cocaine, fentanyl, heroin, and methamphetamine. MARTINEZ-AGUILAR, PULSTILINKOV, and LOVOS also are charged with possessing and using firearms in connection with the narcotics trafficking.
MARTINEZ-AGUILAR and LOVOS were previously charged in Complaints filed in the Southern District of New York, and were taken into custody in California on June 26, 2020, and subsequently presented before magistrate judges in the Central District of California. RAMOS and RUIZ-SALINAS were taken into custody in New York earlier today, and will be presented before Magistrate Judge Sarah Netburn today in Manhattan federal court. PULSTILINKOV currently remains at large. The case is assigned to U.S. District Judge Laura Taylor Swain.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Jose Sergio Martinez-Aguilar led an international drug trafficking organization that imported potentially lethal drugs from Mexico and distributed them throughout the U.S., including right here in New York. Now, thanks to the efforts of HSI, Martinez-Aguilar and his co-defendants are in custody and facing serious federal charges.”
HSI Special Agent-in-Charge Peter C. Fitzhugh said: “As alleged, Martinez-Aguilar and his crew funneled highly addictive drugs across the southern border and from coast to coast, seeking to make a hefty profit off those addicted to his product. This case makes it clear that HSI’s capabilities across borders and across the country leave no one safe from the long arm of the law, and justice will be served.”
As alleged in the Indictment unsealed today in Manhattan federal court, the Complaints charging MARTINEZ-AGUILAR and LOVOS, other court filings related to this matter, and statements made in court[1]:
Since at least June 2019, MARTINEZ-AGUILAR has led a drug trafficking organization (“DTO”) that imports narcotics into California from Mexico, and then distributes those narcotics in California and other parts of the country, including New York City. The DTO is responsible for distributing large quantities of cocaine, fentanyl, heroin, and methamphetamine. PULSTILINKOV, LOVOS, RAMOS, and RUIZ-SALINAS are members of the DTO who worked with MARTINEZ-AGUILAR to traffic the DTO’s narcotics.
During the investigation, communications among members of the DTO intercepted pursuant to court orders revealed a significant drug trafficking operation, led by MARTINEZ-AGUILAR, that imported and distributed multi-kilogram quantities of narcotics across the country. On one occasion, LOVOS discussed with MARTINEZ-AGUILAR obtaining a job near the U.S.-Mexican border, “because things are hot over there” and he could “cross people” and narcotics into the United States. On another occasion, MARTINEZ-AGUILAR bragged to an associate that narcotics distributed by other drug trafficking crews “[wa]s not even half the quality of what I have.” The DTO supplied drugs to dealers for distribution on the streets of New York City. For example, in June 2020, law enforcement seized a package shipped by MARTINEZ-AGUILAR and his DTO associates from California to the New York City area that was found to contain over nine kilograms of fentanyl and more than a kilogram of a heroin/fentanyl mixture.
On June 26, 2020, law enforcement searched a stash house operated by the DTO in California, pursuant to a court-authorized warrant. During the search, law enforcement recovered a stash of heroin, methamphetamine, and other suspected narcotics, as well as multiple handguns and assault rifles. LOVOS was found and arrested at the stash house during the execution of the warrant. LOVOS, MARTINEZ-AGUILAR, and PULSTILINKOV possessed and used firearms in connection with the DTO’s narcotics trafficking business.
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MARTINEZ-AGUILAR, 39, of Thermal, California, and LOVOS, 31, of Indio, California, are each charged with three counts of narcotics conspiracy and one count of firearms possession in connection with drug trafficking. PULSTILINKOV, 44, of Indio, California, is charged with two counts of narcotics conspiracy and one count of firearms possession in connection with drug trafficking. RAMOS, 29, and RUIZ-SALINAS, 43, of Brooklyn, New York, are each charged with one count of narcotics conspiracy. A chart containing the charges and maximum and minimum penalties for the defendants is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
Count
Charge
Defendant(s)
Maximum/Minimum Penalties
1
Conspiracy to Distribute Narcotics – Cocaine
21 U.S.C. §§ 846, 841(b)(1)(A)
JOSE SERGIO MARTINEZ-AGUILAR
VLADIMIR PULSTILINKOV
MIGUEL LOVOS
SEBASTIAN RAMOS
RICARDO RUIZ-SALINAS
Life imprisonment
Mandatory minimum of 10 years’ imprisonment
2
Conspiracy to Distribute Narcotics – Fentanyl, Heroin
21 U.S.C. §§ 846, 841(b)(1)(A)
JOSE SERGIO MARTINEZ-AGUILAR
MIGUEL LOVOS
Life imprisonment
Mandatory minimum of 10 years’ imprisonment
3
Conspiracy to Distribute Narcotics - Methamphetamine
21 U.S.C. §§ 846, 841(b)(1)(A)
JOSE SERGIO MARTINEZ-AGUILAR
VLADIMIR PULSTILINKOV
MIGUEL LOVOS
Life imprisonment
Mandatory minimum of 10 years’ imprisonment
4
Firearms Offense
18 U.S.C. § 924(c)
JOSE SERGIO MARTINEZ-AGUILAR
MIGUEL LOVOS
Life imprisonment
Mandatory minimum of 5 years’ imprisonment
5
Firearms Offense
18 U.S.C. § 924(c)
VLADIMIR PULSTILINKOV
Life imprisonment
Mandatory minimum of 5 years’ imprisonment
* * *
Ms. Strauss praised the outstanding investigative work of HSI, the New York City Police Department, the Pennsylvania State Police, and the Riverside County Sheriff’s Department. She also thanked the U.S. Attorney’s Office for the Central District of California, the U.S. Attorney’s Office for the Southern District of California, the San Diego County Sheriff’s Department, and the U.S. Marshals Service for their assistance in connection with the arrests of certain of the defendants.
The prosecution of this case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Rushmi Bhaskaran and Jarrod L. Schaeffer are in charge of the prosecution.
The charges contained in the Indictment and the Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and Complaints, and the descriptions set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Ghislaine Maxwell Charged in Manhattan Federal Court for Conspiring with Jeffrey Epstein to Sexually Abuse MinorsRead the Press Release
Additionally Charged With Perjury in Connection With 2016 Depositions
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), announced that GHISLANE MAXWELL was arrested this morning and charged with enticing a minor to travel to engage in criminal sexual activity, transporting a minor with the intent to engage in criminal sexual activity, conspiracy to commit both of those offenses, and perjury in connection with a sworn deposition. The Indictment unsealed today alleges that between at least in or about 1994 through 1997, MAXWELL and co-conspirator Jeffrey Epstein exploited girls as young as 14, including by enticing them to travel and transporting them for the purpose of engaging in illegal sex acts. As alleged, knowing that Epstein had a preference for young girls, MAXWELL played a critical role in the grooming and abuse of minor victims that took place in locations including New York, Florida, and New Mexico. In addition, as alleged, MAXWELL made several false statements in sworn depositions in 2016. MAXWELL is expected to be presented this afternoon in the in federal court in New Hampshire. This case is assigned to U.S. District Judge Alison J. Nathan.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Ghislaine Maxwell facilitated, aided, and participated in acts of sexual abuse of minors. Maxwell enticed minor girls, got them to trust her, and then delivered them into the trap that she and Jeffrey Epstein had set. She pretended to be a woman they could trust. All the while, she was setting them up to be abused sexually by Epstein and, in some cases, Maxwell herself. Today, after many years, Ghislaine Maxwell finally stands charged for her role in these crimes.”
FBI Assistant Director William F. Sweeney Jr. said: “Preserving the innocence of children is among the most important responsibilities we carry as adults. Like Epstein, Ms. Maxwell chose to blatantly disregard the law and her responsibility as an adult, using whatever means she had at her disposal to lure vulnerable youth into behavior they should never have been exposed to, creating the potential for lasting harm. We know the quest for justice has been met with great disappointment for the victims, and that reliving these events is traumatic. The example set by the women involved has been a powerful one. They persevered against the rich and connected, and they did so without a badge, a gun, or a subpoena - and they stood together. I have no doubt the bravery exhibited by the women involved here has empowered others to speak up about the crimes of which they've been subjected.”
NYPD Commissioner Dermot Shea said: “The heinous crimes these charges allege are, and always will be abhorrent for the lasting trauma they inflict on victims. I commend our investigators, and law enforcement partners, for their continuing commitment to bringing justice to the survivors of sexual assault, everywhere.”
If you believe you are a victim of the sexual abuse perpetrated by Jeffrey Epstein, please contact the FBI at 1-800-CALL FBI, and reference this case.
According to the Indictment[1] unsealed today in Manhattan federal court:
From at least 1994 through at least 1997, GHISLAINE MAXWELL assisted, facilitated, and participated in Jeffrey Epstein’s abuse of minor girls by, among other things, helping Jeffrey Epstein to recruit, groom, and ultimately abuse victims known to MAXWELL and Epstein to be under the age of 18. The victims were as young as 14 years old when they were groomed and abused by MAXWELL and Epstein, both of whom knew that their victims were in fact minors. As a part and in furtherance of their scheme to abuse minor victims, MAXWELL and Epstein enticed and caused minor victims to travel to Epstein’s residences in different states, which MAXWELL knew and intended would result in their grooming for and subjection to sexual abuse.
As alleged, MAXWELL enticed and groomed minor girls to be abused in multiple ways. For example, MAXWELL attempted to befriend certain victims by asking them about their lives, taking them to the movies or taking them on shopping trips, and encouraging their interactions with Epstein. MAXWELL also acclimated victims to Epstein’s conduct simply by being present for victim interactions with Epstein, which put victims at ease by providing the assurance and comfort of an adult woman who seemingly approved of Epstein’s behavior. Additionally, to make victims feel indebted to Epstein, MAXWELL would encourage victims to accept offers of financial assistance from Epstein, including offers to pay for travel or educational expenses. MAXWELL also normalized and facilitated sexual abuse by discussing sexual topics with victims, encouraging them to massage Epstein, and undressing in front of a victim.
As MAXWELL and Epstein intended, these grooming behaviors left minor victims vulnerable and susceptible to sexual abuse by Epstein. MAXWELL was then present for certain sexual encounters between minor victims and Epstein, such as interactions where a minor victim was undressed, and ultimately MAXWELL was present for sex acts perpetrated by Epstein on minor victims. That abuse included sexualized massages during which a minor victim was fully or partially nude, as well as group sexualized massages of Epstein involving a minor victim where MAXWELL was present.
As alleged, minor victims were subjected to sexual abuse that included, among other things, the touching of a victim’s breasts or genitals, placing a sex toy such a vibrator on a victim’s genitals, directing a victim to touch Epstein while he masturbated, and directing a victim to touch Epstein’s genitals. MAXWELL and Epstein’s victims were groomed or abused at Epstein’s residences in New York, Florida, and New Mexico, as well as MAXWELL’s residence in London, England.
Additionally, in 2016, while testifying under oath in a civil proceeding, MAXWELL repeatedly made false statements, including about certain specific acts and events alleged in the Indictment.
* * *
GHISLAINE MAXWELL, 58, is charged with one count of enticing a minor to travel to engage in illegal sex acts, which carries a maximum sentence of five years in prison, one count of conspiracy to entice a minor to travel to engage in illegal sex acts, which carries a maximum sentence of five years in prison, one count of transporting a minor with the intent to engage in criminal sexual activity, which carries a maximum sentence of 10 years in prison, one count of conspiracy to transport a minor with the intent to engage in criminal sexual activity, which carries a maximum sentence of five years in prison, and two counts of perjury, each of which carries a maximum sentence of five years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI and the NYPD.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Alex Rossmiller, Alison Moe, and Maurene Comey are in charge of the prosecution.
The charges contained in the Indictment are merely accusations. The defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described therein should be treated as an allegation. The defendant is presumed innocent unless and until proven guilty.
Acting Manhattan U.S. Attorney Announces $678 Million Settlement of Fraud Lawsuit Against Novartis Pharmaceuticals for Operating Sham Speaker Programs Through Which It Paid over $100 Million to Doctors to Unlawfully Induce Them to Prescribe Novartis DrugsRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Gregory E. Demske, Chief Counsel to the Inspector General of the United States Department of Health and Human Services, Office of the Inspector General (“HHS-OIG”), Scott J. Lampert, Special Agent in Charge of HHS-OIG’s New York Regional Office, Leigh-Alistair Barzey, Special Agent in Charge of the Northeast Field Office of the U.S. Department of Defense - Office of Inspector General’s Defense Criminal Investigative Service (“DCIS”), and Christopher Algieri, Special Agent in Charge the Department of Veterans Affairs, Office of Inspector General, Northeast Field Office (“VA OIG”), announced today that the United States has settled a civil fraud lawsuit against NOVARTIS PHARMACEUTICALS CORPORATION (“NOVARTIS”), part of Swiss drug manufacturer Novartis International AG, alleging that NOVARTIS violated the federal False Claims Act and Anti-Kickback Statute by providing doctors with cash payments, recreational outings, lavish meals, and expensive alcohol to induce them to prescribe NOVARTIS cardiovascular and diabetes drugs reimbursed by federal healthcare programs. Specifically, the Government alleged that NOVARTIS organized tens of thousands of sham educational events at high-end restaurants and other venues, paid exorbitant speaker fees to doctors who gave no meaningful presentations, and provided expensive meals and alcohol to doctor attendees and their guests. When those doctors then prescribed NOVARTIS’s cardiovascular and diabetes drugs, federal healthcare programs paid hundreds of millions of dollars in reimbursements for these tainted prescriptions. As part of the settlement, approved today by U.S. District Judge Paul G. Gardephe, NOVARTIS will pay the United States and various States a total of $678 million. NOVARTIS also made extensive factual admissions in the settlement and agreed to strict limitations on any future speaker programs, including reductions to the amount it may spend on such programs.
Acting U.S. Attorney Audrey Strauss said: “For more than a decade, Novartis spent hundreds of millions of dollars on so-called speaker programs, including speaking fees, exorbitant meals, and top-shelf alcohol that were nothing more than bribes to get doctors across the country to prescribe Novartis’s drugs. Giving these cash payments and other lavish goodies interferes with the duty of doctors to choose the best treatment for their patients and increases drug costs for everyone. This Office will continue to be vigilant in cracking down on kickbacks, however they may be dressed up, throughout the pharmaceutical industry.”
FBI Assistant Director-in-Charge said: “Not only did Novartis incentivize doctors to host these speaking events, reps bribed the doctors to write more prescriptions of the company’s drugs to give Novartis an advantage over competitors within their field. Greed replaced the responsibility the public expects from those who practice medicine, not to mention the potential for an erosion of trust in the pharmaceutical industry as a whole. This conduct was reprehensible and dishonest. Patients and consumers deserve better, and our office will continue to pursue any similar allegations of this kind.”
HHS-OIG Chief Counsel Gregory Demske said: “OIG will continue to work closely with the Department of Justice to investigate and pursue kickbacks regardless of the form they take. To address Novartis’s conduct and the widely-recognized compliance risks associated with paid speaker programs, the CIA requires Novartis to make fundamental changes to its speaker program practices. Under the CIA, Novartis must significantly reduce the number of programs and the number of paid physicians, and can no longer pay for inherently-risky in-person programs.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “The various kickback schemes employed by Novartis threatened the impartiality of medical decision-making and the financial integrity of Medicare and Medicaid. Greed must never play a part in patient care. Along with our law enforcement partners, HHS-OIG will continue to hold pharmaceutical companies accountable when they step over the line to maximize their market share at the expense of taxpayer-funded federal health care programs.”
DCIS Special Agent in Charge Leigh-Alistair Barzey said: “Protecting the integrity of TRICARE, the healthcare system for military members and their dependents, is a top priority for the DCIS. When pharmaceutical corporations offer kickbacks and engage in other fraudulent activity to induce medical professionals to prescribe their products, they undermine the integrity of TRICARE and other healthcare plans. The settlement agreement announced today is the result of a joint effort and demonstrates the DCIS’s ongoing commitment to work with its law enforcement partners and the U.S. Attorney’s Office, to investigate and prosecute companies that seek to profit by engaging in schemes such as those identified in this case.”
VA-OIG Special Agent in Charge Christopher Algieri said: “Kickback schemes undermine our federal healthcare programs, including healthcare benefits administered by the U.S. Department of Veterans Affairs. We will continue to work collaboratively with our law enforcement partners and the U.S. Attorney’s Office to protect the quality of veterans’ healthcare and integrity of VA’s programs.”
In its Complaint in this lawsuit, the Government alleged that between 2002 and 2011 (the “Relevant Period”), NOVARTIS hosted tens of thousands of speaker programs and related events under the guise of providing educational content, when in fact the events served as nothing more than a means to provide bribes to doctors. NOVARTIS paid physicians honoraria, purportedly as compensation for delivering a lecture regarding a NOVARTIS medication, but, as NOVARTIS knew, many of these programs were nothing more than social events held at expensive restaurants, with little or no discussion about the NOVARTIS drugs. Indeed, some of the so-called speaker events never even took place; the speaker was simply paid a fee in order to induce the speaker to prescribe NOVARTIS drugs.
The Government’s complaint further alleged that NOVARTIS sales representatives, on the instruction of their managers, selected high-volume prescribers to serve as the paid “speakers” at these events with the intent to induce them to write more – or keep writing many – NOVARTIS prescriptions. The sales representatives then pressured the speakers to increase their prescriptions of NOVARTIS drugs, and often dropped doctors from the program if they failed to do so. Further, the Government alleged that this widespread kickback scheme was the result of decisions made by top management at NOVARTIS’s North American headquarters in New Jersey.
As part of the settlement, NOVARTIS admitted and accepted responsibility for certain conduct alleged by the Government including the following:
- Some NOVARTIS sales representatives intended the honoraria paid to doctors to be an inducement to these doctors to prescribe more NOVARTIS drugs.
- NOVARTIS paid many high-prescribing doctors tens or hundreds of thousands of dollars in honoraria.
- In thousands of instances, NOVARTIS paid for the same group of doctors, often colleagues or friends, to have dinners together repeatedly. Doctors in these groups would sometimes rotate being the speaker and receiving the honorarium payment.
- NOVARTIS sales representatives hosted programs at some of the most expensive restaurants in the United States, intending to induce the doctors in attendance to continue to write NOVARTIS prescriptions. These restaurants included some of the most high-end restaurants in the country, such as Masa, Daniel, Gramercy Tavern, Il Mulino, Babbo, Peter Luger, Le Bernardin, and Eleven Madison Park in New York City; Charlie Palmer’s in Washington, D.C.; Morton’s Steakhouse and the Four Seasons in Chicago; Joe’s Stone Crab in Miami; Abacus, Nobu, and the Four Seasons in Dallas; Gary Danko in San Francisco; Patina and Matsuhisa in Los Angeles; Grill 225 in South Carolina; and Commander’s Palace in New Orleans.
- Throughout the Relevant Period, more than 12,000 speaker programs and roundtables had meal spends that were considerably in excess of the $125 per person limit set by NOVARTIS’s compliance policies.
- For example, in 2008, at a speaker program held at Ruth’s Chris Steakhouse in Pikesville, Maryland, NOVARTIS held an event with only one doctor in the audience for the speaker’s presentation, at which it spent $448 per person on food and alcohol, in addition to the $1,000 honorarium payment provided to the speaker.
- During the Relevant Period, some NOVARTIS sales representatives conducted programs at venues where the focus was on entertainment, including fishing trips, sporting events, wine tastings, and hibachi tables. NOVARTIS conducted hundreds of events at wineries and golf clubs.
- Sales representatives also conducted events at Hooters.
- At many of NOVARTIS’s speaker programs, the sales representative hosting the event did not require the speaker, who was being paid an honorarium, to deliver a presentation at all, or allowed the speaker to click through the power point presentation in a matter of minutes. In those instances, the majority of the time was spent socializing and enjoying dinner.
- NOVARTIS in a number of instances paid doctors honoraria for purportedly speaking at events that never took place.
- On Long Island, at least one NOVARTIS sales representative organized fraudulent speaker programs by arranging for a restaurant to create fake receipts to make it appear that a dinner had taken place, and then using the budgeted funds to purchase gift cards that were distributed to high-prescribing doctors. Doctors were then also paid honoraria for “speaking” at these sham events.
- NOVARTIS’s compliance training materials suggested that emails advocating illegal kickbacks were improper in part because they “reflect[] ignorance of the import of written communications, and put[] the Company at risk.” NOVARTIS’s Chief Compliance Officer also stated in training presentations: “If you don't have to write it, don’t. Consider using the phone.”
Under the settlement, NOVARTIS will pay a total of $678,000,000, of which (i) $591,442,008.92 will be paid to the United States as False Claims Act damages, (ii) $38,406,717.42 will be forfeited to the United States as proceeds of violations of the Anti-Kickback Statute; and (iii) $48,151,273.66 will be paid to various States.
The settlement also requires NOVARTIS to reform its business practices. Contemporaneously with this settlement, NOVARTIS has entered into a corporate integrity agreement (“CIA”) with HHS-OIG that will significantly curtail the company’s ability to conduct speaker programs going forward, and will dramatically reduce the amount of money that NOVARTIS may spend on such programs. Under the five-year CIA, NOVARTIS speaker programs are only permitted under limited circumstances and must be conducted in a virtual format such as a webinar. The CIA also requires multi-faceted monitoring of NOVARTIS’s operations and obligates company executives and Board members to certify compliance annually with the terms of the CIA. The strict limitations on speaker programs imposed by the CIA are also incorporated into the settlement. The settlement provides procedures for the Government to raise violations of these requirements with the district court.
This matter was initially brought to the Government’s attention by a whistleblower who filed a complaint pursuant to the False Claims Act.
Ms. Strauss praised the investigative work of the FBI, HHS-OIG, and DCIS. She also thanked the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C., and the Office of Counsel to the Inspector General of HHS for their critical assistance in this case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Jeannette Vargas, Pierre Armand, Mónica Folch, Jacob Lillywhite, Jennifer Jude, and Jacob Bergman are in charge of the case, and Assistant U.S. Attorney Alex Wilson of the Money Laundering and Transnational Criminal Enterprises Unit is responsible for the forfeiture aspects of the case.
Acting Manhattan U.S. Attorney Announces Consent Decree with Chestnut Petroleum Distributors, Inc., and Affiliates Resolving Violations of the Resource Conservation and Recovery ActRead the Press Release
Audrey Strauss, Acting United States Attorney for the Southern District of New York, and Peter D. Lopez, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has entered into a Consent Decree settling a civil lawsuit against Chestnut Petroleum Distributors, Inc., and its affiliates CPD Energy Corp., CPD NY Energy Corp., Chestnut Mart of Gardiner, Inc., Chestnut Marts, Inc., Greenburgh Food Mart, Inc., Middletown Food Mart, Inc., and NJ Energy Corp. (collectively, “Defendants”), for violating the Resource Conservation and Recovery Act (“RCRA”) in connection with their ownership or operation of underground storage tanks at 20 separate gas stations within the Southern District of New York and adjoining districts.
Acting U.S. Attorney Audrey Strauss said: “Today’s settlement holds Chestnut Petroleum Distributors, Inc., and its affiliates accountable for repeatedly failing to comply with regulations designed to prevent gasoline leaks from injuring public health and the environment, and ensures ongoing oversight of the defendants’ operations to protect the public in the future.”
EPA Regional Administrator Peter D. Lopez said: “Failure to regularly monitor underground storage tanks and address possible leaks risks contaminating groundwater, which is one of our most valuable natural resources. This settlement requires the companies to follow laws in place to mitigate safety threats and protect the environment.”
Petroleum products such as gasoline contain chemical compounds that pose substantial threats to human health. Service stations typically store gasoline in underground storage tanks. When operated conscientiously and monitored closely, underground storage tanks are a safe and effective means to store gasoline. But when those tanks are not subjected to basic operational safeguards, they can endanger the public and the environment, for example by leaking petroleum into the water supply, discharging toxic vapors into the air, or even triggering fires or explosions. EPA’s regulations under RCRA are designed to protect the public by requiring underground storage tank operators to reduce the likelihood of leaks, monitor for leaks so they can promptly be addressed, and maintain adequate insurance to conduct corrective action and compensate injured third parties should a leak occur.
The Consent Decree, which is subject to public comment and approval by the district court, resolves a lawsuit filed by the United States in May 2019, which alleges that Defendants repeatedly violated RCRA and related regulations at various times between 2011 and 2014 with respect to their ownership and/or operation of underground storage tanks at 20 gas stations.
* * *
In the Consent Decree filed today, Defendants admit, acknowledge, and accept responsibility for failing to perform required actions at one or more facilities on various specified dates between 2011 and 2014. This includes:
- failing to perform release (i.e., leak or spill) detection;
- failing to maintain and provide records of release detection monitoring;
- failing to operate corrosion protection systems (including inspecting and testing) for steel underground storage tank systems and failing to maintain and provide records of corrosion protection monitoring;
- failing to cap and secure underground storage tanks that were temporarily closed;
- failing to perform release detection for underground storage tanks that were temporarily closed;
- failing to report suspected releases or unusual operating conditions for underground storage tanks;
- failing to conduct release investigations and confirm suspected releases or unusual operating conditions; and
- failing to maintain insurance policies sufficient to take corrective action and compensate third parties for bodily injury and property damage caused by accidental releases arising from the operation of the underground storage tanks.
Pursuant to the Consent Decree, Defendants are required to comply with the regulations applicable to underground storage tanks for all underground storage tanks at the facilities at issue, and to take various measures to ensure such compliance, including undertaking inspections, maintaining and operating an electronic environmental management system providing centralized electronic monitoring of release detection at all underground storage tanks at the facilities, monitoring the under-dispenser containment systems at all underground storage tanks at the facilities, and providing semi-annual reports to EPA. Defendants also agree to undertake certain measures with respect to newly acquired facilities containing underground storage tanks, including providing notice to EPA of the planned acquisition, conducting a pre-acquisition assessment, and ensuring that all underground storage tanks at newly acquired facilities are promptly brought into compliance with all applicable regulations.
In addition to this injunctive relief, Defendants will pay a civil penalty of $187,500. Defendants will also be subject to substantial penalties if they fail to comply with the terms of the Consent Decree.
The Consent Decree will be lodged with the District Court for a period of at least 30 days, and notice of the Consent Decree will be published in the Federal Register before the Consent Decree is submitted for the Court’s approval. This will afford members of the public the opportunity to submit comments on the Consent Decree to the Department of Justice.
Acting U.S. Attorney Strauss thanked EPA’s attorneys and staff for their critical work on this matter.
This case is being handled by the Office’s Environmental Protection Unit. Assistant United States Attorneys Christopher Connolly, Rachael Doud, and Jennifer C. Simon are in charge of the case.Acting U.S. Attorney Announces Extradition of Belgian Man Charged in $8 Million Aircraft Part Fraud SchemeRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that STEFAN GILLIER, a/k/a “Stephan Gillier,” a/k/a “Stefan R.R. Gillier,” a/k/a “Roland Gillier,” a/k/a “Roland Van Gorp,” a Belgian citizen, was extradited today from Italy to the United States. GILLIER was arrested on May 26, 2019, for engaging in a scheme in which he and a co-conspirator fraudulently obtained millions of dollars’ worth of aircraft parts through two aircraft part dealerships that they operated, RTF International, Inc. (“RTF”), and UN Air Service, Inc. (“UAS”). GILLIER is expected be presented this afternoon in Manhattan federal court before Chief U.S. Magistrate Judge Gabriel W. Gorenstein. GILLIER’s case is assigned to U.S. District Judge Richard M. Berman.
Acting U.S. Attorney Audrey Strauss said: “As alleged, from 2004 until 2010, Stefan Gillier conspired to defraud manufacturers and distributors of aircraft parts out of millions of dollars’ worth of aircraft parts. Gillier and his co-conspirator allegedly effectuated the scheme through fraudulent companies, phony references, stop orders on checks after they had received valuable parts, lucrative resales, and transferring criminal proceeds from corporate bank accounts to personal bank accounts once a victim company got wise to the fraud. Thanks to our partner agencies here and abroad, Gillier now faces justice in an American court.”
According to the allegations in the Complaint and in the Indictment unsealed today:[1]
GILLIER and his co-conspirator (“CC-1”) were co-presidents of RTF, a Delaware corporation that was registered to do business in New York, which dealt in aircraft parts.[2] GILLIER ran the day-to-day business activities of RTF and was a signatory on RTF’s bank accounts. RTF began obtaining aircraft parts from Honeywell International, Inc. (“Honeywell”), in June 2004. Starting in 2005, RTF began increasing the number of parts it ordered from Honeywell, paying for them by check. RTF paid with checks written for amounts well above the cost of the parts, which created an apparent credit balance in RTF’s favor. RTF wrote approximately $16.6 million worth of checks to Honeywell, but stopped payment on approximately $15.8 million worth of them. As a result, RTF was able to obtain approximately $8 million worth of aircraft parts without paying for them, and RTF turned a profit when reselling those fraudulently obtained parts to customers for less than the price that Honeywell had charged RTF.
To execute the scheme, GILLIER signed checks to Honeywell on behalf of RTF, but repeatedly caused stop payment orders to be placed after Honeywell shipped the parts to RTF. When questioned by Honeywell’s employees about these stop payment orders, GILLIER, using an alias, falsely represented that the stop payment orders were the result of a misunderstanding with the bank and that he would check with RTF’s finance department. In fact, as GILLIER knew, he had issued the stop payment orders, and RTF did not have a finance department. In June 2006, when Honeywell began seeking civil relief against RTF, GILLIER caused various large transfers of fraud proceeds into other bank accounts – accounts that, by way of example, belonged either to GILLIER, his relative, or CC-1’s relatives.
After Honeywell discovered that it was being victimized by RTF, GILLIER and CC-1 continued their fraud scheme through a new corporate entity, UAS. (Despite its name, “UN Air Service, Inc.” had no relation to the United Nations.) CC-1 was the president and owner of UAS, a Delaware corporation that dealt in aircraft parts, which CC-1 ran out of an apartment in Manhattan. GILLIER helped CC-1 obtain the Manhattan apartment that was used to continue the fraud scheme by providing a reference for CC-1 (using an alias) and by paying CC-1’s initial rental fees. In 2006, UAS began obtaining aircraft parts from Pratt & Whitney Component Solutions, Inc. (“Pratt & Whitney”). Like RTF, UAS began stopping payment on checks it had written to Pratt & Whitney for the aircraft parts; like RTF, UAS sold those aircraft parts to third parties for less than the price that Pratt & Whitney had charged UAS.
GILLIER, 47, a citizen of Belgium, is charged with eight counts: (1) one count of conspiracy to commit mail fraud, wire fraud, interstate transportation of stolen property, and money laundering, which carries a maximum potential penalty of five years in prison; (2) one count of mail fraud, which carries a maximum potential penalty of 20 years in prison; (3) one count of wire fraud, which carries a maximum potential penalty of 20 years in prison; (4) one count of interstate transportation of stolen property, which carries a maximum potential penalty of 10 years in prison; and (5) and four counts of money laundering, each of which carries a maximum potential 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 Homeland Security Investigations and the U.S. Department of Defense, Defense Criminal Investigative Service. She also thanked the Federal Bureau of Investigation, the U.S. Marshals Service, the U.S. Department of Commerce, law enforcement and prosecutorial authorities in Italy, including the Italian Ministry of Justice and Interpol Rome, Honeywell, and Pratt & Whitney for their assistance in this case. The U.S. Department of Justice’s Office of International Affairs of the Department’s Criminal Division provided significant assistance in securing the defendant’s extradition from Italy.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Michael D. Neff is in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and Indictment, and the descriptions of them set forth below, constitute only allegations, and every fact described should be treated as an allegation. The defendant is presumed innocent unless and until proven guilty.
[2] CC-1 died in March 2010, a few weeks after being arrested in this case and released on bail.
Members of the Mac Baller Brims Gang Charged with MurderRead the Press Release
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”), Peter C. Fitzhugh, Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Raymond P. Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), today announced a Superseding Indictment in United States v. Lawrence, et al. 19 Cr. 761 (JPO). In the initial indictment, unsealed on October 24, 2019, 13 defendants were charged in connection with the activities of the Mac Baller Brims gang that operated in and around the Mount Hope section of the Bronx between 2017 and 2019. In the Superseding Indictment, defendants DERRICK CASADO, a/k/a “Big Bank,” a/k/a “Papa D,” and CARLOS ROSARIO, a/k/a “Baby Bottle,” a/k/a “Carlito,” a/k/a “Barlito,” a/k/a “Barlos,” are charged with offenses relating an October 5, 2019 robbery in Manhattan, during which ROSARIO shot and killed Jonathan Rodriguez, 27. A racketeering conspiracy charge was added against defendant JUAN TEJEDA, a/k/a “Gotti.” The case is proceeding before U.S. District Judge J. Paul Oetken.
Acting U.S. Attorney Audrey Strauss said: “As charged in the Superseding Indictment, Carlos Rosario and Derrick Casado were responsible for the murder of Jonathan Rodriguez. This is one of many acts of violence alleged to have been committed by members and associates of the Mac Baller Brims gang. Thanks to the outstanding work of our law enforcement partners at the NYPD, HSI, and DEA, Rosario and Casado now face federal charges for murder.”
Police Commissioner Dermot Shea said: “Today’s indictment reflects our continued focus on keeping criminal gangs off the city’s streets. I thank our NYPD detectives, agents, and prosecutors for their sustained work on this case.”
HSI Special Agent-in-Charge Peter C. Fitzhugh said: “Members of the Mac Baller Brims allegedly brandished firearms and fired those guns in order to preserve their territory and protect their illicit business. As alleged, in this case, gang members Derrick Casado and Carlos Rosario are charged with murder, after having shot and killed Jonathan Rodriguez in a Manhattan robbery. HSI New York’s strong partnerships with the NYPD and DEA, and the continued collaboration in criminal investigations, has led to the arrest of these two individuals and they will now face the consequences for their alleged deadly act.”
DEA Special Agent in Charge Raymond P. Donovan said: “With many acts of violence alleged to be committed by members of the Mac Baller Brims Gang – none were as savage as the murder of Jonathan Rodriguez. Gang violence threatens the safety of New Yorkers and puts communities in the crosshairs of drug trafficking and drug-related crime. I applaud our partners at the US Attorney’s Office, the NYPD, and HSI for their diligent work.”
According to the allegations in the Superseding Indictment[1]:
The Mac Baller Brims was a criminal enterprise, and its members and associates committed numerous acts of violence, including shootings, in and around the Bronx. They engaged in such acts to preserve and protect their power, territory, and profits, and to promote and enhance the gang and its criminal activities. Members of the gang also enriched themselves by committing robberies and by selling drugs, such as crack cocaine, heroin, fentanyl, cocaine, oxycodone, and marijuana, including in New York and in Maine. While conducting their drug business, members and associates of the gang used, carried, and possessed firearms, and members of the gang brandished and fired those guns on multiple occasions since 2017.
On October 5, 2019, CASADO and ROSARIO robbed two victims in the vicinity of 20 East 116th Street in New York, New York, and in the course of that robbery and the immediate flight therefrom, ROSARIO shot and killed a third victim, Jonathan Rodriguez. The Superseding Indictment charges CASADO and ROSARIO with one count of assault in aid of racketeering, and aiding and abetting the same; one count of brandishing a firearm, and aiding and abetting the same; one count of murder in aid of racketeering, and aiding and abetting the same; and one count of murder through use of a firearm, and aiding and abetting the same. CASADO and ROSARIO face a maximum sentence of life in prison.
In addition, the Superseding Indictment charges JUAN TEJEDA with conspiring to conduct and participate in the conduct and affairs of the Mac Ballers enterprise through a pattern of racketeering activity. The maximum sentence for this charge is 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 the judge.
Ms. Strauss praised the outstanding work of the NYPD, HSI, and DEA on this investigation.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Frank Balsamello and Jamie Bagliebter 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.
[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.
Ophthalmologist Previously Charged with Healthcare Fraud Indicted for Defrauding SBA Program Intended to Help Small Businesses During COVID-19 PandemicRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that AMEET GOYAL, M.D., an ophthalmologist in Rye, New York, previously indicted in this District for healthcare fraud offenses in November 2019, has been charged in a Superseding Indictment with fraudulently obtaining Government-guaranteed loans intended to help small businesses during the COVID-19 pandemic while he was on pretrial release.
Under the rules of the Paycheck Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”), GOYAL and the ophthalmology practice he owned (the “Practice”) were ineligible for PPP relief due to GOYAL’s pending criminal charges. In April 2020, in order to gain access to PPP funding, GOYAL falsely represented on two separate applications to the SBA and a financial institution headquartered in New York, New York (“Bank-1”), that he was not subject to any pending indictment. The PPP also limited each business to one loan, with a maximum loan amount, and required applicants to certify that they have not and will not receive another PPP loan until December 31, 2020. While making that certification, GOYAL circumvented the single-loan requirement by submitting two separate applications, with different business names, email addresses, business identification numbers, and loan amounts, for the same underlying Practice, while disclaiming on each application that he owned any other business. Due to these misrepresentations, GOYAL successfully obtained two PPP loans totaling over $630,000. GOYAL will be arraigned on June 26 in White Plains federal court before U.S. District Judge Cathy Seibel.
Acting U.S. Attorney Audrey Strauss said: “While already facing charges for allegedly defrauding patients and insurers of millions of dollars, GOYAL allegedly used his practice to commit a new fraud in the midst of the COVID-19 pandemic. As alleged, Goyal blatantly lied on multiple loan applications that he was not subject to any indictment, and on top of that, fraudulently double-dipped into the limited assets of the Paycheck Protection Program by pretending to apply on behalf of two separate businesses. In so doing, Goyal allegedly looted over $630,000 in federal funds earmarked for legitimate small businesses in dire financial straits.”
According to the allegations contained in the Superseding Indictment[1] filed today in White Plains federal court:
During the relevant time period, GOYAL owned and operated Ameet Goyal, M.D. P.C., an ophthalmology practice doing business as Eye Associates Group, Rye Eye Associates, and other business names. On November 21, 2019, an indictment (the “Indictment”) was returned in the action United States of America v. Ameet Goyal, 19 Cr. 844 (CS) (S.D.N.Y.), charging GOYAL with healthcare fraud, wire fraud, and making false statements relating to healthcare matters. On November 22, 2019, GOYAL was arraigned on the Indictment and placed on pretrial release pursuant to an order that notified GOYAL of the potential effect of committing a criminal offense while on pretrial release.
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of hundreds of billions of dollars in forgivable loans to small businesses for job retention and certain other expenses through the SBA’s PPP.
Applicants with pending criminal charges are ineligible for PPP loans. One question on the PPP borrower application form (the “Pending Charges Question”) requires the applicant to answer “Yes” or “No” and put their initial next to the response to the following question: “Is the Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation or parole?” The application expressly advises that if the Pending Charges Question is answered “Yes,” then “the loan will not be approved.”
The PPP also limits each eligible borrower to one loan, and a maximum loan amount calculated based on a business’s average monthly payroll expenses. The PPP application requires the applicant to certify and initial the representation that “During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program.”
In or about April 2020, GOYAL applied to the SBA and Bank-1, a federally insured institution, for over $630,000 in Government-guaranteed loans through the SBA’s PPP. Specifically, on or about April 21, 2020, GOYAL applied for a loan (“Loan-1”) in the amount of $358,700 for the business “Ameet Goyal,” doing business as “Eye associates.” GOYAL represented the applicant as a C-corporation with a business address in Rye, New York (“Business Address-1”), and supplied his own social security number as the applicant’s business identification number.
On or about April 29, 2020, GOYAL applied for a second loan (“Loan-2”) from Bank-1 under the PPP, this time in the amount of $278,500. On this application, GOYAL listed the applicant’s name as “Rye eye associates,” a sole proprietorship also located at Business Address-1. For the applicant’s business identification number, GOYAL reported the Employer Identification Number for Ameet Goyal, M.D. P.C. To substantiate each loan, however, GOYAL submitted the exact same underlying payroll expense report, showing the same employees and payroll costs.
On each application, GOYAL stated that he was the president and 100% owner of the respective applicant, and that he did not own any business other than the listed applicant. On both applications, GOYAL falsely answered “No” to the Pending Charges Question, and electronically placed his initials “AG” directly under his “No” response. GOYAL also falsely certified, among other things, that the applicant will not receive another PPP loan until the end of the year.
After processing each of GOYAL’s signed and certified applications, which used different business names, business identification numbers, email addresses, and loan amounts, Bank-1 advised GOYAL that the respective application was approved by the SBA, and that the applicant would need to execute a loan note in order for the loan to be funded. Bank-1’s signing instructions to each loan note advised, “REMINDER: The Small Business Administration, in consultation with the Secretary of the Treasury, has determined that no eligible borrower may receive more than one PPP loan. A one loan per borrower limitation is necessary to help ensure that as many eligible borrowers as possible obtain PPP loans. If you have already received a PPP loan, you may not execute a loan note for another.”
On or about May 3, 2020, GOYAL executed the Loan-1 loan note for $358,700, and received the funds in full on or about May 4, 2020. On or about May 2 and 4, 2020, GOYAL executed multiple identical versions of the loan note for Loan-2 for $278,500, and received those funds in full on or about May 11, 2020.
* * *
GOYAL, 57, of Rye, New York, is charged with six counts in the Superseding Indictment. The first count charges healthcare fraud, which carries a maximum sentence of 10 years in prison; the second count charges wire fraud, which carries a maximum sentence of 20 years in prison; and the third count charges making false statements relating to health care matters, which carries a maximum sentence of five years in prison. Counts four, five, and six charge that while on pretrial release, the defendant committed the following offenses, respectively: bank fraud, which carries a maximum sentence of 30 years in prison; making false statements on a loan application, which carries a maximum sentence of 30 years in prison; and making false statements in a matter within the jurisdiction of the executive branch of the Government of the United States, which carries a maximum sentence of five years in prison. Additionally, a conviction under counts four, five, and six, if committed while on pretrial release, provides for an additional maximum sentence of 10 years in prison consecutive to any other sentence of imprisonment.
The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Ms. Strauss praised the work of the Federal Bureau of Investigation, the U.S. Department of Health and Human Services, Office of Inspector General, and the Office of the Inspector General of the SBA in connection with this investigation.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Vladislav Vainberg, David Felton, and Margery Feinzig are in charge of the prosecution. A civil fraud lawsuit relating to healthcare fraud under the False Claims Act is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the civil case.
The charges contained in the Superseding Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the 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.
Genovese Crime Family Member Sentenced to Four Years in Prison for Racketeering OffensesRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced that FRANK GIOVINCO was sentenced yesterday to 48 months in prison for extortion conspiracy and participating in a racketeering conspiracy in connection with the Genovese Crime Family’s control of two local chapters of a labor union. GIOVINCO was convicted on December 3, 2019, following a six-day trial before U.S. District Judge Jed S. Rakoff, who also sentenced GIOVINCO.
Acting U.S. Attorney Audrey Strauss said: “For years, Frank Giovinco, as a member of the Genovese Crime Family, instilled fear in victims and perpetrated kickback schemes to tighten the Family’s stranglehold over two labor unions. For committing these crimes, Giovinco will now spend four years in prison.”
According to the Indictment, evidence admitted at trial, court filings, and statements made in open court:
La Cosa Nostra, also known as the “Mob” or the “Mafia,” operates through entities known as “Families.” The largest of the families operating in the New York City area is the Genovese Crime Family. In the early 1990s, GIOVINCO was inserted by the Genovese Crime Family into a scheme to control the waste carting industry in New York City, and as far back as the late-1990s, GIOVINCO was a member of the Genovese Crime Family.
In more recent years, and continuing until 2017, GIOVINCO conspired with other members and associates of the Genovese Crime Family to commit a wide range of crimes to enrich themselves and the Genovese Crime Family, including multiple acts of extortion, honest services fraud, and bribery. GIOVINCO’s activity for the Genovese Crime Family was centered on two local chapters (the “Unions”) of a labor union. GIOVINCO participated in a host of schemes designed to manipulate and siphon money from the Unions for the benefit of the Genovese Crime Family. Among other things, GIOVINCO extorted a financial adviser (the “Adviser”) and a labor union official (“Official-1”) for a cut of commissions made from union investments. Audio recordings captured GIOVINCO planning to “rattle the cage” of a victim, and to have another victim’s “feet held to the fire.” When Official-1 failed to pay the commissions demanded by GIOVINCO and other members of the Genovese Crime Family, Official-1’s life was threatened by GIOVINCO and his co-conspirators. GIOVINCO further plotted to profit from union investments by paying kickbacks to Official-1 and others, in exchange for a cut of future commissions. GIOVINCO also participated in the long-running extortion of a union president (“Official-2”) for annual tribute payments of more than $10,000, and sought a job at the union for the purpose of exerting control over Official-1 on the Genovese Crime Family’s behalf, and threatening to replace Official-1.
* * *
In addition to the prison term, GIOVINCO, 52, of Syosset, New York, was sentenced to three years of supervised release.
Ms. Strauss praised the outstanding investigative work of the Federal Bureau of Investigation, the U.S. Department of Labor’s Office of Inspector General and Office of Labor-Management Standards, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Kimberly J. Ravener, Jason A. Richman, and Justin V. Rodriguez are in charge of the prosecution.
United States Attorneys Available to Receive Election ComplaintsRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Richard P. Donoghue, the United States Attorney for the Eastern District of New York, announced today that special telephone numbers have been set up to receive complaints of possible violations of federal election laws relating to tomorrow’s primary election in New York City and other counties in their districts.
Their Offices will be available to receive complaints at the following numbers on Tuesday, June 23, 2020:
(646) 369-4739 (for Manhattan, Bronx, Dutchess, Orange, Putnam, Rockland, Sullivan, and Westchester counties) and
(718) 254-6790 (for Brooklyn, Queens, Staten Island, Nassau, and Suffolk counties)
In addition, complaints of possible violations of federal election laws may be made directly to the Federal Bureau of Investigation at (212) 384-1000.
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 on 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.
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.
The United States Attorneys also noted that the following additional telephone numbers are available 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
Orange (Spanish language) (855) 331-2444
Putnam (845) 808-1300
Rockland (845) 638-5172
Suffolk (631) 852-4500
Sullivan (845) 807-0400
Westchester (914) 995-5700
Assistant United States Attorneys David J. Kennedy and Nicolas Roos are responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Southern District of New York.
Assistant United States Attorney Erik Paulsen is responsible for overseeing the handling of complaints of voting rights abuses and election fraud for the Eastern District of New York.
U.S. Army Soldier Charged with Terrorism Offenses for Planning Deadly Ambush on Service Members in His UnitRead the Press Release
The Department of Justice announced today the unsealing of an indictment charging Ethan Melzer, 22, of Louisville, Kentucky, for allegedly planning an attack on his U.S. Army unit by sending sensitive details about the unit – including information about its location, movements, and security – to members of an extremist organization named Order of the Nine Angles (O9A), an occult-based neo-Nazi and white supremacist group. Melzer is charged with conspiring and attempting to murder U.S. nationals, conspiring and attempting to murder military service members, providing and attempting to provide material support to terrorists, and conspiring to murder and maim in a foreign country. The FBI and the U.S. Army thwarted Melzer’s plot in late-May 2020, and the FBI arrested Melzer on June 10, 2020. The case is assigned to U.S. District Judge Gregory Woods.
“As the indictment lays out, Ethan Melzer plotted a deadly ambush on his fellow soldiers in the service of a diabolical cocktail of ideologies laced with hate and violence,” said Assistant Attorney General for National Security John C. Demers. “Our women and men in uniform risk their lives for our country, but they should never face such peril at the hands of one of their own. The National Security Division is proud to support the efforts of those who disrupted this planned attack and to seek justice for these acts.”
“As alleged, Ethan Melzer, a private in the U.S. Army, was the enemy within. Melzer allegedly attempted to orchestrate a murderous ambush on his own unit by unlawfully revealing its location, strength, and armaments to a neo-Nazi, anarchist, white supremacist group,” said Acting U.S. Attorney Audrey Strauss for the Southern District of New York. “Melzer allegedly provided this potentially deadly information intending that it be conveyed to jihadist terrorists. As alleged, Melzer was motivated by racism and hatred as he attempted to carry out this ultimate act of betrayal. Thanks to the efforts of the agents and detectives of the JTTF, our partners in the Departments of Defense and State, and the career prosecutors of this office, a hate-fueled terrorist attack against American soldiers has been thwarted.”
“As alleged, Ethan Melzer sought to facilitate a deadly mass attack on his fellow service members by disclosing sensitive information to multiple extremists, including al-Qa’ida. The FBI’s top priority remains protecting Americans from terrorist attacks, at home and abroad, and this case highlights the outstanding work of the FBI’s Joint Terrorism Task Forces, along with our U.S. military partners, to identify and disrupt threats like this one against our men and women in uniform,” said Assistant Director Jill Sanborn of the FBI's Counterterrorism Division.
“Melzer declared himself to be a traitor against the United States, and described his own conduct as tantamount to treason. We agree. He turned his back on his county and his unit while aligning himself with members of the neo-Nazi group O9A,” said FBI Assistant Director-in-Charge of the New York Office William F. Sweeney Jr. “Today, he is in custody and facing a lifetime of service – behind bars – which is appropriate given the severity of the conduct we allege today.”
“This case is another example of the international responsibilities of the Federal Bureau of Investigation’s New York Joint Terrorism Task Force,” said Dermot Shea, the Commissioner of the New York City Police Department. “Its FBI agents and New York City police detectives will travel anywhere in the world to bring terrorists to justice, in this case a soldier who is alleged to have forsaken his oath to the United States military and his fellow soldiers.”
According to the criminal complaint and the indictment charging Melzer, which were unsealed today in Manhattan federal court:
Melzer joined the U.S. Army in approximately 2018, and he joined O9A by approximately 2019. Members and associates of O9A have espoused violent, neo-Nazi, anti-Semitic, and Satanic beliefs, and have expressed admiration for both Nazis, such as Adolf Hitler, and Islamic jihadists, such as Osama Bin Laden, the now-deceased former leader of al Qaeda. Members and associates of O9A have also participated in acts of violence, including murders.
In approximately October 2019, Melzer deployed abroad with the Army. Prior to planning the attack, Melzer consumed propaganda from multiple extremist groups, including O9A and the Islamic State of Iraq and al-Sham, which is also known as ISIS. For example, in connection with the investigation, the FBI seized from an iCloud account maintained by Melzer an ISIS-issued document with a title that included the phrase “HARVEST OF THE SOLDIERS” and described attacks and murders of U.S. personnel in approximately April 2020.
In approximately April 2020, the Army informed Melzer of plans for a further foreign deployment by his unit. Melzer thereafter sought to facilitate a deadly attack on his fellow service members. After he was notified of the assignment, Melzer used an encrypted application to send messages to members and associates of O9A and a related group known as the “RapeWaffen Division,” including communications regarding Melzer’s commitment to O9A and sensitive information related to his unit’s anticipated deployment such as locations, movements, and security, for purposes of facilitating an attack on Melzer’s unit. Melzer and his co-conspirators planned what they referred to as a “jihadi attack” during the deployment, with the objective of causing a “mass casualty” event victimizing his fellow service members. Melzer acknowledged in electronic communications that he could be killed during the attack, and, describing his willingness to die, wrote “who gives a [expletive] [. . .] it would be another war . . . I would’ve died successfully . . . cause [] another 10 year war in the Middle East would definitely leave a mark.”
On or about May 17, 2020, Melzer exchanged electronic communications regarding passing information about the anticipated deployment to a purported member of al Qaeda. Between approximately May 24 and May 25, 2020, Melzer sent additional electronic messages with specific information about his unit’s anticipated deployment, including, among other things, the number of soldiers who would be traveling, the location of the facility to which Melzer expected the unit would be deployed, and information about the facility’s surveillance and defensive capabilities. Melzer promised to leak more information once he arrived at the location of the new deployment in order to try to maximize the likelihood of a successful attack on his unit.
During a voluntary interview with military investigators and the FBI, Melzer admitted his role in plotting the attack. Melzer said that he intended the planned attack to result in the deaths of as many of his fellow service members as possible. Melzer also declared himself to be a traitor against the United States, and described his conduct as tantamount to treason.
Melzer is charged in the Indictment with (1) conspiring to murder U.S. nationals, in violation of 18 U.S.C. § 2332(b)(2), which carries a maximum sentence of life in prison; (2) attempting to murder U.S. nationals, in violation of 18 U.S.C. § 2332(b)(1), which carries a maximum sentence of 20 years in prison; (3) conspiring to murder U.S. military service members, in violation of 18 U.S.C. § 1117, which carries a maximum sentence of life in prison; (4) attempting to murder U.S. military service members, in violation of 18 U.S.C. § 1114, which carries a maximum sentence of 20 years in prison; (5) attempting to provide and providing material support to terrorists, in violation of 18 U.S.C. § 2339A, which carries a maximum sentence of 15 years in prison; and (6) conspiring to murder and maim in a foreign country, in violation of 18 U.S.C. § 956, which carries a maximum sentence of life in prison. The statutory 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.
Assistant Attorney General Demers and Acting U.S. Attorney Strauss praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state, and local agencies; the FBI’s Legal Attaché Office in Rome, Italy; the Air Force Office of Special Investigations; U.S. Army Counterintelligence; U.S. Army Criminal Investigation Command; Attorneys from the U.S. Army Africa Office of the Staff Judge Advocate and 173rd Airborne Brigade; and the U.S. Department of State Diplomatic Security Service.
This prosecution is being handled by the office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sam Adelsberg, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from Trial Attorney Alicia Cook of the Counterterrorism Section.
The charges in the complaint and indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
U.S. Army Soldier Charged with Terrorism Offenses for Planning Deadly Ambush on Service Members in His UnitRead the Press Release
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, John C. Demers, the Assistant Attorney General for National Security, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an indictment charging ETHAN MELZER for allegedly planning an attack on his U.S. Army unit by sending sensitive details about the unit – including information about its location, movements, and security – to members of an extremist organization named Order of the Nine Angles (“O9A”), an occult-based neo-Nazi and racially motivated violent extremist group. MELZER is charged with conspiring and attempting to murder U.S. nationals, conspiring and attempting to murder military service members, providing and attempting to provide material support to terrorists, and conspiring to murder and maim in a foreign country. The FBI and the U.S. Army thwarted MELZER’s plot in late-May 2020, and the FBI arrested MELZER on June 10, 2020. The case is assigned to United States District Judge Gregory H. Woods.
Acting U.S. Attorney Audrey Strauss said: “As alleged, Ethan Melzer, a private in the U.S. Army, was the enemy within. Melzer allegedly attempted to orchestrate a murderous ambush on his own unit by unlawfully revealing its location, strength, and armaments to a neo-Nazi, anarchist, white supremacist group. Melzer allegedly provided this potentially deadly information intending that it be conveyed to jihadist terrorists. As alleged, Melzer was motivated by racism and hatred as he attempted to carry out this ultimate act of betrayal. Thanks to the efforts of the agents and detectives of the JTTF, our partners in the Departments of Defense and State, and the career prosecutors of this Office, a hate-fueled terrorist attack against American soldiers has been thwarted.”
Assistant Attorney General John C. Demers said: “As the indictment lays out, Ethan Meltzer plotted a deadly ambush on his fellow soldiers in the service of a diabolical cocktail of ideologies laced with hate and violence. Our women and men in uniform risk their lives for our country, but they should never face such peril at the hands of one of their own. The National Security Division is proud to support the efforts of those who disrupted this planned attack and to seek justice for these acts.”
FBI Assistant Director William F. Sweeney Jr. said: “Melzer declared himself to be a traitor against the United States, and described his own conduct as tantamount to treason. We agree. He turned his back on his county and his unit while aligning himself with members of the neo-Nazi group O9A. Today, he is in custody and facing a lifetime of service – behind bars – which is appropriate given the severity of the conduct we allege today.”
NYPD Commissioner Dermot Shea said: “This case is another example of the international responsibilities of the Federal Bureau of Investigation’s New York Joint Terrorism Task Force. Its FBI agents and New York City police detectives will travel anywhere in the world to bring terrorists to justice, in this case a soldier who is alleged to have forsaken his oath to the United States military and his fellow soldiers.”
According to the criminal Complaint and the Indictment charging Melzer,[1] which were unsealed today in Manhattan federal court:
MELZER joined the U.S. Army in approximately 2018, and he joined O9A by approximately 2019. Members and associates of O9A have espoused violent, neo-Nazi, anti-Semitic, and Satanic beliefs, and have expressed admiration for both Nazis, such as Adolf Hitler, and Islamic jihadists, such as Usama Bin Laden, the now-deceased former leader of al Qaeda. Members and associates of O9A have also participated in acts of violence, including murders.
In approximately October 2019, MELZER deployed abroad with the Army. Prior to planning the attack, MELZER consumed propaganda from multiple extremist groups, including O9A and the Islamic State of Iraq and al-Sham, which is also known as ISIS. For example, in connection with the investigation, the FBI seized from an iCloud account maintained by MELZER an ISIS-issued document with a title that included the phrase “HARVEST OF THE SOLDIERS” and described attacks and murders of U.S. personnel in approximately April 2020.
In approximately April 2020, the Army informed MELZER of plans for a further foreign deployment by his unit. MELZER thereafter sought to facilitate a deadly attack on his fellow service members. After he was notified of the assignment, MELZER used an encrypted application to send messages to members and associates of O9A and a related group known as the “RapeWaffen Division,” including communications regarding MELZER’s commitment to O9A and sensitive information related to his unit’s anticipated deployment such as locations, movements, and security, for purposes of facilitating an attack on MELZER’s unit. MELZER and his co-conspirators planned what they referred to as a “jihadi attack” during the deployment, with the objective of causing a “mass casualty” event victimizing his fellow service members. MELZER acknowledged in electronic communications that he could be killed during the attack, and, describing his willingness to die, wrote “who gives a fuck [. . .] it would be another war . . . I would’ve died successfully . . . cause [] another 10 year war in the Middle East would definitely leave a mark.”
On or about May 17, 2020, MELZER exchanged electronic communications regarding passing information about the anticipated deployment to a purported member of al Qaeda. Between approximately May 24 and May 25, 2020, MELZER sent additional electronic messages with specific information about his unit’s anticipated deployment, including, among other things, the number of soldiers who would be traveling, the location of the facility to which MELZER expected the unit would be deployed, and information about the facility’s surveillance and defensive capabilities. MELZER promised to leak more information once he arrived at the location of the new deployment in order to try to maximize the likelihood of a successful attack on his unit.
During a voluntary interview with military investigators and the FBI, MELZER admitted his role in plotting the attack. MELZER said that he intended the planned attack to result in the deaths of as many of his fellow service members as possible. MELZER also declared himself to be a traitor against the United States, and described his conduct as tantamount to treason.
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MELZER, 22, of Louisville, Kentucky, is charged in the Indictment with (1) conspiring to murder U.S. nationals, in violation of 18 U.S.C. § 2332(b)(2), which carries a maximum sentence of life in prison; (2) attempting to murder U.S. nationals, in violation of 18 U.S.C. § 2332(b)(1), which carries a maximum sentence of 20 years in prison; (3) conspiring to murder U.S. military service members, in violation of 18 U.S.C. § 1117, which carries a maximum sentence of life in prison; (4) attempting to murder U.S. military service members, in violation of 18 U.S.C. § 1114, which carries a maximum sentence of 20 years in prison; (5) attempting to provide and providing material support to terrorists, in violation of 18 U.S.C. § 2339A, which carries a maximum sentence of 15 years in prison; and (6) conspiring to murder and maim in a foreign country, in violation of 18 U.S.C. § 956, which carries a maximum sentence of life in prison. The statutory 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 efforts of the FBI’s New York Joint Terrorism Task Force, which consists of investigators and analysts from the FBI, the NYPD, and over 50 other federal, state, and local agencies; the FBI’s Legal Attaché Office in Rome, Italy; the Air Force Office of Special Investigations; U.S. Army Counterintelligence; U.S. Army Criminal Investigation Command; Attorneys from the U.S. Army Africa Office of the Staff Judge Advocate and 173rd Airborne Brigade; and the U.S. Department of State Diplomatic Security Service.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sam Adelsberg, Matthew Hellman, and Sidhardha Kamaraju are in charge of the prosecution, with assistance from Trial Attorney Alicia Cook of the Counterterrorism Section.
The charges in the Complaint and Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the 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.
Statement of Geoffrey S. BermanRead the Press Release
“In light of Attorney General Barr’s decision to respect the normal operation of law and have Deputy U.S. Attorney Audrey Strauss become Acting U.S. Attorney, I will be leaving the U.S. Attorney’s Office for the Southern District of New York, effective immediately. It has been the honor of a lifetime to serve as this District’s U.S. Attorney and a custodian of its proud legacy, but I could leave the District in no better hands than Audrey’s. She is the smartest, most principled, and effective lawyer with whom I have ever had the privilege of working. And I know that under her leadership, this Office’s unparalleled AUSAs, investigators, paralegals, and staff will continue to safeguard the Southern District’s enduring tradition of integrity and independence.”
Statement of U.S. Attorney Geoffrey S. Berman on Announcement by Attorney General BarrRead the Press Release
“I learned in a press release from the Attorney General tonight that I was ‘stepping down’ as United States Attorney. I have not resigned, and have no intention of resigning, my position, to which I was appointed by the Judges of the United States District Court for the Southern District of New York. I will step down when a presidentially appointed nominee is confirmed by the Senate. Until then, our investigations will move forward without delay or interruption. I cherish every day that I work with the men and women of this Office to pursue justice without fear or favor – and intend to ensure that this Office’s important cases continue unimpeded.”
Queens Man Charged in Connection with Arson of an NYPD Vehicle in ManhattanRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John B. DeVito, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), Dermot Shea, the Commissioner of the New York City Police Department (“NYPD”), and Daniel A. Nigro, the Commissioner of the New York City Fire Department (“FDNY”), announced today the arrest of VICTOR A. SANCHEZ-SANTA in connection with his attempts to destroy a police car in midtown Manhattan. SANCHEZ-SANTA was arrested this morning and will be presented in Manhattan federal court before U.S. Magistrate James L. Cott later today.
U.S. Attorney Geoffrey S. Berman stated: “As alleged, the defendant selected a clearly marked NYPD vehicle, walked up beside it, started a fire under the vehicle, and fled the scene. In allegedly doing so, he maliciously targeted law enforcement. Arson is also a threat to more than its immediate victim, with the potential to destroy and terrify far beyond the place where a fire is set. We have the quick response of members of the NYPD, FDNY, and ATF to thank for controlling the fire and identifying the defendant so he can face the significant charge for his alleged crime.”
ATF Special Agent-in-Charge John B. DeVito said: “The use of fire as a weapon places our communities at risk and greatly endangers our citizens. ATF and our partners will vigorously investigate and bring those responsible to justice by means of the Strategic Explosive Arson Response (SEAR) Task Force.”
NYPD Commissioner Dermot Shea said: “Torching an NYPD vehicle, as alleged, is not just an isolated crime but a threat to all New Yorkers. The hard work of our detectives and law enforcement partners in this case ensures there will be justice.”
Fire Commissioner Daniel A. Nigro said: “Arson is a callous act that senselessly puts the lives of New Yorkers and first responders in danger. The excellent teamwork of our Fire Marshals, the NYPD, and ATF continues to seek justice against those who use fire to harm others and destroy property.”
According to the allegations in the Complaint[1]:
On June 9, 2020, at approximately 1:20 a.m., SANCHEZ-SANTA stopped his car beside a marked NYPD vehicle on West 42nd Street in Manhattan. He got out of his car, took a cloth glove in his hand and held the glove to a flame until it ignited. He then put the burning glove underneath the NYPD vehicle, and got back into his car, leaving the glove burning beneath the police car.
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SANCHEZ-SANTA, 19, of Queens, New York, is charged with one count of 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.
Mr. Berman 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 Josiah Pertz is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Co-Founder of Cryptocurrency Company Pleads Guilty for Role in ICO Fraud SchemeRead the Press Release
Craig Stewart, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that ROBERT JOSEPH FARKAS, a/k/a “RJ,” pled guilty today before U.S. Magistrate Judge James L. Cott to conspiring to commit securities and wire fraud in connection with a scheme to induce victims to invest more than $25 million dollars’ worth of digital funds in Centra Tech, Inc. (“Centra Tech”), a Miami-based company he co-founded and that purported to offer cryptocurrency-related financial products. FARKAS and his co-conspirators used material misrepresentations and omissions to solicit investors to purchase securities, in the form of digital tokens issued by Centra Tech, through an initial coin offering (“ICO”) beginning in approximately July 2017.
Mr. Stewart said: “Farkas and his co-conspirators duped ICO investors into investing digital currency worth millions of dollars based on fictitious claims about their company, including misrepresentations relating to its purported digital technologies and its relationships with legitimate businesses in the financial services sector. Whether in the context of traditional equity IPOs or newer cryptocurrency-related ICOs, raising capital through lies and deceit is a crime.”
According to the Superseding Information, and other filings and statements at public court proceedings in the case:
In or about July 2017, FARKAS, along with co-defendants Sohrab Sharma and Raymond Trapani, founded a company called Centra Tech that claimed to offer cryptocurrency-related financial products, including a purported debit card, the “Centra Card,” that supposedly allowed users to make purchases using cryptocurrency at establishments accepting Visa or Mastercard payment cards. From approximately July 30, 2017, through October 5, 2017, FARKAS and his co-defendants solicited investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech (“Centra tokens” or “CTR tokens”), through a so-called “initial coin offering” or “ICO.” As part of this effort, FARKAS and his co-defendants represented, in oral and written offering materials that were disseminated via the internet: (a) that Centra Tech had an experienced executive team with impressive credentials, including a purported CEO named “Michael Edwards” with more than 20 years of banking industry experience and a master’s degree in business administration from Harvard University; (b) that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard; and (c) that Centra Tech had money transmitter and other licenses in 38 states, among other claims. Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens. In or about October 2017, at the end of Centra Tech’s ICO, those digital funds raised from victims were worth more than $25 million. At certain times in 2018, as the defendants’ fraud scheme was ongoing, those funds were worth more than $60 million.
The claims that FARKAS and his co-conspirators made to help secure these investments, however, were false. In fact, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team were fictional people who were fabricated to dupe investors; Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard; and Centra Tech did not have such licenses in a number of those states.
On or about May 2018 and October 2018, this Office and the Federal Bureau of Investigation (“FBI”) seized, pursuant to judicially authorized seizure warrants, 100,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech during its ICO based on fraudulent misrepresentations and omissions.
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FARKAS, 33, pled guilty to one count of securities fraud conspiracy and one count of wire fraud conspiracy, each of 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. FARKAS will be sentenced by U.S. District Judge Lorna G. Schofield on a date to be determined.
Mr. Stewart praised the work of the FBI, and thanked the U.S. Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Samson Enzer, Negar Tekeei, and Daniel Loss are in charge of the prosecution.
Bronx Man Charged with 2015 Murder of Nestor SuazoRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Dermot Shea, the Police Commissioner of the City of New York (“NYPD”), and Peter C. Fitzhugh, the Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), announced the return today of an Indictment charging DERRICK RICHARDSON, a/k/a “J Rocc,” with the September 19, 2015, murder of Nestor Suazo, 25, in the vicinity of East Tremont Avenue and Clinton Avenue in the Bronx, New York.
U.S. Attorney Geoffrey S. Berman said: “Nearly five years ago, Nestor Suazo’s life was senselessly taken. As alleged in the Indictment, Derrick Richardson was one of those responsible for that terrible crime. Now, thanks to the determination of our law enforcement partners at the NYPD and HSI, Richardson faces federal murder charges.”
NYPD Commissioner Dermot Shea said: “The ability of investigators to bring about justice for this young man and provide a sense of closure to his family is paramount. The identification and arrest of the suspect in this case was a joint effort that would not have been possible without the collaboration between the NYPD and our law enforcement partners. I thank the U.S. Attorney and the NYPD Detectives and HSI agents involved in this case.”
HSI Special Agent in Charge Peter C. Fitzhugh said: “Derrick Richardson is charged with the horrible crime of murdering Nestor Suazo in the Bronx in 2015. As alleged in the indictment, Richardson is a member of the Rollin' 30s Crip, a gang that committed and threatened to commit acts of violence in order to promote its interests. HSI stands united with its law enforcement partners to bring closure to the families of those lost to gang violence by finding and arresting the alleged offenders and seeking justice for their criminal acts.”
As alleged in the Indictment returned today[1]:
RICHARDSON was a member of a racketeering enterprise known as the Rollin’ 30s Crips. In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of the Rollin’ 30s committed, conspired, attempted, and threatened to commit acts of violence, including murder and robbery; they conspired to distribute and possess with intent to distribute narcotics; and they obtained, possessed, and used firearms, including by brandishing and discharging them.
In connection with his membership in the gang, on or about September 19, 2015, RICHARDSON shot and killed Nestor Suazo in the vicinity of East Tremont Avenue and Clinton Avenue in the Bronx, New York.
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RICHARDSON, 27, of the Bronx, New York, is charged with murder in aid of racketeering, which carries a mandatory minimum sentence of life in prison, and murder through the use of a firearm, which carries a maximum penalty of life in prison and a mandatory minimum sentence of five years in prison.
The maximum potential sentence in this case is prescribed by Congress and is provided here for information purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the NYPD and HSI.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jessica K. Fender, Anden Chow, and Jacqueline C. Kelly 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 description of the Indictment set forth herein constitute only allegations and every fact described should be treated as an allegation.
Former London and Miami Art Dealer Arrested for Fraud SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a Complaint in Manhattan federal court charging INIGO PHILBRICK, an art dealer specializing in post-war and contemporary fine art, with galleries in London, United Kingdom, and Miami, Florida, with engaging in a multi-year scheme to defraud various individuals and entities in order to finance his art business. In total, PHILBRICK allegedly fraudulently obtained more than $20 million as a result of the scheme.
Federal law enforcement agents took PHILBRICK into custody yesterday in Vanuatu, after Vanuatu authorities expelled PHILBRICK from Vanuatu at the request of the U.S. Embassy in Papua New Guinea in light of the charges in the Complaint. PHILBRICK was then transported to Guam, where he is expected to be presented in federal court on June 15, 2020.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Inigo Philbrick was a serial swindler who misled art collectors, investors, and lenders out of more than $20 million. You can’t sell more than 100 percent ownership in a single piece of art, which Philbrick allegedly did, among other scams. When his schemes began to unravel, Philbrick allegedly fled the country. Now he is in U.S. custody and facing justice.”
FBI Assistant Director William F. Sweeney Jr. said: “Mr. Philbrick allegedly sought out high-dollar art investors, sold pieces he didn’t own, and played games with millions of dollars in other people’s money. The game ended when investors began wondering where their money went. Hats off to the FBI NY Joint Major Theft Task Force/Art Crime Team who worked diligently to track down Mr. Philbrick and bring him back to the U.S., where, if convicted, he might have to trade in his jet-set life for a drab federal prison cell.”
According to the allegations in the Complaint[1] unsealed today in Manhattan federal court:
From approximately 2016 through 2019, to finance his art business, PHILBRICK engaged in a scheme to defraud multiple individuals and entities in the art market located in the New York metropolitan area and abroad. PHILBRICK made material misrepresentations and omissions to art collectors, investors, and lenders to access valuable art and obtain sales proceeds, funding, and loans (the “Fraud Scheme”). PHILBRICK knowingly misrepresented the ownership of certain artworks, for example, by selling a total of more than 100 percent ownership in an artwork to multiple individuals and entities without their knowledge; and by selling artworks and/or using artworks as collateral on loans without the knowledge of co-owners, and without disclosing the ownership interests of third parties to buyers and lenders. PHILBRICK furnished fraudulent contracts and records to investors to artificially inflate the artworks’ value and conceal his scheme, including a contract that listed a stolen identity as the seller.
PHILBRICK obtained millions of dollars in loans and sale proceeds in connection with the Fraud Scheme. Artworks about which PHILBRICK made these fraudulent misrepresentations in furtherance of the Fraud Scheme include, among others, a 1982 painting by the artist Jean-Michel Basquiat titled “Humidity,” a 2010 untitled painting by the artist Christopher Wool, and an untitled 2012 painting by the artist Rudolf Stingel depicting the artist Pablo Picasso.
By in or about the fall of 2019, PHILBRICK’s Fraud Scheme began to come to light as various investors and lenders learned about the fraudulent records PHILBRICK had provided and the material misrepresentations and omissions he had made. By in or about mid-October, a lender officially notified PHILBRICK that he was in default of approximately a $14 million loan, and by November 2019, various investors had filed civil lawsuits in multiple jurisdictions regarding PHILBRICK’s Fraud Scheme in connection with various artworks. At around the same time, PHILBRICK’s art galleries in Miami and London closed, and PHILBRICK stopped responding to legal process. Flight records show that PHILBRICK departed the United States shortly before public reporting began about the lawsuits. Based on information provided by Vanuatu, PHILBRICK has been residing in Vanuatu since in or about late October 2019.
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PHILBRICK, 33, a U.S. citizen previously residing in London, United Kingdom, and a fugitive since October 2019, was charged in the Complaint with one count of wire fraud and one count of aggravated identity theft. The wire fraud charge carries a maximum prison term of 20 years. The aggravated identity theft charge carries a mandatory sentence of two years in prison.
The maximum and minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the judge.
Mr. Berman praised the investigative work of the FBI NY Joint Major Theft Task Force/Art Crime Team. In addition, Mr. Berman thanked authorities in Vanuatu, including the Vanuatu Police Force, Vanuatu Immigration Services, and the Ministry of Foreign Affairs, International Cooperation, and External Trade of the Republic of Vanuatu, as well as the United States Justice Department’s Office of International Affairs of the Department’s Criminal Division, the U.S. State Department, the U.S. Embassy in Papua New Guinea, the Regional Security Office Port Moresby, the FBI’s Legal Attaché in Canberra, Australia, the FBI’s Guam Resident Agency, and the U.S. Marshals Service in Guam for their assistance.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Jessica K. Feinstein and Cecilia E. Vogel are in charge of the prosecution.
To report information related to this case, please contact the FBI's Art Crime Team at [email protected].
The allegations in the 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 herein constitute only allegations, and every fact described should be treated as an allegation.
U.S. Attorney Charges Middletown Man with Sexual Exploitation of MinorsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, Special Agent in Charge of the New York Office of Homeland Security Investigations (“HSI”), announced today the arrest of JONATHAN WEISS, a/k/a “Ian_Jameson.” WEISS is charged with communicating with three different underage victims online and directing them to take sexually explicit images and send them to WEISS. WEISS was arrested this morning and presented today before U.S. Magistrate Judge Judith C. McCarthy in Manhattan federal court and detained.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Jonathan Weiss’s alleged crimes are abhorrent and predatory. Using a common social media app, Weiss allegedly sexually exploited three 13-year-olds. We will continue to work with our partners at Homeland Security Investigations to vigorously investigate and prosecute defendants who prey on children.”
HSI Special Agent in Charge Peter C. Fitzhugh said: “Jonathan Weiss allegedly posed as a minor and directed his teenage victims to take and send sexually explicit photographs to him through Snapchat. It is horrific for anyone to prey on our most vulnerable. HSI New York’s Child Exploitation Investigation Unit is resolute in the pursuit of alleged predators lurking within our communities, and we will continue to work with our partners in the U.S. Attorney’s Office for the Southern District of New York to protect our community from predators seeking to pull them into their dark, evil world.”
According to the Complaint[1] filed yesterday in White Plains federal court and unsealed today:
In September 2019, WEISS, a/k/a “Ian_Jameson,” communicated online via Snapchat with a 13-year-old minor (“Victim-1”) and directed Victim-1 to take and send sexually explicit photographs of Victim-1 to WEISS. WEISS engaged in the same type of activity with another 13-year-old minor (“Victim-2”) in August 2019 and a third 13-year-old minor (“Victim-3”) in May 2020.
During his communications with his victims, WEISS utilized the Snapchat screen name “Ian_Jameson” and posed as a minor. WEISS allegedly told Victim-1 that if she did not send more nude pictures to WEISS, he would send the pictures she had already sent to others. In response to the threats to send her pictures to others, Victim-1 “blocked” “Ian_Jameson” on Snapchat. Shortly thereafter, people began telling her that they had received her nude images.
There may be more victims of this alleged conduct. If you have information to report, contact Homeland Security Investigations through its toll-free Tip Line at 1-866-DHS-2423 or by completing its online tip form. Both are staffed around-the-clock by investigators. From outside the U.S. and Canada, callers should dial 802-872-6199. Hearing-impaired users can call TTY 802-872-6196.
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WEISS, 29, of Middletown, New York, is charged with three counts of sexual exploitation of a minor, each carrying a minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the efforts of Homeland Security Investigations, the Putnam County Sheriff’s Office, the Clay County Sheriff’s Office in Orange Park, Florida, and the Longview Police Department in Longview, Texas, in connection with this investigation. He added that the investigation is ongoing.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
The charges in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Two Defendants Charged with Gunpoint Robbery of Manhattan Jewelry Store While Impersonating NYPD OfficersRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Dermot Shea, Commissioner of the New York City Police Department (“NYPD”), and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ISMAEL IGARTUA, a/k/a “Ismeal John,” a/k/a “John Igartua,” and JOSE RODRIGUEZ have been arrested for their participation in an armed robbery of a jewelry store in Manhattan on Saturday, June 6, 2020. IGARTUA and RODRIGUEZ were apprehended shortly after the robbery and were presented in Manhattan federal court before U.S. Magistrate Judge Debra Freeman today.
U.S. Attorney Geoffrey S. Berman stated: “As alleged, the defendants participated in a brazen daytime robbery, in which a victim was threatened at gunpoint and tied up. The defendants’ alleged scheme – impersonating NYPD officers and asking to check the victim’s firearm due to recent incidents of looting – took advantage of uncertain conditions in our community, preying on the fears of a small business owner and his trust in law enforcement. This alleged criminal conduct is intolerable, and thanks to the work of the NYPD and the FBI, the defendants face significant federal charges for their alleged crimes.”
NYPD Commissioner Dermot Shea said: “Posing as police officers to prey on a city business during an international pandemic, as alleged, is dangerous to civilians and law enforcement officers. Arrests like these highlight the indispensable work of our NYPD detectives, and federal partners, in ensuring justice for New Yorkers.”
FBI Assistant Director William F. Sweeney Jr. said: “Well done to the detectives and agents who worked to solve this quickly and bring justice to a business owner in the community. It speaks highly of the work done by the NYPD’s 19th Precinct Detective Squad and the FBI-NYPD Joint Major Theft Task Force that the only jewelry these men will wind up with are metal bracelets.”
According to the allegations in the Complaint[1]:
On the afternoon of June 6, 2020, IGARTUA and RODRIGUEZ robbed a jewelry store located on the Upper East Side of Manhattan. While dressed as and identifying themselves as NYPD officers, IGARTUA and RODRIGUEZ asked for permission to enter the jewelry store and requested to examine the store owner’s properly permitted firearm, claiming that, due to the recent looting of commercial establishments in New York, firearms were at risk of being stolen. Once the store owner gave IGARTUA and RODRIGUEZ his firearm, the robbers, who were armed with two firearms of their own, restrained and tied up the store owner, and stole his firearm and jewelry valued at over $150,000. IGARTUA and RODRIGUEZ were apprehended a short time later in a subway station several blocks from the jewelry store.
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IGARTUA, 59, of Queens, New York, and JOSE RODRIGUEZ, 59, of the Bronx, New York, are each charged with one count of robbery conspiracy, which carries a maximum sentence of 20 years in prison; one count of robbery, which carries a maximum sentence of 20 years in prison; one count of brandishing a firearm, which carries a maximum sentence of life 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 maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by a judge.
Mr. Berman praised the outstanding investigative work of the FBI-NYPD Joint Major Theft Task Force and the NYPD’s 19th Precinct Detective Squad.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Kaylan E. Lasky is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Statement of U.S. Attorney Geoffrey S. Berman Responding to Statement Issued Today by Law Firm Representing Prince AndrewRead the Press Release
Today, Prince Andrew yet again sought to falsely portray himself to the public as eager and willing to cooperate with an ongoing federal criminal investigation into sex trafficking and related offenses committed by Jeffrey Epstein and his associates, even though the Prince has not given an interview to federal authorities, has repeatedly declined our request to schedule such an interview, and nearly four months ago informed us unequivocally – through the very same counsel who issued today’s release – that he would not come in for such an interview. If Prince Andrew is, in fact, serious about cooperating with the ongoing federal investigation, our doors remain open, and we await word of when we should expect him.
Federal Court Enters Injunction Against Herbal Drug Manufacturer for Selling Misbranded and Unapproved Drugs in Violation of the Federal Food, Drug, and Cosmetic ActRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Stacy Amin, Chief Counsel for the U.S. Food and Drug Administration (“FDA”), announced today that the United States District Court for the Southern District of New York has entered an injunction against defendants RAHSAN A. HAKIM (“Hakim”) and ADONIIAH A. RAHSAN (“Rahsan”) (collectively, the “Defendants”) for repeated violations of the Food, Drug, and Cosmetic Act. HAKIM and RAHSAN do business as Sundial Herbal Products (“Sundial”).
U.S. Attorney Geoffrey S. Berman said: “If you threaten the public health by selling unapproved or misbranded drugs, we will stop you. There is no place for modern-day snake oil salesmen.”
FDA Chief Counsel Stacy Amin said: “Americans expect and deserve medical treatments that have been scientifically proven to be safe and effective. Making claims that unproven drugs can cure or prevent diseases places consumers’ health at risk. We remain committed to pursuing and taking swift action against those who attempt to subvert the regulatory functions of the FDA by repeatedly disregarding the law and distributing unapproved products.”
The Complaint
According to the Government’s complaint, Defendants manufactured and sold various herbal products – often referred to as “tonics” and “herbal teas” – that constitute unapproved new drugs. Defendants claimed that these products cure, treat, and/or prevent numerous diseases and conditions, including HIV, cancer, syphilis, diabetes, high blood pressure, arthritis, asthma, and heart disease. None of Defendants’ products had been tested or approved by the FDA for safety or effectiveness. These products were also “misbranded” in that they failed to include instructions for their safe use. Defendants’ sale of such products pose a threat to public health because the products’ disease treatment claims may cause consumers to delay appropriate medical care for these serious medical issues. Sundial had been inspected by the FDA multiple times, including during the pendency of the lawsuit, and, despite repeated promises to do so, Defendants failed to correct their violations of the Food, Drug, and Cosmetic Act (“FDCA”).
The United States filed this lawsuit seeking to enjoin Defendants from manufacturing and selling drugs in violation of the FDCA.
The District Court’s Findings
On May 26, 2020, the District Court found that Defendants have repeatedly violated the law by distributing unapproved new and misbranded drugs. Among other things, the Court concluded that:
- “The labels that the FDA collected . . . indisputably establish that Defendants claimed that their products were intended for use in diagnosing, curing, mitigating, treating, and/or preventing a wide variety of diseases.”
- The drugs sold by Defendants were “unapproved new drugs” because, among other things, they are “not generally recognized as safe and effective” and have not been approved by the FDA.
- Defendants’ drugs were “misbranded” because “the record shows that many of Defendants’ drugs are intended for treating serious diseases or conditions such as HIV, cancer, and Ebola, all of which require diagnosis and management by a physician . . . . As such, they are only safe for use under the supervision of a physician, which brings them within the definition of prescription drugs.” Furthermore, “Defendants’ drugs are also misbranded because they lack adequate instructions for lay use.”
- “Defendants’ past violations are also egregious, as they made claims that their products could cure cancer, HIV, and Ebola, among other serious diseases,” and “absent injunctive relief, nothing prevents Defendants from returning to their old ways.”
Permanent Injunction
After finding that Defendants had committed “egregious” violations of the law, the Court entered a permanent injunction prohibiting Defendants from manufacturing or selling these products or any drug unless and until either: (1) a new drug application is approved for their drugs; or (2) they meet various requirements demonstrating compliance with the FDCA. Such requirements include that Defendants must:
- Remove all claims in labels, promotional material, websites, and social media pages that these herbal remedies diagnose, cure, mitigate, treat, or prevent disease.
- Recall and destroy, at their own cost, under the FDA’s supervision, all drugs manufactured, packed, labeled, held, and distributed from 2014 through the present.
- Retain, at their own cost, a qualified, trained, and experienced drug labeling expert to review and report to the FDA on Defendants’ compliance with the issued injunction and FDCA.
- Arrange for annual audits by an independent third-party to confirm ongoing compliance.
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Mr. Berman thanked the investigators and attorneys of the FDA for their valuable assistance on this matter.
This case was handled by the Environmental Protection Unit of the Office’s Civil Division. Assistant U.S. Attorney Emily Bretz is in charge of this case.
- “The labels that the FDA collected . . . indisputably establish that Defendants claimed that their products were intended for use in diagnosing, curing, mitigating, treating, and/or preventing a wide variety of diseases.”