Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that VALENTYN BELAN, a/k/a “Belan Valentin,” a/k/a “Belan Valentyn,” a/k/a “Belan Valentyn Volodymyrovych,” a/k/a “Belan Valentyn Voldymyrovich,” a/k/a “Valentino,” was sentenced to 109 months in prison for a sophisticated fraud scheme lasting more than 10 years during which BELAN invented and promoted fake business opportunities purportedly located in Ukraine and elsewhere.  BELAN previously pled guilty to the scheme on May 29, 2019, and he was sentenced today by U.S. District Judge Gregory H. Woods.

U.S. Attorney Geoffrey S. Berman said:  “For years, Valentyn Belan headed an elaborate fraud in which he convinced his victim to part with more than $20 million to invest in fake business opportunities.  In fact, he created false documents and photos, and even arranged for fake meetings with his co-conspirators to perpetuate the fraud.  Today’s sentence, and the judge’s order to forfeit the $20 million in profit, ensures that Belan is punished for his crimes.”

According to the allegations contained in the Criminal Complaint and the Information, as well as other documents filed in federal court and statements made in public court proceedings:

For more than a decade, BELAN was the mastermind behind a scheme to defraud a Hong Kong national through fake business opportunities that included, among others things, sham investments in real estate, rare earth mines, and oil interests.  In order to induce the victim to invest in those fraudulent opportunities, BELAN employed a litany of elaborate misrepresentations, including numerous falsified documents and photographs, and he orchestrated multiple fake meetings around the world with co-conspirators pretending to be business partners and government officials.  Over the course of the scheme, from October 2008 through December 2018, BELAN defrauded his victim of more than $20 million. 

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In addition to the prison term, BELAN, 39, of Kherson, Ukraine, was sentenced to three years of supervised release, ordered to forfeit $20,107,243, representing proceeds traceable to the charged offense, and to pay restitution in the amount of $13,309,918.

In addition to BELAN, Olena Chumachenko and Nika Khrystych were charged in connection with the fraudulent scheme.  Chumachenko pled guilty to a separate charge of visa fraud and was sentenced to a term of probation by U.S. District Judge Edgardo Ramos.  Khrystych remains at large.  All charges against Khrystych are merely allegations, and she is presumed innocent unless and until proven guilty.

Mr. Berman praised the outstanding investigative work of Special Agents from the U.S. Attorney’s Office for the Southern District of New York, and thanked agents with the U.S. Department of State and U.S. Customs and Border Protection for their excellent assistance throughout the investigation. 

The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Jarrod L. Schaeffer is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ALJERMIAH MACK, a/k/a “Nuke,” and ANTHONY ELLISON, a/k/a “Harv,” were found guilty today of racketeering conspiracy in connection with their membership in the Nine Trey Gangsta Bloods (“Nine Trey”), a violent gang that operated in New York City.  ELLISON was also found guilty of kidnapping, maiming, and assault with a dangerous weapon, in connection with his membership in Nine Trey.  MACK was also found guilty of conspiring to distribute more than one kilogram of heroin.  The convictions followed a two-week trial before the Honorable Paul A. Engelmayer.

U.S. Attorney Geoffrey S. Berman said:  “Aljermiah Mack and Anthony Ellison were high-ranking members of Nine Trey, a ruthless gang, and were responsible for terrible acts of violence and the trafficking of dangerous narcotics throughout New York City.  They now stand convicted of their crimes, and will no longer be able to inflict harm on the people of this city.”

According to court documents and the evidence at trial:

Nine Trey was a criminal enterprise involved in committing numerous acts of violence, including shootings, robberies, and assaults in and around Manhattan and Brooklyn.  Members and associates of Nine Trey engaged in violence to retaliate against rival gangs, to promote the standing and reputation of Nine Trey, and to protect the gang’s narcotics business.  Members and associates of Nine Trey enriched themselves by committing robberies and selling drugs, such as heroin, fentanyl, furanly fentanyl, MDMA, dibutylone, and marijuana. 

MACK, 33, a high-ranking member of Nine Trey, conspired with other members of Nine Trey to distribute heroin and MDMA throughout New York City. 

ELLISON, 32, another high-ranking member of Nine Trey, kidnapped and robbed a fellow Nine Trey member on or about July 22, 2018, in order to enhance his status within the gang.  In addition, on or about October 24, 2018, ELLISON slashed an individual in the face in retaliation for the shooting of one of ELLISON’s associates earlier that evening.

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MACK and ELLISON were convicted of racketeering conspiracy, which carries a maximum sentence of 20 years in prison.  ELLISON was also convicted of kidnapping, maiming, and assault with a dangerous weapon in aid of racketeering, which carry maximum sentences of life in prison, 30 years in prison, and 20 years in prison, respectively.  MACK was also convicted of narcotics conspiracy, which carries a maximum sentence of life in prison, with a mandatory minimum of 10 years in prison.  ELLISON was acquitted of one count of assault with a dangerous weapon, and MACK was acquitted of a firearms offense.  The statutory penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.   

MACK is scheduled to be sentenced by Judge Engelmayer on February 19, 2020.  ELLISON is scheduled to be sentenced on February 26, 2020.           

Mr. Berman praised the outstanding investigative work of the New York City Police Department, Homeland Security Investigations, and the Bureau of Alcohol, Tobacco, Firearms and Explosives.

This case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Michael Longyear, Jacob Warren, Jonathan Rebold, and Max Nicholas are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOHN GERACI pled guilty in Manhattan federal court today to conspiring to commit securities and wire fraud.  GERACI’s plea stems from his participation in a scheme to defraud clients of his company, Meridian Capital Asset Management.  GERACI caused two clients (“Victim-1” and “Victim-2”) to invest in a hedge fund called the Meridian Matrix Long Short Fund (the “Meridian Matrix Fund”).  Between in or about December 2015 and November 2016, GERACI provided fictitious account statements and updates to Victim-1 and Victim-2, telling them that their investment was worth millions when, in reality, GERACI knew that large portions of it had been stolen by the Meridian Matrix Fund’s administrator.  GERACI eventually liquidated the Meridian Matrix Fund and misappropriated significant portions of the remaining funds.  Although he had recovered over $1 million of Victim-1 and Victim-2’s investment, GERACI falsely told them that their entire investment had been lost, and improperly used their money to pay his own personal and business expenses. 

GERACI was arrested on August 7, 2018, and pled guilty today before United States District Judge Alison J. Nathan. 

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, John Geraci lied to his clients about how much of their money was lost in investments with Nicholas Mitsakos.  What wasn’t actually lost to Mitsakos was stolen by Geraci.  Now Geraci, like Mitsakos, is a convicted felon.”

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

JOHN GERACI was the principal and founder of Meridian Capital Asset Management.  In or about February 2015, GERACI was introduced to another individual, Nicholas Mitsakos, who purported to operate a hedge fund called Matrix Capital (“Matrix”).  Mitsakos told GERACI that Matrix had tens of millions of dollars under management and had achieved annual returns between 19.4% and 66.3% from 2012 to 2014.  GERACI and Mitsakos subsequently entered into an arrangement whereby GERACI would raise money for Mitsakos, Mitsakos would manage that money through a new vehicle, the Meridian Matrix Fund, and GERACI and Mitsakos would then split any fees that the Meridian Matrix Fund generated.  As part of this arrangement, GERACI solicited Victim-1 and Victim-2 to invest approximately $2 million in the Meridian Matrix Fund, in large part by relying on Mitsakos’s claims about his supposed fund’s assets under management and performance returns.

In or about December 2015, however, GERACI learned that Mitsakos had only invested approximately $1.2 million of Victim-1 and Victim-2’s investment, and had misappropriated significant portions of the remaining money.  GERACI also learned that Mitsakos never had any actual assets under management, and that his performance returns were accordingly fictitious and misleading.  Nonetheless, GERACI never told Victim-1 or Victim-2 that their investment was in jeopardy or had been solicited with misleading information.  To the contrary, GERACI sent Victim-1 and Victim-2 updates that hid Mitsaskos’s misappropriation and falsely claimed that their investment had appreciated.  GERACI sent these fictitious updates even after GERACI had liquidated the Meridian Matrix Fund’s trading positions in or about June 2016.

In or about August 2016, Mitsakos was charged in this District with securities fraud and other offenses.  In or about September 2016, GERACI changed course: instead of providing fictitious account updates to Victim-1 and Victim-2, GERACI told them, in substance and in part, that their entire investment had been wiped out through Mitsakos’s fraud.  GERACI did this even though he had ultimately received approximately $1.1 million of Victim-1 and Victim-2’s investment back from Mitsakos after liquidating the Meridian Matrix Fund’s trading positions.  Rather than returning this amount to Victim-1 and Victim-2, GERACI used it to pay for his own personal and business expenses, including, for example, payments on a BMW automobile, a gym membership, gas, groceries, travel expenses, and his cellphone bill.

In addition to sending false account updates to Victim-1 and Victim-2 even after learning that Mitsakos had lied about his fund’s assets and performance and that Mitsakos had stolen significant portions of Victim-1 and Victim-2’s investment, GERACI continued to try to raise money for an investment related to Meridian Matrix Fund from others.  In attempting to do so, moreover, GERACI relied on the same representations about Matrix’s assets and performance that he knew to be false.   

Mitsakos pled guilty to conspiring to commit securities fraud and wire fraud on May 25, 2017, and on November 7, 2017, was sentenced to 30 months in prison by the Honorable Denny Chin, a judge on the United States Court of Appeals for the Second Circuit who was sitting by designation in the Southern District of New York. 

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GERACI, 62, pled guilty to one count of conspiring to commit securities and wire fraud. This charge carries a maximum term of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

GERACI will be sentenced on January 23, 2020.

Mr. Berman praised the investigative work of the United States Postal Inspection Service and thanked the 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 Jared Lenow and Drew Skinner are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID BRITT, a former KPMG partner who was the co-head of the Banking and Capital Markets Group within the audit group of KPMG’s Department of Professional Practice (“DPP”), pled guilty today to participating in a scheme to defraud the PCAOB by obtaining, disseminating, and using confidential lists of which KPMG audits the PCAOB would be reviewing so that KPMG could improve its performance in PCAOB inspections.  BRITT pled guilty to one count of conspiracy to commit wire fraud before the Honorable J. Paul Oetken.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “David Britt, a former KPMG partner, admitted today to obtaining confidential lists that contained the information on which KPMG audits would be reviewed by the PCAOB.  Using the playbook he illicitly acquired, Britt used that information to improve the results his of firm’s audits.  Independent reviews of accounting firm audits exist to ensure their integrity and accuracy.  David Britt corrupted that process and now faces time in federal prison.”

According to the allegations contained in the Indictment filed against BRITT and statements made in related court proceedings, including the trial of co-defendants David Middendorf and Jeffrey Wada:

The PCAOB is a nonprofit corporation overseen by the SEC that inspects the audit work performed by registered accounting firms with respect to the financial statements of publicly traded companies.  The PCAOB inspects the largest U.S. accounting firms on an annual basis.  As part of the inspection process, the PCAOB chooses a selection of audits performed by the accounting firm for a closer review.  Until shortly before an inspection occurs, the PCAOB does not disclose which audits are being inspected, or the focus areas for those inspections, because it wants to ensure that an auditor does not perform additional work or modify its work papers in anticipation of an inspection.  Following the completion of an inspection, the PCAOB issues an Inspection Report containing any negative findings or “comments” with respect to both the specific audits reviewed and the accounting firm more generally. 

KPMG is one of the largest accounting firms in the world.  In recent years, KPMG fared poorly in PCAOB inspections, and in 2014 received approximately twice as many comments as its competitor firms.  By at least in or about 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel, including Brian Sweet.  At the time, BRITT was a partner in DPP, which was broadly responsible for the quality of KPMG’s audits and KPMG’s performance in PCAOB inspections.

KPMG’s efforts to improve inspection results, however, were not limited to legitimate means.  Instead, between 2015 and 2017, BRITT, David Middendorf, Thomas Whittle, Cynthia Holder, Brian Sweet, and Jeffrey Wada worked to illicitly acquire valuable confidential PCAOB information concerning which KPMG audits would be inspected, in an effort to game the system and improve inspection results.  For example, during Sweet’s first week of employment at KPMG in 2015, BRITT, Middendorf, and Whittle began asking Sweet for confidential PCAOB information about which KPMG audits would be inspected by the PCAOB that year. 

In March 2016, Holder obtained the PCAOB’s confidential 2016 inspection selections for KPMG from Wada, who was still working at the PCAOB but who had recently been passed over for a promotion.  Wada – who was not responsible for KPMG inspections at the PCAOB– accessed and stole valuable confidential information from the PCAOB and passed it on to Holder.  Holder, in turn, provided the 2016 inspection selections to Sweet, who passed them to Middendorf, Whittle, and BRITT.  Middendorf, Whittle, BRITT, and Sweet then agreed to launch a stealth program to “re-review” the audits that had been selected.  In order to cover up their illicit conduct, BRITT gave other KPMG engagement partners a false explanation for the re-reviews.  The stealth re-review program allowed KPMG to double-check its audit work, strengthen its work papers, and, in some cases, identify deficiencies or perform new audit work that had not been done during the live audit.

In January 2017, Wada, who had again been passed over for promotion at the PCAOB, again stole valuable confidential PCAOB information, misappropriating a preliminary list of confidential 2017 inspection selections for KPMG audits and passing it on to Holder.  At the same time, Wada provided Holder with his resume and sought her assistance in helping him to acquire employment at KPMG.  Sweet shared the preliminary inspection selections provided by Wada with Whittle and BRITT, while noting that the information was only preliminary.  Whittle’s response was to ask Sweet to confirm that they would get the final list as well.

In February 2017, Wada texted Holder saying “I have the grocery list. . . .  All the things you’ll need for this year.”  Wada then spoke to Holder and provided her with the full confidential 2017 final inspection selections.  Holder again shared the stolen information with Sweet, who shared it with Middendorf, Whittle, and BRITT, so that it could be acted upon to improve the audits on the list. 

In 2017, a KPMG partner who received early notice that her engagement was on the confidential 2017 inspection list reported the matter, and it was ultimately reported to KPMG’s Office of General Counsel. 

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DAVID BRITT, 56, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  Sentencing is scheduled for May 8, 2020 before the Honorable J. Paul Oetken. 

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentence for the defendant will be determined by the judge.

Mr. Berman praised the investigative work of the United States Postal Inspection Service and also thanked the Securities and Exchange Commission, which has brought an administrative proceeding against BRITT. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jordan Estes, Margaret Graham, Martin Bell, and Rebecca Mermelstein are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that CAMERON COLLINS, the son of former United States Congressman Christopher Collins, and STEPHEN ZARSKY, the father of CAMERON COLLINS’s fiancée, pled guilty to participating in a scheme to commit insider trading in the stock of Innate Immunotherapeutics, a biopharmaceutical company for which Christopher Collins served on the board of directors.

U.S. Attorney Geoffrey S. Berman said:  “Insider trading corrupts the integrity of our markets.  The strength of our financial system depends on investors knowing that everyone is playing by the rules.  Today’s guilty pleas reaffirm the commitment of this Office and our law enforcement partners to protecting and defending those values.”

The following facts are based on the allegations contained in the Superseding Indictment and statements made in related court filings and proceedings:

The Insider Trading Scheme

The Scheme

In or about June 2017, Christopher Collins, who, in addition to serving on Innate’s board of directors, was also one of Innate’s largest shareholders, participated in a scheme to commit insider trading.  Specifically, on or about June 22, 2017, Christopher Collins learned that MIS416 – a multiple sclerosis drug that Innate was developing – had failed a critical drug trial that was meant to determine the drug’s clinical efficacy (the “Drug Trial”).  The negative Drug Trial results were highly confidential, and, as an insider who owed duties of trust and confidence to Innate, Christopher Collins was obligated to keep the Drug Trial results secret until Innate publicly released them.  Instead, in breach of those duties, Christopher Collins tipped his son, CAMERON COLLINS, who was also a substantial Innate shareholder, so that CAMERON COLLINS could make timely trades and tip others before Innate publicly released the Drug Trial results.  CAMERON COLLINS traded on the inside information and passed it to the father of his fiancée, STEPHEN ZARSKY, as well as to three individuals not named in the Superseding Indictment (“Individual-1,” “Individual-2,” and “Individual-6”), so that they could utilize the information for the same purpose.  ZARSKY, in turn, traded on the information and used it to tip three more individuals not named in the Superseding Indictment (“Individual-3,” “Individual-4,” and “Individual-5,”) so that they too could engage in timely trades in Innate stock.  All of the trades preceded the public release of the negative Drug Trial results.

In total, these trades allowed CAMERON COLLINS and ZARSKY, and Individual-1 through Individual-6, to avoid over $768,000 in losses that they would have otherwise incurred if they had sold their stock in Innate after the Drug Trial results became public. 

The Drug Trial Results

In or about October 2014, Innate initiated a Phase 2B clinical trial of its primary drug, MIS416.  Successful completion of the Drug Trial was a necessary prerequisite to the commercialization of MIS416.  Because Innate had no other significant products in development, its stock price was tied to the success of MIS416.

The Drug Trial was widely expected to be completed around the summer of 2017.  For example, on or about June 9, 2017, Innate’s chief executive officer (“CEO”) sent various individuals, including Christopher Collins, an email stating that “the delivery date for [the] review and ‘verdict’” of the Drug Trial “will [] occur at COB on US Thursday June 22nd.”  As the summer progressed, individuals within Innate remained optimistic that MIS416’s Drug Trial results would be positive.  The initial Drug Trial results were made available by trial administrators to Innate’s CEO on June 22, 2017.  These results established that MIS416 lacked therapeutic value in the treatment of multiple sclerosis.  The results were not publicly released at that time.  Instead, they were released publicly on June 26, 2017, after the U.S. markets had closed (the “Public Announcement”).  Innate’s stock price subsequently crashed, dropping 92% on the first trading day following the Public Announcement. 

Dissemination of the Drug Trial Results

On or about June 22, 2017, at approximately 6:55 p.m., Innate’s CEO sent an email describing the Drug Trial results to the company’s Board of Directors, including Christopher Collins.  The email explained to Innate’s Board of Directors for the first time that the Drug Trial had been a failure.  The email began, in part, “I have bad news to report,” and continued to explain that “the top line analysis of the ‘intent to treat’ patient population (ie every subject who was successfully enrolled in the study) would pretty clearly indicate[s] ‘clinical failure.’”  The email continued, “Top-line 12-month data . . . show no clinically meaningful or statistically significant differences in [outcomes] between MIS416 and placebo,” and concluded by stating, “No doubt we will want to consider this extremely bad news. . . .” 

At the time Christopher Collins received this email, he was attending the Congressional Picnic at the White House.  At 7:10 p.m., Christopher Collins replied to the email, stating, in part, “Wow.  Makes no sense.  How are these results even possible???”  After responding to the Innate CEO’s email, Christopher Collins called his son, CAMERON COLLINS.  They traded six missed calls between 7:11 p.m. and 7:15 p.m..  At 7:16 p.m., Christopher Collins and CAMERON COLLINS spoke for more than six minutes.  During that six-minute phone call, Christopher Collins told CAMERON COLLINS, in sum and substance, that MIS416 had failed the Drug Trial.

Trading and Tipping by CAMERON COLLINS and ZARSKY

CAMERON COLLINS began placing orders to sell his Innate shares the morning after he received inside information from Christopher Collins.  Between the morning of Friday, June 23, 2017 and the close of the market on Monday, June 26, 2017, CAMERON COLLINS sold approximately 1,391,500 shares of Innate stock.  These sales allowed CAMERON COLLINS to avoid approximately $570,900 in losses. 

Furthermore, after learning the Drug Trial results from Christopher Collins, on or about the night of June 22, 2017, CAMERON COLLINS provided the Drug Trial results to at least the following three sets of individuals so that they could trade in advance of the Public Announcement:  (1) his fiancée, Individual-1; (2) ZARSKY and ZARSKY’s wife, Individual-2; and (3) CAMERON COLLINS’s friend, Individual-6.  Collectively, these individuals avoided approximately $186,620 in losses as a result of their trading on inside information. 

On or about the morning of June 23, 2017, ZARSKY provided the negative Drug Trial results that he had learned from CAMERON COLLINS and Individual-1 to at least the following individuals, among others, or otherwise caused them to trade or attempt to trade in advance of the Public Announcement: (1) his brother, Individual-3; (2) his sister, Individual-4; and (3) his longstanding friend, Individual-5.  Collectively, these individuals avoided approximately $10,900 in losses as a result of their trading on inside information.

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CAMERON COLLINS, 26, and STEPHEN ZARSKY, 67, each pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum penalty of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the Judge. 

Mr. Berman praised the outstanding 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 U.S. Attorneys Scott Hartman, Max Nicholas, and Damian Williams are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Donald Halmy, Chief of the Peekskill Police Department, and Thomas Gleason, Commissioner of the Westchester County Police Department, announced today the unsealing of an Indictment and Complaint collectively charging 13 defendants with narcotics distribution offenses in and around Westchester County, New York.  The defendants, WENDELL JONES, JESSE DABBS, JASON BOGAN, BYRON MOUNTAIN, SARAH GILLON, DOROTHY MCALLISTER, a/k/a “Dot,” GUSTAVO GONZALEZ, a/k/a “Tavo,” KEVIN HERBIN, WILLIE SIMS, a/k/a “Black,” MAURICE ELLIS, ISAAC MALLORY, a/k/a “Face,” HAKIM ANDERSON, a/k/a “Hak,” and RAHMEL GARRAWAY, a/k/a “Major,” were presented in White Plains federal court this afternoon before United States Magistrate Judge Lisa Margaret Smith.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants trafficked crack cocaine, an addicting and potentially deadly product that devastates communities throughout the Southern District of New York.  Thanks to the FBI, the Peekskill Police Department, and the Westchester County Police Department, the defendants are in custody and facing federal criminal charges.”

FBI Assistant Director William F. Sweeney Jr. said:  “Long before the opioid epidemic started in this country, crack cocaine was destroying lives.  It persists as a preferred drug for many of these violent groups to sell, which means our FBI Westchester County Safe Streets Task Force is going after those dealers and their pushers.  I want to thank the local law enforcement agencies for the work they put into this investigation because their partnerships are vital to getting rid of the violence these criminals bring to these communities.”

Peekskill Police Chief Donald Halmy said:  “We have all seen the devastating effects that drugs have played in destroying individuals, families, and even communities.  We are committed to using every resource, from the local level to the federal level, to make sure that those responsible for this blight are apprehended and sentenced appropriately.  We commend all those involved who put in countless hours to help make Peekskill a better place to live today.”

Westchester County Police Commissioner Thomas Gleason said:  “The Westchester County Department of Public Safety remains committed to working with federal and local law enforcement to combat the distribution and sale of illegal narcotics in our county.  I am grateful to all of the law enforcement personnel and agencies that played a part in this successful investigation.”

As alleged in the Indictment and Complaint unsealed today in White Plains federal court[1]:

From at least November 2018 until September 2019, WENDELL JONES, JESSE DABBS, JASON BOGAN, BYRON MOUNTAIN, SARAH GILLON, DOROTHY MCALLISTER, GUSTAVO GONZALEZ, and KEVIN HERBIN conspired to distribute 280 grams and more of crack cocaine.  In addition, from at least March 2019 until September 2019, WILLIE SIMS, MAURICE ELLIS, ISAAC MALLORY, HAKIM ANDERSON, and RAHMEL GARRAWAY conspired to distribute 28 grams and more of crack cocaine.  

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Conspiring to distribute 280 grams and more of crack cocaine carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  Conspiring to distribute 28 grams and more of crack cocaine carries a mandatory minimum sentence of five years in prison and a maximum sentence of 40 years in prison.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI Westchester County Safe Streets Task Force, the Peekskill Police Department, and the Westchester County Police Department.  The Westchester County Safe Streets Task Force comprises Special Agents and Task Force Officers from the FBI, US Probation, ATF, New York State Police, Westchester County PD, Westchester County DAs Office, NYPD, Yonkers PD, Mount Vernon PD, Peekskill PD, Greenburgh PD, and New Rochelle PD. 

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Jim Ligtenberg and Shiva Logarajah are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), Peter C. Fitzhugh, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Ray Donovan, the Special Agent in Charge of the New York Division of the U.S. Drug Enforcement Administration (“DEA”), announced today the unsealing of an indictment charging ARIEL TAVAREZ, a/k/a “A,” a/k/a “Mike,” CHRISTIAN BAEZ, LUIS MESON, a/k/a “Sito,” GREGORIS MARTINEZ, a/k/a “Greg,” KEVIN GRULLON, a/k/a “Kev,” a/k/a “JB,” and JOIFFREY URENA, a/k/a “Jeff,” a/k/a “Jay,” with conspiring to distribute heroin and cocaine through an on-demand drug delivery service called “Mike’s Candyshop.”  All six defendants were arrested today and will be presented before United States Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court this afternoon.  The case has been assigned to United States District Judge Katherine Polk Failla.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants operated a covert on-demand delivery service for the distribution of highly addictive and dangerous drugs.  Allegedly, even after they realized the potency of the drugs they were distributing and selling, the defendants continued to sell their poison.  Today’s arrests are part of our continued commitment, along with our law enforcement partners, to stop the flow of heroin and cocaine onto the streets of New York City.  Thanks to the tireless efforts of law enforcement, Mike’s Candyshop is no longer open for business.”           

NYPD Commissioner James P. O’Neill said:  “The NYPD’s efforts to rid New York City streets of drug traffickers are greatly strengthened by our close partnerships with the U.S. Attorney for the Southern District, Homeland Security Investigations, and the Drug Enforcement Administration.  Anyone who deals in illegal narcotics must understand that the nation’s best investigators will stop at nothing to fight crime and keep safe all the people we serve.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “Those arrested today are alleged to have operated an on-demand drug distribution network known as ‘Mike’s Candyshop.’  This illicit enterprise allegedly allowed people to order heroin and cocaine to their doorstep simply by calling the business phone number with the same convenience as if they were ordering a pizza.  At least one overdose death is allegedly linked to this drug trafficking organization.  HSI’s coordination and information sharing with its partners at the NYPD, DEA and CBP have proven to be effective strategies in investigating drug trafficking organizations.  We know that we must continue to combat the trafficking and distribution of these dangerous narcotics in the hope of preventing future overdose deaths.”

DEA Special Agent in Charge Ray Donovan said:  “Traffickers take note, it is our job to investigate and arrest drug suppliers whose business leads to drug addiction, overdoses, and death.  This case gives new meaning to the term ‘candy’ and gave investigators a look into alleged drug delivery services in New York.  Our partnership with the U.S. Attorney’s Office, HSI, and NYPD will continue to identify alleged drug suppliers at all levels.”   

According to the allegations in the Indictment,[1] and statements made in Court:

The defendants were members of a drug trafficking organization (the “DTO”) that engaged in a drug delivery service, which identified itself as “Mike’s Candyshop.”  The DTO delivered heroin and cocaine on demand to customers in New York City, and distributed numerous kilograms of heroin and cocaine throughout the course of the conspiracy.  Mike’s Candyshop generally operated seven days per week, from approximately 6:00 p.m. to 12:00 a.m., with the exception of major holidays such as Thanksgiving, New Year’s Eve, and Labor Day.  Customers of the DTO placed delivery orders via text message to a centralized phone number (the “Candyshop Number”).  The operator of the Candyshop Number was usually TAVAREZ, a/k/a “A,” a/k/a “Mike,” one of the charged defendants and the leader of the DTO.  Using the Candyshop Number, TAVAREZ accepted customer orders and subsequently arranged for a courier working for the DTO to deliver the narcotics to the customer, usually within hours of the customer texting his or her order to the Candyshop Number.  Certain of the DTO members, including BAEZ, MESON, GRULLON, and URENA, served as couriers for the DTO, and regularly delivered and sold narcotics to the DTO’s customers in hand-to-hand drug transactions coordinated through the Candyshop Number.  MARTINEZ managed the DTO’s day-to-day supply of drugs and cash proceeds. 

The DTO stored heroin, cocaine, and cash from drug sales in various stash locations maintained by the DTO, including in Brooklyn, New York.  In an effort to avoid law enforcement detection, the DTO sold only to customers who had been referred by existing customers, periodically changed the Candyshop Number, used coded language to discuss narcotics, and delivered narcotics directly to customers at locations specified by the customer.

As a means of marketing its cocaine, and to ensure that the DTO’s customers knew the cocaine provided by the couriers belonged to the DTO, the DTO sold its cocaine in vials sealed with different colored tops.  On or about December 16, 2018, a customer of the DTO (“Victim‑1”) died of a drug overdose in Manhattan, New York.  At the scene of the overdose death, law enforcement officers recovered empty vials with colored tops, and a glassine next to a powder mixture containing, among other substances, heroin and cocaine, along with Victim-1’s cellphone.  Victim-1’s cellphone contained text messages showing that Victim-1 had ordered narcotics from the Candyshop Number on numerous occasions, including the day before Victim-1’s death.

*                      *                      *

BAEZ, 33, MESON, 31, MARTINEZ, 34, GRULLON, 25, and URENA, 27, each of New York, New York, and TAVAREZ, 38, of East Stroudsburg, Pennsylvania, are each charged with one count of conspiring to distribute heroin and cocaine, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of HSI, the DEA, and the NYPD.  He also thanked U.S. Customs and Border Protection for their assistance.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Aline R. Flodr, Mollie Bracewell, and Nicholas W. Chiuchiolo are in charge of the prosecution. 

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector in Charge of the New York Office of the United States Postal Inspection Service (“USPIS”), announced that ANDREW GARSON was arrested today on wire fraud charges in connection with a multimillion-dollar scheme to defraud two public relations firms where GARSON worked, and a subsequent scheme to obtain New York State unemployment insurance benefits to which GARSON was not entitled.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As a public relations executive, Andrew Garson’s expertise in garnering positive attention for his clients is well known, even earning him a spot on the ‘40 Under 40’ in a popular industry magazine.  But behind the scenes, Garson allegedly schemed to steal from his employers, eventually costing them over $2 million in losses.  Andrew Garson has likely generated his own (negative) publicity, and now faces the possibility of serious time in federal prison.”

USPIS Inspector in Charge Philip R. Bartlett said:  “As alleged, Mr. Garson’s arrogance and disrespect for his employers and the rule of law was on full display in this case.  He allegedly lied and stole from his employers to feed his greed and fund his personal endeavors.  Mr. Garson may have plenty of time to utilize his keen public relations skills if convicted of the charges.”

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

Between approximately 2013 and 2018, GARSON was employed as an executive at two different marketing/public relations agencies located in New York, New York, the first between approximately 2013 and January 2018 (“PR Firm-1”), and the second between approximately January 2018 and November 2018 (“PR Firm-2”).  In his respective roles at those two firms, GARSON was responsible for working directly with clients, coordinating various marketing and public relations campaigns, and managing vendor relationships in connection with such campaigns.  In or about July 2018, GARSON was named a “40 Under 40” public relations executive by PR Week Magazine.  For years, however, GARSON engaged in a scheme to lie to his two employers, which fraudulently induced interstate wire transfers of funds and caused his employers millions of dollars in losses.        

One such series of misrepresentations by GARSON resulted in the unauthorized payment by PR Firm-2 of expenses owed to vendors in connection with marketing campaigns led by GARSON while employed at PR Firm‑1.  Over the course of GARSON’s first several months of employment at PR Firm-2, GARSON lied to certain vendors, stating that PR Firm-2 had agreed to cover expenses still owed to those vendors related to GARSON’s prior projects at PR Firm-1.  In fact, PR Firm-2 did not authorize the payment of those expenses.  In order to cause PR Firm-2 to effect payment of these expenses, GARSON created fraudulent invoices falsely claiming that the vendors were due payment for work performed on PR Firm-2 projects.  In this fashion, GARSON caused PR Firm-2 to pay substantial expenses to vendors with which GARSON had worked on projects while employed at PR Firm-1, thereby causing losses to PR Firm-2 in excess of $2.5 million.

In addition, while employed at PR Firm-1, GARSON used his corporate credit card for unauthorized personal expenses.  For example, in or about August 2017, GARSON purchased a luxury watch using his PR Firm-1 corporate credit card for approximately $14,000, claiming that that the expense related to event production for a client marketing event.  GARSON later sold the watch to a New Jersey jewelry store in or about December 2018 for approximately $4,000.  GARSON deposited the money that he earned from the sale of the watch into his personal bank account.

GARSON similarly defrauded PR Firm-2 with respect to the unauthorized use of his corporate credit card.  For example, GARSON submitted expense reports to PR Firm-2 in which he claimed the same expense for reimbursement on more than one occasion, causing PR Firm-2 to reimburse GARSON twice for the same expenditure.

After uncovering certain aspects of the fraud scheme perpetrated by GARSON, PR Firm-2 terminated GARSON in or about November 2018.  In the course of applying for unemployment insurance program benefits from the New York State Department of Labor following his termination, GARSON lied regarding the circumstances surrounding his separation from PR Firm-2.  According to the New York State Department of Labor, had GARSON truthfully conveyed the circumstances surrounding his termination from PR Firm-2, GARSON would have been ineligible for the receipt of unemployment insurance benefits.  As a result of his misrepresentations, between in or about December 2018 and in or about March 2019, GARSON received a total of over $5,000 in unemployment insurance benefits to which he was not entitled.  As part of the scheme, GARSON engaged in and caused others to engage in interstate wire communications.  For example, on at least one occasion GARSON logged onto the New York State Department of Labor’s unemployment website, hosted on a server located in New York, from a location in New Jersey.

*                      *                      *

GARSON, 37, of Rockville Centre, New York, is charged by Indictment with two counts 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.

Mr. Berman praised the outstanding investigative work of USPIS.

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

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

 

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

Geoffrey S. Berman, United States Attorney for the Southern District of New York, Peter C. Fitzhugh, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that MICHAEL BARRETO has been arrested for his scheme to produce and possess child pornography, and enticing a minor.  BARRETO was arrested yesterday in the Bronx, New York, and was presented today before United States Magistrate Judge Kevin Nathaniel Fox.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Michael Barreto groomed his victim by communicating via social media.  He then allegedly lured the teen to his apartment, gave him alcohol and drugs, and then filmed their sexual conduct.  Barreto has been arrested for his crime and faces significant time behind bars where he can no longer harm other children.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “In a not so chance encounter, Barreto allegedly lured his victim through social media to meet him.  He later filmed himself in a sexual encounter with the child.  This is harsh reminder to all parents about the need to stay involved with a child’s online activities.  HSI and the NYPD are committed to arresting predators like Barreto, those who prey on the young and steal their innocence.  It is equally important to ensure that children understand the dangers that lurk inside the world of the internet.”

NYPD Commissioner James P. O’Neill said:  “The NYPD and its law enforcement partners will never cease efforts to root out those who seek to exploit children, and we urge anyone with information about this despicable case – or any other case – to report it to the NYPD.”

As alleged in the criminal Complaint, which was unsealed today:[1] 

Between November 2017 and July 2019, BARRETO knowingly used a social media platform to communicate with and entice a minor (“Victim-1”).  In July 2019, BARRETO filmed sexual conduct between himself and Victim-1.  When law enforcement officers arrested BARRETO in September 2019 on separate criminal charges, they seized his mobile phone and found the July 2019 video.

*                      *                      *

BARRETO, 31, of the Bronx, is charged with one count of sexual exploitation of a child, which carries a minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison; one count of enticement of a minor, which carries a minimum sentence of 10 years in prison and a maximum sentence of life in prison; and one count of possession of child pornography, which carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Any individuals who believe they have information that may be relevant to this investigation should contact the NYPD’s Special Victims Division 24-hour hotline at 212-267-RAPE (7273).

Mr. Berman praised the outstanding work of the NYPD and HSI.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that CHRISTOPHER COLLINS, who represented the 27th District of New York as a member of the U.S. House of Representatives, pled guilty to participating in a scheme to commit insider trading and to making false statements to federal law enforcement agents when interviewed about his conduct. 

U.S. Attorney Geoffrey S. Berman said:  “By virtue of his office, Christopher Collins helped write the laws of this country, but he acted as if the law did not apply to him.  Today, by pleading guilty, Collins acknowledged that while he was a member of Congress he committed insider trading and then lied to the FBI in an attempt to cover it up.  Today’s plea is a reminder that all citizens stand equal before the law in our criminal justice system.”

The following facts are based on the allegations contained in the Superseding Indictment and statements made in related court filings and proceedings:[1]

The Insider Trading Scheme

The Scheme

In or about June 2017, CHRISTOPHER COLLINS, who, in addition to serving on the board of directors of Innate Immunotherapeutics (“Innate”), an Australian biotechnology company, was also one of Innate’s largest shareholders, participated in a scheme to commit insider trading.  Specifically, on or about June 22, 2017, CHRISTOPHER COLLINS learned that MIS416 – a multiple sclerosis drug that Innate was developing – had failed a critical drug trial that was meant to determine the drug’s clinical efficacy (the “Drug Trial”).  The negative Drug Trial results were highly confidential, and, as an insider who owed duties of trust and confidence to Innate, CHRISTOPHER COLLINS was obligated to keep the Drug Trial results secret until Innate publicly released them.  Instead, in breach of those duties, CHRISTOPHER COLLINS tipped his son, Cameron Collins, who was also a substantial Innate shareholder, so that Cameron Collins could make timely trades and tip others before Innate publicly released the Drug Trial results.  Cameron Collins traded on the inside information and passed it to the father of his fiancée, Stephen Zarsky, as well as to three individuals not named in the Superseding Indictment (“Individual-1,” “Individual-2,” and “Individual-6”), so that they could utilize the information for the same purpose.  Zarsky, in turn, traded on the information and used it to tip three more individuals not named in the Superseding Indictment (“Individual-3,” “Individual-4,” and “Individual-5,”) so that they too could engage in timely trades in Innate stock.  All of the trades preceded the public release of the negative Drug Trial results.

In total, these trades allowed Cameron Collins and Zarsky, and Individual-1 through Individual-6, to avoid over $768,000 in losses that they would have otherwise incurred if they had sold their stock in Innate after the Drug Trial results became public. 

The Drug Trial Results

In or about October 2014, Innate initiated a Phase 2B clinical trial of its primary drug, MIS416.  Successful completion of the Drug Trial was a necessary prerequisite to the commercialization of MIS416.  Because Innate had no other significant products in development, its stock price was tied to the success of MIS416.

The Drug Trial was widely expected to be completed around the summer of 2017.  For example, on or about June 9, 2017, Innate’s chief executive officer (“CEO”) sent various individuals, including CHRISTOPHER COLLINS, an email stating that “the delivery date for [the] review and ‘verdict’” of the Drug Trial “will [] occur at COB on US Thursday June 22nd.”  As the summer progressed, individuals within Innate remained optimistic that MIS416’s Drug Trial results would be positive.  The initial Drug Trial results were made available by trial administrators to Innate’s CEO on June 22, 2017.  These results established that MIS416 lacked therapeutic value in the treatment of multiple sclerosis.  The results were not publicly released at that time.  Instead, they were released publicly on June 26, 2017, after the U.S. markets had closed (the “Public Announcement”).  Innate’s stock price subsequently crashed, dropping 92% on the first trading day following the Public Announcement. 

Dissemination of the Drug Trial Results

On or about June 22, 2017, at approximately 6:55 p.m., Innate’s CEO sent an email describing the Drug Trial results to the company’s board of directors, including CHRISTOPHER COLLINS.  The email explained to Innate’s board of directors for the first time that the Drug Trial had been a failure.  The email began, in part, “I have bad news to report,” and continued to explain that “the top line analysis of the ‘intent to treat’ patient population (ie every subject who was successfully enrolled in the study) would pretty clearly indicate[s] ‘clinical failure.’”  The email continued, “Top-line 12-month data . . . show no clinically meaningful or statistically significant differences in [outcomes] between MIS416 and placebo,” and concluded by stating, “No doubt we will want to consider this extremely bad news. . . .” 

At the time CHRISTOPHER COLLINS received this email, he was attending the Congressional Picnic at the White House.  At 7:10 p.m., CHRISTOPHER COLLINS replied to the email, stating, in part, “Wow.  Makes no sense.  How are these results even possible???”  After responding to the Innate CEO’s email, CHRISTOPHER COLLINS called his son, Cameron Collins.  They traded six missed calls between 7:11 p.m. and 7:15 p.m..  At 7:16 p.m., CHRISTOPHER COLLINS and Cameron Collins spoke for more than six minutes.  During that six-minute phone call, CHRISTOPHER COLLINS told Cameron Collins, in sum and substance, that MIS416 had failed the Drug Trial.

Trading and Tipping by Cameron Collins and Zarsky

Cameron Collins began placing orders to sell his Innate shares the morning after he received inside information from CHRISTOPHER COLLINS.  Between the morning of Friday, June 23, 2017 and the close of the market on Monday, June 26, 2017, Cameron Collins sold approximately 1,391,500 shares of Innate stock.  These sales allowed Cameron Collins to avoid approximately $570,900 in losses. 

Furthermore, after learning the Drug Trial results from CHRISTOPHER COLLINS, on or about the night of June 22, 2017, Cameron Collins provided the Drug Trial results to at least the following three sets of individuals so that they could trade in advance of the Public Announcement:  (1) his fiancée, Individual-1; (2) Zarsky and Zarsky’s wife, Individual-2; and (3) Cameron Collins’s friend, Individual-6.  Collectively, these individuals avoided approximately $186,620 in losses as a result of their trading on inside information. 

On or about the morning of June 23, 2017, Zarsky provided the negative Drug Trial results that he had learned from Cameron Collins and Individual-1 to at least the following individuals, among others, or otherwise caused them to trade or attempt to trade in advance of the Public Announcement: (1) his brother, Individual-3; (2) his sister, Individual-4; and (3) his longstanding friend, Individual-5.  Collectively, these individuals avoided approximately $10,900 in losses as a result of their trading on inside information.

False Statements to the FBI

On or about April 25, 2018, special agents from the FBI separately interviewed CHRISTOPHER COLLINS, Cameron Collins, and Zarsky.  During these interviews, and as detailed in the Superseding Indictment, CHRISTOPHER COLLINS, Cameron Collins, and Zarsky made false statements to the FBI to cover up their participation in the insider trading scheme. 

*                      *                      *

CHRISTOPHER COLLINS, 69, pled guilty to one count of conspiracy to commit securities fraud, in violation of Title 18, United States Code, Section 371, which carries a maximum penalty of five years in prison, and one count of making false statements to law enforcement officials, in violation of Title 18, United States Code, Section 1001, which also carries a maximum penalty of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the Judge. 

COLLINS will be sentenced January 17, 2020. 

Mr. Berman praised the outstanding 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 U.S. Attorneys Scott Hartman, Max Nicholas, and Damian Williams are in charge of the prosecution.  

The charges against Cameron Collins and Stephen Zarsky are merely accusations, and they are deemed innocent unless and until proven guilty.

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that a grand jury in the Southern District of New York has returned an indictment charging JON BARRY THOMPSON, a/k/a “J. Barry Thompson,” the principal of the cryptocurrency escrow company Volantis Escrow Platform LLC and the related company Volantis Market Making LCC (collectively “Volantis”) with commodities fraud and wire fraud offenses.  As alleged, THOMPSON took over $7 million from two victim companies after making false promises in connection with Bitcoin transactions.  THOMPSON was arrested in July based on a criminal complaint filed by this Office charging him with the same crimes.  The case has been assigned to U.S. District Judge Edgardo Ramos.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Jon Barry Thompson repeatedly lied to investors in cryptocurrencies about the safety of their investments made through his companies.  As a result of Thompson’s lies, investors lost millions of dollars.”

In a separate civil action, the U.S. Commodity Futures Trading Commission (“CFTC”) today filed civil charges against THOMPSON. 

As alleged in the Indictment and the criminal complaint previously filed in this case:[1]

THOMPSON claimed in promotional materials that Volantis “minimize[d] settlement default risk” in cryptocurrency transactions.  THOMPSON claimed that because Volantis acted as a custodian of assets for “both sides of the transaction, there is no risk of default.” 

 In June and July 2018, THOMPSON made false statements to one victim company (“Company-1”) to induce Company-1 to send Volantis over $3 million to fund the purchase of Bitcoin for Company-1.  THOMPSON falsely assured Company-1 that THOMPSON had the Bitcoin in hand and Company-1’s money could not be lost.  Even though THOMPSON had told Company-1 that before any transaction, “cash is with me, coin is with me,” THOMPSON sent over $3 million of Company-1’s money to a third-party entity purportedly in exchange for Bitcoin without first receiving any of the Bitcoin in hand.  After taking Company-1’s money, THOMPSON lied for days about the status of the transaction and the location of Company-1’s Bitcoin and money, which was never returned. 

In July 2018, THOMPSON made false statements to another victim company (“Company-2”) to induce Company-2 to send Volantis over $4 million to fund the purchase of Bitcoin for Company-2.  After receiving Company-2’s money, THOMPSON sent a substantial portion of the money to a third party without first receiving any Bitcoin in return.  THOMPSON never provided Company-2 with any Bitcoin, nor did he return Company-2’s money.  After receiving Company-2’s money, THOMPSON also lied to Company-2 about the location of the Bitcoin and the status of the transaction.

*                      *                      *

THOMPSON, 48, of Easton, Pennsylvania, is charged with two counts of commodities fraud, each of which carries a maximum sentence of 10 years in prison, and two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and also thanked the CFTC for its assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jordan Estes and Drew Skinner are in charge of the prosecution.

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 Complaint and the Indictment, and the description of the Complaint and the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the 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 JAMES T. BOOTH with securities fraud, wire fraud, and investment adviser fraud charges in connection with his years-long scheme to defraud customers of his financial services firm, Booth Financial Associates (“Booth Financial”).  Throughout the scheme, BOOTH solicited money from clients of Booth Financial and falsely promised to invest their money in securities offered outside of their ordinary advisory and brokerage accounts.  Instead, BOOTH used nearly all of the money to pay personal and business expenses.  In total, BOOTH fraudulently obtained nearly $5 million from his customers.  BOOTH was arrested this morning in Norwalk, Connecticut, and will be presented this afternoon before Magistrate Judge Kevin N. Fox in Manhattan federal court. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, James Booth convinced his clients that he would deliver solid and secure returns on their investments.  Instead, as alleged, Booth delivered only lies and deceit, and bilked some 40 clients of nearly $5 million.  Booth is now in federal custody and will have to answer for his alleged crimes.” 

Special Agent-in-Charge Peter C. Fitzhugh:  “In an elaborate scheme of false promises and deception, it is alleged that Booth attained almost $5 million by luring investors to move their assets with the guarantee of safer investments and higher returns.  Instead, Booth allegedly pocketed the money.  HSI New York’s El Dorado Task Force has investigated financial fraud cases for more than two decades, and with the continued law enforcement partnerships in these cases, we are able to arrest alleged fraudsters who seek to take advantage of the hopes and dreams of others for their own illicit gain.”

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

From 2013 through 2019, BOOTH solicited money from clients of Booth Financial and falsely promised to invest their money in securities offered outside of their ordinary advisory and brokerage accounts.  Specifically, BOOTH directed certain of his clients to write checks or wire money to an entity named “Insurance Trends, Inc.”  Instead of investing his clients’ funds, BOOTH, who controlled the bank account of Insurance Trends, Inc., subsequently misappropriated his clients’ funds to pay his personal and business expenses.

In total, BOOTH raised approximately $4.9 million from approximately 40 investors.  BOOTH lured many of his victims with false promises of safe investments with high returns.  For example:

• BOOTH convinced a recently widowed elderly investor (“Investor-1”) to move money she had received from her late husband’s pension into Insurance Trends, Inc.  BOOTH falsely promised Investor-1 that she would have $1 million by the time she was 100 years old.  As a result of BOOTH’s false assurances, Investor-1 invested more than $600,000 with BOOTH.

 

• BOOTH similarly convinced another investor (“Investor-2”) to move his money into an investment product that, according to BOOTH, would never lose its principal and would grow with the market.  Based on this false representation, Investor-2 moved money he had set aside for his child’s college expenses, at least approximately $60,000, to BOOTH.  BOOTH subsequently failed to provide Investor-2 with documentation of his investment or to allow Investor-2 to redeem his investment.

 

• BOOTH convinced another elderly investor (“Investor-3”) to withdraw money from an annuity established for the care of his disabled sibling, approximately $18,000, and invest that money with BOOTH.  Investor-3 gave the money to BOOTH with the understanding that BOOTH would invest that money for the benefit of Investor-3’s sibling’s continued care.

To prevent investors from seeking a return of their money, and to induce additional investments, BOOTH provided investors with fabricated account statements that falsely indicated that BOOTH had purchased certain securities on their behalf and that those investments had generated a profit.  BOOTH further concealed the truth from investors by using money obtained from new investors to make redemption payments to previous investors, in a Ponzi-like fashion.

*          *          *

BOOTH, 74, of Norwalk, Connecticut, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of investment adviser fraud, which carries a maximum sentence of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Anyone with information about the crimes charged in the Indictment should call the United States Attorney’s Office at 866-874-8900.

Mr. Berman praised the investigative work of HSI New York and HSI Boston - New Haven, Connecticut.  Mr. Berman also thanked the U.S. States Postal Inspection Service, the U.S. Internal Revenue Service, the New York City Police Department, and the New York City Sherriff’s Office, which assisted in the investigation.  Mr. Berman also thanked the Securities and Exchange Commission, which has filed a civil enforcement action against the defendant. 

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

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

 

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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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that KEITH ORLEAN, a/k/a “Jack Allen,” pled guilty to participating in a scheme to target elderly persons to solicit purchases of stock in a series of valueless companies through a variety of lies and misrepresentations.  ORLEAN pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud before U.S. District Judge Vernon S. Broderick.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Keith Orlean purported to offer elderly victims time-sensitive investment opportunities.  In actuality, he was selling victims a package of false promises that yielded profit only for him and his co-defendants.  Orlean now awaits sentencing for his predatory practices.”

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

For several years, ORLEAN and his co-defendants operated a fraudulent scheme in which a salesman named “Mike Palmer” would call elderly persons on the phone and offer them what he claimed was a time-sensitive opportunity to buy stock in certain companies.  In fact, there was no “Mike Palmer,” and the salesman was actually one or the other of ORLEAN’s two co-defendants, who were taking turns using the fake alias.  The purported time-sensitive investment opportunity was also fabricated by the defendants, as the companies in which they solicited investments were actually companies under their control.  In one intercepted phone conversation, Co-defendant-1 described to ORLEAN his strategy for a successful investor sales pitch as:  “You ram it down their fucking throat.”  In another intercepted call between Co-defendant-1 and ORLEAN, upon learning that a particular victim investor died, Co-defendant-1 remarked:  “I knew I should have pulled the last $10,000 out of him.”   

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

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

*                *                *

ORLEAN, 61, of Dix Hills, New York, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum penalty of five years in prison, and one count of securities fraud, which carries a maximum penalty of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

ORLEAN is scheduled to be sentenced before Judge Broderick on January 10, 2020, at 3:00 p.m.

Mr. Berman praised the outstanding work of the FBI.

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

 

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[1] As for ORLEAN’s co-defendants, the description of the charges set forth herein constitute only allegations.

On March 7, 2019, a five-count Indictment, S4 17 Cr. 630 (ER), was unsealed charging Ruja Ignatova with wire fraud, securities fraud, and money laundering offenses in connection with an alleged international pyramid scheme that involved the marketing of a purported cryptocurrency called “OneCoin.”  On May 28, 2019, co-defendant Konstantin Ignatov entered a not guilty plea to a one-count Information, S7 17 Cr. 630 (ER), charging him with conspiracy to commit wire fraud in connection with the OneCoin scheme.  Co-defendant Mark S. Scott has been charged in a one-count Indictment, S6 17 Cr. 630 (ER), alleging that he conspired to launder proceeds of the OneCoin scheme; Scott’s case is presently scheduled for trial on November 4, 2019.

Yesterday, the District Court entered an Order in the case, directing a series of entities and individuals – namely, OneCoin Ltd., OnePayments Ltd., OneNetwork Services Ltd., OneAcademy, OneLife, RavenR, Ruja Ignatova, Frank Ricketts, Manon Hubenthal, Irina Dilkinska, International Marketing Services GmBH, International Marketing Services Pte, International Marketing Strategies Ltd., and B&N Consult EOOD (collectively, the “Affected Parties”) – to Show Cause why the Court should not enter an Order finding that any privilege the Affected Parties may have in communications with counsel falls within the crime-fraud exception to the attorney-client privilege, or has otherwise been waived for failure to assert or defend such privilege.  The Order to Show Cause requires that the Affected Parties respond within 10 days of the entry of the Order, i.e., no later than October 7, 2019, due to intervening weekend days.

The District Court also unsealed a previously sealed Order dated July 23, 2019, regarding the application of the crime-fraud exception to certain materials in the case.  Copies of yesterday’s Order to Show Cause and the July 23, 2019, Order are appended to this press release.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced the unsealing of an Indictment charging RASHAWN WHIDBEE, a/k/a “RaBoy,” with the September 27, 2014, attempted robbery and murder of Cody Dubose, 24, in New York, New York.  WHIDBEE was arrested today and will be presented this afternoon before U.S. Magistrate Judge Robert W. Lehrburger.  This case is assigned to United States District Judge Edgardo Ramos.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Almost exactly five years ago, Cody Dubose was shot and killed during an attempted armed robbery in Manhattan.  Now, thanks to the outstanding work of the NYPD, Rashawn Whidbee has been charged for his alleged participation in that heinous crime.” 

NYPD Commissioner James P. O’Neill said:  “The NYPD, along with our partners in the U.S. Attorney’s Office for the Southern District, is making New Yorkers safer by focusing our resources on the small percentage of criminals responsible for much of the city’s violent crime. We remain relentless in our efforts to identify, arrest, and prosecute anyone who involves himself in such behavior.”

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

On or about September 27, 2014, in the vicinity of East 112th Street and Madison Avenue in New York, New York, WHIDBEE and others participated in an attempted robbery of money belonging to a drug dealer, during which Cody Dubose was shot and killed.

*                *                *

WHIDBEE, 32, of the Bronx, New York, is charged with one count of attempted robbery, which carries a maximum sentence of 20 years in prison, one count of conspiracy to commit robbery, which carries a maximum sentence of 20 years in prison, and one count of using a firearm to commit murder, which carries a maximum sentence of death or life in prison, and a mandatory minimum term of five years in prison.  The maximum and minimum 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.          

Mr. Berman praised the outstanding investigative work of the NYPD.

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jacob Warren, Michael Longyear, and Christopher Clore 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 below constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ANDREI TYURIN, a/k/a “Andrei Tiurin,” pled guilty in Manhattan federal court to computer intrusion, wire fraud, bank fraud, and illegal online gambling offenses in connection with his involvement in a massive computer hacking campaign targeting U.S. financial institutions, brokerage firms, financial news publishers, and other American companies.  These hacks included one of the largest thefts of customer data from a U.S. financial institution in history.  TYURIN is charged with committing these crimes with Gery Shalon, a/k/a “Garri Shalelashvili,” a/k/a “Gabriel,” a/k/a “Gabi,” a/k/a “Phillipe Mousset,” a/k/a “Christopher Engeham”; Joshua Samuel Aaron, a/k/a “Mike Shields”; and Ziv Orenstein, a/k/a “Aviv Stein,” a/k/a “John Avery,” in furtherance of securities market manipulation, illegal online gambling, and payment processing fraud schemes perpetrated by Shalon, Aaron, Orenstein, and their co-conspirators.  TYURIN pled guilty before U.S. District Judge Laura Taylor Swain. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Andrei Tyurin’s extensive hacking campaign targeted major financial institutions, brokerage firms, news agencies, and other companies.  Ultimately, he gathered the customer data of more than 80 million victims, one of the largest thefts of U.S. customer data from a single financial institution in history.  With today’s plea, Tyurin’s global reign of computer intrusion is over and he faces significant time in a U.S. prison for his crimes.”

According to the allegations contained in the Indictments to which TYURIN pled guilty, other filings in this case, and statements made during court proceedings, including TYURIN’s guilty plea hearing:

From approximately 2012 to mid-2015, TYURIN engaged in an extensive computer hacking campaign targeting financial institutions, brokerage firms, and financial news publishers in the U.S., including the theft of personal information of over 100 million customers of the victim companies.  TYURIN’s hack of one financial institution headquartered in Manhattan resulted in the theft of personal information of over 80 million customers, making it one of the largest theft of customer data from a U.S. financial institution in history.  TYURIN engaged in these crimes at the direction of Shalon and in furtherance of other criminal schemes overseen and operated by Shalon and his co-conspirators, including securities fraud schemes in the United States.  For example, in an effort to artificially inflate the price of certain stocks publicly traded in the U.S., Shalon and his co-conspirators marketed the stocks in a deceptive and misleading manner to customers of the victim companies whose contact information TYURIN stole in the intrusions.

In addition to the U.S. financial sector hacks, TYURIN also conducted cyberattacks against numerous U.S. and foreign companies in furtherance of various criminal enterprises operated by Shalon and his co-conspirators, including unlawful internet gambling businesses and international payment processors.  Nearly all of these illegal businesses, like the securities market manipulation schemes, exploited the fruits of TYURIN’s computer hacking campaigns.  Through these various criminal schemes, TYURIN, Shalon, and their co-conspirators obtained hundreds of millions of dollars in illicit proceeds.

*                *                *

TYURIN, 35, of Moscow, Russia, pled guilty to one count of conspiracy to commit computer hacking, which carries a maximum sentence of five years in prison; one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of conspiracy to violate the Unlawful Internet Gambling Enforcement Act, which carries a maximum sentence of five years in prison; and one count of conspiracy to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison.  In addition, TYURIN pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years in prison; and one count of conspiracy to commit computer hacking, which carries a maximum sentence of five years prison, which was transferred from the Northern District of Georgia for purposes of his plea. 

TYURIN is scheduled to be sentenced by Judge Swain on February 13, 2020.

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 Judge Swain.

Mr. Berman praised the investigative work of the FBI and the U.S. Secret Service, and expressed his sincere gratitude to the Chief Prosecutor’s Office of Georgia and the Ministry of Justice of Georgia for their support and assistance with the extradition proceedings.  He also thanked the Securities and Exchange Commission, Homeland Security Investigations, the Financial Industry Regulatory Authority, the Office of International Affairs of the U.S. Department of Justice for its assistance with the extradition, and the Financial Services Information Sharing and Analysis Center, which significantly aided the investigation by facilitating information-sharing among the victim institutions.

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Eun Young Choi, Noah Solowiejczyk, and Sarah Lai are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that SEAN STEWART, a former senior investment banker at two different New York-based investment banks, was convicted after a seven-day trial for illegally tipping his father, Robert Stewart, with material non-public information concerning five separate corporate acquisitions before they were publicly announced.  U.S. District Judge Jed S. Rakoff presided over the trial. 

Manhattan U.S. Attorney Geoffrey Berman said:  “From 2011 through 2014, Sean Stewart used his position of trust at two different investment banks to steal confidential information and pass it on to his father so he could make illicit profits in the stock market.  As a unanimous jury found today, he abused his positions over and over again to tip his father.  Today’s verdict, which comes after the Second Circuit reversed Stewart’s original conviction, shows that this Office and our law enforcement partners at the FBI will persevere to achieve justice.”

According to the allegations contained in the Superseding Indictment and evidence presented at trial:

In early 2011, SEAN STEWART, who at the time held the position of Vice President in the Healthcare Investment Banking Group of a global bank headquartered in Manhattan (“Investment Bank A”), began tipping his father, Robert Stewart, with nonpublic information about upcoming mergers and acquisitions.  The first of these tips related to the acquisition of Kendle International Inc. by INC Research, LLC, which was announced publicly on May 4, 2011.  SEAN STEWART represented Kendle in the confidential negotiations that led to the deal announcement.  Based on inside information from SEAN STEWART, Robert Stewart purchased Kendle stock and passed the information to another individual to trade on his behalf, and earned several thousand dollars in profits after the acquisition of Kendle was publicly announced. 

The second deal about which SEAN STEWART tipped Robert Stewart was the acquisition of Kinetic Concepts, Inc. (“KCI”) by Apax Partners, announced on July 13, 2011.  Robert Stewart passed the inside information to another co-conspirator, Richard Cunniffe, to trade on Robert’s behalf.  Robert Stewart and Cunniffe earned more than $100,000 in profits after the acquisition was publicly announced. 

In the summer of 2011, SEAN STEWART learned that the Financial Industry Regulatory Authority (“FINRA”) was conducting an inquiry into suspicious trading in Kendle securities, including trading by Robert Stewart.  SEAN STEWART at first falsely claimed to compliance officials at Investment Bank A that he did not recognize his father’s name on a list of individuals who traded prior to the public announcement of Kendle’s acquisition.  After FINRA and compliance officials at Investment Bank A recognized the connection between SEAN STEWART and his father, SEAN STEWART told a series of lies to those compliance officials, to make it seem as if Robert Stewart had decided on his own initiative to invest in Kendle without the benefit of inside information. 

In October 2011, Sean Stewart joined an investment banking advisory firm headquartered in Manhattan (“Investment Bank B”) and was later promoted to Managing Director.  During his tenure with Investment Bank B, SEAN STEWART provided his father with tips concerning non-public acquisition negotiations involving three more public companies:  (1) the acquisition of Gen-Probe Inc. by Hologic, Inc., announced on April 30, 2012; (2) the acquisition, by tender offer, of Lincare Holdings Inc. by Linde AG, announced on July 1, 2012; and (3) the acquisition of CareFusion Corp. by Becton, Dickinson & Co. (“Becton”), announced October 4, 2014.  Investment Bank B represented Hologic in connection with its acquisition of Gen-Probe; Linde in connection with its acquisition of Lincare; and CareFusion in connection with its acquisition by Becton.  As before, Robert Stewart passed the information to Cunniffe in order to place trades for the two of them. 

During the course of the scheme, SEAN STEWART became aware that his father was having financial problems.  Rather than loan his father money, SEAN STEWART gave his father stock tips so that his father could profit from the information that STEWART stole from Investment Bank A and Investment Bank B and their clients.  In total, with respect to all five deals, Robert Stewart and Cunniffe earned profits of more than $1.1 million.

*                      *                      *

SEAN STEWART, 38, of North Merrick, New York, was convicted of one count of conspiracy to commit securities fraud and tender offer fraud, which carries a maximum sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; six counts of substantive securities fraud, and one count of substantive tender offer fraud, each of which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.

SEAN STEWART is scheduled to be sentenced before Judge Rakoff on January 29, 2020, at 4:00 p.m.

Robert Stewart pled guilty on August 12, 2015, to one count of conspiracy to commit securities fraud and tender offer fraud and was sentenced to four years’ probation, with the first year to be served in home detention, and $150,000 in forfeiture.

Richard Cunniffe pled guilty on May 12, 2015, to one count of conspiracy to commit securities fraud and tender offer fraud, one count of conspiracy to commit wire fraud, three counts of substantive securities fraud, and one count of substantive tender offer fraud, and was sentenced to one year of probation, and $900,000 in forfeiture.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and also thanked the U.S. Securities and Exchange Commission, which has brought a civil action against SEAN STEWART.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Richard Cooper and Samson Enzer are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LORRAINE SHANLEY pled guilty today to bank fraud and subscribing to false and fraudulent individual income tax returns in connection with fraudulently obtaining over $400,000 from a charity providing support to the families of New York City Police Department (“NYPD”) officers killed in the line of duty.  SHANLEY also agreed to forfeit more than $400,000 in criminal proceeds.  SHANLEY pled guilty before U.S. District Judge Sidney H. Stein.

U.S. Attorney Geoffrey S. Berman said:  “As she admitted today, Lorraine Shanley exploited the NYPD officers and employees who generously made charitable donations to support the survivors of fallen officers.  Thanks to the investigative work of the IRS and special agents from our Office, Shanley will be held responsible for her actions, and will forfeit her ill-gotten gains.”

According to the allegations in Information to which LORRAINE SHANLEY pled guilty, public court filings, and statements made in court:

For many years, from 2010 to 2017, SHANLEY served as a volunteer treasurer for a charity that provides financial support to the families of NYPD officers killed in the line of duty (“Charity-1”).  During that time period, Charity-1 received approximately $1.9 million in donations, over 99% of which came from NYPD employees, from an average of 5,500 NYPD employees per year. 

SHANLEY was an authorized signatory on Charity-1’s bank account and credit card, and was authorized to use them for Charity-1’s operations.  But SHANLEY also used the bank account and credit card to benefit herself and her family members.  From 2010 to 2017, SHANLEY fraudulently obtained over $400,000 from Charity-1’s coffers, taking money for herself and relatives, and paying for various personal expenditures such as private school tuition for her grandchild, legal services, dental bills, landscaping, and entertainment.

*                *                *

SHANLEY, 69, of Staten Island, New York, pled guilty to one count of bank fraud, which carries a maximum penalty of 30 years in prison, and six counts of subscribing to false and fraudulent individual income tax returns, which each carry a maximum term of 3 years in prison.  As a condition of her plea, SHANLEY also agreed to forfeit $406,851 and to pay restitution of $406,851 to Charity-1 and $103,983 to the IRS.

SHANLEY is scheduled to be sentenced by Judge Stein on December 19, 2019 at 3:00 p.m.

Mr. Berman praised the Internal Revenue Service and special agents with the U.S. Attorney’s Office for their outstanding work.

The maximum and mandatory minimum 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.

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

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Brian Ryan, Town of Greenburgh Police Chief, announced the unsealing of an Indictment charging 11 defendants with narcotics distribution offenses in and around Westchester County, New York.  The defendants, RANDY SARGEANT, a/k/a “Black,” KELVIN GANPAT, JEANCARLOS LAUREANO, a/k/a “Rico,” CHRISTOPHER MARTINEZ, a/k/a “Panama,” HOWARD MEREDITH, WILLIAM BRITO, AMANDA COPPOLLA, JAMAAL PETERS, a/k/a “Mega Head,” BERT HICKSON, CHRISTINE MORRISON, and CRYSTAL MARTINE, were presented in White Plains federal court yesterday before U.S. Magistrate Judge Judith C. McCarthy.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants were responsible for selling crack cocaine, a potentially lethal commodity that plagues far too many of our communities.  Thanks to the FBI and the Greenburgh Police, the defendants are in custody and facing federal criminal charges.”

FBI Assistant Director William F. Sweeney Jr. said:  “The outstanding work of our law enforcement partners on the FBI Westchester County Safe Streets Task Force should give the community peace of mind that we are working every day to make their lives safer.  These groups pushing illegal drugs create chaos and violence which put innocent people at risk.  Our work going after these criminals won’t stop.”

Greenburgh Police Chief Brian Ryan said: “I would like state my appreciation for this outstanding example of what can be achieved when local and federal law enforcement agencies collaborate to maximize our efforts in battling drug trafficking in our communities. We are committed to maintaining our partnerships with all our law enforcement partners and staying vigilant in our efforts to keep our communities safe.”

As alleged in the Indictment unsealed today in White Plains federal court [1]:

From at least 2018 until September 2019, RANDY SARGEANT, a/k/a “Black,” KELVIN GANPAT, JEANCARLOS LAUREANO, a/k/a “Rico,” CHRISTOPHER MARTINEZ, a/k/a “Panama,” HOWARD MEREDITH, WILLIAM BRITO, AMANDA COPPOLLA, JAMAAL PETERS, a/k/a “Mega Head,” BERT HICKSON, CHRISTINE MORRISON, and CRYSTAL MARTINEZ conspired to distribute 280 grams and more of crack cocaine.       

*                *                *

 

All defendants are charged with one count of conspiracy to distribute 280 grams and more of crack cocaine, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.   

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI Westchester County Safe Streets Task Force and the Greenburgh Drug and Alcohol Task Force.  The FBI Westchester County Safe Streets Task Force is comprised of Special Agents and Task Force Officers from the FBI, US Probation, ATF, New York State Police, Westchester County PD, Westchester County DAs Office, NYPD, Yonkers PD, Mount Vernon PD, Peekskill PD, Greenburgh PD and New Rochelle PD.  The Greenburgh Drug and Alcohol Task Force is comprised of investigators from the Greenburgh PD, Tarrytown PD, Sleepy Hollow PD, Dobbs Ferry PD, Ardsley PD, Irvington PD, Hastings PD and Elmsford PD. 

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Christopher Brumwell is in charge of the prosecution.

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

 

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

The Department of Justice today announced that Alexei Saab, 42, of Morristown, New Jersey, also known as  Ali Hassan Saab,  Alex Saab, or Rachid, was charged today in a nine-count indictment for offenses related to his support for Hizballah and separate marriage-fraud offenses.  The case is assigned to U.S. District Judge Paul G. Gardephe.

“According to the allegations, while living in the United States, Saab served as an operative of Hizballah and conducted surveillance of possible target locations in order to help the foreign terrorist organization prepare for potential future attacks against the United States,” said Assistant Attorney General for National Security John C. Demers.  “Such covert activities conducted on U.S. soil are a clear threat to our national security and I applaud the agents, analysts, and prosecutors who are responsible for this investigation and prosecution.”

 “As a member of the Hizballah component that coordinates external terrorist attack planning, Alexei Saab allegedly used his training to scout possible targets throughout the U.S,” said U.S. Attorney Geoffrey S. Berman.  “Even though Saab was a naturalized American citizen, his true allegiance was to Hizballah, the terrorist organization responsible for decades of terrorist attacks that have killed hundreds, including U.S. citizens and military personnel.  Thankfully, Saab is now in federal custody, and faces significant prison time for his alleged crimes.”

“As alleged, Saab began his training with Hizballah operatives overseas and, while living in the U.S., surveilled multiple locations in major cities,” said FBI Assistant Director-in-Charge William F. Sweeney Jr.  “Today’s announcement highlights the persistent efforts of a sophisticated international terrorist organization to scout targets at home and abroad, identifying vulnerabilities, and gathering essential details useful for a future attack.  In the city that never sleeps, neither do the FBI agents, detectives, and analysts who work on the JTTF to protect it, and because of their work, Saab’s future surveillances will be limited to a cell.  We cannot do this work alone.  I would like to thank the countless private security professionals who protect many of these sites, remind them to remain vigilant in order to make the enemy’s job more difficult, and I would ask the general public to continue to report suspicious activity to law enforcement like you have so many times in the past.”

“I would like to thank the efforts of the investigators and our Counter-Terrorism law enforcement partners who worked tirelessly to assemble the case that prevents this individual from caring out his plans,” said NYPD Commissioner James P. O’Neill.  “This case sends a clear message of deterrence to all those who plot to promote violence here in the U.S. and abroad.”

According to the Indictment and Complaint unsealed today in Manhattan federal court:

Hizballah is a Lebanon-based Shia Islamic organization with political, social, and terrorist components.  Hizballah was founded in the 1980s with support from Iran after the 1982 Israeli invasion of Lebanon, and its mission includes establishing a fundamentalist Islamic state in Lebanon.  Since Hizballah’s formation, the organization has been responsible for numerous terrorist attacks that have killed hundreds, including United States citizens and military personnel.  In 1997, the U.S. Department of State designated Hizballah a Foreign Terrorist Organization, pursuant to Section 219 of the Immigration and Nationality Act, and it remains so designated today.  In 2001, pursuant to Executive Order 13224, the U.S. Department of Treasury designated Hizballah a Specially Designated Global Terrorist entity.  In 2010, State Department officials described Hizballah as the most technically capable terrorist group in the world, and a continued security threat to the United States.

The Islamic Jihad Organization (IJO), which is also known as the External Security Organization and “910,” is a component of Hizballah responsible for the planning and coordination of intelligence, counterintelligence, and terrorist activities on behalf of Hizballah outside of Lebanon.  In July 2012, an IJO operative detonated explosives on a bus transporting Israeli tourists in the vicinity of an airport in Burgas, Bulgaria, which killed six people and injured 32 others.  Law enforcement authorities have disrupted several other IJO attack-planning operations around the world, including the arrest of an IJO operative surveilling Israeli targets in Cyprus in 2012, the seizure of bomb-making precursor chemicals in Thailand in 2012, and a seizure of similar chemicals in May 2015 in connection with the arrest of another IJO operative.  In June 2017, two IJO operatives were arrested in the United States and charged with terrorism-related offenses in the Southern District of New York.  In May 2019, a jury convicted one of those two IJO operatives on all counts. 

Saab joined Hizballah in 1996.  Saab’s first Hizballah operation occurred in Lebanon, where he was tasked with observing and reporting on the movements of Israeli and Southern Lebanese Army soldiers in Yaroun, Lebanon.  Among other things, Saab reported on patrol schedules and formations, procedures at security checkpoints, and the vehicles used by soldiers.

In approximately 1999, Saab attended his first Hizballah training.  The training focused on the use of firearms, and Saab handled and fired an AK-47, an M16 rifle, and a pistol, and threw grenades.  In 2000, Saab transitioned to membership in Hizballah’s unit responsible for external operations, the IJO, and he then received extensive training in IJO tradecraft, weapons, and military tactics, including how to construct bombs and other explosive devices.  In 2004 and 2005, Saab attended explosives training in Lebanon during which he received detailed instruction in, among other things, triggering mechanisms, explosive substances, detonators, and the assembly of circuits. 

In 2000, Saab lawfully entered the United States using a Lebanese passport.  In 2005, Saab applied for naturalized citizenship and falsely affirmed, under penalty of perjury, that he had never been “a member of or in any way associated with . . . a terrorist organization.”  In August 2008, Saab became a naturalized U.S. citizen. 

While living in the United States, Saab remained an IJO operative, continued to receive military training in Lebanon, and conducted numerous operations for the IJO.  For example, Saab surveilled dozens of locations in New York City—including the United Nations headquarters, the Statue of Liberty, Rockefeller Center, Times Square, the Empire State Building, and local airports, tunnels, and bridges—and provided detailed information on these locations, including photographs, to the IJO.  In particular, Saab focused on the structural weaknesses of locations he surveilled in order to determine how a future attack could cause the most destruction.  Saab’s reporting to the IJO included the materials used to construct a particular target, how close in proximity one could get to a target, and site weaknesses or “soft spots” that the IJO could exploit if it attacked a target in the future.  Saab conducted similar intelligence gathering in a variety of American cities.  The FBI recovered photographs from Saab’s electronic devices reflecting his surveillance activities, including photographs of New York City landmarks. 

In addition to his attack-planning activities in the United States, Saab conducted operations abroad.  For example, Saab attempted to murder a man he later understood to be a suspected Israeli spy.  Saab pointed a firearm at the individual at close range and pulled the trigger twice, but the firearm did not fire.  Saab also conducted intelligence-gathering for Hizballah in Istanbul, Turkey.  

Finally, unrelated to his IJO activities, in July 2012, Saab married another individual (CC-1) so that CC-1 could apply for naturalized citizenship in the United States based on their marriage.  On March 13, 2015, Saab and CC-1 jointly filed a petition seeking to obtain naturalized citizenship for CC-1.  In doing so, Saab and CC-1 falsely claimed under penalty of perjury that their marriage was “not for the purpose of procuring an immigration benefit.”

Saab is charged with providing material support to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison; conspiracy to provide material support and resources to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison; receiving military-type training from a designated foreign terrorist organization, which carries a sentence of 10 years in prison or a fine; conspiracy to receive military-type training from a designated foreign terrorist organization, which carries a maximum sentence of five years in prison; unlawful procurement of citizenship or naturalization to facilitate an act of international terrorism, which carries a maximum sentence of 25 years in prison; marriage fraud conspiracy, which carries a maximum sentence of five years; citizenship application fraud, which carries a maximum sentence of 10 years; naturalization fraud, which carries a maximum sentence of five years; and making false statements, which carries a maximum sentence of five years.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Assistant Attorney General Demers and U.S. Attorney Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD.  They also thanked the 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 Michael K. Krouse and Jason A. Richman are in charge of the prosecution, with assistance from Trial Attorneys Bridget Behling and Alexandra Hughes of the Counterterrorism Section.

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

Geoffrey S. Berman, the 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 James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that ALEXEI SAAB, a/k/a “Ali Hassan Saab,” a/k/a “Alex Saab,” a/k/a “Rachid,” was charged today in a nine-count Indictment for offenses related to his support for Hizballah and separate marriage-fraud offenses.  SAAB was arrested July 9, 2019, in New York, New York, pursuant to a criminal complaint, and remains detained.  The case is assigned to U.S. District Judge Paul G. Gardephe.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As a member of the Hizballah component that coordinates external terrorist attack planning, Alexei Saab allegedly used his training to scout possible targets throughout the U.S.  Even though Saab was a naturalized American citizen, his true allegiance was to Hizballah, the terrorist organization responsible for decades of terrorist attacks that have killed hundreds, including U.S. citizens and military personnel.  Thankfully, Saab is now in federal custody, and faces significant prison time for his alleged crimes.”

Assistant Attorney General John C. Demers said:  “According to the allegations, while living in the United States, Saab served as an operative of Hizballah and conducted surveillance of possible target locations in order to help the foreign terrorist organization prepare for potential future attacks against the United States.  Such covert activities conducted on U.S. soil are a clear threat to our national security and I applaud the agents, analysts, and prosecutors who are responsible for this investigation and prosecution.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “As alleged, Saab began his training with Hizballah operatives overseas and, while living in the U.S., surveilled multiple locations in major cities.  Today’s announcement highlights the persistent efforts of a sophisticated international terrorist organization to scout targets at home and abroad, identifying vulnerabilities, and gathering essential details useful for a future attack.  In the city that never sleeps, neither do the FBI agents, detectives, and analysts who work on the JTTF to protect it, and because of their work, Saab’s future surveillances will be limited to a cell.  We cannot do this work alone.  I would like to thank the countless private security professionals who protect many of these sites, remind them to remain vigilant in order to make the enemy’s job more difficult, and I would ask the general public to continue to report suspicious activity to law enforcement like you have so many times in the past.”

NYPD Commissioner James P. O’Neill said:  “Saab operated in the streets of New York as a covert operative for Hizballah, gathering intelligence and sizing up targets for potential attacks on US soil.  This case brings us another important piece of the puzzle in our long term investigations into the terrorist groups targeting New York City.  I commend the teamwork of the NYPD detectives, FBI agents and all the partner agencies in the Joint Terrorism Task Force”.

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

Hizballah is a Lebanon-based Shia Islamic organization with political, social, and terrorist components.  Hizballah was founded in the 1980s with support from Iran after the 1982 Israeli invasion of Lebanon, and its mission includes establishing a fundamentalist Islamic state in Lebanon.  Since Hizballah’s formation, the organization has been responsible for numerous terrorist attacks that have killed hundreds, including United States citizens and military personnel.  In 1997, the U.S. Department of State designated Hizballah a Foreign Terrorist Organization, pursuant to Section 219 of the Immigration and Nationality Act, and it remains so designated today.  In 2001, pursuant to Executive Order 13224, the U.S. Department of Treasury designated Hizballah a Specially Designated Global Terrorist entity.  In 2010, State Department officials described Hizballah as the most technically capable terrorist group in the world, and a continued security threat to the United States.

The Islamic Jihad Organization (“IJO”), which is also known as the External Security Organization and “910,” is a component of Hizballah responsible for the planning and coordination of intelligence, counterintelligence, and terrorist activities on behalf of Hizballah outside of Lebanon.  In July 2012, an IJO operative detonated explosives on a bus transporting Israeli tourists in the vicinity of an airport in Burgas, Bulgaria, which killed six people and injured 32 others.  Law enforcement authorities have disrupted several other IJO attack-planning operations around the world, including the arrest of an IJO operative surveilling Israeli targets in Cyprus in 2012, the seizure of bomb-making precursor chemicals in Thailand in 2012, and a seizure of similar chemicals in May 2015 in connection with the arrest of another IJO operative.  In June 2017, two IJO operatives were arrested in the United States and charged with terrorism-related offenses in the Southern District of New York.  In May 2019, a jury convicted one of those two IJO operatives on all counts. 

SAAB joined Hizballah in 1996.  SAAB’s first Hizballah operation occurred in Lebanon, where he was tasked with observing and reporting on the movements of Israeli and Southern Lebanese Army soldiers in Yaroun, Lebanon.  Among other things, SAAB reported on patrol schedules and formations, procedures at security checkpoints, and the vehicles used by soldiers.

In approximately 1999, SAAB attended his first Hizballah training.  The training focused on the use of firearms, and SAAB handled and fired an AK-47, an M16 rifle, and a pistol, and threw grenades.  In 2000, SAAB transitioned to membership in Hizballah’s unit responsible for external operations, the IJO, and he then received extensive training in IJO tradecraft, weapons, and military tactics, including how to construct and detonate bombs and other explosive devices.  In 2004 and 2005, Saab attended explosives training in Lebanon during which he received detailed instruction in, among other things, triggering mechanisms, explosive substances, detonators, and the assembly of circuits.

In 2000, SAAB lawfully entered the United States using a Lebanese passport.  In 2005, SAAB applied for naturalized citizenship and falsely affirmed, under penalty of perjury, that he had never been “a member of or in any way associated with . . . a terrorist organization.”  In August 2008, SAAB became a naturalized U.S. citizen. 

While living in the United States, SAAB remained an IJO operative, continued to receive military training in Lebanon, and conducted numerous operations for the IJO.  For example, SAAB surveilled dozens of locations in New York City – including the United Nations headquarters, the Statue of Liberty, Rockefeller Center, Times Square, the Empire State Building, and local airports, tunnels, and bridges – and provided detailed information on these locations, including photographs, to the IJO.  In particular, SAAB focused on the structural weaknesses of locations he surveilled in order to determine how a future attack could cause the most destruction.  SAAB’s reporting to the IJO included the materials used to construct a particular target, how close in proximity one could get to a target, and site weaknesses or “soft spots” that the IJO could exploit if it attacked a target in the future.  SAAB conducted similar intelligence gathering in a variety of large American cities, including Washington, D.C.  The FBI recovered photographs from SAAB’s electronic devices reflecting his surveillance activities, including photographs of New York City landmarks. 

In addition to his attack-planning activities in the United States, SAAB conducted operations abroad.  For example, SAAB attempted to murder a man he later understood to be a suspected Israeli spy.  SAAB pointed a firearm at the individual at close range and pulled the trigger twice, but the firearm did not fire.  SAAB also conducted intelligence-gathering for Hizballah in Istanbul, Turkey.  

Finally, unrelated to his IJO activities, in July 2012, SAAB married another individual (“CC-1”) so that CC-1 could apply for naturalized citizenship in the United States based on their marriage.  On March 13, 2015, SAAB and CC-1 jointly filed a petition seeking to obtain naturalized citizenship for CC-1.  In doing so, SAAB and CC-1 falsely claimed under penalty of perjury that their marriage was “not for the purpose of procuring an immigration benefit.”

*                      *                      *

SAAB, 42, of Morristown, New Jersey, is charged with providing material support to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison; conspiracy to provide material support and resources to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison; receiving military-type training from a designated foreign terrorist organization, which carries a sentence of 10 years in prison or a fine; conspiracy to receive military-type training from a designated foreign terrorist organization, which carries a maximum sentence of five years in prison; unlawful procurement of citizenship or naturalization to facilitate an act of international terrorism, which carries a maximum sentence of 25 years in prison; marriage fraud conspiracy, which carries a maximum sentence of five years; citizenship application fraud, which carries a maximum sentence of 10 years; naturalization fraud, which carries a maximum sentence of five years; and making false statements, which carries a maximum sentence of five years.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman and Mr. Demers praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD.  They also thanked the Counterterrorism Section of the Department of Justice’s National Security Division as well as the Attorney General’s Hezbollah Financing and Narcoterrorism Team.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Michael K. Krouse and Jason A. Richman are in charge of the prosecution, with assistance from Trial Attorneys Bridget Behling and Alexandra Hughes of the Counterterrorism Section.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter C. Fitzhugh, the Special Agent in Charge of the New York Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced charges against ROMANA LEYVA and ARIFUL HAQUE for participating in a conspiracy that for several years exploited elderly victims by remotely accessing their computers and convincing victims to pay for computer support services they did not need, and which were never actually provided.  In total, the conspiracy generated more than $10 million in proceeds from at least approximately 7,500 victims.  LEYVA was arrested today in Las Vegas, Nevada, and will be presented, in the District of Nevada, before Magistrate Judge Cam Ferenbach.  HAQUE was arrested this morning in Bellerose, New York, and will be presented today before Magistrate Judge Ona T. Wang in the Southern District of New York.  The case has been assigned to U.S. District Judge Paul A. Crotty.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants participated in a sophisticated fraud scheme that preyed on the elderly.  The conspirators allegedly caused pop-up windows to appear on victims’ computers – pop-up windows that claimed, falsely, that a virus had infected the victim’s computer.  Through this and other misrepresentations, this fraud scheme deceived thousands of victims, including some of society’s most vulnerable members, into paying a total of more than $10 million.”

HSI Special Agent in Charge Peter C. Fitzhugh said:  “In a fraud scheme that targeted thousands of elderly victims who were swindled out of millions, the conspirators allegedly posed as tech support to fix computers supposedly infected by malware.  It is our duty as citizens to protect our growing elderly population and it is our duty as law enforcement to investigate and arrest those, like Leyva and Haque, who seek to make a profit through fraud and deception.”

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

From March 2015 through December 2018, LEYVA and HAQUE were members of a criminal fraud ring (the “Fraud Ring”) based in the United States and India that committed a technical support fraud scheme targeting elderly victims located across the United States and Canada, including in the Southern District of New York.  The Fraud Ring’s primary objective was to trick victims into believing that their computers were infected with malware, in order to deceive them into paying hundreds or thousands of dollars for phony computer repair services.  Over the course of the conspiracy, the Fraud Ring generated more than $10 million in proceeds from at least 7,500 victims.

The scheme generally worked as follows.  First, the Fraud Ring caused pop-up windows to appear on victims’ computers.  The pop-up windows claimed, falsely, that a virus had infected the victim’s computer.  The pop-up window directed the victim to call a particular telephone number to obtain technical support.  In at least some instances, the pop-up window threatened victims that, if they restarted or shut down their computer, it could “cause serious damage to the system,” including “complete data loss.”  In an attempt to give the false appearance of legitimacy, in some instances the pop-up window included, without authorization, the corporate logo of a well-known, legitimate technology company.  In fact, no virus had infected victims’ computers, and the technical support phone numbers were not associated with the legitimate technology company.  Rather, these representations were false and were designed to trick victims into paying the Fraud Ring to “fix” a problem that did not exist.  In exchange for victims’ payment of several hundred or thousand dollars (depending on the precise “service” victims purchased), the purported technician remotely accessed the victim’s computer and ran an anti-virus tool, which is free and available on the Internet.  The Fraud Ring also re-victimized various victims again.

LEYVA’s roles in the scheme included (1) creating several fraudulent corporate entities that were used to receive fraud proceeds from victims, (2) recruiting others (including through misrepresentations) to register fraudulent corporate entities that became part of and facilitated the activities of the Fraud Ring, and (3) assisting others in setting up fraudulent corporate entities and bank accounts, including coaching them to make misrepresentations to bank employees where necessary.  HAQUE registered a fraudulent corporate entity that was used to receive fraud proceeds from victims on behalf of the Fraud Ring.  HAQUE also provided guidance to a co-conspirator who registered a different fraudulent corporate entity that was part of the Fraud Ring, and deposited fraud proceeds into accounts associated with that entity.

*                *                *

LEYVA, 35, of Las Vegas, Nevada, and HAQUE, 33, of Bellerose, New York, are each charged with one count of wire fraud and one count of conspiracy to commit wire fraud, each of which carries a maximum sentence of 20 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised HSI’s El Dorado Task Force, Cyber Intrusion/Cyber Fraud Group for its outstanding work on the investigation and the NYPD for their assistance on this case.  He added that the investigation is continuing. 

This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Michael D. Neff is in charge of the prosecution.

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

 

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[1] 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Peter C. Fitzhugh, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), today announced the unsealing of an indictment charging three members of the MacBallas street gang with attempted murder, arising out of their role in an assault and attempted murder against a fellow inmate inside a New York City jail in June 2017.

Two of the defendants, KALVIN THWAITES and ANDREW BURRELL, were taken into federal custody last week and presented before U.S. Magistrate Judge James L. Cott.  The remaining defendant, KENDALL NEWLAND, was taken into federal custody this morning and presented before U.S. Magistrate Judge Ona T. Wang.  The case has been assigned to U.S. District Judge Victor Marrero.  An initial pretrial conference is scheduled for September 20, 2019, at 2:00 p.m., before Judge Marrero.

Manhattan U.S. Attorney Geoffrey Berman said:  “As alleged in the Indictment, the defendants tried to kill a fellow inmate in order to promote their membership in the MacBallas street gang.  We are committed to working with our law enforcement partners to end gang violence, wherever it occurs.”

HSI Special Agent-in Charge Peter C. Fitzhugh said:  “These MacBallas gang members were already serving time for their criminal acts when they tried to take the life of another inmate.  When it comes to maintaining power and position, these individuals have little regard for human life.  This is why law enforcement remains diligent in its gang enforcement both on and off the streets.”

According to the allegations contained in the Indictment[1] and statements made in court:

The MacBallas gang is a criminal enterprise that operates principally in and around the New York City area, including within city, state, and federal jails and prisons.  Members and associates of the MacBallas engage in, among other things, narcotics trafficking, as well as acts of violence, to preserve and protect the power of the gang. 

On June 7, 2017, the defendants, who were detained at the Vernon C. Bain Center, a New York City jail in the Bronx, New York, assaulted with a dangerous weapon and attempted to murder a fellow inmate in order to maintain or increase their position in the MacBallas.

*                *                *

THWAITES, 26, of Queens, New York, NEWLAND, 25, of Mount Vernon, New York, and BURRELL, 28, of the Bronx, New York, are each charged with one count of assault and attempted murder in aid of racketeering activity, which carries a maximum sentence of  20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.    

Mr. Berman praised the outstanding investigative work of HSI and the NYPD.

Assistant U.S. Attorneys Jason Swergold and Adam Hobson are in charge of the prosecution.  The case is being handled by the Office’s Violent and Organized Crime Unit.

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

 

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

Geoffrey S. Berman, the 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 James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”),  announced the unsealing of an indictment charging RUVIM KRUPKIN, a New York state-licensed doctor, with writing medically unnecessary prescriptions for oxycodone over at least an 11-year period.  KRUPKIN is expected to be presented before U.S. Magistrate Judge Ona T. Wang later today.  The case has been assigned to United States District Judge Analisa Torres.    

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, for more than a decade, as the nationwide opioid crisis mushroomed and left death and destruction in its wake, Ruvim Krupkin wrote thousands of medically unnecessary prescriptions for oxycodone.  He allegedly charged $200 per prescription.  Now he will learn the true cost of his alleged crime.”

FBI Assistant Director William F. Sweeney said:  “While society continues to grapple with a solution to end the plague of drug addiction throughout this country, Ruvim Krupkin, as alleged, was complicit in prescribing medically unnecessary doses of oxycodone pills to patients under his care.  Those with access to a now-virtual prescription pad carry a heavy responsibility to uphold the ethics of their profession.  Those who don’t will be held accountable.”  

NYPD Commissioner James P. O’Neill said:  “As alleged, the doctor who’s charged in this case not only broke the law, he betrayed his oath and his ethical obligations for millions in personal profit – and he did this at a time when the nation and our city was in the throes of an opioid epidemic.  I want to thank the investigators who worked to bring federal charges in this case.  Whether you purport to be a medical professional or you’re a street-level drug dealer, the NYPD and its law enforcement partners will find you and hold you accountable.”

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

From in or about 2006 up to and including July 2017, RUVIM KRUPKIN wrote prescriptions resulting in the unlawful distribution of more than four million oxycodone pills to individuals he knew had no legitimate medical need for this medication.  In exchange for writing these medically unnecessary oxycodone prescriptions, KRUPKIN received over $3.8 million in cash payments.

During the time period charged in the Indictment, KRUPKIN was an internal medicine doctor with specialties in oncology and hematology.  KRUPKIN practiced out of a medical office located in Coney Island, New York.  As a hematologist, KRUPKIN treated patients who had, or claimed to have, sickle cell anemia – a medical condition that can cause pain for which oxycodone, in conjunction with other treatments – may be legitimately prescribed.  However, KRUPKIN wrote thousands of prescriptions for large quantities of oxycodone to patients, knowing that they in fact had no legitimate medical need for the prescriptions.  KRUPKIN generally performed little to no physical examination on these patients; indeed, the medical notes for each patient were largely the same from one visit to the next.  KRUPKIN charged each patient $200 in cash for each visit, payable directly to him. 

Notwithstanding having performed little to no physical examination of the patients, KRUPKIN typically issued them prescriptions for a large dose of oxycodone – typically 180 80-milligram pills, until approximately 2010, when the formula for oxycodone changed, reducing the street value of the 80-milligram pills.  At that time, KRUPKIN began prescribing 180 or 240 30-milligram pills.  KRUPKIN’s patients filled their prescriptions at pharmacies throughout New York, and in certain cases, sold the oxycodone pills they received to drug dealers, who in turn re-sold the pills at high value on the street.  KRUPKIN knew that certain of his patients were diverting the oxycodone pills he was prescribing, but he nonetheless continued writing prescriptions of oxycodone for such individuals. 

*                *                *

KRUPKIN, 68, of Summit, New Jersey, is charged with one count of participating in a conspiracy to 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.

Mr. Berman praised the outstanding investigative work of the FBI-NYPD Health Care Fraud Task Force.  Mr. Berman also thanked the New York City Human Resources Administration for its work on the investigation.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Tara M. La Morte and Alexandra Rothman 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 below constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, 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 James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that PEDRO DAVILA has been arrested for his participation in an armed robbery of a jewelry store in New York, New York, on Sunday, August 25, 2019.  DAVILA was apprehended Sunday night in Pasco County, Florida, by the Pasco County Sheriff’s Office, and will be presented today before United States Magistrate Judge Thomas Wilson in Tampa federal court.  The criminal Complaint, unsealed today, also names JAYSEAN SUTTON as a defendant.  SUTTON remains at large.

U.S. Attorney Geoffrey S. Berman said:  “As alleged in the Complaint, Pedro Davila participated in a brazen daytime robbery, in which victims were held at gunpoint and tied up.  This criminal conduct is intolerable, and thanks to the work of our law enforcement partners, the defendant faces significant federal charges for his alleged crimes.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “In the day and age of technology and cameras, you would think robbers trying to pull off a cinematic heist would think twice.  But these men allegedly took over a jewelry store in Midtown, tied up the employees and robbed it without believing they would get caught.  Their mistakes should be a warning to everyone wanting to be a copycat, you will get caught and pay the price for breaking the law.”

NYPD Commissioner James P. O’Neill stated:  “In working to reduce crime past already record-lows in New York City, the NYPD is relentless in our pursuit of the relatively small percentage of the population driving the violence and disorder. I commend the NYPD investigators involved in this investigation, the U.S. Attorney for the Southern District, and the Federal Bureau of Investigation for their efforts and making these arrests. The NYPD will continue, along with our law enforcement partners, to vigorously pursue and hold responsible individuals responsible for violent criminal activity.”

As alleged in the criminal Complaint:[1] 

On August 25, 2019, DAVILA, SUTTON, and a third co-conspirator committed a brazen gunpoint robbery of a jewelry store in Midtown Manhattan in broad daylight.  Surveillance video from the time of the robbery shows the robbers, two of whom were carrying guns, tying up several employees in a back room and throwing multiple pieces of expensive jewelry into bags before fleeing the store. 

*                      *                      *

DAVILA, 27, of the Bronx, and SUTTON, 39, of Brooklyn, are each charged with one count of robbery, which carries a maximum sentence of 20 years in prison; one count of robbery conspiracy, which carries a maximum sentence of 20 years in prison; and one count of brandishing of a firearm, which carries a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

Mr. Berman praised the outstanding work of the NYPD’s Major Case Squad and the Joint Bank Robbery Task Force of the FBI and the NYPD.  Mr. Berman also thanked the New York/New Jersey Regional Fugitive Task Force of the United States Marshals Service and the Pasco County Sheriff’s Office for their assistance in apprehending DAVILA.  

This case is being handled by the Office’s Violent and Organized Crime Unit and the General Crimes Unit.  Assistant United States Attorneys Christopher J. Clore and Alexander Li are in charge of the prosecution.

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

Geoffrey S. Berman, the 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 James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced the arrest of JONATHAN SKOLNICK on charges of child enticement; production, receipt, and possession of child pornography; and sending extortionate communications.  SKOLNICK was arrested Saturday, September 14, 2019, presented the same day before United States Magistrate Judge Henry B. Pitman, and detained on consent pending a detention hearing on Wednesday, September 18, 2019.

U.S. Attorney Geoffrey S. Berman said:  “As an associate principal of a Bronx private school, one of Jonathan Skolnick’s primary responsibilities was the well-being and education of students.  Instead, Skolnick allegedly preyed on his underage victims in a heinous plot to fool them into sending him nude photos of themselves.  Skolnick allegedly falsely identified himself as several different teenage girls – and when his victims refused to continue to send more photos, he unconscionably threatened to publicly release the ones they had already sent. This arrest exemplifies law enforcement’s ability to detect those attempting to use the ‘anonymity’ of the internet to prey on young children.”

FBI Assistant Director William F. Sweeney Jr. said:  “A principal at a school plays a significant role in the lives of children, and is charged with protecting and educating them.  Now Mr. Skolnick faces criminal charges for his alleged attempts to illegally extort a vulnerable child in a manner that should shock and anger every parent in this community.  Members of our FBI New York Child Exploitation and Human Trafficking Task Force got information Mr. Skolnick might be engaged in this illicit activity, and acted as quickly as possible to protect other children.  We believe Mr. Skolnick may have victimized other teens, and we ask that they call us at 1-800-CALL-FBI.  Speaking directly to parents, have a conversation with your children, and please let us know any information you can that will help this investigation.”

NYPD Commissioner James P. O’Neill said:  “Today’s charges serve as a warning to individuals who prey upon some of our society’s most vulnerable population – you will be arrested and held accountable for your actions.  I thank the NYPD detectives, the U.S. Attorney’s Office for the Southern District, and the FBI for their work in this investigation.  The NYPD will continue to work with our law enforcement partners to end the exploitation and abuse of children in our city and nation and work to bring justice to victims of these heinous crimes.”

According to allegations in the Complaint and statements made in public court proceedings[1]:

Between at least March 2019 and September 2019, SKOLNICK, who was an associate principal at a private school located in the Bronx, New York, communicated online with a 14 year-old male victim (“Victim-1”) while posing as several teenaged girls.  SKOLNICK used several purported names in these communications, including “Molly Dejmal,” “Tina Warner,” and “Anna Freed.”  In response to requests from SKOLNICK, posing as the “girls,” Victim-1 emailed nude and sexually explicit photographs of himself to at least two email accounts, including to “[email protected]” and “[email protected]”.   

In or about June 2019, Victim-1 stopped communicating with SKOLNICK.  In or about September 2019, SKOLNICK, using the name “Molly Dejmal,” texted Victim-1 from a spoofed telephone number.  SKOLNICK’s messages became increasingly threatening in nature, causing Victim-1 to fear that the person he was communicating with would release the sexually explicit photographs that Victim-1 previously sent.  Internet Protocol addresses associated with certain of the messages directed to Victim-1 were registered to SKOLNICK’s home in the Bronx.   

SKOLNICK, of the Bronx, New York, is charged with one count of production of child pornography, which carries a mandatory minimum sentence of 15 years in prison and a maximum sentence of 30 years in prison; one count of receipt of child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison; one count of possession of child pornography, which carries a maximum sentence of 10 years in prison; one count of child enticement, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; and one count of making extortionate communications, which carries a maximum sentence of two years in prison. 

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Any individuals who believe they have information that may be relevant to this investigation should contact the FBI at 1-800-CALL-FBI or https://tips.fbi.gov.

Mr. Berman praised the FBI and NYPD for their outstanding investigative work. 

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

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

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

The Department announced today the arrest of Zhongsan Liu, who was charged by complaint for his involvement in a conspiracy to fraudulently obtain U.S. visas for Chinese government employees.  Liu was arrested today in Fort Lee, New Jersey, and presented this afternoon in Manhattan federal court before the U.S. Magistrate Judge Ona T. Wang. 

“We welcome foreign students and researchers, including from China, but we do not welcome visa fraud – especially on behalf of a government,” said Assistant Attorney General John C. Demers of National Security.  “We will continue to confront Chinese government attempts to subvert American law to advance its own interests in diverting U.S. research and know-how to China.”

“As alleged Zhongsan Liu conspired to obtain research scholar visas fraudulently for people whose actual purpose was not research but recruitment,” said U.S. Attorney Geoffrey S. Berman.  “Rather than helping to bring students to the U.S., Liu allegedly conspired to defraud this country’s visa system to advance his efforts to attract U.S. experts to China.  Thanks to the FBI, this alleged abuse of the visa system has been halted.”

"Zhongsan Liu broke the law by seeking visas for employees of the government of The People's Republic of China to enter the United States under false pretenses.  Individuals obtained visas under the guise of research scholars, but in reality their assignment was to recruit top U.S. talent to benefit the government of China," said Assistant Director John Brown of the FBI's Counterintelligence Division. "The FBI recognizes the immense benefit of academic freedom in our open society, and we will investigate those who break our laws in an effort to take advantage of that freedom.”

“The allegation that an employee of a foreign government has worked to mask the true purpose of an individual’s presence in the United States isn’t news to the FBI,” said FBI Assistant Director William F. Sweeney Jr.  “This alleged behavior should be another alarm bell that foreign governments are constantly working to exploit research work being conducted throughout the United States.  Not everyone shares the honest goal of conducting open research to benefit society as a whole.  This case is another example of the pervasive and organized effort, in this instance an allegedly flat-out illegal one, to fulfill a top priority of collecting information to advantage a foreign adversary.  Putting a halt to Mr. Liu’s alleged actions are an important and significant step to highlighting these activities.  The FBI New York, along with our intelligence community partners, will continue to disrupt the behavior when it is detected.”

According to the allegations in the Complaint unsealed in Manhattan federal court:

From approximately 2017, up to and including September 2019, Liu participated in a conspiracy to fraudulently procure U.S. visas for employees of the government of the People’s Republic of China (PRC Government).  Liu operates the New York office of the China Association for International Exchange of Personnel (CAIEP-NY).  CAIEP-NY is a PRC Government agency that, among other things, recruits U.S. scientists, academics, engineers and other experts to work in China.

Liu worked with others, including other PRC Government employees in the United States, to fraudulently procure J-1 Research Scholar visas for a CAIEP-NY employee (CC-1) and a prospective CAIEP-NY employee (the CAIEP-NY Hire).  The J-1 Research Scholar visa program permits foreign nationals to come to the United States for the primary purpose of conducting research at a corporate research facility, museum, library, university or other research institution.

In or about April 2018, CC-1 applied for and received a J-1 visa to conduct research at a particular U.S. university (University-1) located outside of New York.  Although CC-1 represented to the U.S. Government that she was entering the United States for the primary purpose of conducting research at University-1, CC-1’s actual purpose in the United States consisted of performing full-time talent-recruitment work at CAIEP-NY.  Liu helped CC-1 take measures to enhance her false appearance as a Research Scholar at University-1 by, among other things, directing CC-1 to report to University-1 upon her arrival in the United States; ensuring that CC-1 obtained a driver’s license in the state where University-1 is located; and instructing CC-1 to periodically visit University-1 while working full-time at CAIEP-NY.

In addition, Liu attempted to enable the CAIEP-NY Hire to obtain a J-1 Research Scholar visa under false pretenses.  In particular, Liu reached out to contacts at multiple U.S. universities in order to arrange for a university to invite the CAIEP-NY Hire to come to the United States as a J-1 Research Scholar.  In truth and in fact, however, Liu intended that the CAIEP-NY Hire’s primary purpose in the United States would consist of engaging full-time in the talent-recruitment work of CAIEP-NY.

Liu, 57, of Fort Lee, New Jersey, is charged with one count of conspiracy to commit visa fraud, which carries a maximum sentence of five years.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Assistant Attorney General Demers and U.S. Attorney Berman praised the outstanding investigative work of the FBI, and thanked the U.S. Department of State, Department of Homeland Security, Homeland Security Investigations, and the Counterintelligence and Export Control Section of the U.S. Department of Justice’s National Security Division for their assistance. 

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorney Gillian Grossman 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John C. Demers, Assistant Attorney General for National Security, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and John Brown, Assistant Director of the FBI’s Counterintelligence Division, announced the arrest of ZHONGSAN LIU, for his involvement in a conspiracy to fraudulently obtain U.S. visas for Chinese government employees.  LIU was arrested today in Fort Lee, New Jersey, and presented this afternoon in Manhattan federal court before the U.S. Magistrate Judge Ona T. Wang. 

U.S. Attorney Geoffrey S. Berman stated:  “As alleged Zhongsan Liu conspired to obtain research scholar visas fraudulently for people whose actual purpose was not research but recruitment.  Rather than helping to bring students to the U.S., Liu allegedly conspired to defraud this country’s visa system to advance his efforts to attract U.S. experts to China.  Thanks to the FBI, this alleged abuse of the visa system has been halted.”

Assistant Attorney General John C. Demers said:  “We welcome foreign students and researchers, including from China, but we do not welcome visa fraud – especially on behalf of a government.  We will continue to confront Chinese government attempts to subvert American law to advance its own interests in diverting U.S. research and know-how to China.”

FBI Assistant Director William F. Sweeney Jr. said:  “The allegation that an employee of a foreign government has worked to mask the true purpose of an individual’s presence in the United States isn’t news to the FBI.  This alleged behavior should be another alarm bell that foreign governments are constantly working to exploit research work being conducted throughout the United States.  Not everyone shares the honest goal of conducting open research to benefit society as a whole.  This case is another example of the pervasive and organized effort, in this instance an allegedly flat-out illegal one, to fulfill a top priority of collecting information to advantage a foreign adversary.  Putting a halt to Mr. Liu’s alleged actions are an important and significant step to highlighting these activities.  The FBI New York, along with our intelligence community partners, will continue to disrupt the behavior when it is detected.”

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

From approximately 2017, up to and including September 2019, LIU participated in a conspiracy to fraudulently procure U.S. visas for employees of the government of the People’s Republic of China (the “PRC Government”).  LIU operates the New York office of the China Association for International Exchange of Personnel (“CAIEP-NY”).  CAIEP-NY is a PRC Government agency that, among other things, engages in talent-recruitment for the benefit of the PRC.  In particular, CAIEP recruits U.S. scientists, academics, engineers, and other experts to work in China.

LIU worked with others, including other PRC Government employees in the United States, to fraudulently procure J-1 Research Scholar visas for a CAIEP-NY employee (“CC-1”) and a prospective CAIEP-NY employee (“the CAIEP-NY Hire”).  The J-1 Research Scholar visa program permits foreign nationals to come to the United States for the primary purpose of conducting research at a corporate research facility, museum, library, university, or other research institution.

In or about April 2018, CC-1 applied for and received a J-1 visa to conduct research at a particular U.S. university (“University-1”) located outside New York.  Although CC-1 represented to the U.S. Government that she was entering the United States for the primary purpose of conducting research at University-1, CC-1’s actual purpose in the United States consisted of performing full-time talent-recruitment work at CAIEP-NY.  LIU helped CC-1 take measures to enhance her false appearance as a Research Scholar at University-1 by, among other things, directing CC-1 to report to University-1 upon her arrival in the United States; ensuring that CC-1 obtained a driver’s license in the state where University-1 is located; and instructing CC-1 to periodically visit University-1 while working full-time at CAIEP-NY.

In addition, LIU attempted to enable the CAIEP-NY Hire to obtain a J-1 Research Scholar visa under false pretenses.  In particular, LIU reached out to contacts at multiple U.S. universities in order to arrange for a university to invite the CAIEP-NY Hire to come to the United States as a J-1 Research Scholar.  In truth and in fact, however, LIU intended that the CAIEP-NY Hire’s primary purpose in the United States would consist of engaging full-time in the talent-recruitment work of CAIEP-NY.

*                *                *

LIU, 57, of Fort Lee, New Jersey, is charged with one count of conspiracy to commit visa fraud, which carries a maximum sentence of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI, and thanked the U.S. Department of State, Department of Homeland Security - Homeland Security Investigations, and the Counterintelligence and Export Control Section of the U.S. Department of Justice’s National Security Division for their assistance.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorney Gillian Grossman is in charge of the prosecution.

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

 

---

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Mark S. McCormack, Special Agent in Charge of the U.S. Food and Drug Administration’s Office of Criminal Investigations Metro Washington Field Office (“FDA”), announced today that the United States has simultaneously filed and settled a civil fraud lawsuit under the False Claims Act against AVALIGN TECHNOLOGIES, INC. (“Avalign”), and its subsidiary INSTRUMED INTERNATIONAL, INC. (“Instrumed,” and together with Avalign, “Defendants”), for manufacturing and selling medical devices that were not cleared by the FDA.  These uncleared devices were used by medical providers in spinal surgeries, circumcisions, and other medical procedures.  The providers submitted claims for reimbursement to Medicare and Medicaid for those procedures.  As part of the settlement, approved in Manhattan federal court by U.S. District Judge Edgardo Ramos, Defendants agreed to pay the Government $9,500,000 and admitted to conduct alleged in the United States’ complaint.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “It is critical that the devices used in some of the most consequential medical procedures have the required FDA approval or clearance.  Unapproved or uncleared devices used in medical procedures present a significant public health and safety risk, and this Office will continue to hold manufacturers of medical devices accountable for profiting from sales of uncleared devices.”    

Special Agent in Charge Mark S. McCormack said:  “U.S. patients rely on FDA oversight to ensure that medical devices are safe and effective.  When companies fail to follow FDA rules, they put patients’ health at risk.  We will continue to investigate and bring to justice companies that attempt to evade FDA requirements and jeopardize the public health.”

As alleged in the complaint filed with the settlement agreement, since 1976, many different kinds of medical devices must, depending on the degree of patient risk, be approved or cleared by the FDA before they can be marketed for use on patients.  There is a grandfather exception for medical devices that were legally in commerce prior to 1976, which are known as “pre-amendment” devices.  To qualify for pre-amendment status, the device’s owner (typically the manufacturer) must, among other things, have marketed the device prior to May 28, 1976.  From 2007 through 2014, Instrumed sold medical devices for which Instrumed had not obtained the required clearances from the FDA and for which Instrumed could not demonstrate that the pre-amendment exception applied.

As part of the settlement, Defendants admitted, among other things, that:

• • In February 2009, Instrumed’s then-head f Quality and Regulatory Affairs acknowledged in an email in response to an inquiry about an Instrumed device, that “we cannot claim pre-amendment because Instrumed was not selling/marketing this device before May 28, 1976.”
  • By n later than April 2009, representatives of Instrumed and CareFusion Corporation (“CareFusion”), a customer of Instrumed pre-amendment devices and distributor of those devices, began exchanging correspondence regarding whether Instrumed and CareFusion could legitimately rely on Instrumed’s invocation of the pre-amendment status exemption to market its devices. 
  • CareFusion repeatedly informed Instrumed that the evidence Instrumed was relying on to justify its claim that certain devices qualified for the pre-amendment status exemption – evidence consisting of excerpts from a catalogue issued by the devices’ original manufacturer, not Instrumed, and an affidavit from an Instrumed employee – was insufficient.  Instrumed never provided CareFusion a satisfactory affidavit to justify its claim that the devices qualified for the pre-amendment status exemption. 
  • In March 2014, the FDA issued a warning letter indicating that it had determined that Instrumed’s devices “are nt pre-amendment devices that were legally on the market in the United States prior to May 28, 1976.”
  • Instrumed ultimately decided t discontinue sale of these products and conducted a recall of these products.  Thrughout the period 2007 to 2014, however, Instrumed continued to sell the devices listed in the settlement agreement.  Sme of the devices were then sold by Instrumed’s customers to hospitals and other medical providers, and used in procedures for which providers submitted claims for reimbursement to federal health care programs. 

Of the $9.5 million that Defendants agreed to pay under the settlement, $8,128,440.60 will go to the United States and $1,371,559.40 will go to states impacted by Defendants’ conduct through separate settlements with those states. 

In connection with this settlement, the United States joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.  The United States had previously reached a settlement with CareFusion, which was entered by the Court on May 7, 2019.  As part of that settlement, CareFusion agreed to pay a total of $3.3 million to the United States and certain states, and admitted to selling devices that Instrumed wrongly claimed qualified for the pre-amendment exception.

Mr. Berman thanked the FDA, the Department of Health and Human Services Office of Inspector General, and the Centers for Medicare and Medicaid Services for their invaluable assistance in this matter.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant United States Attorneys Sharanya Mohan and Mónica P. Folch are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LUIDJI BENJAMIN was sentenced today to 17 years in prison for sex trafficking of minor females.  BENJAMIN was sentenced by U.S. District Judge Jed S. Rakoff, before whom BENJAMIN previously was convicted by a federal jury of one count of sex trafficking of a minor and one count of conspiracy to commit sex trafficking, following a five-day jury trial.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Luidji Benjamin sexually exploited vulnerable girls for his own financial gain.  This sexual predator damaged the lives of at least two young women, advertising their bodies for commercial sex.  Today Benjamin was justly sentenced to 17 years in prison for his callous and depraved exploitation.”

According to the allegations contained in the Indictment and evidence presented during the trial in Manhattan federal court:

From at least in or about Fall 2015 to in or about December 2015, LUIDJI BENJAMIN, a/k/a “Zoe,” the defendant, engaged in sex trafficking and commercial sexual exploitation of two minor victims.  The defendant recruited, enticed, harbored, transported, provided, obtained, and maintained women for the purpose of commercial sex, including one minor victim (“Victim-1”) who resided at a residential treatment facility located in Westchester County, which provided housing for at-risk troubled children and adolescents on behalf of departments of social services for certain counties in New York State.

The defendant recruited Victim-1 to engage in commercial sex through a social media website, and he used Backpage.com and Craiglist.com, online classifieds websites, to post advertisements for commercial sex.  Certain of these advertisements included graphic images, including of Victim-1 performing oral sex on the defendant.  BENJAMIN directed Victim-1 to engage in commercial sex acts in cars and residences throughout Queens, New York. 

The defendant and a co-conspirator also recruited a second minor victim (“Victim-2”) to engage in commercial sex acts.  The defendant and his co-conspirator spent the proceeds of this scheme on marijuana, liquor, and other goods for themselves. 

This prosecution is part of an ongoing investigation that, including LUIDJ BENJAMIN, has charged 19 defendants, set forth in eight indictments, for the sex trafficking of at least 13 minor girls and young adults in New York State’s social services system. 

*                *                *

In addition to his prison sentence, BENJAMIN, 23, of Queens, New York, was sentenced to five years of supervised release.

Any individuals who believe that they have information that may be relevant to this investigation should contact the FBI at 1-212-384-1000 or https://tips.fbi.gov.

Mr. Berman thanked the FBI and the NYPD for their outstanding work in this matter and, in particular, the New York Child Exploitation and Human Trafficking Task Force.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Mollie Bracewell, Jacob Gutwillig, and Richard Cooper are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jonathan D. Larsen, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), announced that ALFRED FERATOVIC pled guilty today in Manhattan federal court to fraudulently under-reporting income in his United States individual income tax returns between 2012 and 2017, while employed as an officer for the New York City Police Department (“NYPD”).  FERATOVIC, who is no longer with the NYPD, was arrested and charged in connection with this offense in June 2019, and he pled guilty today to aiding the preparation of fraudulent tax returns before United States District Judge Ronnie Abrams.

Manhattan U.S. Attorney Berman said:  “Alfred Feratovic admitted today that while enforcing the laws as an NYPD officer, he was violating the law himself by falsifying his tax records and failing to report hundreds of thousands of dollars in income.  Our Office is committed to demonstrating that no one is above the law, and that tax fraud is a serious offense that we will prosecute to the fullest extent of the law.”

Special Agent in Charge Jonathan D. Larsen said:  "As a New York City police officer, Mr. Feratovic betrayed the public trust by not paying his fair share in taxes.  Nobody is above the law and IRS-CI will continue to investigate individuals who underreport rental income."

According to the allegations set forth in the Information filed against FERATOVIC in Manhattan federal court, and statements made in court proceedings, including FERATOVIC’s guilty plea hearing:

Between 2012 and 2017, FERATOVIC was employed as a police officer, and received income from his employment with the NYPD.  FERATOVIC also owned and operated residential rental properties from which he derived significant personal income.  He reported rental income from those properties on his U.S. federal income tax returns.  In particular, FERATOVIC owned and operated more than 10 rental properties in New York and Connecticut.  Rental income he received from those properties was reported to the IRS on certain schedules and filings in FERATOVIC’s tax returns, which he participated in preparing and filing with the IRS.

For each of the tax years 2012 through 2017, FERATOVIC falsely reported to his tax return preparer, and caused to be reported to the IRS, rental income from his properties in amounts significantly below the true rental income he received.  He did so in generally increasing amounts during the relevant years, with the largest under-reporting occurring in 2017, during which he failed to report hundreds of thousands of dollars in rental income.

*                      *                      *

FERATOVIC, 39, of Staten Island, New York, pled guilty to one count of aiding the preparation of fraudulent federal tax returns, which carries a maximum sentence of three years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as the sentence of the defendant will be determined by the court.

Mr. Berman praised the outstanding investigative work of the Special Agents of the United States Attorney’s Office for the Southern District of New York and the Internal Revenue Service, and thanked the New York City Police Department for their valuable assistance in the investigation.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorney Alex Rossmiller is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DEANDRE MORRISON, a/k/a “D-Nice,” was sentenced today to 318 months in prison for the murder of Danny Delgado on August 1, 2011.  MORRISON shot and killed Delgado at the direction of a high-ranking member of the MacBallas, a subset of the Bloods street gang, in the Bronx.  MORRISON was sentenced by U.S. District Judge Denise Cote, after previously pleading guilty to racketeering conspiracy and narcotics conspiracy offenses.

U.S. Attorney Geoffrey S. Berman said:  “Deandre Morrison executed Danny Delgado in cold blood right outside his home.  For this senseless act of violence, Morrison will now serve over 26 years in prison.  We thank the NYPD and the DEA for their tireless work pursuing justice in this case.”

According to court filings and statements made in connection with the sentencing proceeding:

Beginning in or around 2011, MORRISON was an associate of the MacBallas, who sold crack cocaine in MacBalla territory.  On or about August 1, 2011, a high-ranking member of the MacBallas approached MORRISON and asked him to kill Danny Delgado because the high-ranking gang member believed that Delgado had publicly disrespected him.  MORRISON agreed to commit the murder, which was a means for him to increase his status among the MacBallas.  That same night, MORRISON walked to Delgado’s residence on East 153rd Street in the Bronx, walked up to Delgado, and opened fire, shooting Delgado three times, then fled on foot.  Delgado died from his injuries later that night.   After committing this murder, MORRISON gained both membership and heightened status within the MacBallas, and he remained a member of the gang for years.

*                *                *

In addition to the prison term, MORRISON, 28, of the Bronx, New York, was sentenced to 3 years of supervised release.

Mr. Berman praised the outstanding investigative work of the NYPD and the DEA.

The case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Christopher Clore, Maurene Comey, and Justin Rodriguez are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Troy Miller, Director, Field Operations New York, U.S. Customs and Border Protection (“CBP”), announced today that the United States has filed and settled a civil fraud lawsuit against MIROGLIO TEXTILE S.R.L. (“MIROGLIO”), an Italian textile manufacturer, and its wholly owned, New York City-based subsidiary, MIROGLIO TEXTILES USA, INC (“MIROGLIO USA”).  As alleged in the Government’s complaint, MIROGLIO used sham intermediary “sales” to MIROGLIO USA at fraudulent, artificially low values, in order to underpay customs duties on goods that in fact MIROGLIO sold directly to United States customers at higher prices.  Pursuant to the settlement, MIROGLIO and MIROGLIO USA admit and accept responsibility for conduct alleged in the complaint, agree to pay the United States a sum of $650,000, and agree to implement a policy to ensure future compliance with customs laws, including rules governing transactions between related parties like MIROGLIO and MIROGLIO USA.  The settlement was approved yesterday by United States District Judge Louis L. Stanton.

U.S. Attorney Geoffrey S. Berman said:  “Importers cannot use related-party companies to simply make up values out of whole cloth, but must pay duties based on legitimately reported values.  We will be vigilant to ensure that companies pay the customs duties they owe when importing goods into the country.” 

CBP Field Operations Director Troy Miller said:  “The case filed today is a testament to the dedication of our partners in the United States Attorney's Office, Homeland Security Investigations, and our CBP officers, auditors, import specialists, and attorneys in enforcing our nation’s trade laws and punishing those perpetrating this type of fraud.”

The Government’s complaint-in-intervention alleges that for each sale of fabric, decals, and other products MIROGLIO made to a customer in the United States, MIROGLIO created a simultaneous sham transaction to its subsidiary MIROGLIO USA at an artificial discount unrelated to any bona fide market factor.  MIROGLIO and MIROGLIO USA reported that fraudulent sale to CBP as the basis to calculate duties upon entry of the goods into the United States, which MIROGLIO USA claimed it was then independently reselling to end customers. But MIROGLIO USA never made any legitimate payment for its sham purchases from MIROGLIO, never took any inventory aside from a few sample pieces, and played no role in selecting the end customers or setting the terms of sale.  The sham sales by MIROGLIO to MIROGLIO USA existed solely on paper and solely for the purpose of falsely undervaluing goods and reducing the customs duties that would apply.  MIROGLIO and MIROGLIO USA also falsely certified to CBP that these fraudulent transactions were not affected by their related-party status.   

As part of the settlement, MIROGLIO and MIROGLIO USA agreed to pay $650,000 and to implement a written compliance policy that will include measures to ensure that they properly report related-party transactions and pay duties on the full, actual value of all future imports.  In addition, MIROGLIO and MIROGLIO USA admit, acknowledge, and accept responsibility for the following conduct:

• The reported values in the paper transactions between MIROGLIO and MIROGLIO USA were wholly influenced by the two companies’ status as related parties, and were based on an arbitrary discount calculated to reduce customs duties rather than on any legitimate market factors.
• MIROGLIO USA never paid proper consideration and in most cases did not receive or hold the goods that MIROGLIO USA supposedly purchased from MIROGLIO.
• MIROGLIO USA had no meaningful control over the transactions actually underlying the imports in question, as MIROGLIO USA had no authority to determine or negotiate the products to be sold, their prices, or the identity of end customers. 
• MIROGLIO and MIROGLIO USA reported the low, artificial prices on CBP entry forms and associated invoices even though MIROGLIO and MIROGLIO USA were aware at all times that the reported information was incorrect.  As a result, MIROGLIO and MIROGLIO USA caused an underpayment of customs duties that were due to the United States.  

In connection with the filing of the lawsuit and settlement, the Government intervened in a private whistleblower lawsuit that had been filed under seal pursuant to the False Claims Act. 

*                *                *

Mr. Berman thanked CBP for its efforts and ongoing support and assistance with the case.

This case is being handled by the Office’s Civil Frauds Unit.  Assistant United States Attorney Stephen Cha-Kim is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that SEAN PETER, a/k/a “Huggie,” JASON CAMPBELL, a/k/a “Holiday,” a/k/a “Fish,” and STEVEN SYDER were sentenced today for the murder of Brian Gray on October 2, 2012.  PETER was sentenced to 23 years in prison, CAMPBELL was sentenced to 23 years in prison, and SYDER was sentenced to 20 years in prison.  The defendants were convicted following a six-day jury trial in December 2018 before United States District Judge Naomi Reice Buchwald, who imposed today’s sentences.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As the evidence at trial established, the defendants murdered Brian Gray in cold blood and injured two others.  Now, as a result of the jury’s verdict, and the extraordinary efforts of our law enforcement partners, the defendants will spend decades in prison for their heinous

According to the evidence introduced at trial:

On October 2, 2012, CAMPBELL and SYDER spotted Brian Gray and his friends at a neighborhood bodega in the Bronx.  CAMPELL and SYDER soon met up with PETER, who had confronted Gray weeks earlier during an attempted drug robbery.  The defendants traced the path of Gray and his friends and went to PETER’s residence where they armed themselves with guns stashed in a trash can outside.  The defendants then ambushed Gray and his friends outside a residence on Barker Avenue and opened fire, fatally shooting Gray and injuring two others.

*              *             *

In addition to their prison sentences, PETER, 36, CAMPBELL, 33, and SYDER, 36, all of the Bronx, New York, were each sentenced to three years of supervised release.

Mr. Berman praised the investigative efforts of the Violent Crime Task Force of the Federal Bureau of Investigation and the New York City Police Department.  Mr. Berman also thanked the Teaneck Police Department for their assistance with the investigation. 

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Sagar K. Ravi, Jacqueline C. Kelly, and Christopher J. Clore are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Field Division of the United States Postal Inspection Service (“USPIS”), announced today the unsealing of an indictment charging JEFFREY N. CROSSLAND, RAYMOND E. ROBINSON, and STEPHEN C. PARENTE with participating in a conspiracy to defraud four churches and a development company out of more than $3.5 million.  CROSSLAND was arrested this morning at his home in Santa Monica, California, ROBINSON was arrested this morning at his home in Leander, Texas, and PARENTE was arrested this morning at his home in Buford, Georgia. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these three defendants devised a complex scheme to provide unconventional construction loans to churches and other development projects.  But instead of helping to build houses of worship, the defendants allegedly built a house-of-cards, Ponzi-like scheme.  Now all three have been arrested and face 20 years in prison for their crimes.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “This case highlights the fact that when money is involved scammers don’t care where it comes from, even if it comes from parishioners at local churches.  There will always be a day of reckoning and today is that day.”

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

CROSSLAND was a managing member of Crossland Capital Partners, LLC (“Crossland Capital”), a purported broker dealer focused on “real estate related capital raising,” located in Santa Monica, California.  He also controlled JC Funding Group, also located in Santa Monica, which was represented to be a corporate entity overseeing various subsidiary lending companies under the JC Funding name.  PARENTE controlled Eagle Capital Investment Partners, LP (“Eagle Capital”), a purported private financial advisory consultancy practice based in Georgia.  ROBINSON was a minister, and was employed by a church-building company based in Missouri, ran Ray Robinson Ministries – a purported consulting firm for churches – and, along with PARENTE, had an ownership interest in Eagle Capital.

In early 2013, CROSSLAND, ROBINSON, and PARENTE began working together purporting to offer unconventional loans to churches and others for construction projects.  They targeted victims, particularly churches, by capitalizing on ROBINSON’s role as a minister and builder of churches.  ROBINSON was responsible for finding clients, PARENTE was responsible for reviewing clients’ financial profiles and assisting them through the loan application process, and CROSSLAND was supposed to provide the funding for the loans. 

CROSSLAND, ROBINSON, and PARENTE perpetrated a scheme in which they defrauded clients (the “Victims”) by inducing them to enter into purported loan agreements, in which the Victims were required to deposit money into a “production account” or “escrow holding account” at an Ohio bank (the “Escrow Account”).  Based on the defendants’ false representations that the deposited money would remain safe and secure in the Escrow Account, the Victims deposited a total of more than $3.5 million into the Escrow Account.  

Contrary to the defendants’ representations, the money did not remain in the Escrow Account.  Shortly after the Victims wire-transferred their deposit money, an attorney who controlled the Escrow Account (“Attorney-1”), acting on CROSSLAND’s instructions, transferred more than half of the deposit money to bank accounts controlled by an individual in Michigan (“Individual-1”) and an entity controlled by Individual-1.  Individual-1 then transferred much of that deposit money to bank accounts outside the United States.  Attorney-1 also transferred nearly $1 million of the deposit money to the bank account of a New Jersey law firm.  Thereafter, approximately $400,000 was transferred to a bank account controlled by a second individual (“Individual-2”), and the remaining approximately $600,000 was used to pay Individual-2’s tax obligations and legal fees.

In order to perpetuate the scheme and conceal the fraud, CROSSLAND had Attorney-1 and Individual-1 transfer some of certain Victims’ deposit money to other Victims and falsely represent that these money transfers were loan draw payments.  In actuality, CROSSLAND never had money to fund the Victims’ loans.  In addition to providing certain Victims with funds the defendants claimed to be loan draw payments, in order to perpetuate the scheme and conceal the fraud, CROSSLAND and ROBINSON also participated in telephone conversations with, and sent emails to, the Victims, with the intention of (a) lulling them into believing that their loans would be funded and/or their deposits returned, and (b) preventing them from reporting their conduct to law enforcement authorities and/or taking legal action against them.

In this way, from April 2013 through March 2015, CROSSLAND, ROBINSON, and PARENTE fraudulently induced Victims to transfer more than $3.5 million to the Escrow Account.  The purported loans were never funded and millions of dollars in deposits were lost.  

*                *                *

CROSSLAND, 63, of Santa Monica, California, ROBINSON, 67, of Leander, Texas, and PARENTE, 51, of Buford, Georgia, are each charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the U.S. Postal Inspection Service and Special Agents of the United States Attorney’s Office.  Mr. Berman also thanked the Westchester County District Attorney’s Office, the Knoxville, Tennessee, field office of the Federal Bureau of Investigation, and the United States Attorney’s Office for the Eastern District of Tennessee for their assistance.

The case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorney Margery B. Feinzig is in charge of the prosecution.

 

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[1]  As the introductory phrase signifies, the entirety of the text of the Indictment charging the defendants and the descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Raymond P. Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), Scott J. Lampert, Special Agent in Charge of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of MICHAEL PAULSEN, the owner and operator of a pharmacy located in Staten Island.  The Indictment unsealed today charges PAULSEN with conspiring to illegally distribute oxycodone, committing health care fraud, and providing “kickbacks” to customers from Medicare and Medicaid reimbursements to induce them to obtain substances from his pharmacy.  PAULSEN will be presented before U.S. Magistrate Judge James L. Cott later today.  The case is assigned to U.S. District Judge Paul A. Crotty.

U.S. Attorney Geoffrey S. Berman stated:  “As alleged, the defendant abused his position as a pharmacy owner and his access to controlled substances for his personal gain, directly contributing to the glut of highly addictive opioids flooding the streets of the New York City area.  Now he faces justice for his contribution to the opioid epidemic plaguing our communities.”

DEA Special Agent in Charge Raymond P. Donovan said:  “Opioid abuse is America’s deadliest enemy killing more than 130 people daily.  It is alleged that lives were endangered every time Michael Paulsen opened Regal Remedies’ front or back door to peddle unprescribed opioids.  Working with our local, state, and federal partners, DEA’s priority is to investigate those responsible for pushing diverted pills, heroin, and fentanyl into our communities.”

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “Fueled by greed, opioid fraud schemes have devastated many communities around this country.  We will continue to work with our law enforcement partners, and all available resources will be used to thoroughly investigate such alleged crimes.”

NYPD Commissioner James P. O’Neill said:  “Opioids have a well-known history of destroying lives and devastating communities and this is why the NYPD and its law enforcement partners work relentlessly to bring to justice those who traffic them and seek to profit from them illegally.  I want to thank the investigators and prosecutors who worked on this case - it is their dedication and hard work that keeps our communities safe.”

According to the allegations in the Indictment[1]:

From approximately March 2016 to September 2019, PAULSEN, who owned and operated a pharmacy in Staten Island, conspired with others to unlawfully distribute thousands of oxycodone pills to individuals who PAULSEN knew had no legitimate medical need for them, in exchange for lucrative cash payments.

In total, during that period, PAULSEN ordered for his pharmacy more than 170,000 oxycodone pills from pharmaceutical suppliers.  However, during the same period, PAULSEN’s pharmacy dispensed approximately only 62,000 of those oxycodone pills with a prescription, or slightly more than one-third of the oxycodone pills that were ordered. 

PAULSEN instead distributed significant quantities of oxycodone pills to the pharmacy’s customers, including his co-conspirators, who either did not have a prescription or had fraudulent prescriptions, in exchange for thousands of dollars.  PAULSEN knew that at least some of those oxycodone pills would be resold at the street level.  PAULSEN is not a registered pharmacist and is not authorized to distribute controlled substances such as oxycodone in New York State. 

While operating his pharmacy, and in connection with his unlawful distribution of oxycodone pills, PAULSEN also perpetrated a scheme to defraud Medicare, Medicaid, and other insurance providers.  PAULSEN instructed customers of his pharmacy to order particular products that were not medically necessary.  PAULSEN then billed Medicare, Medicaid, and other insurance providers for reimbursements for those products, and provided a portion of those reimbursements as financial compensation to the customers.

*                *                *

PAULSEN, 41, of Staten Island, is charged with one count of conspiring to distribute and possess with the intent to distribute oxycodone illegally, which carries a maximum sentence of 20 years in prison; one count of committing health care fraud, which carries a maximum sentence of 20 years in prison; and one count of paying kickbacks to induce individuals to purchase items under a Federal health care program, 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 sentence would be determined by a judge.

Mr. Berman 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 and New York City Department of Investigation and New York State Department of Health Bureau of Narcotics Enforcement.  Mr. Berman also thanked the HHS-OIG and the New York City Human Resources Administration for their work on the investigation.

Parts of this case were conducted under the auspices of the Organized Crime Drug Enforcement Task Force (“OCDETF”), a partnership among federal, state, and local law enforcement agencies.  The principal mission of the OCDETF program is to identify, disrupt, and dismantle the most serious drug trafficking, weapons trafficking, and money laundering organizations and those primarily responsible for the nation’s illegal drug supply.

The prosecution of this case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Elinor Tarlow and Daniel Wolf 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID MIDDENDORF, the former head of KPMG’s National Office, also known as the Department of Professional Practice (the “DPP”), was sentenced today to one year and one day in prison for participating in a scheme to defraud the Public Company Accounting Oversight Board (the “PCAOB”) by obtaining, disseminating, and using confidential lists of which KPMG audits the PCAOB would be reviewing so that KPMG could improve its performance in PCAOB inspections.  Middendorf was convicted of wire fraud charges in March 2019 following a month-long trial before U.S. District Judge J. Paul Oetken, who imposed today’s sentence. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As the head of the KPMG department responsible for the quality of its audits, David Middendorf was at the top of a chain of corruption that threatened to corrupt KPMG and the PCAOB’s inspections process.  Today’s sentence recognizes the harm this fraudulent scheme caused to the PCAOB and the auditing profession more generally.” 

According to the evidence presented at trial:

The PCAOB is a nonprofit corporation overseen by the SEC that inspects the audit work performed by registered accounting firms (“Auditors”) with respect to the financial statements of publicly traded companies (“Issuers”).  The PCAOB inspects the largest U.S. accounting firms on an annual basis.  As part of the inspection process, the PCAOB chooses a selection of audits performed by an accounting firm for a closer review, commonly referred to as an inspection.  Until shortly before an inspection occurs, the PCAOB does not disclose which audits are being inspected, or the focus areas for those inspections, because it wants to ensure that an Auditor does not perform additional work or modify its work papers in anticipation of an inspection.  Following the completion of an inspection, the PCAOB issues an Inspection Report containing any negative findings or “comments” with respect to both the specific audits reviewed and the accounting firm more generally. 

KPMG is one of the largest accounting firms in the world.  In recent years, KPMG fared poorly in PCAOB inspections and in 2014 received approximately twice as many comments as its competitor firms.  By at least in or about 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel.  At the time, MIDDENDORF was head of KPMG’s DPP, which was broadly responsible for the quality of KPMG’s audits and KPMG’s performance in PCAOB inspections. 

KPMG’s efforts to improve inspection results, however, were not limited to legitimate means.  Instead, between 2015 and 2017, MIDDENDORF and others worked to illicitly acquire valuable confidential PCAOB information concerning which KPMG audits would be inspected in an effort to game the system and improve inspection results.  For example, beginning in 2015, Brian Sweet, a former PCAOB employee who had joined KPMG, provided MIDDENDORF, Thomas Whittle, and others with the PCAOB’s confidential 2015 list of inspection selections, at MIDDENDORF’s request, so that the information could be used by MIDDENDORF, Whittle, and others to improve KPMG’s performance on PCAOB inspections. 

In March 2016, Jeffrey Wada, an Inspections Leader at the PCAOB, provided Cynthia Holder, a KPMG employee, with confidential information on certain of the PCAOB’s 2016 inspection selections.  Holder, in turn, provided the 2016 inspection selections to Sweet, who passed them to MIDDENDORF, Whittle, and others.  MIDDENDORF, Whittle, Sweet, and others then agreed to launch a stealth program to “re-review” the audits that had been selected, and agreed to keep their stealth re-reviews within their “circle of trust.”  In order to cover up their illicit conduct, other KPMG engagement partners were given a false explanation for the re-reviews.  The stealth re-review program allowed KPMG to strengthen its work papers, and, in some cases, identify deficiencies or perform new audit work that had not been done during the live audit.

In January 2017, Wada, who had been passed over for promotion at the PCAOB, again stole valuable confidential PCAOB information, misappropriating a preliminary list of confidential 2017 inspection selections for KPMG audits and passing it on to Holder, referring to it in a voicemail as the “grocery list.”  At the same time, Wada provided Holder with his resume and sought Holder’s assistance in helping him to acquire employment at KPMG.  Sweet shared with Whittle the preliminary inspection selections provided by Wada; Wada in turn shared them with MIDDENDORF, who approved their use to improve the audits on the list.

In February 2017, Wada texted Holder saying, “I have the grocery list. . . . All the things you’ll need for the year.”  Wada then spoke to Holder and provided her with the full confidential 2017 final inspection selections.  Holder again shared the stolen information with Sweet, who shared it with MIDDENDORF, Whittle, and others so that it could be acted upon to improve the audits on the list. 

In 2017, a KPMG partner who received early notice that her engagement was on the confidential 2017 inspection list reported the matter, and it was ultimately reported to KPMG’s Office of General Counsel.            

*                      *                      *           

            In addition to a prison sentence, MIDDENDORF, 55, of Marietta, Georgia, was sentenced to three years of supervised release.  A determination of the restitution amount was deferred to a later date.   

Mr. Berman praised the investigative work of the United States Postal Inspection Service 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 Rebecca Mermelstein, Jordan Estes, Margaret Graham, and Martin Bell are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that YMER SHAHINI pled guilty today before United States District Judge P. Kevin Castel in connection with his role in a scheme to defraud shareholders of a publicly traded company and the investing public.

U.S. Attorney Geoffrey S. Berman said:  “Ymer Shahini has now admitted to his vital role in a multimillion-dollar fraud.  He knowingly served as a straw man to conceal beneficial ownership of stock, which facilitated a fraudulent scheme that reaped tens of millions in illegal profits.”           

According to the allegations contained in the Indictment:

From 2009 to 2011, YMER SHAHINI, along with co-defendants Jason Galanis, John Galanis, Derek Galanis, Gary Hirst, and Gavin Hamels, engaged in a scheme to defraud the shareholders of a publicly traded company called Gerova Financial Group, Ltd. (“Gerova”), and the investing public, by obtaining secret control over millions of shares of Gerova stock and then manipulating the market for the stock as the defendants caused their secretly held shares to be sold.  As part of the scheme, the defendants fraudulently generated demand for Gerova stock by bribing investment advisers to purchase for client accounts the Gerova stock that was sold by the defendants, thereby enabling the defendants to cash out from the scheme and make millions in illegal profits.   

As a part of the scheme to defraud, Jason Galanis obtained such control over Gerova so as to be able to cause Gerova to enter into transactions of his design, and for his benefit, including the issuance of Gerova stock.  Jason Galanis obtained this control without identifying himself as an officer or director of Gerova to avoid the SEC-imposed bar that prohibited him from holding such positions at publicly traded companies.  Among other means and methods, Jason Galanis, with the assistance of Gary Hirst, caused more than five million shares of Gerova stock, which represented nearly half the company’s public float and which was intended for Jason Galanis’s ultimate benefit, to be issued to and held in the name of YMER SHAHINI, who knowingly served as a foreign nominee for Jason Galanis.  SHAHINI, Jason Galanis, John Galanis, Derek Galanis, and Hirst understood that the purpose of the stock grant to SHAHINI was to disguise Jason Galanis’s ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock. 

At the same time, and as a further part of the scheme to defraud, John Galanis and Derek Galanis, among others, with the knowledge and approval of YMER SHAHINI and Jason Galanis, opened and managed brokerage accounts in the name of SHAHINI (the “SHAHINI Accounts”), effected the sale of Gerova stock from the SHAHINI Accounts, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public Jason Galanis’s ownership of and control over the Gerova stock.

Jason Galanis also fraudulently induced investment advisers, including Gavin Hamels and others, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser.  By causing the purchase of Gerova stock at the time, quantity, and/or price of their choosing, Jason Galanis was able to, among other things, effectuate the sale of large quantities of Gerova stock from the SHAHINI Accounts that Jason Galanis controlled while artificially maintaining the price of Gerova stock through coordinated match trading.  Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public.  As a result, Jason Galanis and his co-conspirators reaped nearly $20 million in profits.

*                *                *

SHAHINI, 49, a citizen of Kosovo, was the first defendant extradited to the United States pursuant to the extradition treaty between the United States and the Republic of Kosovo, which went into effect on June 13, 2019.  SHAHINI pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison.  SHAHINI will be sentenced by Judge Castel on December 12, 2019, at 2:15 p.m.

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 a judge.

Mr. Berman praised the work of the United States Postal Inspection Service and the Federal Bureau of Investigation, 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 U.S. Attorneys Brian Blais, Rebecca Mermelstein, and Elizabeth Espinosa are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Raymond P. Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), announced today that the Dominican Republic’s former Consul General to Jamaica, JEREMIAS JIMENEZ CRUZ, and a co-conspirator have been charged in Manhattan federal court with conspiring to import cocaine into the United States and conspiring to launder money.  JIMENEZ CRUZ was arrested on September 6 and presented on September 7 before United States Magistrate Judge Sarah Netburn.  The second defendant has not yet been arrested.  The case has been assigned to United States District Judge Kimba M. Wood.

U.S. Attorney Geoffrey S. Berman said:  “Jeremias Jimenez Cruz, the Dominican Republic’s former Consul General to Jamaica, allegedly used his high-level role in Dominican government to traffic large quantities of cocaine into the United States.  When senior foreign officials invidiously conduct illegal activity in the United States, this Office and our law enforcement partners will act swiftly and resolutely to bring them to justice.”

DEA Special Agent in Charge Raymond Donovan said:  “Greed is the underlying motivation for drug traffickers worldwide.  And saving lives is law enforcement’s mission, which leads to investigations like this one; Jeremias Jimenez Cruz is alleged to have used his position and resources to facilitate trafficking cocaine from the Dominican Republic to the United States.  This is another example of how DEA and our law enforcement partners are focused on identifying, investigating and dismantling drug trafficking organizations responsible for fueling drug addiction.”

IRS-CI New York Special Agent in Charge Jonathan D. Larsen said:  "As alleged, Jimenez Cruz used his high level connections to launder drug proceeds. IRS-CI special agents will continue to work closely with our law enforcement partners globally in following the money to stop the flow of these illicit profits back to the drug trafficking organizations."  

According to the allegations in the Indictment[1] and statements made in Court:

JIMENEZ CRUZ is a former high-ranking government official in the Dominican Republic whose positions have included Vice Consul of the Dominican Republic to Germany, Consul General of the Dominican Republic to Jamaica, and president of the National Christian Movement.  As alleged, JIMENEZ CRUZ and his co-conspirators used JIMENEZ CRUZ’s position, connections, and private plane to traffic large quantities of cocaine, including for importation to the United States, and to launder drug proceeds.

*                      *                      *

JIMENEZ CRUZ, 50, of the Dominican Republic, is charged with two counts:  (1) conspiring to import at least five kilograms of cocaine into the United States, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; and (2) 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 the judge.  

Mr. Berman praised the outstanding investigative work of the DEA.  The arrest was the result of an investigation by the New York Strike Force, a crime-fighting unit comprised of federal, state, and local law enforcement agencies supported by the Organized Crime Drug Enforcement Task Force (OCDETF) and the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA).  

The Strike Force is housed at the DEA’s New York Division and includes agents and officers of the DEA and its Special Operations Division, the New York City Police Department, the New York State Police, New York City Sheriff’s Office, Immigration and Customs Enforcement – Homeland Security Investigations, the U. S. Internal Revenue Service Criminal Investigation Division, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, U.S. Customs and Border Protection, U.S. Secret Service, the U.S. Marshals Service, New York National Guard, the Clarkstown Police Department, U.S. Coast Guard, Port Washington Police Department, and New York State Department of Corrections and Community Supervision.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Adam S. Hobson and Mollie Bracewell are in charge of the prosecution. 

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that KIFANO JORDAN, a/k/a “Shotti,” was sentenced to 15 years in prison in connection with a robbery and a non-fatal shooting carried out as part of his participation in the Nine Trey Gangsta Bloods (“Nine Trey”).  JORDAN pled guilty on March 28, 2019, before U.S. District Judge Paul A. Engelmayer, who imposed today’s sentence.

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

Nine Trey was a criminal enterprise involved in committing numerous acts of violence, including shootings, robberies, and assaults in and around Manhattan and Brooklyn.  Members and associates of Nine Trey engaged in violence to retaliate against rival gangs, to promote the standing and reputation of Nine Trey, and to protect the gang’s narcotics business.  Members and associates of Nine Trey enriched themselves by committing robberies and selling drugs, such as heroin, fentanyl, furanly fentanyl, MDMA, dibutylone, and marijuana. 

JORDAN, a member of Nine Trey, pled guilty to one count of using and possessing a firearm in furtherance of a crime of violence, for an assault with a dangerous weapon that occurred in Manhattan on April 3, 2018; he also admitted to discharging a firearm in furtherance of a crime of violence for a shooting that occurred in Brooklyn on April 21, 2018.

*                *                *

In addition to the prison term, JORDAN, 36, of Brooklyn, New York, was sentenced to 5 years of supervised release.   

Mr. Berman praised the outstanding investigative work of the New York City Police Department, Homeland Security Investigations, and the Bureau of Alcohol, Tobacco, Firearms and Explosives.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Michael Longyear, Jacob Warren, Jonathan Rebold, and Sebastian Swett are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JANELL THOMPSON, the former vice-president, chief financial officer, and co-owner of a consumer products wholesaler based in California, pled guilty today before U.S. District Judge Naomi Reice Buchwald to using her business to distribute massive wholesale quantities of smokeable synthetic cannabinoids throughout the U.S. and to laundering the proceeds of that scheme.

U.S. Attorney Geoffrey S. Berman said:  “Janell Thompson’s position as a company CFO and vice president masked her true identity:  a drug trafficker and money launderer.  Through her wholesale company, Thompson distributed massive quantities of illegal and potentially dangerous synthetic cannabinoids throughout the U.S.  Thompson now faces 40 years in prison for her crimes.”

According to the allegations in the Superseding Information, other documents filed in the case, and statements made in court:

From February 2014 until February 2019, THOMPSON was the vice-president, chief financial officer, and co-owner of JK Wholesale LLC, a consumer products retailer based in Carlsbad, California.  During that time period, THOMPSON used JK Wholesale LLC and its affiliated corporate entities to operate a scheme to distribute large quantities of smokeable synthetic cannabinoids (“SSC”), containing controlled substances and controlled substance analogues, throughout the U.S.  SSC, colloquially referred to as “K2” or “Spice,” can be addictive, but are often marketed as safe, legal alternatives to marijuana.  In fact, SSC are not safe and may affect the brain much more powerfully than marijuana; their actual effects can be unpredictable and, in some cases, more dangerous or even life-threatening.

Some of the SSC distributed by THOMPSON’s scheme were branded with colorful graphics and distinctive names, including “Yolo.”  The branded SSC sometimes were misleadingly marketed as “herbal incense.”  Other of the SSC were distributed in bulk quantities. 

*                      *                      *

THOMPSON, 42, of Carlsbad, California, pled guilty to one count of conspiracy to distribute a controlled substance and a controlled substance analogue and one count of conspiracy to commit money laundering.  Each count carries a maximum sentence of 20 years in prison. 

THOMPSON is scheduled to be sentenced by Judge Buchwald on January 27, 2019.

In addition to THOMPSON, four other defendants have been charged in this case:

On January 31, 2019, Jonathan Riendeau, 39, of Port Saint Lucie, Florida, pled guilty pursuant to a cooperation agreement with the Government before Judge Buchwald to six counts: three counts of conspiracy to unlawfully distribute controlled substances and controlled substance analogues; two counts of unlawful importation of controlled substances and controlled substance analogues; and one count of unlawfully distributing a controlled substance.  Each count carries a maximum sentence of 20 years in prison.  Riendeau’s sentencing has not yet been scheduled.

On April 23, 2019, Jade Plante, 40, of Port Saint Lucie, Florida, pled guilty before Judge Buchwald to one count of conspiracy to distribute and possess with intent to distribute a controlled substance analogues.  On August 7, 2019, Plante was sentenced by Judge Buchwald to eight months in prison and two years of supervised release, and ordered to forfeit $100,000.

On February 7, 2019, Daniel Borer, 42, of Adams, Massachusetts, and Josephine McLaughlin, 65, of Stoneham, Massachusetts, were charged in a Superseding Indictment with three counts of conspiring to unlawfully import and distribute controlled substances and controlled substance analogues.  Each count carries a maximum sentence of 20 years in prison.  Trial has not yet been scheduled for Borer and McLaughlin. 

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.

Mr. Berman praised the outstanding investigative work of the New York City Police Department, the United States Postal Inspection Service, and Homeland Security Investigations.  He also thanked the Drug Enforcement Administration, the Naval Criminal Investigative Service, and the United States Attorney’s Office for the Eastern District of North Carolina for their assistance.  The long-term investigation of this case was partially funded by the New York/New Jersey High Intensity Drug Trafficking Area, a federal grant program that invests in law enforcement partnerships to build safe and healthy communities.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Daniel G. Nessim and Robert B. Sobelman are in charge of the prosecution. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Peter C. Fitzhugh, the Special Agent in Charge of the New York Field Office of Homeland Security Investigations (“HSI”), James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), and Margaret Garnett, Commissioner of the New York City Department of Investigation (“DOI”), announced today the unsealing of an Indictment charging ROBERT WILSON, a/k/a “RO,” KEVIN CROSBY, a/k/a “Sama,” and YEFREL BRITO, a/k/a “Mini,” with murder in aid of racketeering, conspiracy to commit murder in aid of racketeering, and firearms offenses in connection with the murder of Nelson Ramos on January 6, 2019, in the Bronx.  WILSON is also charged with participating in a racketeering conspiracy.

WILSON and CROSBY were arrested last night. BRITO was already in federal custody, having been previously charged with narcotics trafficking. CROSBY was presented today before Magistrate Judge Sarah Netburn.  WILSON and BRITO will be presented this afternoon before Magistrate Judge Debra Freeman.  The case is assigned to U.S. District Judge Jesse M. Furman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, these defendants are responsible for the cold-blooded murder of Nelson Ramos earlier this year.  We commend the extraordinary efforts of our law enforcement partners to bring these defendants to justice.”

HSI Special Agent-in Charge Peter C. Fitzhugh said:  “These gang members are alleged to not only brandish firearms and deal drugs in their own Bronx neighborhood, but they are also known to threaten acts of violence against rival gangs.  HSI will continue to work with the NYPD, and its law enforcement partners, to rid our city streets of gangs, like the Stevenson Commons Crew, and the drugs and violence they promote.”

DOI Commissioner Margaret Garnett said:  “This investigation demonstrates how gang violence, and the murders, drugs and other crimes associated with it, rips at the fabric of communities, terrorizes residents, and destroys New Yorkers’ lives.  Many of the charged crimes in this case took place in public housing in the Bronx, and DOI contributed its expertise on how violence and criminality can take root in these communities. Working in partnership with the NYPD, the New York Field Office of Homeland Security Investigations, and the United States Attorney’s Office for the Southern District of New York, DOI is proud to be part of the team to protect New York neighborhoods and hold accountable those individuals who perpetrate serious and devastating crimes.”

NYPD Police Commissioner James P. O’Neill said:  “Exceptional collaboration among the NYPD and its local law enforcement partners have resulted in the successful dismantling of this violent street gang.  To ensure the safety of our neighborhoods, we must continue to be vigilant about combating gang activity wherever it occurs.”

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

WILSON and CROSBY are members or associates of a racketeering enterprise known as the Stevenson Commons Crew.  In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of the Stevenson Commons Crew committed, conspired, attempted, and threatened to commit acts of violence against rival gangs, including murder and robbery; conspired to distribute and possess with intent to distribute narcotics; and obtained, possessed and used firearms, including by brandishing and discharging them. 

BRITO is a member or associate of a racketeering enterprise known as Sex Money Murder, a criminal organization whose members and associates engaged in, among other things, murder, attempted murder, and narcotics trafficking. 

On January 6, 2019, WILSON, CROSBY, and BRITO murdered Nelson Ramos in the vicinity of 800 Soundview Avenue in the Bronx, New York.

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WILSON, 28, CROSBY, 23, and BRITO, 21, all from the Bronx, New York, are each charged with one count of murder and assault with a deadly weapon in aid of racketeering, which carries a maximum sentence of death or life in prison, and a mandatory minimum sentence of life in prison; one count of conspiracy to commit murder in aid of racketeering, which carries a maximum sentence of 10 years in prison; and one count of murder through use of a firearm, which carries a maximum sentence of death or life in prison, and a mandatory minimum sentence of five years in prison.  WILSON is also charged with one count of racketeering conspiracy, which carries a maximum sentence of life in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Berman praised the investigative work of HSI and the NYPD.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Andrew K. Chan and Justin V. Rodriguez are in charge of the prosecution.

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

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

Geoffrey S. Berman, United States Attorney for the Southern District of New York announced the arrest of HICHAM KABBAJ, a former senior manager in Manhattan for a global internet company (“Company-1”), for wire fraud and transacting in criminally derived proceeds.  KABBAJ was arrested today and presented before Magistrate Judge Debra Freeman .

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

From at least August 2015 until at least May 2019, KABBAJ engaged in a scheme to defraud his employer into paying a vendor named Interactive Systems for various IT products and services.  Pursuant to the scheme, Interactive Systems sent approximately 52 invoices to KABBAJ for payment.  In reality, Interactive Systems was a shell company controlled by KABBAJ, and money Company-1 sent Interactive Systems was quickly transferred to KABBAJ’s own bank accounts.  From in and about December 2016 until in and about July 2019, Company-1 paid Interactive Systems more than $4.5 million.

KABBAJ, 48, of Floral Park, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of transacting in criminally derived property, which carries a maximum sentence of 10 years.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

This case is being investigated by Special Agents of the U.S. Attorney’s Office, with the assistance of the Internal Revenue Service.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Ni Qian and Andrew A. Rohrbach are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Wendy Woolcock, Special Agent in Charge of the Special Operations Division of the U.S. Drug Enforcement Administration (“DEA”), announced today that former Honduran National Police officer MAURICIO HERNANDEZ PINEDA (“HERNANDEZ PINEDA”) was charged in Manhattan federal court with conspiring to import cocaine into the United States and related weapons offenses involving the use and possession of machineguns and destructive devices.  The case is assigned to U.S. District Judge P. Kevin Castel.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Today’s charges against a high-ranking former Honduran National Police officer are disturbing.  Honduras has long been a corridor for drug traffickers to ship their drugs to the United States from South America.  As alleged, Mauricio Hernandez Pineda betrayed his obligations as a police officer to uphold his country’s laws and prevent trafficking through his country, and instead facilitated the shipments of tons of cocaine that eventually made its way to the U.S.  Hernandez Pineda will soon have to answer for his alleged crimes in a U.S. court.”

DEA Special Agent in Charge Wendy Woolcock said:  “DEA continues to uncover corruption at the highest levels of government and law enforcement across the world, including Honduras.  This alleged criminal conspiracy involved huge amounts of cocaine trafficking into the United States.  DEA will continue to attack global criminal networks who pose a direct threat to our safety and security. We look forward to seeing Mr. Hernandez-Pineda, a former high-ranking Honduran National Police official, face justice in a U.S. courtroom.”    

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

From 2000 up to and including 2018, multiple drug trafficking organizations in Honduras and elsewhere worked together, and with support from certain prominent public and private individuals, including Honduran politicians and law enforcement officials, to receive multi-ton loads of cocaine sent to Honduras from, among other places, Colombia via air and maritime routes, and to transport the drugs westward in Honduras toward the border with Guatemala and eventually to the United States.  For protection from official interference, and in order to facilitate the safe passage through Honduras of multi-hundred-kilogram loads of cocaine, drug traffickers paid bribes to public officials, including certain members of the National Congress of Honduras.

HERNANDEZ PINEDA is a former high-ranking member of the Honduran National Police who participated in and supported the drug trafficking activities of, among others, his cousin, Juan Antonio Hernandez Alvarado, also known as “Tony Hernandez.”  Among other things, HERNANDEZ PINEDA provided armed security, including individuals carrying machineguns, for multi-ton cocaine shipments sent through Honduras, and provided his co-conspirators with sensitive law enforcement information concerning planned operations so they could evade detection while transporting cocaine through Honduras.  In exchange, HERNANDEZ PINEDA received hundreds of thousands of dollars in drug proceeds.  

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HERNANDEZ PINEDA, 47,  of Honduras, is charged with three counts:  (1) conspiring to import cocaine into the United States, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; (2) using and carrying machine guns and destructive devices during, and possessing machine guns and destructive devices in furtherance of, the cocaine-importation conspiracy, which carries a mandatory minimum sentence of 30 years in prison and a maximum sentence of life in prison; and (3) conspiring to use and carry machine guns and destructive devices during, and to possess machine guns and destructive devices in furtherance of, the cocaine importation conspiracy, which carries a maximum sentence of life in prison.  

The potential mandatory minimum and maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding efforts of the DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and Tegucigalpa Country Office, as well as the Office of International Affairs of the Justice Department’s Criminal Division.

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Emil J. Bove III, Amanda L. Houle, Mathew J. Laroche, and Jason A. Richman are in charge of the prosecution.

The charges contained in the Superseding Indictment are merely allegations, 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 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.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced today that ELIAS HERBERT HAFEN, a former financial adviser at two investment banks with offices in Manhattan, pled guilty today to investment adviser fraud in connection with having defrauded his clients out of hundreds of thousands of dollars.  HAFEN surrendered to law enforcement and was presented before Magistrate Judge Debra Freeman in Manhattan federal court this afternoon, and he pled guilty before District Judge Alvin K. Hellerstein this afternoon.

U.S. Attorney Geoffrey S. Berman said:  “Elias Hafen promised his investment clients significant returns in a ‘special’ fund.  With fake statements and guaranteed returns, Hafen was every investor’s worst nightmare.  He never invested his clients’ money and instead used it to fund his own lavish lifestyle.  Today, Hafen admitted his crimes and he will soon likely spend time in prison for his misdeeds.”

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

From 2013 until 2018, HAFEN engaged in a scheme to defraud at least 11 of his financial advisory clients into believing that HAFEN had access to a high-yield investment fund with guaranteed returns, which was not affiliated with the investment bank at which HAFEN worked.  On HAFEN’s advice, these clients transferred hundreds of thousands of dollars directly to HAFEN’s personal bank account for investment in the purported investment fund over the years that HAFEN engaged in his fraudulent scheme.  HAFEN also created fictitious “Investor’s Statements” bearing the name of a non-existent investment company purporting to detail the status of his victims’ investments.  In reality, however, there was no investment fund at all; HAFEN was using the victims’ funds to pay for a lavish lifestyle including custom men’s accessories and an expensive collection of artwork.

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HAFEN, 64, of New Canaan, Connecticut, pled guilty to one count of investment adviser fraud, which carries a maximum penalty of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

HAFEN is scheduled to be sentenced by Judge Hellerstein on January 14, 2020.

Mr. Berman praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action.

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

Behzad Pourghannad pleaded guilty today to participating in a conspiracy to export carbon fiber from the United States to Iran between 2008 and 2013.

“Pourghannad was in Iran while he worked to obtain carbon fiber from the United States contrary to U.S. law,” said Assistant Attorney General John C. Demers for National Security.  “He may have believed he was out of U.S. law enforcement’s reach, but thanks in part to assistance from the German government, which extradited him, this case is now another example of the Department’s ability to hold Iran’s illicit procurement agents accountable, regardless of where they work.”    

Manhattan U.S. Attorney Geoffrey S. Berman said: “Behzad Pourghannad has now admitted that he conspired to circumvent repeatedly U.S. export controls on carbon fiber, a substance with numerous military and aerospace applications.  Together with the FBI, the Commerce Department, and all of our law enforcement partners, we will continue to protect our national security.”

According to the allegations contained in the indictment and statements made at Pourghannad’s guilty plea:

Between 2008 and July 2013, Pourghannad and his two codefendants, Ali Reza Shokri and Farzin Faridmanesh lived and worked in Iran.  During that period, they worked together to obtain carbon fiber from the United States and surreptitiously export it to Iran via third countries.  In particular, Shokri worked to procure many tons of carbon fiber from the United States; Pourghannad agreed to serve as the financial guarantor for large carbon fiber transactions; and Faridmanesh agreed to serve as the trans-shipper.  Carbon fiber has a wide variety of uses, including in missiles, aerospace engineering and gas centrifuges that enrich uranium. 

In or about late 2007 and early 2008, Shokri and a Turkey-based co-conspirator (CC-2) successfully arranged for the illegal export and transshipment of carbon fiber from the United States to an Iranian company associated with Shokri (Iranian Company-1).  Specifically, CC-2 contacted a United States supplier of carbon fiber, who in turn enlisted a third individual (Individual-1) for assistance with the transaction.  Through Individual-1, CC-2 purchased carbon fiber from the United States supplier and arranged for the shipment of the carbon fiber from the United States, through Europe and Dubai, United Arab Emirates, to Iranian Company-1, operated by Shokri, in Iran.

In or about May 2009, Pourghannad and Shokri attempted to arrange another illegal purchase and transshipment of carbon fiber from the United States to Iran.  Specifically, Individual-1 returned a signed contract to Pourghannad for Shokri’s purchase of a large quantity of carbon fiber.  Individual-1 then purchased the carbon fiber from a United States supplier and arranged for the carbon fiber to be exported from the United States to a third country (Country-1), en route to Iran.  Country-1 authorities, however, interdicted the carbon fiber shipment before it could be trans-shipped to Iran.

In or about 2013, Pourghannad, Shokri, and Faridmanesh again attempted to illegally procure and export carbon fiber from the United States to Iran.  In the 2013 transaction, Shokri and Pourghannad negotiated with Individual-1 for the purchase and trans-shipment to Iran of more than five tons of carbon fiber.  Faridmanesh and Pourghannad further agreed with Individual-1 that the carbon fiber would be trans-shipped from the United States to Iran through Tbilisi, Georgia, with Faridmanesh to serve as the trans-shipper.  Faridmanesh specifically instructed Individual-1 to change the shipping labels on the carbon fiber to reference “acrylic” or “polyester,” rather than “carbon fiber.”  Pourghannad provided Individual-1 with the bank guarantee that was to serve as surety for a portion of the carbon fiber.  In or about June 2013, Individual-1 informed Pourghannad , Shokri and Faridmanesh that the carbon fiber would soon be shipped from New York, New York, and that Individual-1 would replace the carbon fiber labels with shipping labels referencing “acrylic” to evade U.S. export controls.

No one involved in these transactions obtained permission from the U.S. Department of Treasury, Office of Foreign Assets Control, to export the carbon fiber from the United States. 

Pourghannad , 65, who is an Iranian citizen, pled guilty to one count of conspiracy to violate the International Emergency Economic Powers Act, which carries a maximum sentence of 20 years in prison.  He will be sentenced by Judge Briccetti on Dec. 13, 2019.

Shokri and Faridmanesh remain at liberty.           

Assistant Attorney General Demers and U.S. Attorney Berman praised the outstanding investigative work of the FBI and the U.S. Department of Commerce, and thanked the U.S. Department of Justice’s National Security Division and Office of International Affairs, the U.S. Marshals Service, Homeland Security Investigations and Immigration and Customs Enforcement for their assistance. The Office of International Affairs of the Justice Department’s Criminal Division provided significant support with the defendant’s extradition.

This case is being handled by the Office’s Terrorism and International Narcotics Unit, with assistance from the Counterintelligence and Export Control Section of the National Security Division.  Assistant United States Attorney Gillian Grossman is in charge of the prosecution.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, the Assistant Attorney General for National Security, announced that BEHZAD POURGHANNAD pled guilty today to participating in a conspiracy to export carbon fiber from the United States to Iran between 2008 and 2013.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Behzad Pourghannad has now admitted that he conspired to circumvent repeatedly U.S. export controls on carbon fiber, a substance with numerous military and aerospace applications.  Together with the FBI, the Commerce Department, and all of our law enforcement partners, we will continue to protect our national security.”

Assistant Attorney General John C. Demers said:  “Pourghannad was in Iran while he worked to obtain carbon fiber from the United States contrary to U.S. law.  He may have believed he was out of U.S. law enforcement’s reach, but thanks in part to assistance from the German government, which extradited him, this case is now another example of the Department’s ability to hold Iran’s illicit procurement agents accountable, regardless of where they work.”

According to the allegations contained in the Indictment and statements made at POURGHANNAD’s guilty plea[1]:

Between 2008 and July 2013, POURGHANNAD and his two codefendants, Ali Reza Shokri and Farzin Faridmanesh, lived and worked in Iran.  During that period, they worked together to obtain carbon fiber from the United States and surreptitiously export it to Iran via third countries.  In particular, Shokri worked to procure many tons of carbon fiber from the United States; POURGHANNAD agreed to serve as the financial guarantor for large carbon fiber transactions; and Faridmanesh agreed to serve as the trans-shipper.  Carbon fiber has a wide variety of uses, including in missiles, aerospace engineering, and gas centrifuges that enrich uranium. 

In or about late 2007 and early 2008, Shokri and a Turkey-based co-conspirator (“CC-2”) successfully arranged for the illegal export and transshipment of carbon fiber from the United States to an Iranian company associated with Shokri (“Iranian Company-1”).  Specifically, CC-2 contacted a United States supplier of carbon fiber, who in turn enlisted a third individual (“Individual-1”) for assistance with the transaction.  Through Individual-1, CC-2 purchased carbon fiber from the United States supplier and arranged for the shipment of the carbon fiber from the United States, through Europe and Dubai, United Arab Emirates, to Iranian Company-1, operated by Shokri, in Iran.

In or about May 2009, POURGHANNAD and Shokri attempted to arrange another illegal purchase and transshipment of carbon fiber from the United States to Iran.  Specifically, Individual-1 returned a signed contract to POURGHANNAD for Shokri’s purchase of a large quantity of carbon fiber.  Individual-1 then purchased the carbon fiber from a United States supplier and arranged for the carbon fiber to be exported from the United States to a third country (“Country-1”), en route to Iran.  Country-1 authorities, however, interdicted the carbon fiber shipment before it could be trans-shipped to Iran.

In or about 2013, POURGHANNAD, Shokri, and Faridmanesh again attempted to illegally procure and export carbon fiber from the United States to Iran.  In the 2013 transaction, Shokri and POURGHANNAD negotiated with Individual-1 for the purchase and trans-shipment to Iran of more than five tons of carbon fiber.  Faridmanesh and POURGHANNAD further agreed with Individual-1 that the carbon fiber would be trans-shipped from the United States to Iran through Tbilisi, Georgia, with Faridmanesh to serve as the trans-shipper.  Faridmanesh specifically instructed Individual-1 to change the shipping labels on the carbon fiber to reference “acrylic” or “polyester,” rather than “carbon fiber.”  POURGHANNAD provided Individual-1 with the bank guarantee that was to serve as surety for a portion of the carbon fiber.  In or about June 2013, Individual-1 informed POURGHANNAD, Shokri, and Faridmanesh that the carbon fiber would soon be shipped from New York, New York, and that Individual-1 would replace the carbon fiber labels with shipping labels referencing “acrylic” to evade U.S. export controls.

No one involved in these transactions obtained permission from the U.S. Department of Treasury, Office of Foreign Assets Control, to export the carbon fiber from the United States. 

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POURGHANNAD, 65, who is an Iranian citizen, pled guilty to one count of conspiracy to violate the International Emergency Economic Powers Act, which carries a maximum sentence of 20 years in prison.  He will be sentenced by Judge Briccetti on December 13, 2019.

Shokri and Faridmanesh remain at liberty.

Mr. Berman praised the outstanding investigative work of the FBI and the U.S. Department of Commerce, Office of Export Enforcement, New York Field Office.  Mr. Berman also thanked the U.S. Department of Justice’s National Security Division and Office of International Affairs, the U.S. Marshals Service, Homeland Security Investigations, and Immigration and Customs Enforcement for their assistance. 

This case is being handled by the Office’s Terrorism and International Narcotics Unit, with assistance from the Counterintelligence and Export Control Section of the National Security Division.  Assistant United States Attorney Gillian Grossman is in charge of the prosecution.

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

 

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[1] The descriptions set forth below of conduct by co-defendants Ali Reza Shokri and Farzin Faridmanesh, constitute only allegations, and every fact described should be treated as an allegation with respect to Shokri and Faridmanesh.

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 Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of MICHAEL HILD, the founder, former chief executive officer, and controlling shareholder in Live Well Financial, Inc. (“Live Well”).  HILD’s arrest was in connection with a scheme, from in or about September 2015 through in or about May 2019, to fraudulently inflate the value of a portfolio of bonds owned by Live Well in order to induce various securities dealers and at least one financial institution into loaning more money to Live Well – through repurchase (“repo”) agreements and collateralized loans – than they otherwise would have had they known the actual value of Live Well’s bond portfolio.  The scheme allowed Live Well to grow its bond portfolio exponentially, from approximately 20 bonds with a stated value of $50 million in 2014 to approximately 50 bonds with a stated value of $500 million by the end of 2016.  In May 2019, in conjunction with an effort to wind down the company, Live Well wrote down the value of its portfolio by approximately $141 million. 

In addition, Mr. Berman announced today the unsealing of charges against ERIC ROHR, the former chief financial officer at Live Well, and DARREN STUMBERGER, the former head trader at Live Well, for their participation in the scheme.  Both ROHR and STUMBERGER have pled guilty and are cooperating with the Government.

HILD was arrested in Richmond, Virginia, this morning.  HILD will be presented and arraigned later today in the United States District Court for the Eastern District of Virginia.  HILD’s case is assigned to United States District Judge Ronnie Abrams.  ROHR’s case is assigned to United States District Judge Edgardo Ramos, and STUMBERGER’s case is assigned to United States District Judge J. Paul Oetken. 

On August 28, 2019, the Government obtained a post-indictment restraining order restraining assets – including various real properties and business interests in the Richmond area – owned directly or indirectly by HILD and, as alleged, purchased with proceeds of the scheme.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Michael Hild orchestrated a scheme to deceive Live Well’s lenders by fraudulently inflating the value of its mortgage-backed bonds by over $140 million.  This allegedly enabled Live Well to borrow money well over the value of the collateral it put up.  In turn, Hild used these ill-gotten funds to gain control of the company and increase his own compensation by nearly 700 per cent, while exposing lenders cumulatively to $65 million in unsecured loans to the company, which is now in bankruptcy.” 

FBI Assistant Director William F. Sweeney Jr. said:  “As CEO of Live Well Financial Inc., Hild allegedly inflated the true value of the company’s bond portfolio and used this false information to obtain loans the company otherwise would not have been able to obtain. The dealers and financial institution that lent the money are now in the possession of bonds that don’t hold the value promised as collateral. The FBI is committed to working with our law enforcement partners to ensure this type of behavior ceases to exist.”

In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against HILD. 

As alleged in the Indictment unsealed today in Manhattan federal court and other public court documents:[1]

Live Well’s Bond Portfolio and Repurchase Agreements

Live Well was a Richmond, Virginia-based company that originated, serviced, and securitized government-guaranteed reverse mortgages known as Home Equity Conversion Mortgages (“HECMs”).   In or about 2014, Live Well acquired a portfolio of approximately 20 bonds, each entitling the holder to receive a portion of the interest payments, but not the principal payments, from a particular pool of reverse mortgages (“HECM IO bonds.”).  Live Well purchased the HECM IO bond portfolio for approximately $50 million.  At the same time that Live Well purchased the HECM IO bond portfolio, HILD established within Live Well a New York City-based trading desk to manage and grow Live Well’s bond portfolio.  STUMBERGER supervised the trading desk.

Live Well financed the acquisition and growth of its bond portfolio through a series of loans in which Live Well used its bond portfolio as collateral.  The majority of Live Well’s lenders were securities dealers whose lending arrangements with Live Well were structured as bond repurchase agreements, also known as “repo agreements.”  A repo agreement is a short-term loan in which both parties agree to the sale and future repurchase of an asset within a specified contract period.  The seller sells the asset to the lender with a promise to buy it back at a specific date and at a price that includes an interest payment.  Functionally, a repo agreement is a collateralized loan in which title of the collateral is transferred to the lender.  When the loan is repaid by the borrower, the collateral is returned to the borrower through a repurchase.  Additionally, at least one of Live Well’s lenders was an FDIC-insured bank, and its lending arrangement with Live Well was structured as a secured loan, with certain bonds held as collateral by a third-party custodian.

The Scheme to Mismark the Bond Portfolio

Live Well’s financing agreements with all but one of the lenders required that any bond that Live Well sought to borrow against be priced by a third-party pricing source in order to determine the market value of the bond as of the measurement date.  The lenders then used the value of the bond, minus 10% to 20%, generally, to determine the amount of money to lend Live Well.

The lenders generally relied on a particular widely utilized subscription service (the “Pricing Service”) to price various securities.  In or about September 2014, HILD, ROHR, STUMBERGER, and their co-conspirators embarked on a scheme to cause the Pricing Service to publish valuations for the bonds that far exceeded actual market prices.  By doing so, the conspirators induced the lenders to extend credit to Live Well far in excess of the prices for which the bonds could be sold in the market.  The inflated prices were based on a set of market assumptions that the conspirators called “Scenario 14.” 

HILD was aware that if the lenders had known that the Pricing Service was publishing bond prices that did not reflect fair value (meaning the price at which a lender could sell the bond in the market if necessary to recoup its capital), they would have refused to use those prices in determining how much money to loan to Live Well.  To prevent the Pricing Service and the lenders from learning that the prices did not reflect market value, HILD directed ROHR, STUMBERGER, and others to take steps to conceal their provision of inflated marks to the Pricing Service.  Ultimately, due to the asset overvaluation and the purchase of additional bonds using the capital generated by the scheme, Live Well grew the purported value of its bond portfolio to $500 million by December 2016.

In addition to using the liquidity generated by the scheme to expand Live Well’s bond portfolio, in or about September 2016, HILD used $18 million generated from the repo lenders to buy out the preferred stockholders in Live Well.  The elimination of the preferred stockholders gave HILD exclusive control of the company and allowed him to substantially increase his personal compensation.  Accordingly, HILD’s compensation jumped from approximately $1.4 million in 2015, to approximately $5 million in 2016, approximately $9.7 million in 2017, and over $8 million in 2018.

In or about late 2018, ROHR resigned as chief financial officer of Live Well.  In or about May 2019, the company’s interim chief financial officer informed HILD that he would not sign the company’s interim financial statements because he believed that the company’s carrying value for the HECM IO bond portfolio was significantly overstated.  On or about May 4, 2019, Live Well announced that it would cease operations and unwind.  After the announcement of Live Well’s closing, Live Well’s interim chief financial officer provided a balance sheet to Live Well’s lenders showing that Live Well had reduced the value of its bond portfolio by approximately $141 million.  As of May 31, 2019, the debt Live Well owed to its lenders on the bond portfolio exceeded the portfolio’s carrying value by approximately $65 million.

On June 10, 2019, three of Live Well’s lenders filed a Chapter 7 petition for involuntary bankruptcy against Live Well in the United States Bankruptcy Court for the District of Delaware.  See In re Live Well Financial, Inc., 19-11317 (LSS).  On or about July 1, 2019, the bankruptcy court appointed a trustee for Live Well.

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HILD, 44, of Richmond, Virginia, is charged with five counts:  one count of conspiracy to commit securities fraud; one count of conspiracy to commit wire and bank fraud; one count of securities fraud; one count of wire fraud; and one count of bank fraud.  Count One carries a maximum sentence of five years in prison, Counts Two, Four, and Five each carry a maximum sentence of 30 years in prison, and Count Three carries a maximum sentence of 20 years in prison.  The charges also contain a maximum fine of $5 million, or twice the gross gain or loss from the offense.

The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman praised the investigative work of the FBI and also thanked the SEC and the Department of Housing and Urban Development, Office of the Inspector General for their assistance. 

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Jordan Estes and Scott Hartman 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that KEITH BORGE, the former controller of the College of New Rochelle (“CNR”), was sentenced to 36 months in prison for failing to pay more than $20 million in payroll taxes and for securities fraud.  BORGE pled guilty to both charges in March 2019.  U.S. District Judge Vincent L. Briccetti imposed today’s sentence. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Keith Borge failed to pay payroll taxes on behalf of CNR’s employees, and covered up CNR’s true financial condition.  Borge thereby denied CNR’s leaders the opportunity to address the college’s financial problems, defrauded CNR’s bondholders, and left the college with a $20 million tax liability.  He is now paying the price for those crimes.” 

According to the allegations contained in the Information and other publicly filed documents:

From in or about 2011 to in or about August 2014, BORGE was the vice president for financial affairs at CNR, a private college with its main campus in New Rochelle, New York.  From in or about August 2014 to in or about June 2016, BORGE was CNR’s controller.  CNR had approximately 500 to 900 paid employees, depending on the time of year.  The college withheld from its employees’ pay both federal income tax and its employees’ contributions to Social Security and Medicare.  Federal law required that the college pay over those withheld taxes and contributions within one week of the day it paid its employees.  During that one-week period, CNR held those withheld taxes and contributions in trust for the federal government.

As controller, BORGE managed CNR’s financial affairs and was responsible for paying over withheld payroll taxes and contributions.  From the third quarter of 2014 through the second quarter of 2016, BORGE failed to do so.  By the end of the second quarter of 2016, BORGE had failed to pay over more than $20 million in combined federal and state payroll taxes and contributions.

BORGE also made false entries into CNR’s books and records to conceal the college’s actual financial condition.  As a result, CNR’s financial statements for its fiscal year ending June 30, 2015, reported the college had net assets of $25 million, which was an overstatement by at least $24 million.  Among other things, BORGE caused the financial statements to understate CNR’s liability for federal and state payroll taxes by approximately $11 million; to overstate accounts receivable by approximately $9.2 million by recognizing pledged donations twice; to understate accounts payable by at least $1.5 million by failing to enter unpaid vendor invoices into CNR’s books and records; and to overstate investment assets by at least $2.2 million by recognizing assets that did not exist and by failing to enter his withdrawals from CNR’s investment accounts into the college’s books and records.

BORGE caused CNR’s inaccurate financial statements for the fiscal year ending June 30, 2015, to be released to the public by, among other things, providing the financial statements to the Municipal Securities Rulemaking Board for publication on the Electronic Municipal Market Access web site, where they could be reviewed by the investing public.  As a result, investors in bonds issued by the college through the City of New Rochelle Industrial Development Agency were defrauded by BORGE’s materially false and misleading statements in CNR’s financial statements. 

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In addition to the prison term, BORGE, 63, of Valley Cottage, New York, was sentenced to three years of supervised release and ordered to pay a fine of $25,000.

Mr. Berman praised the outstanding investigative work of the Postal Inspection Service and IRS-CI and also thanked the Securities and Exchange Commission, which has brought a civil proceeding against Borge.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys James McMahon and Dan Loss are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John B. DeVito, Special Agent in Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), announced the unsealing of a superseding Indictment charging JOSE ALVAREZ, a/k/a “Ignacio Alvarez,” with the 1999 murder of Jose Miguel Mendez.  ALVAREZ was previously arrested in the Dominican Republic and was extradited to the Southern District of New York last Friday.  He was presented before U.S. Magistrate Judge Katharine H. Parker yesterday and detained.  The case is assigned to U.S. District Judge Kimba M. Wood.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Jose Alvarez participated in the heinous robbery and murder of Jose Miguel Mendez.  Alvarez was extradited from the Dominican Republic and now faces charges in a U.S. court for this terrible crime.”

Special Agent in Charge John B. DeVito said:  “Jose Alvarez is alleged to have participated in a crime of violence and murder of Jose Miguel Mendez approximately 20 years ago.  Through the diligent and steadfast efforts of ATF agents working alongside our state, local, and federal partners, he will be before a judge and finally face justice for his crimes.  I would like to thank the United States Attorney’s Office for their work in prosecuting this case.”

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

ALVAREZ, along with other individuals, planned to rob and kill Jose Miguel Mendez to obtain money to invest in a drug robbery in Puerto Rico.  On the night of the robbery and murder, ALVAREZ and his co-conspirators ambushed Mendez inside an apartment in the Bronx, where they restrained him with duct tape, burned him, and questioned him.  Ultimately, ALVAREZ and one of his co-conspirators took Mendez to a location in Upper Manhattan, where Mendez was shot in the head, resulting in his death.

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ALVAREZ, 54, of the Dominican Republic, is charged with one count of causing the death of another through the use of a firearm in connection with a crime of violence and a drug trafficking crime, and aiding and abetting the same, which carries a mandatory minimum sentence of five years in prison and maximum sentence of life in prison; and one count of killing another, and aiding and abetting the same, while engaged in drug trafficking, which carries a mandatory minimum sentence of 20 years in prison and maximum sentence of life 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.

Mr. Berman praised the excellent work of the ATF, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.  Mr. Berman also thanked Dominican authorities, the Office of International Affairs of the Justice Department’s Criminal Division, and the United States Marshals Service for their assistance.     

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Sarah Krissoff and Michael Maimin 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 descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.