Southern District of New York
Press releases recorded for this federal judicial district.
California Woman Pleads Guilty to Operating Wholesaler of Synthetic CannabinoidsRead the Press Release
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.
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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.
Three Bronx Gang Members Arrested and Charged with Murder, Racketeering, and Firearms OffensesRead the Press Release
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.
[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.
Senior Manager of Global Internet Company Charged in Embezzlement SchemeRead the Press Release
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.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Former Honduran National Police Officer Charged with Conspiring to Import Cocaine into the United States and Related Firearms OffensesRead the Press Release
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.
[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.
Financial Adviser Pleads Guilty to Defrauding Clients in Fake Investment SchemeRead the Press Release
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.
Iranian Businessman Pleads Guilty to Conspiracy to Violate U.S. Sanctions by Exporting Carbon Fiber from the United States to IranRead the Press Release
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.
Iranian Businessman Pleads Guilty to Conspiracy to Violate U.S. Sanctions by Exporting Carbon Fiber from the United States to IranRead the Press Release
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.
[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.
Former CEO of Live Well Financial Charged in $140 Million Bond Fraud SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York 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.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Former Controller of College of New Rochelle Sentenced to 3 Years in Prison for Failure to Pay Payroll Taxes and Securities FraudRead the Press Release
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.
Manhattan U.S. Attorney Announces Charges Against Jose Alvarez for 1999 MurderRead the Press Release
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.
[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.
Manhattan U.S. Attorney Announces Extradition of Kosovar Man for Securities Fraud OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ruth M. Mendonça, Acting Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), 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 extradition of YMER SHAHINI in connection with alleged securities fraud offenses relating to a scheme to defraud shareholders of a publicly traded company and the investing public. SHAHINI was taken into custody by Kosovar authorities in Pristina, Kosovo, on June 11, 2019, and 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 arrived in the United States on Friday, August 23, 2019, was presented that same day before United States Magistrate Gabriel W. Gorenstein, and was ordered detained. An arraignment and initial conference are scheduled before United States District Judge P. Kevin Castel on September 10, 2019, at 11:00 a.m.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Ymer Shahini played a vital role in a multimillion-dollar fraud, knowingly serving as a straw man to conceal beneficial ownership of stock. Now, with the invaluable assistance of the Kosovo Ministry of Justice and the Justice Department’s Office of International Affairs, Shahini is in the U.S. and facing justice in federal court in our District.”
Acting Postal Inspector-in-Charge Ruth M. Mendonça said: “Mr. Shahini’s extradition to the United States is a testament to the collaboration amongst the international law enforcement community. Mr. Shahini’s alleged participation in this investment fraud scheme was uncovered and now he faces the same fate of his co-conspirators.”
FBI Assistant Director William F. Sweeney Jr. said: “Ymer Shahini allegedly assisted others in a scheme to manipulate the stock of a publicly traded company, thereby defrauding shareholders and the public. Now, Shahini will finally face justice for his allegedly deliberate acts.”
According to the allegations contained in the Indictment:[1]
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 shares held by public investors, and which were 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.
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The Indictment charges SHAHINI, 49, a citizen of Kosovo, in four counts: (1) conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison, (2) securities fraud, which carries a maximum sentence of 20 years in prison, (3) conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and (4) wire fraud, 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 defendant will be determined by a judge.
The cases against YMER SHAHINI’s co-defendants have all been resolved, as follows:
Jason Galanis pled guilty to two counts of conspiracy to commit securities fraud, one count of securities fraud, and one count of investment adviser fraud, and received a term of imprisonment of 135 months.
John Galanis pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud, and received a term of imprisonment of 72 months.
Derek Galanis pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud, and received a term of imprisonment of 72 months.
Gary Hirst was found guilty by a jury after a 3-week trial of one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud, and was sentenced to a term of imprisonment of 78 months.
Gavin Hamels pled guilty to one count of conspiracy to commit securities fraud, one count of securities fraud, and one count of investment adviser fraud, and received a sentence of time served.
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. With respect to the extradition, Mr. Berman also thanked the Office of International Affairs of the Justice Department’s Criminal Division, the United States Marshals Service, and the Kosovo Ministry of Justice.
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.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below, with respect to Ymer Shahini, constitute only allegations, and every fact described should be treated as an allegation.
Leader of Bronx Drug Distribution Organization Sentenced to More Than 18 Years in PrisonRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MIGUEL RAMIREZ was sentenced today to 218 months in prison for leading a drug trafficking conspiracy that operated in the Hunts Point section of the Bronx. RAMIREZ pled guilty on October 22, 2018, before U.S. District Judge Gregory H. Woods, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Miguel Ramirez led a violent street gang in the Bronx for years, supervising its day-to-day sales of heroin and crack cocaine. Now, Ramirez will spend more than 18 years in prison for his ‘leadership’ skills.”
According to the allegations in the Indictment, and statements made in court filings and during court proceedings:
Between approximately 2014 and 2017, RAMIREZ was one of the leaders of a violent drug trafficking organization that controlled the distribution of large amounts of crack cocaine and heroin in the Hunts Point section of the Bronx. RAMIREZ managed all aspects of the organization, from obtaining supply and arranging for the preparation of drugs for resale, to the supervision of individuals who conducted hand-to-hand sales of narcotics. RAMIREZ possessed firearms and ammunition, and also engaged in violence and directed others to commit violence, in connection with the drug trafficking organization.
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In addition to his prison sentence, RAMIREZ, 30, of the Bronx, New York, was sentenced to five years of supervised release.
Mr. Berman praised the excellent work of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, Homeland Security Investigations, and the New York City Police Department. Mr. Berman also thanked the Bronx County District Attorney’s Office for their assistance in the investigation.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Sarah Krissoff is in charge of the prosecution.
Tax Accountant Pleads Guilty to Scamming Clients in Fraud and Money Laundering SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that SALVATORE ARENA pled guilty before United States District Judge Katherine Polk Failla to defrauding clients who trusted him to prepare and pay their taxes. ARENA misappropriated over $780,000 of client money for his own use.
U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Salvatore Arena defrauded his clients and the United States by misappropriating money his clients intended would be used to pay their taxes. Arena now awaits sentencing for his serious crimes.”
According to allegations in the criminal complaint, the information, and other documents filed in federal court, as well as statements made in public court proceedings:
During the relevant time period, SALVATORE ARENA purported to offer tax services, including the preparation and payment of taxes, to clients of an accounting firm in Manhattan. Instead of making payments on behalf of those clients, as ARENA represented he would, he diverted client funds for his own use. ARENA executed this fraudulent scheme in two primary ways – first, by diverting pre-payments of taxes to his own tax account and later claiming illegitimate refunds, and second, by misappropriating tax payments clients had wired into a bank account controlled by ARENA.
ARENA defrauded numerous victims during the period from January 2014 through March 2019, and agreed as part of his guilty plea to forfeit $789,195.35 in United States currency, representing proceeds traceable to the charged offenses, and to pay restitution as ordered by the court.
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ARENA, 47, of Queens, New York, pled guilty to one count each of mail fraud, money laundering, and 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. ARENA is scheduled to be sentenced by Judge Failla on December 13, 2019.
Mr. Berman praised the outstanding investigative work of Special Agents from the U.S. Attorney’s Office for the Southern District of New York, the U.S. Treasury Inspector General for Tax Administration, Office of Investigations, the New York State Department of Taxation and Finance, Office of Internal Affairs, and the New York City Department of Finance, Office of Tax Enforcement.
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If you believe you have been a victim of the scheme described above, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at 866-874-8900, or [email protected]. You may also report it to Criminal Investigator John Patterson at (518) 451-1566 or [email protected].
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.
Manhattan Man Sentenced to 20 Years in Prison for Christmas Eve MurderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that FRANK BRIGHT was sentenced yesterday to 20 years in prison for the murder of Amaury Paulino on December 24, 2014. BRIGHT shot and killed Paulino during the course of a gunpoint robbery in the vicinity of St. Nicholas Avenue and West 129th Street in Manhattan. BRIGHT was sentenced by U.S. District Judge Katherine Polk Failla, before whom BRIGHT previously pled guilty to a robbery conspiracy offense.
U.S. Attorney Geoffrey S. Berman said: “On Christmas Eve in 2014, Frank Bright shot and killed Amaury Paulino during a robbery. For committing this terrible crime, Frank Bright will now serve 20 years in prison. We thank our partners at the NYPD and the DEA for their outstanding work pursuing justice for Mr. Paulino and for his family.”
According to the allegations contained in the Indictment and statements made in related court filings and proceedings:
On December 24, 2014, BRIGHT and an accomplice robbed Amaury Paulino in the vicinity of St. Nicholas Avenue and West 129th Street in Manhattan. During the course of the robbery, BRIGHT shot and killed Paulino.
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In addition to the prison term, BRIGHT, 32, of New York, New York, was sentenced to three years of supervised release.
Mr. Berman praised the outstanding investigative work of the New York City Police Department and the Drug Enforcement Administration.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Michael D. Longyear, Justin V. Rodriguez, Jordan L. Estes, Jason A. Richman, and Gina Castellano are in charge of the prosecution.
Bronx Man Sentenced to 27 Years in Prison for Murder of Innocent BystanderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that RICHARD FELIZ, a/k/a “Dirt,” was sentenced to 27 years in prison for murdering Victor Chafla, an innocent bystander, while shooting at a rival gang member. FELIZ was sentenced on August 16, 2019, by U.S. District Judge Victor Marrero, before whom FELIZ previously pled guilty to narcotics and firearms offenses.
U.S. Attorney Geoffrey S. Berman said: “On March 26, 2015, Victor Chafla was stocking produce outside a grocery store when he was shot in the head, an innocent bystander struck down by senseless gang violence. For committing this terrible murder, Richard Feliz will now serve 27 years in prison. We thank our partners at HSI and the NYPD for their outstanding work pursuing justice for Mr. Chafla. Our hearts go out to Mr. Chafla’s family for their terrible loss.”
According to the allegations contained in the Indictment and statements made in related court filings and proceedings:
Between 2013 and 2017, FELIZ was a member of a racketeering enterprise known as the “Rollin’ 30s Crips,” a street gang that operated in the Bronx, among other places. In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of the Rollin’ 30s Crips committed, conspired, attempted, and threated to commit acts of violence, including murder and robbery, and conspired to distribute and possess with intent to distribute narcotics.
On March 26, 2015, during a dispute with a member of a rival gang, FELIZ shot at that rival, but instead struck Victor Chafla in the head, while Chafla was working outside at a grocery store. Chafla died from his wounds a few days later.
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In addition to the prison term, FELIZ, 23, of the Bronx, New York, was sentenced to three years of supervised release.
Mr. Berman praised the outstanding investigative work of the Department of Homeland Security, Homeland Security Investigations, and the New York City Police Department.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Jessica Fender, Anden Chow, and Jacqueline Kelly are in charge of the prosecution.
Serial Fraudster Pleads Guilty to Scamming Elderly Victims Out of Hundreds of Thousands of Dollars in Fraudulent Payment SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL PIZARRO, a/k/a “Eric Miller,” pled guilty today before Chief United States Magistrate Judge Gabriel W. Gorenstein to defrauding individuals (the “Victims”) by representing to them that they had qualified for a government grant, which could be accessed only upon the payment of an up-front refundable application fee. In actuality, the government grant did not exist and none of the Victims had been approved for such a grant. PIZARRO continued to perpetrate this scheme even after he was arrested and released on bail.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As he admitted in court, Michael Pizarro preyed on elderly victims and others by charging them up-front fees to get government grant money that was fictitious. In fact, there were no ‘grants’ and the ‘registration fee’ Pizarro charged his victims was just money he stole from them.”
According to allegations in the criminal complaint, the information, and other documents filed in federal court, as well as statements made in public court proceedings:
Beginning in at least February 2017 through July 25, 2019, PIZARRO called the Victims, many of whom were more than 70 years old, and told them that his name was “Eric Miller” and he was calling on behalf of a company called “National Grants.” PIZARRO informed the Victims that they had been approved for a government grant, which was being held in escrow at an account with the “Word Bank” in Washington, D.C. Before the funds could be released, however, the Victims would have to pay a registration fee. In fact, none of the Victims had been approved for a grant, the grants did not exist, and no Victim ever received any funds.
In April 2018, PIZARRO was charged in New York Supreme Court in connection with his involvement with National Grants from October 2015 through January 2017. PIZARRO pled guilty in December 2018 and was awaiting sentencing when he was arrested in connection with this scheme on May 2, 2019. After he was released on bail, PIZARRO continued to seek contact information for additional Victims in furtherance of the scheme. In total, not including the conduct charged in New York Supreme Court, PIZARRO defrauded the Victims out of approximately $270,000.
PIZARRO, 37, of Brooklyn, New York, pled guilty to one count of wire fraud while on pre-trial release. That offense carries a maximum prison term of 30 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. PIZARRO is scheduled to be sentenced by Judge Paul A. Crotty on December 20, 2019.
Mr. Berman praised the outstanding investigative work of the Department of Homeland Security, Homeland Security Investigations, and the New York City Police Department.
The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorneys Kiersten A. Fletcher and Benet J. Kearney are in charge of the prosecution.
If you believe you have been a victim of the scheme described above, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney’s Office for the Southern District of New York, at 866-874-8900, or [email protected]. You may also report it to Detective Christopher Bastos at 917-480-7167 or [email protected].
Fourth Manhattan Doctor Pleads Guilty to Accepting Bribes and Kickbacks from Pharmaceutical Company in Exchange for Prescribing Fentanyl DrugRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JEFFREY GOLDSTEIN, a doctor who practiced in Manhattan, pled guilty today to conspiracy to violate the Anti-Kickback Statute, in connection with a scheme to prescribe Subsys, a potent fentanyl-based spray, in exchange for bribes and kickbacks from Subsys’s manufacturer, Insys Therapeutics. GOLDSTEIN pled guilty before U.S. Magistrate Judge Henry B. Pitman. The case is assigned to U.S. District Judge Kimba M. Wood.
U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Jeffrey Goldstein, a Manhattan doctor who owned a private medical office on the Upper East Side, prescribed his patients Subsys, a powerful fentanyl drug, in exchange for nearly $200,000 in bribes and kickbacks from the drug’s manufacturer, Insys, as well as various other items of value, including all-expenses paid visits to a Manhattan strip club. Goldstein is the fourth doctor to plead guilty in this case and his admission of guilt once again demonstrates that this Office will hold any physician accountable when that physician’s medical judgment is compromised by the corrupting influence of money. That is particularly so when the drug that is being prescribed is a dangerous opioid like fentanyl. This case should stand as a warning to the New York medical community that if you take bribes from pharmaceutical companies in exchange for prescribing – whether in the form of Speaker Program fees or otherwise – this Office will hold you to account for placing your own interests above those of your patients.”
According to the allegations contained in the Indictment against GOLDSTEIN and filings in related proceedings:
The Insys Speakers Bureau
Subsys, which is manufactured by Insys, is a powerful painkiller approximately 50 to 100 times more potent than morphine. The FDA approved Subsys only for the management of breakthrough pain in cancer patients. Prescriptions of Subsys typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by GOLDSTEIN.
In or about August 2012, Insys launched a “Speakers Bureau,” a roster of doctors who would conduct programs (“Speaker Programs”) purportedly aimed at educating other practitioners about Subsys. In reality, Insys used its Speakers Bureau to induce the doctors who served as speakers to prescribe large volumes of Subsys by paying them Speaker Program fees. Speakers were supposed to conduct an educational slide presentation for other health care practitioners at each Speaker Program. In reality, many of the Speaker Programs were predominantly social affairs where no educational presentation about Subsys occurred. Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of health care practitioners who had not actually been present.
GOLDSTEIN’s Participation in the Scheme
GOLDSTEIN was a doctor of osteopathic medicine who owned a private medical office on the Upper East Side. GOLDSTEIN received approximately $196,000 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys. After GOLDSTEIN began prescribing a competitor painkiller, Insys pressured him to stop doing so and switch patients to Subsys, which GOLDSTEIN did.
GOLDSTEIN also received other items of value from Insys in order to induce him to prescribe. For example, Insys employees took GOLDSTEIN and Todd Schlifstein, who co-owned a private medical office with GOLDSTEIN, to a Manhattan strip club where Insys spent approximately $4,100 on a private room, alcoholic drinks, and “lap dances” for GOLDSTEIN and Schlifstein. GOLDSTEIN also arranged for Insys to pay for the annual holiday party for his private medical office.
In 2014, GOLDSTEIN was approximately the fifth-highest-paid Insys Speaker nationally. He was the sixth-highest prescriber of Subsys in the last quarter of 2014, accounting for approximately $809,275 in overall net sales of Subsys in that quarter.
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GOLDSTEIN, 49, of New Rochelle, New York, pled guilty to one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. GOLDSTEIN is scheduled to be sentenced by Judge Wood on January 22, 2020 at 2:00 p.m.
Mr. Berman praised the investigative work of the FBI, and thanked the Department of Health and Human Service’s Office of Inspector General for its participation in the investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Noah Solowiejczyk and David Abramowicz are in charge of the prosecution.
Former Leader of Violent Kenyan Organized Crime Family Sentenced to 25 Years in Prison for Narcotics, Weapons, and Obstruction OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that BAKTASH AKASHA ABDALLA, a/k/a “Baktash Akasha,” was sentenced to 25 years in prison for conspiring to import and importing heroin and methamphetamine, conspiring to use and carry machineguns and destructive devices in connection with their drug-trafficking crimes, and obstructing justice by paying bribes to Kenyan officials in an effort to avoid extradition to the United States. The defendants were provisionally arrested in Kenya on November 9, 2014, after providing 99 kilograms of heroin and two kilograms of methamphetamine to confidential sources acting at the direction of the Drug Enforcement Administration (“DEA”). Their bribery scheme was thwarted on January 29, 2017, when the defendants were expelled from Kenya and DEA agents brought them to the U.S. AKASHA ABDALLA previously pled guilty before U.S. Magistrate Judge Katharine H. Parker, and U.S. District Judge Victor Marrero imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Baktash Akasha led a massive drug trafficking organization responsible for shipping tons of finished narcotics, and the ingredients to make tons more, around the world. Akasha, along with his brother, ensured that their enterprise operated with impunity for nearly 20 years by eliminating and intimidating rival drug traffickers with violence and murder, and bribing Kenyan government officials to avoid extradition to the U.S. Akasha was once one of the world’s most prolific and violent drug traffickers, but today’s significant sentence of 25 years in prison all but guarantees he will never profit from the illicit drug trade again.”
According to the Superseding Indictment, other court filings, and statements made during court proceedings[1]:
AKASHA ABDALLA and his brother, Ibrahim Akasha Abdalla, a/k/a “Ibrahim Akasha” (together, “the defendants”) operated a sprawling and lucrative international drug-trafficking organization, which distributed multi-ton quantities of narcotics including hashish, ephedrine, methamphetamine, and methaqulone—a Schedule I controlled substance commonly referred to in Europe, South Africa, and elsewhere as “Mandrax” or “mandies,” and in the U.S. as “Quaaludes.” For almost two decades, BAKTASH AKASHA ABDALLA acted as the leader of the Akasha Organization, and Ibrahim Akasha Abdalla functioned as his brother’s deputy. The defendants engaged in acts of violence to protect the reputation of the Akasha Organization and their drug-trafficking business. For example, in 2014, the defendants kidnapped and assaulted a rival drug trafficker in Kenya named David Armstrong. The defendants helped orchestrate the murder in South Africa of an associate of Armstrong, who was known as “Pinky” and was shot approximately 32 times in the street. The defendants subsequently participated in an altercation at a public shopping mall in Kenya with an Armstrong associate named Stanley Livondo, during which Ibrahim Akasha Abdalla threatened Livondo with a pistol in the mall.
By early 2014, the defendants and other members of the Akasha Organization started to work to import ton quantities of methaqualone precursor chemicals into Africa in order to fuel the illicit pills’ production in South Africa. The defendants used the proceeds of their methaqualone-related business to pursue other illegal ventures, including efforts to import ephedrine that was produced illegally by Avon Lifesciences in India, so that the Akasha Organization and others could manufacture methamphetamine in Africa. In connection with these methamphetamine-production efforts, the defendants aligned the Akasha Organization and other associates with co-defendant Muhammad Asif Hafeez, a/k/a “Sultan,” and worked together to establish a methamphetamine-production facility in Mozambique. But the defendants, Hafeez, and other co-conspirators were forced to abandon their plan after law enforcement authorities seized approximately 18 tons of ephedrine from an Avon Lifesciences factory in Solapur, India, including several tons of ephedrine that the defendants and Hafeez planned to use to manufacture methamphetamine in Mozambique.
Over the course of several months beginning in March 2014, during telephone calls and meetings in Nairobi and Mombasa, Kenya, the defendants agreed to supply, and in fact did supply, multi-kilogram quantities of heroin and methamphetamine to individuals they believed to be representatives of a South American drug-trafficking organization, but who were in fact confidential sources (the “CSes”) working at the direction and under the supervision of the Drug Enforcement Administration (“DEA”). The defendants negotiated on behalf of the Akasha Organization to procure and distribute hundreds of kilograms of heroin from suppliers in the Afghanistan/Pakistan region and to produce and distribute hundreds of kilograms of methamphetamine, which they understood would ultimately be imported into the U.S.
During a meeting in Mombasa, Kenya, in April 2014, BAKTASH AKASHA ABDALLA introduced a CS via Skype to one of his heroin suppliers in Pakistan, who said he could provide 420 kilograms of 100 percent pure heroin—which he called “diamond” quality—for distribution in the U.S. Thereafter, in June 2014, a co-defendant began discussing with the CSes his ability to procure methamphetamine precursor chemicals and to establish labs to produce methamphetamine for importation to the U.S. In a meeting in Mombasa in September 2014, BAKTASH AKASHA ABDALLA introduced another co-defendant as a narcotics transporter from Afghanistan who moved ton quantities of narcotics using ships. BAKTASH AKASHA ABDALLA and a co-defendant also described Hafeez to the CSes as one of the top drug traffickers in the world.
In September and October 2014, Ibrahim Akasha Abdalla personally delivered one-kilogram samples of methamphetamine and heroin to the CSes in Nairobi on behalf of the Akasha Organization. In early November, Ibrahim Akasha Abdalla personally delivered an additional 98 kilograms of heroin to the CSes in Nairobi on behalf of the Akasha Organization. A few days later, Ibrahim Akasha Abdalla also delivered another kilogram of methamphetamine. In the course of these preliminary transactions, the Akasha Organization provided a total of 99 kilograms of heroin and two kilograms of methamphetamine to the CSes, and agreed to provide hundreds of kilograms more of each.
The defendants, along with Gulam Hussein and Vijaygiri Anandgiri Goswami, were provisionally arrested by Kenyan Anti-Narcotics Unit officers on November 9, 2014, in Mombasa, Kenya, prior to another planned meeting with the CSes. At the time of the provisional arrests in Kenya, 500 kilograms of heroin brokered by Hafeez were being transported through international waters to the defendants in Africa. The defendants directed the ship to return to the Afghanistan/Pakistan region rather than risk interdiction upon arrival. Following the arrests and during pending extradition proceedings, the defendants continued to distribute ton quantities of narcotics. They used some of the drug proceeds to bribe Kenyan officials— including judges, prosecutors, and law enforcement officers—in an effort to avoid extradition to face the charges against them in the U.S.
On January 29, 2017, the Kenyan government expelled the defendants, and the DEA brought them to the Southern District of New York for prosecution.
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In addition to the prison term, BAKTASH AKASHA ABDALLA, 41, was ordered to pay a $100,000 fine.
Hafeez was provisionally arrested in London in August 2017, and the U.S. has requested his extradition from the United Kingdom. Ibrahim Akasha Abdalla pleaded guilty to the same drug-trafficking, weapons, and obstruction offenses as BAKTASH Akasha Abdalla, and is scheduled to be sentenced by Judge Marrero on November 8, 2019.
Mr. Berman praised the outstanding efforts of the Special Operations Division of the DEA, Bilateral Investigations Unit. Mr. Berman also thanked the DEA Dubai Country Office, the DEA Nairobi Country Office, the DEA Pretoria Country Office, the DEA New Delhi Country Office, the U.S. Department of Justice’s Office of International Affairs, Kenya’s Anti-Narcotics Unit, Kenya’s Director of Public Prosecutions, Kenya’s Director of Criminal Investigations, local Nairobi law enforcement officers, and the Government of Kenya.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Emil J. Bove III, Amanda L. Houle, and Jason A. Richman are in charge of the prosecution.
The charges contained in the Indictment against Muhammad Asif Hafeez, a/k/a “Sultan,” are merely accusations, and Hafeez is presumed innocent unless and until proven guilty.
[1] The descriptions set forth below of conduct by co-defendant Muhammad Asif Hafeez, a/k/a “Sultan,” constitute only allegations, and all descriptions should be treated as allegations with respect to Hafeez.
Brooklyn Man Sentenced to 57 Months in Prison for an Account Takeover and Money Laundering Scheme Affecting Tens of Thousands of VictimsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JASON MICKEL ELCOCK, a/k/a “Prezzi,” was sentenced today in Manhattan federal court to 57 months in prison for engaging in a decade-long scheme to steal personal and financial information from tens of thousands of individuals and businesses and unlawful possession of a firearm, resulting in a loss of more than $1.1 million to banks and online retailers. ELCOCK pled guilty on March 12, 2019, to wire fraud and money laundering conspiracies, and unlawful possession of a firearm. U.S. District Judge Victor Marrero imposed sentence earlier today.
U.S. Attorney Geoffrey S. Berman said: “The theft and exploitation of our online data by perpetrators hiding in the weeds of the Internet is becoming all too common. This Office is committed to identifying, exposing and prosecuting cyber thieves wherever they may be found.”
NYPD Police Commissioner James P. O'Neill said: “As criminals move to the digital frontier, law enforcement is following. In this case, the NYPD is proud to have teamed with its FBI partners to bring this insidious criminal scheme to a close.”
According to the Complaint, the Indictment, the Superseding Information, statements made in court, and publicly available documents:
Between 2008 and 2018, ELCOCK, co-defendant Shoshana Marie McGill, and other co-conspirators participated in a scheme to defraud banks and e-commerce retailers by using stolen personal identifying information (“PII”), bank account information, and credit and debit card data from tens of thousands of individuals and businesses for personal financial gain. ELCOCK and his co-conspirators acquired PII and financial account data in part by buying the information from criminal websites. They also hacked into victims’ email accounts to steal personal information stored in those accounts, into victims’ online bank accounts to download copies of their checks, and into victims’ digital password vaults to pilfer their usernames and passwords. ELCOCK then monetized the stolen data in various ways, including by: (1) using the stolen credit card information to buy merchandise and services from e-commerce retailers for resale or for personal use; (2) using stolen PII to open new lines of credit in his victims’ names without their permission; (3) transferring money electronically out of victims’ bank accounts; and (4) creating and cashing fraudulent checks issued against victims’ bank accounts. Among other things, ELCOCK and McGill used the fraud proceeds to make a down payment on a Mercedes Benz, buy Rolex watches, electronic goods and designer clothing, and take trips to high end resorts. In addition, ELCOCK sold a portion of the stolen bank account data, along with check-making supplies, to other co-conspirators in exchange for a cut of the value of the checks that those co-conspirators successfully cashed. ELCOCK laundered the bulk of his criminal earnings through bank accounts belonging to other co-conspirators, including McGill.
As part of the fraudulent scheme, ELCOCK also transferred phone numbers and changed email addresses that were linked to victims’ bank and online shopping accounts, to different phone numbers and email addresses that he and McGill controlled. In some cases, ELCOCK also changed victims’ email account passwords or deleted activity alerts from their hacked email accounts. In these ways, ELCOCK prevented his victims from receiving text and email notifications regarding unauthorized transactions, to make the criminal scheme harder to detect. ELCOCK’s decade-long scheme caused banks and retailers to lose more than $1.1 million, and imposed burden and stress on countless individual victims, as they had to take steps to regain access to their phone numbers and email accounts, file police reports, notify credit agencies, cancel lines of credit, and dispute unauthorized purchases.
Law enforcement officers seized from ELCOCK’s residence a 9-millimeter pistol, ammunition, a bill counter, Rolex watches, multiples laptops, tablets and smartphones, and designer clothing, shoes, and handbags, among other things.
* * *
In addition to the prison term, ELCOCK, 34, of Brooklyn, New York, was sentenced to three years of supervised release. He was also ordered to forfeit $1,111,893 and his interest in two bank accounts and certain merchandise stashed at his residence, and pay restitution.
McGill pled guilty on January 3, 2019, to conspiring to commit money laundering and was sentenced on June 13, 2019, by Judge Marrero to five years’ probation, including 90 days in a community re-entry facility and six months’ home confinement. She was also ordered to forfeit $1,081,893 and her interest in three bank accounts and various merchandise.
U.S. Attorney Berman praised the outstanding work of the FBI and the New York City Police Department.
This case is prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah Lai is in charge of the prosecution.
Tennessee Man Convicted of Defrauding Investors in A Snack Company and A Pet Food CompanyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that yesterday, following a seven-day jury trial before U.S. District Judge Jed S. Rakoff, JOEL MARGULIES was convicted of participating in two schemes to defraud more than 50 investors in the Starship Snacks Corporation and the All American Pet Company of more than $2.8 million. MARGULIES made false and fraudulent representations about, among other things, the status of the companies’ products, guarantees that purportedly backed the investments, and the interest of large multi-national corporations in acquiring the companies. The jury also convicted MARGULIES of illegally transferring a firearm to an out-of-state resident. Additionally, today, MARGULIES pled guilty before Judge Rakoff to conspiracy to distribute and to possess with the intent to distribute cocaine.
U.S. Attorney Geoffrey Berman said: “Joel Margulies went to trial in Manhattan federal court to face a slew of charges related to defrauding more than 50 investors by making materially false representations about the snack and pet food companies he helped run. As part of his schemes, Margulies used other people’s identities and created falsified documents that were sent to investors, on the basis of which he and his co-conspirators raised more than $2.8 million. Rather than using those funds for their intended purpose of creating dog food bars and caffeinated candies, the co-conspirators spent the money on real estate in Bel Air, Manhattan, and West Palm beach, as well as on plastic surgery, luxury clothing, and the purchase of a Mercedes. Not only was Margulies convicted unanimously by a Manhattan jury, but he also pled guilty today to conspiracy to distribute cocaine to one of his fraud scheme co-conspirators. Margulies’s criminal conduct was as audacious as it was diverse, and he faces a lengthy sentence in federal prison.”
According to the evidence presented during the trial and statements made in related court filings and proceedings:
The All American Pet Company Fraud Scheme
From October 2013 through May 2017, MARGULIES, Lisa Bershan, and a co-conspirator raised more than $575,000 in purported loans for the All American Pet Company (“AAPT”), a penny-stock company that produced, marketed and sold food bars and other products for dogs, based on the following misrepresentations, among others: (a) that the Internal Revenue Service (“IRS”) had accepted an “offer in compromise” from AAPT that significantly reduced the back taxes AAPT owed to the IRS; (b) that Bershan had paid to the IRS the amount of this offer in compromise and had thus absolved AAPT of its outstanding tax liability; (c) that Bershan was the beneficial owner of a bank account containing over $6.9 million; (d) that Bershan would personally guarantee some of the loans; and (e) that Nestlé USA had proposed various business deals with AAPT. Margulies held himself out as AAPT’s Vice President for Marketing and Advertising, but in reality he played a number of roles at the company, including communicating with investors and creating fake documents, such as forged bank account statements and letters, to support AAPT’s misrepresentations to investors.
Although MARGULIES and his co-conspirators had promised investors that they would use the loans to help improve AAPT’s manufacturing and distribution capacities, the conspirators instead used those funds largely for their personal expenses, including the rental of a luxury villa in the Bel Air neighborhood of Los Angeles where all three of them lived.
In connection with the AAPT fraud scheme, MARGULIES used the stolen identities of three individuals – an IRS employee, a Nestlé Purina employee, and a Manhattan attorney – to create false and fraudulent letters that were sent to AAPT investors to induce them to make loans to AAPT.
The Starship Snack Corporation Fraud Scheme
From approximately August 2015 through August 2017, MARGULIES, Bershan, and a co-conspirator, Barry Schwartz, raised more than $2.3 million from investors in a company originally called the Awake Company and later renamed Starship Snacks Corporation (“Starship”), which purported to be in the business of developing and manufacturing caffeinated snack products, based on the following misrepresentations, among others: (a) that investments in Starship were guaranteed against losses by Bershan; (b) that Starship was going to be acquired by Monster Beverage (“Monster”) in a one-for-one stock exchange; (c) that Starship was engaged in actual product development and had procured samples of chocolate candies infused with caffeine; (d) that MARGULIES and others at Starship had entered into non-disclosure agreements with Monster that prohibited them from discussing Starship’s purported acquisition by Monster and its purported product development. Margulies’s title at Starship was Senior Vice President; he served as the primary point of contact for investors, to whom he made the aforementioned misrepresentations, and he also created a number of fake documents that were used in connection with the Starship fraud.
After receiving funds from Starship investors, Margulies and his co-conspirators used those funds to maintain their own extravagant lifestyles, spending hundreds of thousands of dollars on things like luxury clothing, plastic surgery, interior decorating, the rental of a high-end apartment in New York City, and the down payment for a multi-million dollar house in Florida.
The Illegal Firearm Transfer and Narcotics Distribution of Narcotics
In addition to the fraud and identity theft conduct set forth above, the jury also convicted MARGULIES of illegally transferring a firearm and ammunition from Tennessee to Bershan in New York via commercial courier without being a licensed firearms dealer.
Finally, MARGULIES pled guilty today to a narcotics distribution charge that had been severed from the charges that were the subject of the trial. Specifically, MARGULIES pled guilty to a conspiracy to distribute cocaine that lasted from October 2015 through August 2017, during which MARGULIES sent, and caused to be sent, quantities of cocaine via commercial courier in interstate commerce to Bershan.
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JOEL MARGULIES, 75, of Murfreesboro, Tennessee, was convicted at trial of wire fraud and wire fraud conspiracy in relation to AAPT; aggravated identity theft; securities fraud, wire fraud and conspiracy to commit securities and wire fraud in relation to Starship; and illegally transferring a firearm to an out-of-state resident. Today, he also pled guilty to conspiracy to distribute cocaine. The wire fraud, securities fraud, and conspiracy to commit wire fraud counts carry a maximum sentence of 20 years in prison; the conspiracy to commit securities fraud and wire fraud count carries a maximum sentence of five years in prison; the aggravated identity carries a mandatory sentence of two years in prison to run consecutively to any punishment; the firearm offense carries a maximum sentence of five years in prison; and the drug conspiracy count 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 would be determined by the Court.
MARGULIES is scheduled to be sentenced before Judge Rakoff on December 16, 2019, at 11:00 a.m.
Lisa Bershan and Barry Schwartz each previously pled guilty and are scheduled to be sentenced before Judge Rakoff on October 17, 2019 and October 10, 2019, respectively.
Mr. Berman praised the work of the FBI, and thanked the SEC for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Negar Tekeei and Christine Magdo are in charge of the prosecution.
Broadway Producer Charged with Possession and Distribution of Child PornographyRead the Press Release
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 the Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the arrest of BEN SPRECHER for possession and distribution of child pornography. SPRECHER was arrested today and presented before United States Magistrate Judge Henry B. Pitman.
U.S. Attorney Geoffrey S. Berman said: “Child pornography targets the most innocent and vulnerable in our society. Today, Broadway producer, Ben Sprecher was arrested for allegedly possessing child pornography in his Manhattan home. Sexualizing young children is unconscionable; and this Office and our law enforcement partners will continue to utilize all of the expertise and resources available to shine a light on every dark corner where it is produced, shared, and possessed.”
Special Agent-in Charge Peter C. Fitzhugh said: “It is alleged that Sprecher made available for downloading more than one hundred files of children who were demoralized as their innocence was taken away. HSI and our law enforcement partners at the NYPD remain committed in our global fight to protect children and keep them safe from those who choose to take advantage of a child with the intention of fulfilling their own horrid fantasies.”
According to the allegations in the Complaint filed today[1]:
Between at least October 2018 and August 2019, SPRECHER, a Broadway producer, used a peer-to-peer file sharing network to receive and make available for download over 100 video or photograph files known to contain child pornography. The child pornography included depictions of prepubescent children engaged in sexual activity with adults. On August 13, 2019, law enforcement officers executed a search warrant at SPRECHER’S apartment and recovered an external hard drive, which contained numerous files containing child pornography.
SPRECHER, 65, of New York, New York, is charged with one count of distribution and receipt of child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years 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 the judge.
The charges in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Mr. Berman praised the New York City Police Department and Homeland Security Investigations for their outstanding investigative work.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Samuel P. Rothschild is in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Obtains Civil Injunction Against New York City Accountant Barring Him from Organizing, Promoting, or Selling Abusive Tax SheltersRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York announced today that the United States has simultaneously filed and settled a civil injunction lawsuit against MICHAEL N. SCHWARTZ, a certified public accountant in New York City, to permanently enjoin him from organizing, promoting, or selling abusive tax shelters. The tax shelters that SCHWARTZ organized, promoted and sold, exploited foreign currency options contracts and U.S tax rules to generate artificial losses that taxpayers could claim on their tax returns. As part of the settlement, approved on Thursday, August 8, 2019, in Manhattan federal court by U.S. District Judge Vernon S. Broderick, SCHWARTZ agreed to be permanently enjoined from organizing, promoting, or selling any illegal tax shelter.
Manhattan U.S. Attorney Geoffrey S. Berman said: “These illegal tax avoidance schemes cheated the Government out of hundreds of millions of dollars in taxes. This Office will hold accountable those professionals who abuse their expertise to promote this type of fraud on the United States.”
As alleged in the complaint filed with the settlement agreement:
The abusive tax shelter transactions organized, promoted, and sold by SCHWARTZ involved complex foreign currency transactions designed to generate artificial losses. Under these schemes, investors entered into foreign currency options contracts, with long and short positions that largely offset each other. The investors then transferred some or all of the foreign currency options, and, exploiting certain tax rules, purportedly generated large losses without also realizing the offsetting gains. SCHWARTZ’s tax shelters therefore resulted in taxpayers claiming large phony tax losses, though they suffered no real economic loss. All told, more than one hundred taxpayers participated in these shelters, which yielded them over $400 million in purported losses.
As part of the settlement, SCHWARTZ admitted, among other things, that he developed several of these transactions:
- Schwartz admitted that he developed the so-called Deerhurst Trading Strategies transaction (the “DTS Transaction”), which involved the use of foreign currency options contracts in an effort to generate losses that taxpayers could claim on their tax returns through reliance on specific tax rules.
- This transaction was examined by the Tenth Circuit Court of Appeals in Sala v. United States, 613 F.3d 1249 (10th Cir. 2010), which found that the transaction lacked economic substance in light of the fact that the loss generated “was designed to be entirely artificial.” Id. at 1253.
- Schwartz also admitted that he developed the so-called Castle and MM-MNS Transactions (the “Major-Minor Transactions”), which involved the use of foreign currency options contracts in an effort to generate losses that taxpayers could claim on their returns through reliance on specific tax rules.
- One of these transactions was examined by the Sixth Circuit Court of Appeals in Wright v. Commissioner, 809 F.3d 877, 880 (6th Cir. 2016), which found that “[a]lthough these transactions involve large sums of dollars, euros, and krones, [they] appear to have subjected the [taxpayers] to little actual economic risk because the four options in the major-minor transactions offset each other,'' and concluded that "the [taxpayers] appear to have engaged in the major-minor transactions primarily to generate the desired tax loss.” Id. at 884.
In July and August 2015, the IRS assessed penalties against SCHWARTZ pursuant to Section 6707 of the Internal Revenue Code that have been the subject of litigation in the Chapter 7 bankruptcy proceeding In re Schwartz, 15-12746 (MKV) (Bankr. S.D.N.Y.). Through a stipulation approved by the bankruptcy court on June 4, 2019, SCHWARTZ agreed to pay $650,000 to satisfy these penalties, having demonstrated an inability to pay the full amount, and further agreed to be subject to the injunction that is the subject of this district court action.
Mr. Berman thanked IRS for its invaluable assistance in this matter.
The case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant United States Attorneys Mónica P. Folch and Samuel Dolinger are in charge of the case.
Manhattan U.S. Attorney Announces Insider Trading Charges Against Analyst at Investment BankRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that BILL TSAI, an analyst at an investment bank with offices in Manhattan (the “Investment Bank”), was arrested yesterday morning and charged with insider trading. TSAI made profits in connection with options trading based on material, non-public information he misappropriated from the Investment Bank about an impending acquisition of a publicly traded company. TSAI will be presented today in Manhattan federal court before United States Magistrate Judge Henry Pitman.
Manhattan U.S. Attorney Geoffrey S. Berman said: “In April of this year, Bill Tsai made a quick profit by trading options in a publicly traded company he knew was about to be acquired. His profits were not the result of trading acumen, diligent research, or blind luck, but rather, as alleged, the product of theft of confidential information from his employer. For his alleged conduct, he now faces federal securities fraud charges.”
As alleged in the Complaint unsealed today in Manhattan federal court:[1]
In March 2019, the Investment Bank began working to provide financing to a private equity firm headquartered in New York (“Private Equity Firm-1”) on its possible acquisition of a publicly traded company Electronics for Imaging, Inc. (“EFI”). Information relating to the EFI deal, including its existence, was non-public and confidential. As an analyst at the Investment Bank, TSAI was responsible for, among other things, updating a running list of active transactional deals, including mergers and acquisitions, involving clients of the Investment Bank. As such, TSAI had access to files containing material, non-public information, including information about the EFI deal.
In violation of the Investment Bank’s policies and in breach of his duties to the Investment Bank and its clients, TSAI used material, non-public information about Private Equity Firm-1’s pending acquisition of EFI to purchase EFI call options. Specifically, from on or about March 29, 2019 continuing until on or about April 12, 2019, TSAI bought 187 EFI call options, for a total price of approximately $28,410. TSAI purchased the EFI call options through a brokerage account in his own name. Contrary to Investment Bank policies, TSAI did not reveal his trades or the existence of the brokerage account to the Investment Bank.
The public announcement of Private Equity Firm-1’s acquisition of EFI on the morning of April 15, 2019 caused EFI’s shares to increase in value. Indeed, by the close of the market on April 15, 2019, EFI’s stock price had risen to $38 per share, an approximately 29.25% increase from the previous trading day’s close, resulting in an increase in the value of the call options TSAI had purchased. On April 15, 2019, after the morning announcement of the EFI deal, TSAI placed an order to sell all 187 EFI call options he previously purchased. TSAI’s trading activity in EFI options resulted in a profit of approximately $98,750.
TSAI is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
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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 Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Robert L. Boone and Gina Castellano are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Statement of Manhattan U.S. Attorney on the Death of Defendant Jeffrey EpsteinRead the Press Release
Manhattan U.S. Attorney Geoffrey S. Berman said: “Earlier this morning, the Manhattan Correctional Center confirmed that Jeffrey Epstein, who faced charges brought by this Office of engaging in the sex trafficking of minors, had been found unresponsive in his cell and was pronounced dead shortly thereafter of an apparent suicide. Today’s events are disturbing, and we are deeply aware of their potential to present yet another hurdle to giving Epstein’s many victims their day in Court. To those brave young women who have already come forward and to the many others who have yet to do so, let me reiterate that we remain committed to standing for you, and our investigation of the conduct charged in the Indictment – which included a conspiracy count – remains ongoing.
We continue to urge anyone who feels they may be a victim or have information related to the conduct in this case to please contact 1-800- CALL FBI.”
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Second Former NYPD Officer Sentenced to Federal Prison for Social Security Disability Fraud and Tax EvasionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that GERARD SCPARTA, a former New York City Police Department (“NYPD”) officer, was sentenced today to 18 months in prison for fraudulently obtaining over approximately $630,000 in disability benefits from the Social Security Administration (“SSA”) and underreporting income on his taxes by approximately $268,000. At the same time SCPARTA was fraudulently collecting disability benefits, he earned a total of approximately $1.6 million working as a security guard and host at a strip club (the “Strip Club”) located in Manhattan. SCPARTA was sentenced by U.S. District Judge Alison J. Nathan, before whom he had previously pled guilty to tax evasion and theft of government property.
Earlier this year, in a related case also involving a former NYPD police officer and New York City Fire Department (“FDNY”) firefighter, SCOTT MARAIO was sentenced to one year and one day in prison on January 23, 2019 by U.S. District Judge Sidney H. Stein for fraudulently collecting over approximately 360,000 in Social Security benefits over a period of ten years by lying repeatedly to the SSA about his purported inability to work due to disability, when he also worked at the Strip Club and in other employment.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Gerard Scparta, a former NYPD officer, illegally collected over $630,000 in disability benefits by claiming that he could not work in any capacity due to anxiety and depression. During the very same time period, Scparta felt well enough to earn over $1.6 million working at a Manhattan strip club. Gerard Scparta perverted the Disability Insurance system for his own personal gain, depleting a system intended for people with legitimate claims who depend on those benefits for their well-being. For his reprehensible conduct, Scparta has been sentenced to federal prison and will trade velvet ropes for steel bars.”
According to documents filed in Manhattan federal court:
The SSA administers Social Security Disability Insurance (“SSD”), a federal benefits program that provides monthly cash benefits to individuals who have worked in the past and paid into Social Security, but who can no longer engage in any substantial gainful activity due to medical disabilities. SSD is a disability benefit available only to individuals who have a qualifying disability and are unable to work in any profession. In order to receive SSD, a beneficiary must certify that he or she is incapable of performing any gainful activity due to disability. In addition, a beneficiary must report to the SSA all sources of income from work activity and any changes in the beneficiary’s medical condition, which are taken into account in determining whether the beneficiary is entitled to payments and the amount of those payments.
GERARD SCPARTA
Between in or about 1986 and in or about 1997, SCPARTA worked as a police officer with the NYPD. In or about 1997, after reportedly sustaining an injury at the age of 32, SCPARTA was referred to an individual (“CC-1”) who helped him fraudulently obtain disability benefits. Specifically, CC-1 submitted SSD application materials signed by SCPARTA that falsely stated, among other things, that SCPARTA suffered from severe depression and anxiety, could not do anything around his house, and was unable to work in any capacity. In addition, CC-1 coached SCPARTA to make the same false statements to physicians who examined SCPARTA for the purpose of establishing his disability and submitting reports to the SSA. For example, in one examination by a physician, SCPARTA pretended that he did not know where he was, could not remember the last four vice presidents, and had trouble repeating numbers that were told to him. Based on these false statements and representations by SCPARTA in documents and reports submitted to the SSA, the SSA approved SCPARTA to receive disability benefits from in or about 1997 onward.
In addition to lying about his disability status and inability to work, SCPARTA falsely claimed on multiple forms submitted to the SSA that he did not work, and failed to report earnings from employment as required. In fact, from in or about April 2004 up to and including at least in or about December 2017, SCPARTA worked as a security guard and host at the Strip Club. From in or about 1997 up to and including in or about 2017, SCPARTA received a total of over approximately $638,000 in disability benefits for himself, his wife, and his children, while at the same time SCPARTA earned approximately $1.6 million from his work at the Strip Club.
Further, from in or about 2012 up to and including in or about 2017, SCPARTA engaged in tax evasion by concealing and attempting to conceal from the IRS the nature and extent of his income. Specifically, SCARPTA utilized a nominee company registered to his wife to report income that SCPARTA earned from the Strip Club and falsely underreported that income by a total of approximately $268,602 for the tax years 2012 through 2016.
SCOTT MARAIO
From in or about 1985 through in or about 1986, MARAIO worked as an NYPD police officer. Beginning in or about July 1987, MARAIO began working as a firefighter with the FDNY. In or about January 2002, at the age of 37, MARAIO stopped working as a firefighter due to a claimed disability, and began receiving disability benefits. On multiple forms submitted to the SSA, MARAIO falsely claimed he could not work due to problems with his neck and back and failed to report earnings from employment as required. In fact, from in or about September 2008 through in or about August 2014, MARAIO worked as a security guard at the Strip Club. In addition, from in or about July 2012 through at least in or about February 2018, MARAIO worked for a staffing company (the “Staffing Company”) in various positions relating to fire safety on construction sites, including as a fire safety manager and fireguard. From in or about October 2008 through in or about February 2018, MARAIO received a total of over approximately $364,000 in disability benefits for himself, his wife, and his children, while at the same time MARAIO earned a total of approximately $450,000 from his employment at the Strip Club and with the Staffing Company.
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In addition to his prison sentence, SCPARTA, 54, of Campbell Hall, New York, was sentenced to 3 years of supervised release and ordered to make restitution in the amount of $726,517 and to forfeit the $638,586 in Social Security disability benefits he obtained fraudulently.
MARAIO, 54, of Staten Island, New York, was also sentenced to three years of supervised release and ordered to pay restitution and forfeiture of $364,040.
Mr. Berman praised the outstanding investigative work of the United States Social Security Administration, Office of the Inspector General, and the Internal Revenue Service, Criminal Investigation Division. Mr. Berman also thanked the Manhattan District Attorney’s Office and the New York City Department of Investigation for their assistance with the investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
Owner of AMA, A Rockland Based Consumer Products Testing Company, Arrested for Fraud Scheme Involving Fabricated Test ResultsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Catherine A. Hermsen, Director of the United States Food and Drug Administration (“FDA”) Office of Criminal Investigations (“OCI”), William F. Sweeney, Jr., Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and Kevin Gilleece, Acting Rockland County District Attorney, announced that GABRIEL LETIZIA, Jr., the owner and executive director of AMA Laboratories, Inc. (“AMA”), a consumer products testing company in New City, has been charged with wire fraud and conspiracy to commit wire fraud in connection with his participation in a scheme to defraud AMA’s customers by reporting false laboratory test results. Letizia was arrested this morning and was presented and arraigned this afternoon before Magistrate Judge Paul E. Davison in White Plains federal court. The case is assigned to U.S. District Judge Kenneth M. Karas.
U.S. Attorney Geoffrey S. Berman said: “AMA Laboratories, a consumer products testing company, tested consumer products for other companies that relied on AMA for genuine, accurate test results in order to safely bring their products to the consumer market. Unbeknownst to them, AMA’s owner, Gabriel Letizia, and others were engaged in a scheme to falsify those crucial test results by testing their products on far fewer panelists than they reported. Letizia and his co-defendants’ scheme not only cost the victim companies millions, they endangered the safety of thousands of consumers.”
Director, FDA Office of Criminal Investigations Catherine A. Hermsen said: “Honest reporting of product testing is vital for ensuring the safety of drugs and cosmetics for U.S. consumers. When companies and individuals engage in criminal activity that puts the public health at risk, FDA will work to investigate and bring them to justice.”
Acting Rockland County District Attorney Kevin Gilleece said: “As if enriching themselves through theft and fraud wasn't bad enough, the 30-year scheme perpetrated by these individuals may have had a deleterious impact on the health and wellness of countless victims. Letizia and his employees broke the law and violated the ethical duties owed to their customers and volunteers. The teamwork exhibited by all participating agencies throughout the joint investigation that began with the Rockland County District Attorney's Office was exemplary.”
According to the allegations contained in the Indictment that was unsealed today and statements made in court proceedings[1]:
AMA is a consumer products testing company in Rockland County, New York. LETIZIA is AMA’s owner and executive director. David Winne served as AMA’s technical director, Mayya Tatsene served as AMA’s clinical laboratory director, Patrycja Wojtowicz served as AMA’s associate director of clinical studies, and Kaitlyn Gold served as AMA’s supervising laboratory technician. AMA tested the safety and efficacy of cosmetics, sunscreens and other products on specified numbers of volunteer panelists for consumer products companies.
From 1987 through April 2017, LETIZIA and others at AMA defrauded AMA’s customers of tens of millions of dollars by testing products on materially lower numbers of panelists than the numbers specified and paid for by AMA’s customers. LETIZIA, and AMA employees acting under his direction, sent the customers fraudulent reports, which falsely represented to the customers that AMA had tested the products on the number of panelists specified by the customers. LETIZIA and AMA employees acting under his direction also made materially false and misleading statements about the results of the tests to AMA’s Customers.
LETIZIA, 69, of New City, New York, was charged in the Indictment with conspiracy to commit wire fraud and wire fraud. The charges each carry a maximum prison term of 20 years.
David Winne pled guilty on May 23, 2019, before United States Magistrate Judge Judith C. McCarthy, to one count of conspiracy to commit wire fraud and one count of wire fraud. The charges each carry a maximum prison term of 20 years.
Mayya Tatsene pled guilty on May 29, 2019, before United States Magistrate Judge Lisa Margaret Smith, to one count of conspiracy to commit wire fraud and one count of wire fraud. The charges each carry a maximum prison term of 20 years.
Patrycja Wojtowicz pled guilty on June 12, 2019, before United States Magistrate Judge Judith C. McCarthy, to one count of conspiracy to commit wire fraud and one count of wire fraud. The charges each carry a maximum prison term of 20 years.
Kaitlyn Gold pled guilty on June 24, 2019, before United States District Judge Cathy Seibel, to one count of conspiracy to commit wire fraud and one count of wire fraud. The charges each carry a maximum prison term of 20 years.
The maximum potential sentences in these cases 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 the U.S. Food and Drug Administration, Office of Criminal Investigations, the Federal Bureau of Investigation, and the Rockland County District Attorney’s Office.
This case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Jeffrey C. Coffman, James McMahon, and Olga Zverovich are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Former PCAOB Inspections Leader and KPMG Executive Director Sentenced for Scheme to Steal Confidential PCAOB Information in Order to Fraudulently Improve KPMG’s PCAOB Inspection ResultsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CYNTHIA HOLDER, a former Public Company Accounting Oversight Board (“PCAOB”) Inspections Leader and KPMG Executive Director, was sentenced today to 8 months in federal prison for participating in a scheme to defraud the Securities and Exchange Commission (the “SEC”) and 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, the results of which were shared with, and utilized by, the SEC in carrying out its governmental functions. HOLDER pled guilty October 16, 2018, before U.S. District Judge J. Paul Oetken, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As a former employee of the PCAOB, Cynthia Holder understood the importance of the organization’s work: to protect investors and the public by overseeing the audits of public companies. But she undermined the Board’s and the SEC’s regulatory missions when she stole confidential inspection information and provided it to KPMG, her new employer. KPMG, in turn, used this confidential information to cheat on PCAOB inspections. Holder’s sentence should be an example to others that stealing confidential information and corrupting regulatory processes are crimes that this Office takes very seriously.”
According to the allegations contained in the Indictment filed against HOLDER and statements made in related court filings and proceedings:
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 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. The PCAOB transmits these Inspection Reports to the SEC, which utilizes them in carrying out its agency functions.
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 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel such as HOLDER and HOLDER’s co-conspirator, Brian Sweet.
KPMG’s efforts to improve inspection results, however, were not limited to legitimate means. Instead, between 2015 and 2017, HOLDER, David Middendorf, Thomas Whittle, Jeffrey Wada, Sweet, 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, after Sweet began employment at KPMG, but while HOLDER was still employed by the PCAOB, HOLDER fed Sweet confidential PCAOB information about certain pending inspections. HOLDER did so while simultaneously seeking employment at KPMG. During the pendency of her efforts to obtain employment at KPMG, HOLDER – in violation of PCAOB rules – continued to work on KPMG inspections at the PCAOB. Once she secured a job at KPMG, HOLDER stole valuable confidential information on her way out of the PCAOB and then passed it on to Sweet, her new boss at KPMG.
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 others. Middendorf, Whittle, Sweet, and others then agreed to launch a stealth program to “re-review” the audits that had been selected. In order to cover up their illicit conduct, the KPMG engagement partners were given 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 others. Middendorf, Whittle, and Sweet agreed to inform engagement partners on the list so that extra attention could be paid to these audits in light of the forthcoming PCAOB inspections.
In 2017, a KPMG partner who received early notice that her engagement was on the confidential 2017 inspection list reported the matter, as a result of which KPMG’s Office of General Counsel launched an internal investigation. Thereafter, HOLDER and Sweet took a number of steps to destroy or fabricate evidence relevant to the investigation. For example, HOLDER deleted a number of relevant text messages, emails, and documents, and said she was going to purchase a “burner phone” so her conversations could not be monitored. Similarly, Sweet burned evidence of the 2017 inspection list and provided a falsified version of the list to KPMG counsel.
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In addition to a prison term, HOLDER, 53, of Houston, Texas, was sentenced to 2 years of supervised release. 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, which has brought an administrative proceeding against Holder.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein, Jordan Estes, Martin Bell, and Margaret Graham are in charge of the prosecution.
Financial Broker Sentenced to 42 Months in Prison for Tax Evasion and Failure to File Tax ReturnsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York announced today that RICHARD JOSEPHBERG was sentenced to 42 months in prison for evading hundreds of thousands of dollars in taxes for the calendar year 2011 and willfully failing to file tax returns for the calendar years 2013 through 2015. JOSEPHBERG previously pleaded guilty to these crimes before U.S. Circuit Judge Richard J. Sullivan, who imposed today’s sentence.
According to allegations in the Indictment, court filings, and statements made in public court proceedings:
JOSEPHBERG was previously convicted in September 2007, in the U.S. District Court for the Southern District of New York, of 16 counts of tax fraud and one count of health care fraud, which resulted in a sentence of 50 months in prison and three years’ supervised release. JOSEPHBERG was released from custody and commenced his term of supervised release in late October 2010. While on supervised release, JOSEPHBERG began committing the tax crimes for which he was sentenced today.
Specifically, starting in late 2010, JOSEPHBERG began employment with an investor relations firm called CEOcast in Manhattan. Through the individual who operated CEOcast, JOSEPHBERG secured a commission-based arrangement with another investment firm, Socius Capital Group LLC (“Socius”). Socius agreed to pay JOSEPHBERG a commission of approximately 15 percent of any profit generated by Socius on financing deals originated by JOSEPHBERG. For originating one such financing deal, JOSEPHBERG was entitled to commission payments totaling approximately $1.57 million in 2011. After receiving payments totaling approximately $35,725 in his own name, JOSEPHBERG directed Socius to issue the remaining commission payments in the name of a newly formed corporate entity called “Almorli Advisors Inc.” JOSEPHBERG opened a new bank account in the name of Almorli Advisors Inc. (“Almorli Bank Account-1”), and deposited payments totaling approximately $1.53 million into that account.
In March 2012, while preparing to file 2011 federal income tax returns, JOSEPHBERG took steps to evade paying hundreds of thousands of dollars in federal income taxes by disguising and concealing the type of income that JOSEPHBERG had received from Socius. On or about March 27, 2012, JOSEPHBERG formed a second corporate entity called “Almorli Advisors NY LLC,” which served as a shell company to insulate JOSEPHBERG from IRS scrutiny. JOSEPHBERG caused his accountant to prepare a false 2011 partnership income tax return, Form 1065, in the name of Almorli Advisors NY LLC (the “2011 Form 1065”), listing JOSEPHBERG as a 99 percent partner and JOSEPHBERG’s son as a one percent partner. To evade a substantial part of the income taxes due and owing for 2011, JOSEPHBERG caused the 2011 Form 1065 falsely to report the commission payments from Socius, totaling approximately $1,574,922, as a long-term capital gain, rather than ordinary income. JOSEPHBERG’s purported 99 percent share of this false long-term capital gain flowed through to his 2011 individual income tax return, Form 1040. JOSEPHBERG’s fraudulent misclassification of this income resulted in a reported tax liability that was hundreds of thousands of dollars lower than the true tax liability because individual long-term capital gains were taxed at a significantly lower rate than ordinary income.
JOSEPHBERG also engaged in a scheme to evade the assessment of federal income taxes for calendar years 2013 through 2016. During those years, JOSEPHBERG received substantial income from performing consulting and other professional services. Despite earning substantial income, JOSEPHBERG failed timely to file any federal income tax returns for the calendar years 2013 through 2016 until after IRS agents informed JOSEPHBERG in May 2017 that he was under investigation. In addition to not timely filing any tax returns, JOSEPHBERG took various affirmative steps to evade the assessment of taxes. Among other things, JOSEPHBERG routed substantial amounts of income through Almorli Bank Account-1 and another bank account in the name of Almorli Advisors Inc., which bank accounts JOSEPHBERG controlled and used to pay for his personal expenses.
In all, through the crimes to which he pleaded guilty and relevant conduct, JOSEPHBERG caused the Internal Revenue Service (“IRS”) to incur losses of approximately $1.2 million. JOSEPHBERG’s scheme also caused a loss of $75,744.28 to the New York State Department of Taxation and Finance (“NYSDTF”), based in large part on JOSEPHBERG’s failure to timely file any state tax returns for 2013 through 2016.
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In addition to the term of prison imprisonment, Judge Sullivan ordered JOSEPHBERG to serve 3 years of supervised release. Judge Sullivan deferred restitution to a later date.
Mr. Berman praised the outstanding investigative work of IRS Criminal Investigation in this case.
This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution.
DEA Agent and International Narcotics Trafficker Each Plead Guilty in Connection with Decade-Long Narcotics ConspiracyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that FERNANDO GOMEZ and JOSE MARTINEZ-DIAZ, a/k/a “Tony Zinc,” pled guilty in Manhattan federal court to charges related to a decade-long narcotics conspiracy. GOMEZ, who was an active agent with the Drug Enforcement Administration (“DEA”) until his arrest in December 2018, pled guilty today to a narcotics conspiracy involving the distribution of cocaine. As part of his plea, Gomez agreed that he supplied guns to MARTINEZ-DIAZ. MARTINEZ-DIAZ pled guilty on July 29 to his participation in a racketeering conspiracy involving the enterprise known as La Organizacion de Narcotraficantes Unidos (“La ONU”). As part of his plea, MARTINEZ-DIAZ agreed that his participation in the enterprise involved the distribution of at least 450 kilograms of cocaine and two attempted murders.
U.S. Attorney Geoffrey S. Berman said: “DEA Special Agent Fernando Gomez violated the very laws he swore to enforce. Rather than uphold the nation’s drug laws, for over a decade he helped a major drug trafficker, Jose Martinez-Diaz, get away with his crimes. This case exemplifies the enduring commitment of this Office, along with our law enforcement partners, of preserving the highest degree of integrity for law enforcement from within. And with the guilty pleas of Gomez and Martinez-Diaz, justice will now be served.”
According to the Indictment, statements made during public court proceedings, and public court filings:
GOMEZ, while working as a detective with the City of Evanston Police Department in Illinois, transported firearms to Puerto Rico and provided those firearms to MARTINEZ-DIAZ. After joining the DEA, GOMEZ helped members of the narcotics conspiracy, including MARTINEZ-DIAZ, evade detection by law enforcement.
La ONU was a criminal enterprise involved in the trafficking of cocaine from Puerto Rico to the Bronx, New York. The cocaine was distributed in New York, including out of a daycare center in the Bronx, New York. Members and associates of La ONU also engaged in acts of violence, including murder, to protect and expand the enterprise’s criminal operations and in connection with rivalries with other criminal organizations.
MARTINEZ-DIAZ was a high volume cocaine trafficker who supplied La ONU members with drugs that were transported from the Dominican Republic. La ONU further distributed the cocaine, including in the Southern District of New York. Martinez-Diaz smuggled the narcotics from the Dominican Republic, usually by boat. In connection with his membership in La ONU, Martinez-Diaz was involved in the distribution of over 5,000 kilograms of cocaine.
Martinez-Diaz funded and assisted La ONU in its fight against its rival, La Rompe ONU. For example, Martinez-Diaz provided money to La ONU members to purchase firearms. In addition, Martinez-Diaz and others created a fake Puerto Rico Police Department patrol car. Members of La ONU used the fake patrol car to harass and intimidate members of La Rompe ONU, and to conduct shootings.
In or about 2007, Martinez-Diaz ordered a shootout in Puerto Rico. The target of the shootout was shot but survived.
On another occasion, Martinez-Diaz paid an individual $5,000 in connection with the attempted murder of a rival drug dealer.
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FERNANDO GOMEZ, 42, of Chicago, Illinois, pled guilty to one count of participating in a narcotics conspiracy involving the distribution of cocaine, which carries a maximum sentence of 20 years in prison. MARTINEZ-DIAZ, of San Juan, Puerto Rico, pled guilty to one count of participating in a racketeering conspiracy, which carries a maximum sentence of 20 years in prison. Sentencing for GOMEZ is scheduled for November 21, 2019; sentencing for MARTINEZ-DIAZ is scheduled for November 26, 2019 at 3:30 p.m.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence for the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of United States Postal Inspection Service, DEA, Bureau of Alcohol, Tobacco, Firearms, and Explosives, Department of Justice Office of the Inspector General, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jordan Estes, Andrew Thomas, Lara Pomerantz, and Allison Nichols are in charge of the prosecution.
CEO of Miami Investment Management Companies Pleads Guilty to Defrauding Investors of over $7.5 MillionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that FABIO BRETAS DE FREITAS pled guilty today before U.S. District Judge Laura T. Swain to defrauding a group of investors (the “Victims”) by soliciting funds for investment in the commodity futures markets, but instead using the funds for personal and other expenses. BRETAS lulled his Victims and furthered the scheme by distributing fictitious financial statements to the Victims, purporting to show their investments’ position and growth under his management. When his companies were audited by regulators, the Commodities Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”), BRETAS lied to the regulators in order to cover up his crimes, going so far as to steal the identity of one Victim and to impersonate that Victim in email communications with the NFA.
Manhattan U.S. Attorney Geoffrey Berman said: “Fabio Bretas De Freitas solicited investor funds from several companies he operated by touting his prolific ability to profit from his futures market trading strategies. In reality, Bretas’ core strategy was swindling investors, using the funds to line his own pockets while doing minimal trading for his investors. Bretas now faces serious time in prison, and this case is a prime example of the inevitability of getting caught when defrauding investors.”
According to the allegations in the criminal complaint, the indictment, and other documents filed in federal court, as well as statements made in public court proceedings:
BRETAS operated a group of investment companies, including Phynance Capital Management LLC (“Phy Cap”), Phy Global Partners Fund LLC (“PGP”), Absolute Experience LLC (“Absolute”), and Global Partners Investors LLC (“GPI”), that he used to solicit investments from. Phy Cap was a commodity pool operator and commodity trading advisor, registered with the NFA, as required by CFTC. In his companies’ marketing materials, BRETAS represented that he used “statistical analysis and mathematical modeling of historical data to develop quantitative systematic methodologies applied to managed futures strategies.” In fact, while BRETAS solicited more than $7.5 million from individual investors, he conducted only a minimal level of trading; his predominant use of his companies was the theft of investor money, using it to cover his personal expenses and transferring investor funds abroad. In order to continue the scheme, and solicit additional investments, BRETAS prepared false monthly statements, purporting to demonstrate the investments’ growth, and distributed them to the Victims. When his regulators, the CFTC and NFA, initiated an audit in 2017, BRETAS lied about his affiliation with Absolute, falsely claimed that the funds that the Victims invested in PGP were mere loans to his company, lied about the use of those funds and the solicitation of investments, and ultimately created a fraudulent email account for the purpose of impersonating one victim in communications with the NFA.
BRETAS, 53, of Miami, Florida, pled guilty to one count of conspiracy to commit wire fraud and commodities fraud. That offense carries a maximum prison term of 25 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. BRETAS is scheduled to be sentenced by Judge Swain on December 17, 2019.
Mr. Berman praised the outstanding investigative work of the FBI’s New York Money Laundering Investigation Squad, and thanked the attorneys and investigators at the CFTC whose expertise and diligence were integral to the development of this investigation and today’s successful guilty plea.
This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorney Benet J. Kearney is in charge of the prosecution.
Brooklyn Man Sentenced to 13 Years in Manhattan Federal Court for Sex Trafficking of MinorsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that COREY ROPER was sentenced today to 13 years in prison for sex trafficking of minor females. ROPER was sentenced by U.S. District Judge Naomi Reice Buchwald, before whom he previously pled guilty to one count of sex trafficking minor victims. As part of his plea, ROPER acknowledged that he trafficked three minor females, and also trafficked another female by force.
Manhattan U.S. Attorney Geoffrey S. Berman stated: “Self-proclaimed pimp, Corey Roper, perpetrated awful acts against young women. Roper subjected his victims – some as young as 13 years old – to what he called ‘pimp rules,’ and punished them through cruel physical violence and depriving them of food and sleep if they didn’t comply with his abhorrent commands. Because of his unconscionable conduct against these vulnerable victims, Roper now ironically finds himself subject to a code of conduct that he’s forced to comply with – prison rules.”
According to the Indictment and other court documents filed in Manhattan federal court:
The defendants were members of or affiliated with the Snow Gang, a gang based in Queens, New York, which was engaged in a myriad of criminal activities, including violence, drug trafficking, credit card fraud, and sex trafficking of young women. Between February 2015 and March 2017, the defendants worked together to traffic minor female victims, using methods of force, fraud, and coercion. Members of this conspiracy used brutal violence to capture and control their victims, and used firearms to protect their illegal sex trafficking business.
ROPER was a violent pimp who controlled his victims through force and intimidation. ROPER’s victims included minor females as young as 13 years old, who were subjected to ROPER’s code of “pimp rules,” that, for example, prohibited his victims from speaking to other men, from keeping any money they earned, and from eating if they did not make ROPER enough money. If any of the rules were broken, ROPER punished his victims through violence, including choking, hitting, punching, and kicking his victims. One victim—identified in court documents as “Minor Victim-4”—was regularly abused by ROPER, including being beaten with a cord, being forced to kneel on uncooked rice for hours as a form of punishment, and being held in a windowless room in Brooklyn where she was physically abused by ROPER and forced to have sex with customers of his choosing. Another victim—identified in court documents as “Victim-1”—was beaten by ROPER when she initially refused to work for him. ROPER responded by slapping her, refusing to let her leave, and denying her food. When Victim-1 angered Roper by disobeying him, he disciplined her, including by making her stand in the corner of a room for hours and depriving her of food and sleep.
* * *
In addition to his prison sentence, ROPER, 27, was sentenced to five years of supervised release.
ROPER is the seventh defendant to be sentenced in this case by Judge Buchwald for his participation in sex trafficking minors. The other defendants in this case—David Hightower, Nashean Folds, Antwone Washington, Terrell Clarke, Tremain Moore, and Gregory Luck—pled guilty to and have been sentenced in connection with various offenses, including participating in a conspiracy to commit sex trafficking of minors.
Mr. Berman praised the outstanding work of the New York City Police Department’s Human Trafficking Team and the Federal Bureau of Investigation. He also thanked the Georgia Bureau of Investigation, the Department of Homeland Security Investigations, the Nassau County Police Department, and the Edison New Jersey Police Department for their support and cooperation in this case.
The prosecution is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Amanda L. Houle and Lara Pomerantz are in charge of the prosecution.
Bronx Drug Dealer Charged with 2012 MurderRead the 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 ELIJAH BILAL, a/k/a “Karate Kid,” with the April 15, 2012, murder of Terrance Martin, 25, in the Bronx, New York. BILAL was arrested this morning and is expected to be presented before U.S. Magistrate Judge Debra Freeman in federal court later today. This case is assigned to U.S. District Judge Paul J. Oetken.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Elijah Bilal murdered Terrance Martin nine years ago in connection with his drug dealing. Now, thanks to the outstanding work of the NYPD, the defendant has been charged with this heinous crime.”
NYPD Commissioner James P. O’Neill said: “Today’s charges demonstrate that the investigative efforts of New York City law enforcement are far-reaching, precisely-focused, and patient. As long as individuals are involved in the sale of illegal narcotics and gun violence, the NYPD and our partners will work to stop the threat to public safety. I commend and thank the U.S. Attorney’s Office for the Southern District for their assistance in bringing Elijah Bilal to justice.”
According to the allegations in the Indictment unsealed in Manhattan federal court:
On April 15, 2012, in the vicinity of 285 East 156th Street in the Bronx, New York, BILAL shot and killed Martin in connection with a conspiracy to distribute heroin and crack cocaine.
* * *
BILAL, 27, of the Bronx, New York, is charged with one count of using a firearm to commit murder during a drug-trafficking crime, 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 Attorney Christopher Clore 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.
North Carolina Man Pleads Guilty to Scheme to Defraud Consumers of Legal Advice and ServicesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JOHN LAMBERT, a/k/a “Eric Pope,” pled guilty this afternoon before U.S. District Judge Valerie E. Caproni to one count of conspiracy to commit wire fraud, in connection with a scheme to defraud consumers of legal advice and services.
U.S. Attorney Geoffrey S. Berman said: “John Lambert represented himself to clients as a prominent New York attorney with a law degree from an elite law school. But Lambert’s de facto career was one of a grifter: he had never been to law school and certainly wasn’t an attorney. Today, Lambert admitted to his crimes and faces time in prison for his misdeeds.”
According to the Information and other documents filed in the case, as well as statements made during the plea proceedings:
From August 2016 through April 2018, LAMBERT perpetrated a scheme to defraud consumers of legal advice and services, by falsely representing, through web-based platforms for freelancing services, websites, emails, phones calls, and other means, that he was an experienced attorney who had attended an elite law school, when in fact he was not an attorney and had never attended law school. Having misled his victims into believing that he was a highly qualified attorney, LAMBERT then provided legal advice and services to his victims, in exchange for which his victims paid him money.
LAMBERT’s victims included at least six individuals and corporations who paid him money for purported legal advice and services. The victims hired LAMBERT to provide legal advice and services on a wide range of subjects, including issues with their credit reports, drafting a will, corporate and intellectual property law, and a dispute with a former employee. One of the victims withdrew money from his 401(k) account to pay LAMBERT.
LAMBERT used the alias “Eric Pope” when communicating with the victims, and falsely represented to at least some of them that he was an attorney at a law firm called “Pope and Dunn;” had attended an elite law school; was an expert in corporate, finance, and property law; had worked with hundreds of clients, including “tech moguls” and “entrepreneurs,” in the United States and Europe; and was located in New York City. But LAMBERT was not and had never been an attorney, and was not located in New York City.
* * *
LAMBERT, 23, of Bristol, Tennessee, pleaded guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. LAMBERT is scheduled to be sentenced by Judge Caproni on November 18, 2019.
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 the FBI.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Benjamin Woodside Schrier is in charge of the prosecution.
Member of Bronx Gang Pleads Guilty to Ordering 2009 MurderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that STEVEN BROWN, a/k/a “BI,” pled guilty today to participating in a murder in connection with a drug crime for his role in the August 2, 2009, murder of Derrick Moore in the Bronx. BROWN pled before U.S. District Judge Katherine Polk Failla.
Manhattan U.S. Attorney Geoffrey Berman said: “Almost 10 years ago to the day, Steven Brown, the leader of a violent, drug-dealing street crew, ordered the killing of rival street crewmember, Derrick Moore. We are committed to combating gang violence, and today’s guilty plea shows that no passage of time will stop us from bringing perpetrators of violence to justice.”
According to the allegations contained in the Indictment and statements made in court:
The Taylor Avenue Crew was a criminal enterprise that operated principally in and around the Bronx from at least 2007 up to and including 2015. The Taylor Avenue Crew sold cocaine base, commonly known as “crack cocaine,” primarily in and around Taylor Avenue in the Bronx. The Taylor Avenue Crew controlled crack cocaine sales within this area by prohibiting and preventing non-members, outsiders, and rival narcotics dealers from distributing crack cocaine in the area controlled by the Crew. The Taylor Avenue Crew also committed acts of violence in the area against rival gangs, including assaults, attempted murder, and murder.
Members and associates of the Taylor Avenue Crew also allied themselves with crews from nearby areas of the Bronx. One such crew included the Creston Avenue Crew, a criminal enterprise that operated principally in and around the Bronx, New York, from at least 2003 up to and including 2011 and whose members sold cocaine and marijuana primarily in and around Creston Avenue in the Bronx. Members of the Taylor and Creston Avenue Crews associated with each other and assisted each other by, among other things, carrying out acts of violence on each other’s behalf upon request by the leaders of the respective crews. One such act of violence was the murder of 22-year-old Derrick Moore. In August 2009, after escalating violence between the Taylor Avenue Crew and a rival crew, BROWN, who was the head of the Taylor Avenue Crew, ordered the murder of Moore. To carry out the murder, BROWN requested the assistance of the Creston Avenue Crew, whose members then shot and killed Moore.
* * *
BROWN, 40, of the Bronx, New York, pled guilty to one count of murder while engaged in a narcotics trafficking offense, which carries a maximum sentence of life imprisonment and a mandatory minimum sentence of 20 years in prison. He will be sentenced by Judge Failla on December 4, 2019.
Luis Ortiz, one of BROWN’s co-defendants, pled guilty on July 24, 2019, to murder through use of a firearm in connection with a drug crime, and faces a maximum sentence of life imprisonment and a mandatory minimum sentence of five years in prison. Ortiz is scheduled to be sentenced on October 18, 2019.
Trial for an additional co-defendant, Rafael Reyes, is scheduled to begin on September 30, 2019. The description of the offense set forth in this release are merely allegations and Reyes is innocent until proven guilty.
Mr. Berman praised the outstanding investigative work of the New York City Police Department, the Drug Enforcement Administration, Homeland Security Investigations, and the FBI. Mr. Berman also thanked the United States Attorney’s Office for the Middle District of Pennsylvania for their assistance.
Assistant U.S. Attorneys Maurene Comey, Jessica Lonergan, and Jason Swergold are in charge of the prosecution. The case is being handled by the Office’s Violent and Organized Crime Unit.
Florida Man Sentenced in Manhattan Federal Court to 20 Years in Prison for Mailing 16 Improvised Explosive Devices in Connection with October 2018 Domestic Terrorist AttackRead the Press Release
Cesar Altieri Sayoc was sentenced yesterday to 20 years in prison in connection with his mailing of 16 improvised explosive devices to victims across the country. SAYOC pled guilty to a 65-count Superseding Information on March 21, 2019, before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.
Assistant Attorney General for National Security John C. Demers said: “Time and again, we have seen individuals attempt to express political views and resolve political disagreements through violence. Cesar Sayoc has now been sentenced for acts of domestic terrorism that are repulsive to all Americans who cherish a society built on respectful and non-violent political discourse. Our democracy depends on our debating our strongly held views peacefully and respectfully, and when someone does not, on our prosecuting and punishing those who do not abide by these values. I applaud the efforts of so many in our law enforcement community whose alertness and tirelessness led to the prompt arrest of the defendant before he was able to injure anyone, as well as those whose efforts led to this sentence.”
Manhattan U.S. Attorney Geoffrey S. Berman said: “Cesar Sayoc assembled and mailed explosive devices to high-ranking officials and former elected leaders to incite fear and to terrorize his victims. Though thankfully no one was hurt by his actions, Sayoc’s domestic terrorism challenged our nation’s cherished tradition of peaceful political discourse. For his wanton disregard of the safety of so many people, Sayoc will now spend 20 years in prison.”
“I could not be more proud of the work by our Joint Terrorism Task Forces across the country, our partners including the U.S. Postal Inspection Service and U.S. Secret Service, and the FBI’s Laboratory and Counterterrorism Divisions to bring Cesar Sayoc to justice,” said Assistant Director Michael McGarrity of the FBI’s Counterterrorism Division. "This case should serve as a warning to anyone looking to intimidate or hurt those they disagree with that the FBI will stop at nothing to protect the communities we serve from the threat of domestic terrorism."
FBI Assistant Director William F. Sweeney Jr. said: “Sayoc’s crimes were intended to incite fear among his targets and uncertainty among the general public, leading to a significant deployment of various law enforcement resources in a nationwide search to find him. When called upon, our FBI JTTFs across the country – along with our partner agencies – did what we do best, working swiftly, and side by side, to bring him to justice. Unlike most of our investigations, this case played out in plain view from beginning to end. Today's sentencing is as good a time as any to remind the public that our JTTFs are working behind the scenes on a daily basis, in much the same way, to keep our communities safe.”
According to the Superseding Information, court filings, and statements made during court proceedings:
In October 2018, Sayoc mailed from Florida 16 padded envelopes, each containing an improvised explosive device (IED), to addresses in New York, New Jersey, Washington, D.C., Delaware, Georgia, and California. In alphabetical order, Sayoc’s intended victims (the Victims) were former Vice President Joseph Biden, Senator Cory Booker, former CIA Director John Brennan, former Director of National Intelligence James Clapper, former Secretary of State Hillary Clinton, CNN, Robert De Niro, Senator Kamala Harris, former Attorney General Eric Holder, former President Barack Obama, George Soros, Thomas Steyer, and Representative Maxine Walters. Between October 22 and Nov. 2, 2018, the FBI and the U.S. Postal Service recovered all of the 16 IEDs mailed by Sayoc.
Each of the IEDs mailed by Sayoc contained a mix of explosive powder from fireworks, shards of glass, and pool chemicals, designed to maximize potential injuries, damage, and the burning of his intended Victims’ skin. On the outside of each IED, Sayoc placed photographs of each of the Victims, and sometimes their families and others, with a red “X” over their faces. Sayoc also affixed black flags, similar in appearance to banners used by ISIS and other foreign terrorist organizations, to the outside of the IEDs.
Sayoc had posted incendiary comments about liberal political figures online since at least 2011. In the months prior to mailing the IEDs, Sayoc incited violence against the Victims, conveyed direct threats against them, and researched where and how to carry out his attack. For example, in April 2016, he wrote that former President Barack Obama’s “head need[ed] to be chopped off” and he wished “death” to George Soros and former Attorney General Eric Holder. In April 2017, Sayoc wished “Death” to “all Clintons” and in November 2017 posted “Your days are number[ed] Steyer[].” Beginning in December 2017, Sayoc researched the Victims and their addresses. For example, on Dec. 23, 2017, Sayoc searched for the address of Congresswoman Maxine Waters, and, over the course of the ensuing months, Sayoc repeatedly searched for the “home address” or “address” of several of the Victims, and Sayoc intensified these searches in the days before his attack. Finally, Sayoc researched online how to make a “letter bomb” and watched videos depicting explosions.
The FBI arrested Sayoc in Plantation, Florida, on Oct. 26, 2018—less than five days after the October 22 recovery of the first IED, which Sayoc mailed to Soros in New York.
In addition to his prison sentence, Sayoc, 57, of Florida, was sentenced to five of supervised release.
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 New York City Police Department, and the U.S. Postal Inspection Service. Assistant Attorney General Demers and U.S. Attorney Berman also thanked the U.S. Attorney’s Offices for the Southern District of Florida, the District of Columbia, the District of Delaware, the District of New Jersey, the Central District of California, the Eastern District of California, the Northern District of California, and the Northern District of Georgia for their assistance in the investigation.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sam Adelsberg, Emil J. Bove III, Jane Kim, and Jason A. Richman are in charge of the prosecution, with assistance from Trial Attorney David Cora of the Counterterrorism Section of the Department of Justice’s National Security Division.
Manhattan U.S. Attorney Announces Settlement with Construction Company for Underpaying Workers and Submitting False Payroll Reports on Two Federally Funded ProjectsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Mark H. Watson Jr., U.S. Department of Labor (“DOL”) Wage and Hour Division Northeast Regional Administrator, announced today a settlement of a civil fraud lawsuit against NAGAN CONSTRUCTION, INC. (“NAGAN”), a construction contractor based in Inwood, New York, for underpaying workers on two federally funded construction projects and submitting false certified payroll reports that misclassified thousands of hours of work performed by these workers. The United States’ Complaint alleges that NAGAN violated federal prevailing wage requirements by paying 20 employees the wage rate applicable to “laborer” work – which typically involves unskilled tasks such as cleaning and transporting materials and equipment – when the employees had performed skilled work, such as carpentry and bricklayer tasks, which entitled them to a substantially higher wage rate.
As part of the settlement approved by U.S. District Judge Analisa Torres, NAGAN has agreed to pay the United States a sum of $435,000, $242,375.60 of which will be distributed to the current and former NAGAN employees who were underpaid. In addition, NAGAN admitted and accepted responsibility for conduct alleged in the Complaint, including underpaying its employees and improperly misclassifying thousands of hours of work they performed. NAGAN also agreed to implement specific measures designed to ensure future compliance with applicable federal prevailing wage laws, including conducting periodic internal compliance audits and ensuring that supervisors are fully trained on federal labor standards.
Manhattan U.S. Attorney Geoffrey S. Berman said: “On two large construction projects funded by the government, Nagan Construction violated federal labor laws – as well as its contracts – by failing to pay skilled employees the wages they were owed and then falsely describing the nature of the employees’ work in reports submitted to the government. This office will hold companies accountable when they cheat workers out of the wages they rightfully earn and then submit false reports to the government to justify the lower wage rate.”
DOL Wage and Hour Division Regional Administrator Mark H. Watson Jr. said: “Federal contractors must properly classify their employees and pay them the correct required rates and benefits. Not doing so not only denies workers their hard-earned wages, it also places law-abiding employers at a competitive disadvantage. The U.S. Department of Labor will utilize all available legal options and work cooperatively with our fellow law enforcement agencies to hold those who commit violations accountable. We encourage all employers to reach out to us for guidance, and to use the wide variety of tools we provide to help them comply with the law and avoid violations like those found in this case.”
The Davis-Bacon Act (the “DBA”) requires workers on federally funded construction projects in excess of $2,000 to be paid the local “prevailing wage.” The DOL issues wage determinations setting forth the applicable local prevailing wages for different work classifications on a project. The DBA requirements and applicable wage determinations are incorporated into project contracts. The construction contractor must submit certified payroll records to the federal contracting agency reflecting the employees who worked on a project each day, the hours each employee worked, the classification of the work performed, and the rate and total amount each employee was paid.
As alleged in the Complaint filed in Manhattan federal court:
In 2012, NAGAN entered into a contract with the United States Merchant Marine Academy (“USMMA”) to renovate a dining facility called Delano Hall located in Kings Point, New York (the “Delano Hall Project”). In 2014, NAGAN entered into a contract with the DOL to renovate the South Bronx Job Corps Center located in Bronx, New York (the “Job Corps Center Project”). NAGAN served as the prime contractor on the Delano Hall Project and the Job Corps Center Project, which were completed in or about March 2015 and February 2018, respectively.
During the course of the projects, NAGAN submitted monthly reports to the USMMA and the DOL requesting payment and describing the work performed during the month. NAGAN regularly submitted false certified payroll reports that misclassified thousands of hours of skilled work as “laborer” work.
NAGAN knowingly underpaid 20 employees working on the two projects and failed to pay them the prevailing wages they were entitled to based on the nature of the work the employees performed. NAGAN routinely paid its employees the wage rate applicable to “laborer” work – which typically involves unskilled tasks such as cleaning and transporting materials and equipment – when in fact the employees had performed skilled work, such as carpentry and bricklayer tasks. The prevailing wage rates for carpentry, bricklayer, and other skilled work were substantially higher than the wage rate for laborer work on both projects.
In the settlement agreement, NAGAN admits, acknowledges, and accepts responsibility for the following conduct:
- NAGAN’s president and CEO, as well as other senior NAGAN managers, were aware of the requirement to pay workers the prevailing wage rates listed in the applicable wage determinations.
- NAGAN underpaid 20 employees who worked on the Delano Hall Project and the Job Corps Center Project. NAGAN improperly misclassified thousands of hours of the work these employees performed on the two projects. NAGAN paid these employees for this work using the prevailing laborer wage, instead of the higher prevailing wage to which they were entitled for the carpentry, bricklayer, and other skilled work the employees had actually performed.
- NAGAN failed to adequately train its supervisors and managers on how to properly classify work in order to comply with DBA requirements.
- NAGAN failed to implement effective systems and mechanisms to verify that the company properly classified its employees and consistently paid them the correct prevailing wage as required by federal law.
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 DOL’s Wage and Hour Division for its investigative efforts and significant assistance with the case.
The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.
Florida Man Sentenced in Manhattan Federal Court to 20 Years in Prison for Mailing 16 Improvised Explosive Devices in Connection with October 2018 Domestic Terrorist AttackRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, Assistant Attorney General for National Security, announced today that CESAR ALTIERI SAYOC was sentenced today to 20 years in prison in connection with his mailing of 16 improvised explosive devices to victims across the country. SAYOC pled guilty to a 65-count Superseding Information on March 21, 2019, before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Cesar Sayoc assembled and mailed explosive devices to high-ranking officials and former elected leaders to incite fear and to terrorize his victims. Though thankfully no one was hurt by his actions, Sayoc’s domestic terrorism challenged our nation’s cherished tradition of peaceful political discourse. For his wanton disregard of the safety of so many people, Sayoc will now spend 20 years in prison.”
Assistant Attorney General for National Security John C. Demers said: “Time and again, we have seen individuals attempt to express political views and resolve political disagreements through violence. Cesar Sayoc has now been sentenced for acts of domestic terrorism that are repulsive to all Americans who cherish a society built on respectful and non-violent political discourse. Our democracy depends on our debating our strongly held views peacefully and respectfully, and when someone does not, on our prosecuting and punishing those who do not abide by these values. I applaud the efforts of so many in our law enforcement community whose alertness and tirelessness led to the prompt arrest of the defendant before he was able to injure anyone, as well as those whose efforts led to today’s sentence.”
According to the Superseding Information, court filings, and statements made during court proceedings:
In October 2018, SAYOC mailed from Florida 16 padded envelopes, each containing an improvised explosive device (“IED”), to addresses in New York, New Jersey, Washington, D.C., Delaware, Georgia, and California. In alphabetical order, SAYOC’S intended victims (the “Victims”) were former Vice President Joseph Biden, Senator Cory Booker, former CIA Director John Brennan, former Director of National Intelligence James Clapper, former Secretary of State Hillary Clinton, CNN, Robert De Niro, Senator Kamala Harris, former Attorney General Eric Holder, former President Barack Obama, George Soros, Thomas Steyer, and Representative Maxine Walters. Between October 22 and November 2, 2018, the Federal Bureau of Investigation (“FBI”) and the U.S. Postal Service recovered all of the 16 IEDs mailed by SAYOC.
Each of the IEDs mailed by SAYOC contained a mix of explosive powder from fireworks, shards of glass, and pool chemicals, designed to maximize potential injuries, damage, and the burning of his intended Victims’ skin. On the outside of each IED, SAYOC placed photographs of each of the Victims, and sometimes their families and others, with a red “X” over their faces. SAYOC also affixed black flags, similar in appearance to banners used by ISIS and other foreign terrorist organizations, to the outside of the IEDs.
SAYOC had posted incendiary comments about liberal political figures online since at least 2011. In the months prior to mailing the IEDs, SAYOC incited violence against the Victims, conveyed direct threats against them, and researched where and how to carry out his attack. For example, in April 2016, he wrote that former President Barack Obama’s “head need[ed] to be chopped off” and he wished “death” to George Soros and former Attorney General Eric Holder. In April 2017, SAYOC wished “Death” to “all Clintons” and in November 2017 posted “Your days are number[ed] Steyer[].” Beginning in December 2017, SAYOC researched the Victims and their addresses. For example, on December 23, 2017, SAYOC searched for the address of Congresswoman Maxine Waters, and, over the course of the ensuing months, SAYOC repeatedly searched for the “home address” or “address” of several of the Victims, and SAYOC intensified these searches in the days before his attack. Finally, SAYOC researched online how to make a “letter bomb” and watched videos depicting explosions.
The FBI arrested SAYOC in Plantation, Florida, on October 26, 2018—less than five days after the October 22 recovery of the first IED, which SAYOC mailed to Soros in New York.
* * *
In addition to his prison sentence, SAYOC, 57, of Florida, was sentenced to five years of supervised release.
Mr. 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 New York City Police Department, and the U.S. Postal Inspection Service. Mr. Berman also thanked the U.S. Attorney’s Offices for the Southern District of Florida, the District of Columbia, the District of Delaware, the District of New Jersey, the Central District of California, the Eastern District of California, the Northern District of California, and the Northern District of Georgia for their assistance in the investigation.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sam Adelsberg, Emil J. Bove III, Jane Kim, and Jason A. Richman are in charge of the prosecution, with assistance from Trial Attorney David Cora of the Counterterrorism Section of the Department of Justice’s National Security Division.
Owners of Orange County Car Dealership Arrested on Tax and Bank Fraud ChargesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Jonathan D. Larsen, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrests today of MEHDI MOSLEM and SAAED MOSLEM, father-and-son operators of the Exclusive Motor Sports car dealership in Central Valley, New York. The defendants will be presented before United States Magistrate Judge Lisa Margaret Smith.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Mehdi and Saaed Moslem defrauded the United States by understating income and inventory of their auto dealership, and they defrauded lenders by overstating their net worth in loan applications. Whether allegedly understating or overstating, father and son were falsifying – and committing crimes.”
IRS-CI Special Agent in Charge Jonathan D. Larsen said: “Today’s arrests show that underreporting business gross receipts to conceal millions of dollars of income is a serious criminal offense. IRS Criminal Investigation will pursue those individuals who break the law and violate the American tax system.”
FBI Assistant Director William F. Sweeney Jr. said: “Lying to financial institutions and skirting the regulations put in place by U.S. tax laws is a violation of federal law, crimes both Mehdi and Saaed Moslem are charged with today. The popular saying about certainties in life omits a third guarantee – when the FBI and IRS catch you engaging in fraudulent behavior and illegal business practices, you will be charged.”
As alleged in the Indictment, which was unsealed today in White Plains federal court:[1]
From 2009 through 2016, MEHDI MOSLEM and SAAED MOSLEM conspired to defraud the United States by concealing millions of dollars of profits relating to Exclusive Motor Sports from the IRS. To falsely lower their business income, MEHDI MOSLEM and SAAED MOSLEM caused their accountant to prepare partnership tax returns that significantly understated Exclusive Motor Sports’ gross receipts and inventory. The fraudulent business income figures passed through to MEHDI MOSLEM’s and SAAED MOSLEM’s personal tax returns filed with the IRS, resulting in a substantial underreporting of the amount of tax due. SAAED MOSLEM then used his fraudulent income tax returns and made other false statements to conceal his assets from creditors when he filed for bankruptcy in 2015.
From 2011 through 2017, MEHDI MOSLEM and SAAED MOSLEM also conspired to defraud multiple financial institutions by submitting falsely inflated net worth statements and fabricated tax returns in connection with loan applications, including for a $1.2 million mortgage on the Exclusive Motor Sports property in Central Valley, on which they later defaulted.
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MEHDI MOSLEM, 70, of Central Valley, New York, and SAAED MOSLEM, 35, of Central Valley, New York, are each charged with one count of conspiracy to defraud the United States, which carries a maximum sentence of five years in prison, and one count of bank fraud conspiracy, which carries a maximum sentence of 30 years in prison. SAAED MOSLEM is also charged with two counts of making false statements to a lender, each of which carries a maximum sentence of 30 years in prison, and one count of concealing assets and making false declarations in a bankruptcy case, 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 defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the IRS-CI and the FBI.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorney Daniel Loss is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Manhattan Doctor Pleads Guilty to Accepting Bribes and Kickbacks from Pharmaceutical Company in Exchange for Prescribing Fentanyl DrugRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DIALECTI VOUDOURIS, a doctor who practiced in Manhattan, pled guilty today to conspiracy to violate the Anti-Kickback Statute, in connection with a scheme to prescribe Subsys, a potent fentanyl-based spray, in exchange for bribes and kickbacks from Subsys’s manufacturer, Insys Therapeutics. VOUDOURIS pled guilty before U.S. Magistrate Judge Ona T. Wang. The case is assigned to U.S. District Judge Kimba M. Wood.
U.S. Attorney Geoffrey S. Berman said: “As she admitted today, Dialecti Voudouris, a prominent Manhattan oncologist, prescribed her patients Subsys, a powerful fentanyl drug, in exchange for over $100,000 in bribes and kickbacks from the drug’s manufacturer, Insys. Today’s guilty plea – the third in this case – once again demonstrates that when a doctor’s best medical judgment is compromised by bribes, this Office will hold that physician to account, especially when a dangerous opioid like fentanyl is involved.”
According to the allegations contained in the Indictment against VOUDOURIS and filings in related proceedings:
The Insys Speakers Bureau
Subsys, which is manufactured by Insys, is a powerful painkiller approximately 50 to 100 times more potent than morphine. The FDA approved Subsys only for the management of breakthrough pain in cancer patients. Prescriptions of Subsys typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by VOUDOURIS.
In or about August 2012, Insys launched a “Speakers Bureau,” a roster of doctors who would conduct programs (“Speaker Programs”) purportedly aimed at educating other practitioners about Subsys. In reality, Insys used its Speakers Bureau to induce the doctors who served as speakers to prescribe large volumes of Subsys by paying them Speaker Program fees. Speakers were supposed to conduct an educational slide presentation for other health care practitioners at each Speaker Program. In reality, many of the Speaker Programs were predominantly social affairs where no educational presentation about Subsys occurred. Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of health care practitioners who had not actually been present.
VOUDOURIS’s Participation in the Scheme
VOUDOURIS, a doctor specializing in oncology and hematology who worked at a private medical office on the Upper East Side, received approximately $119,400 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys. During a September 2014 dinner with several Insys executives and managers, a senior Insys executive told VOUDOURIS, who had recently been nominated by Insys as a Speaker, that he wanted her to prescribe Subsys to one new patient every day, and that VOUDOURIS would be allocated Speaker Programs if she continued prescribing Subsys. In a conversation with an Insys manager and sales representative soon thereafter, VOUDOURIS was once again informed that Insys expected her to write more Subsys prescriptions. In the months that followed the dinner and this conversation, VOUDOURIS’s Subsys prescriptions rose significantly. By the end of the first quarter of 2015, VOUDOURIS – who had prescribed very minimal quantities of Subsys prior to becoming a Speaker for Insys – was approximately the 10th-highest prescriber of Subsys nationally, accounting for total net sales of Subsys of approximately $581,500 in that quarter alone.
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VOUDOURIS, 48, of Queens, New York, pled guilty to one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. VOUDOURIS is scheduled to be sentenced by Judge Wood on January 3, 2020.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Department of Health and Human Services’ Office of Inspector General for its participation in the investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Noah Solowiejczyk and David Abramowicz are in charge of the prosecution.
Former Honduran Drug Trafficker Sentenced to Life in Prison for Distributing over 150 Tons of Controlled SubstancesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Michael Machak, Acting Special Agent in Charge of the Drug Enforcement Administration’s Special Operations Division, announced today that HECTOR EMILIO FERNANDEZ ROSA, a/k/a “Don H,” was sentenced to life in prison for conspiring to distribute and possess with intent to distribute controlled substances. FERNANDEZ ROSA made approximately $50 million in connection with the distribution of 135 tons of cocaine and 20 tons of methamphetamine precursor chemicals, which he was ordered to forfeit in connection with sentencing. FERNANDEZ ROSA was provisionally arrested in Honduras in October 2014, and extradited to the United States in September 2015. FERNANDEZ ROSA previously pled guilty before U.S. Circuit Judge Richard J. Sullivan, who imposed today’s sentence while sitting by designation.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Hector Emilio Fernandez Rosa, operating with impunity in Honduras, trafficked more than 135 tons of cocaine to the United States over the course of 17 years. By paying millions of dollars in bribes to Honduran officials, including the former president, he ensured safe passage of his drugs to the U.S. He also protected his trafficking organization by eliminating his rivals, murdering 19 people, including Honduran Congressman Mario Fernando Hernández Bonilla in 2008. Today, one of the most prolific and violent drug traffickers has been brought to justice.”
Acting Special Agent in Charge Michael Machak said: “Bringing to justice and putting behind bars individuals like Fernandez Rosa not only makes our country safer, but keeps enormous quantities of dangerous drugs off our streets. This should serve as a message that DEA will not tolerate and will prosecute dangerous drug traffickers that wreak havoc on our country.”
According to court filings and statements made during court proceedings:
In approximately 1998, FERNANDEZ ROSA started to participate in drug trafficking in Honduras with a cell of traffickers distributing approximately five tons of cocaine per year. By 2003, FERNANDEZ ROSA assumed a management position in the group, which increased the volume of cocaine it was distributing to approximately 10 tons per year until at least 2013. FERNANDEZ ROSA coordinated the payment of large bribes to members of the Honduran National Police and at least one Honduran military official who helped escort and assure safe passage of large drug shipments. For example, in approximately 2005, FERNANDEZ ROSA and other co-conspirators paid a Honduran presidential candidate more than $2 million in narcotics proceeds in an effort to install one of FERNANDEZ ROSA’s allies as the Vice Minister of Security in Honduras. The candidate prevailed in the election, but did not follow through on his promise to FERNANDEZ ROSA. During the same period, FERNANDEZ ROSA and other co-conspirators spent approximately $100,000 on bribes to law enforcement in connection with each of their drug shipments.
Between 2008 and 2010, FERNANDEZ ROSA diversified his operations by working to receive approximately 20 tons of ephedrine at Puerto Cortés, which is the biggest commercial port in Honduras. In connection with this scheme, FERNDNEZ ROSA worked with key lieutenants of Joaquin El Chapo Guzman, a/k/a “El Chapo,” to help the Sinaloa Cartel manufacture large quantities of methamphetamine in Honduras and Guatemala, which was then transported north over land, like the cocaine, and imported into the United States.
In November 2008, following a seizure of related ephedrine in France, FERNANDEZ ROSA ordered the murder of Honduran Congressman Mario Fernando Hernández Bonilla. The assassination was one of 19 murders that FERNANDEZ ROSA ordered or carried out. In 2003, for example, FERNANDEZ ROSA directed his drug trafficking workers to kidnap a man who worked for a rival trafficker. After the victim was kidnapped, FERNANDEZ ROSA’s workers tortured him and, as FERNANDEZ ROSA watched, placed him in a recently dug grave while he was still alive. FERNANDEZ ROSA and his workers than executed the victim. In 2013, FERNANDEZ ROSA deployed an assassin to murder someone FERNANDEZ ROSA suspected had helped kill a relative, and the assassin coordinated a large attack that resulted in killing FERNANDEZ ROSA’s target and approximately nine additional victims.
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In addition to the prison term, FERNANDEZ ROSA, 46, of Honduras, was also sentenced to five years of supervised release and ordered to pay forfeiture in the amount of $50,000,000.
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 U.S. Department of Justice’s Office of International Affairs.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Emil J. Bove III and Matthew J. Laroche are in charge of the prosecution.
Former Collections Manager Arrested for Defrauding Former Employer of over $1.3 MillionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROILAND GOTIANGCO was arrested on fraud and aggravated identity theft charges in connection with his embezzlement from the security and protection company (the “Company”) where he previously worked as the Head of Collections. Specifically, GOTIANGCO has been charged with wire fraud and aggravated identity theft for falsifying customer refund requests and pocketing the refunds, and with wire fraud for accepting payments from certain Company customers in exchange for concealing the amounts those customers owed the Company. GOTIANGCO was arrested today in River Edge, New Jersey, and was presented before Magistrate Ona T. Wang in Manhattan federal court.
Manhattan U.S. Geoffrey S. Berman said: “Roiland Gotiangco abused his position and lined his own pockets to the tune of over $1.3 million. The means were sophisticated but the motive was simple: greed. We will continue to work with our law enforcement partners to root out fraud wherever it is found.”
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ROILAND GOTIANGCO, 38 of River Edge, New Jersey, is charged with two counts of wire fraud and one count of aggravated identity theft. The wire fraud counts each carry a maximum potential sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The aggravated identity theft charge carries a mandatory minimum sentence of two years in prison consecutive to any other term of imprisonment imposed and a maximum fine of $250,000. 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 FBI.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Jilan J. Kamal 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.
Former President of Investment Adviser Firm Sentenced and Former Comptroller Charged in Multimillion-Dollar Investment FraudRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that HECTOR MAY, the president of Executive Compensation Planners, Inc. (“ECP”), a registered investment adviser and financial planning firm located in New City, New York, was sentenced to 13 years in prison for participating in a conspiracy to defraud certain investment advisory clients (the “Victims”) out of more than $11 million. MAY was sentenced yesterday by United States District Judge Vincent Briccetti.
U.S. Attorney Berman also announced the return of an indictment charging VANIA MAY BELL, MAY’s daughter and former comptroller of ECP, with participating in the conspiracy to defraud certain investment advisory clients. She was arraigned this afternoon before U.S. District Court Judge Nelson S. Roman.
U.S. Attorney Geoffrey S. Berman said: “For more than two decades, May conceived and orchestrated a multimillion-dollar Ponzi scheme. His conduct was marked by extreme cunning, ruthlessness, and utter disregard for the well-being of his victims, including aging couples, close friends, relatives, and an employment pension plan.”
At the sentencing hearing, Judge Briccetti said that MAY is “a fraud and a thief,” and that his conduct was “appalling, reprehensible, and evil.”
According to the allegations in the Information to which MAY pled guilty, court filings, statements made in court, and the Indictment charging BELL[1]:
Since 1982, MAY was the president of ECP and provided financial advisory services to numerous clients. Since 1994, MAY was a registered representative of a broker dealer (“Broker Dealer-1”). In its role as a broker dealer, Broker Dealer-1 facilitated the buying and selling of securities for clients of Broker Dealer-1’s registered representatives, including clients of MAY. To that end, Broker Dealer-1 and associated clearing firms maintained securities accounts for ECP’s clients and, through those accounts, held ECP’s clients’ money, executed their securities trades, produced account statements reflecting activity in the clients’ accounts, and forwarded these account statements to ECP’s clients.
In order to obtain money from the Victims’ securities accounts with Broker Dealer-1, MAY advised the Victims, among other things, that they should use money from those accounts to have ECP, rather than Broker Dealer-1, purchase bonds on their behalf. He further represented that by purchasing bonds through ECP directly, the Victims could avoid transaction fees. Because MAY lacked the authority to withdraw money directly from the Victims’ accounts with Broker Dealer-1, he persuaded the Victims to withdraw the money themselves and to forward that money to an ECP “custodial” account (the “ECP Custodial Account”), so that he could use the money to purchase bonds on their behalf.
With the assistance of BELL, MAY guided the Victims, first, to withdraw their money from their Broker Dealer-1 accounts, and second, to send that money to the ECP Custodial Account by wire transfer or check. At times, MAY falsely represented that the funds being withdrawn from Victims’ Broker Dealer-1 accounts were the proceeds of prior bond purchases MAY had made. After the Victims sent their money to the ECP Custodial Account, MAY did not use the money to purchase bonds. Instead, MAY and BELL spent the money on business expenses, personal expenses, and to make payments to certain Victims in order to perpetuate the scheme and conceal the fraud.
Specifically, in some cases, MAY used Victims’ funds to make purported bond interest payments to other Victims. In other cases, MAY used Victims’ funds to make payments to other Victims who wished to withdraw funds from their accounts. MAY and BELL also created phony “consolidated” account statements that they issued through ECP and sent to the Victims. These “consolidated” account statements purported to reflect the Victims’ total portfolio balances and included the names of bonds MAY falsely represented that he purchased for the Victims and the amounts of interest the Victims were supposedly earning on the bonds. In order to create the phony consolidated account statements, MAY provided BELL with bond names and false interest earnings, and BELL created ECP computerized account statements and distributed them to the Victims.
To keep track of the money that the co-conspirators were taking from the Victims, BELL processed the Victims’ payments for the purported bonds, entered them in a computerized accounting program, and, through that program, kept track of how MAY and BELL received and spent the Victims’ stolen money. In this way, from the late 1990’s through March 9, 2018, MAY and BELL induced Victims to forward them more than $11,400,000.
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In addition to his prison term, MAY, 78, of Orangeburg, New York, was ordered to serve three years of supervised release, pay $8,041,233 in restitution, and forfeit $11,452,185.
BELL, 54, of Montvale, New Jersey, is charged with one count each of conspiracy to commit wire fraud and wire fraud. Each count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential 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 U.S. Postal Inspection Service, Special Agents of the United States Attorney’s Office, and the Federal Bureau of Investigation. He also thanked the Securities and Exchange Commission, which initiated civil proceedings against MAY and BELL, for its assistance.
The criminal case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorneys Margery B. Feinzig and Vlad Vainberg are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment charging BELL and the descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.
Former Chief Executive Officer and Chief Financial Officer of Publicly Traded Company Charged with Accounting FraudRead the Press Release
Audrey Strauss, Attorney for the United States acting under authority conferred by 28 U.S.C. § 515 for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of an Indictment in Manhattan federal court charging MICHAEL CARROLL and MICHAEL PAPPAGALLO, the respective former chief executive officer and chief financial officer of Brixmor Property Group (“Brixmor”), a publicly traded real estate investment trust (“REIT”), with fraud. Specifically, CARROLL and PAPPAGALLO were charged with securities fraud in connection with their participation in a scheme to fraudulently “smooth” a key metric reported in Brixmor’s public filings and used by the investing public to evaluate the financial performance of publicly traded REITs such as Brixmor. The case is assigned to U.S. District Judge Colleen McMahon.
MICHAEL CARROLL and MICHAEL PAPPAGALLO are expected to be presented later today before Judge McMahon in Manhattan federal court.
Deputy U.S. Attorney Audrey Strauss said: “As alleged, the most senior executives at Brixmor engaged in a years-long scheme to cook the books and deceive the investing public. When executives allegedly lie to the investing public about their company’s performance and thereby harm the integrity of the market, they must be held accountable.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “By devising schemes to make Brixmor more appealing to the investing public, Carroll and Pappagallo not only committed criminal acts, their actions led them down a path of distrust from shareholders. The investing public depends on the veracity of information released by publicly traded companies and the U.S. Postal Inspection Service is devoted in protecting the integrity of this information.”
According to the allegations contained in the Indictment[1] unsealed today in Manhattan federal court and statements made in related court filings and proceedings:
Brixmor is a publicly-traded REIT headquartered in New York, New York. At all relevant times, Brixmor owned and operated hundreds of commercial shopping centers located in cities around the United States. From the time of its initial public offering in 2013 until 2015, MICHAEL CARROLL served as Brixmor’s chief executive officer, MICHAEL PAPPAGALLO served as Brixmor’s chief financial officer, Steven Splain served as Brixmor’s chief accounting officer, and Michael Mortimer served as a senior vice president for management accounting. As a publicly traded company, Brixmor was required to file, and filed, quarterly and annual reports with the U.S. Securities and Exchange Commission (the “SEC”) that were also available to the investing public. These reports contained important information regarding Brixmor’s financial performance for the relevant reporting period. As the respective CEO and CFO of the company, CARROLL and PAPPAGALLO were required to sign these reports and file certifications entitled “Certification of Periodic Report Under Section 302 of the Sarbanes-Oxley Act of 2002” that attested to, among other things, the veracity of Brixmor’s SEC filings. Brixmor, like many public companies, also filed, and otherwise released to the investing public, supplemental documents along with their periodic filings that provided additional representations regarding Brixmor’s performance and financial condition.
In addition to financial metrics governed by Generally Accepted Accounting Principles (“GAAP”), Brixmor, like many REITs, reported a non-GAAP metric related to its financial performance known as Same Store Net Operating Income (“SS-NOI”). SS-NOI measures the amount of income derived from a set group of properties (the “Property Pool”). In addition to SS-NOI, Brixmor also reported a metric that tracked the increase (or decrease) in SS-NOI (“SS-NOI Growth”) for a set group of properties between one period and the same period in the prior year. More specifically, SS-NOI Growth is derived from comparing SS-NOI in a particular reporting period (the “Current Period”) with SS-NOI in a past period, for example, the same quarter in the prior year, (the “Comparison Period”) for the same Property Pool. SS-NOI Growth was a key performance metric utilized by investors when assessing investments in publicly traded REITs such as Brixmor. Because of the importance of this metric, Brixmor also provided forecasts to the investing public on what it expected SS-NOI Growth to be for each annual reporting period, often narrowing that guidance over the course of a given year.
From 2013 through 2015, CARROLL and PAPPAGALLO regularly touted Brixmor’s consistent SS-NOI Growth from quarter to quarter and understood that the investing public paid significant attention to this metric. For example, on August 6, 2014, CARROLL stated during a quarterly earnings call for the second quarter of 2014 that Brixmor had “a steady state portfolio with a large same property pool that is delivering consistent organic growth. . . . As I said, we are consistent, transparent and easy to understand.” Similarly, on September 17, 2015, PAPPAGALLO spoke publicly at an industry conference in New York, New York, stating that “[S]ame-property NOI, which is certainly a metric which is looked at very, very carefully by REIT investors, it’s been at or above 3.4% for 12 quarters. Very consistent same-property NOI growth coming from our primary drivers.” CARROLL and PAPPAGALLO also understood that the investing public paid careful attention to whether Brixmor’s SS-NOI Growth fell within previously forecasted guidance for the year. For every quarter between the fourth quarter of 2013 and the third quarter of 2015, Brixmor’s reported SS-NOI that fell squarely within its forecasted guidance for the year.
In reality, however, Brixmor’s SS-NOI Growth was not as steady and consistent quarter over quarter as represented to the public, and instead fluctuated significantly – often outside the bounds of what Brixmor’s guidance was for the relevant year. From 2013 through 2015, however, CARROLL, PAPPAGALLO, Splain, and Mortimer engaged in a scheme to hide that volatility from the investing public and instead report SS-NOI Growth numbers each quarter that showed even growth and that always fell in line within the annual guidance. Rather than report the true results of their operations, CARROLL and PAPPAGALLO dictated where Brixmor’s reported SS-NOI Growth should land each quarter, and others, including Splain and Mortimer, carried out the necessary manipulation to reach those results.
CARROLL, PAPPAGALLO, Splain, and Mortimer engaged in this manipulation of SS-NOI Growth through three primary means. First, in quarters in which Brixmor generated more than enough income to meet the bottom, or in some cases middle, of its guidance range, it illicitly “stored” reportable income instead of immediately recognizing it, a deceptive practice often referred to as “cookie jar” accounting. In fact, certain Brixmor employees frequently referred to a particular account that was used to hold such income as the “cookie jar.” Brixmor employees then utilized that income in later quarters as necessary to inflate SS-NOI Growth in order to report the desired steady and smooth SS-NOI Growth to the investing public. For example, on April 6, 2015, PAPPAGALLO emailed Splain, Mortimer, and others to schedule a meeting “regarding same property NOI planning” the “objective” of which was “to try to make decisions on 1Q number – push a little or squirrel away stuff for 2Q & 3Q.”
Second, Brixmor reported in all of its public filings that it did not take lease termination income (“LSI”) into account when calculating SS-NOI. LSI is money that a tenant pays as a lump sum payment upon the early termination of a lease. Notwithstanding these representations, CARROLL, PAPPAGALLO, Splain, and Mortimer included some portion of LSI within SS-NOI when doing so helped show steady SS-NOI Growth or to meet guidance.
Third, CARROLL, PAPPAGALLO, Splain, and Mortimer at times removed payments that had been included in SS-NOI in a prior Comparison Period in order to the boost SS-NOI Growth for the current period. Because SS-NOI Growth effectively measures the SS-NOI change from one period to another, retroactively reducing the SS-NOI for a prior Comparison Period has the effect of creating a bigger spread to SS-NOI in the current period, thereby increasing the SS-NOI Growth metric for the current period. For example, after the close of the third quarter of 2015 but before reporting SS-NOI Growth for that period, CARROLL instructed certain Brixmor employees as to what SS-NOI Growth figures he wanted the company to show for the third and fourth quarters of the year. CARROLL, PAPPAGALLO, Splain, Mortimer, and others then went to work manipulating Brixmor’s SS-NOI Growth number for the third quarter, including by making multiple changes to the Comparison Period, in order to report the SS-NOI Growth number that had been pre-determined by CARROLL – a number that showed consistent growth over the year and was within guidance. Toward the end of these discussions, on October 6, 2015, PAPPAGALLO sent an email to Splain and Mortimer, stating “[Splain] and [Mortimer] LLC Bratwurst at its Finest,” to which Mortimer responded with an image of a man holding a batch of sausage.
As a result of these manipulations, Brixmor reported steady quarter-by-quarter SS-NOI Growth between 2013 and 2015 that consistently fell within the company’s public annual guidance. The below chart shows Brixmor’s reported SS-NOI Growth as compared to reported guidance:
The below chart shows the actual SS-NOI Growth figures absent manipulation:
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MICHAEL CARROLL, 51, of New York, New York, and MICHAEL PAPPAGALLO, 60, of Trumbull, Connecticut, were each charged in the Indictment with conspiracy to commit securities fraud and other offenses (Count One), securities fraud (Count Two), making false statements in filings with the SEC (Counts Three and Four); and filing false certifications (Counts Five and Six). The securities fraud, false filings charges, and false certification charges each carry a maximum prison term of 20 years. The charge of conspiracy carries a maximum prison term of five years.
Steven Splain, 57, of Cheshire, Connecticut, pled guilty on July 16, 2019, before United States District Judge Vernon S. Broderick to one count of conspiracy to commit securities fraud and to make false filings with the SEC, and one count of securities fraud. The conspiracy charge carries a maximum prison term of five years and the securities fraud charge carries a maximum prison term of 20 years.
Michael Mortimer, 49, of Yardley, Pennsylvania, pled guilty on July 10, 2019, before United States District Judge Valerie E. Caproni to one count of conspiracy to commit securities fraud and to make false filings with the SEC, and one count of securities fraud. The conspiracy charge carries a maximum prison term of five years and the securities fraud charge carries a maximum prison term of 20 years.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
Ms. Strauss praised the investigative work of the U.S. Postal Inspection Service, and thanked the Federal Bureau of Investigation for its assistance. She also thanked the Securities and Exchange Commission, which has brought a civil action against the defendants.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Martin S. Bell, Daniel M. Tracer, and Rebecca Mermelstein are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.
Army Reservist Pleads Guilty to Participating in Money Laundering SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that EMEKA NNAWUBA, a/k/a “Benjamin Alabie,” who is a member of the United States Army Reserves, has pled guilty to participating in a scheme to launder the proceeds of frauds perpetrated against dozens of victims. NNAWUBA pled guilty today before United States District Judge Katherine Polk Failla, who will impose sentence on January 7, 2020.
U.S. Attorney Geoffrey S. Berman said: “Emeka Nnawuba admitted today that he received over $1 million from unsuspecting women in internet romance scams and laundered those proceeds to conceal their origin. Nnawuba callously preyed upon victims looking for companionship, only to come away as victims of theft. Nnawuba tried his luck in love and lost, as he now faces time in prison.”
According to the allegations in the Superseding Indictment and statements made in court:
From at least 2016 until 2018, NNAWUBA participated in a scheme to launder the proceeds of frauds perpetrated against dozens of victims. Among other things, NNAWUBA used false identities and false passports to open bank accounts, received or attempted to receive more than $2,000,000 in fraud proceeds, withdrew tens of thousands of dollars of fraud proceeds in cash, and transferred more than $1 million of fraud proceeds to bank accounts controlled by co-conspirators in an effort to conceal the source of funds.
The funds laundered by NNAWUBA were procured principally by (a) romance scams, in which members of the scheme trolled dating websites to find unsuspecting women and stole their money on false pretenses, and (b) business compromise scams, in which members of the scheme impersonated individuals, professionals, or businesses in the course of otherwise ordinary financial transactions, and then fraudulently induced the counterparties to those transactions to transfer funds to bank accounts controlled and operated by NNAWUBA or other members of the scheme.
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NNAWUBA, 29, of Fayetteville, Arkansas, pled guilty to one count of participating in a conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Five other individuals previously were charged and pled guilty in connection with their participation in the scheme.
On February 12, 2018, Ifeanyi Ezeji pled guilty to participating in a conspiracy to commit money laundering. On May 31, 2018, Judge Failla sentenced Ifeanyi Ezeji to 40 months in prison and three years of supervised release, and ordered him to forfeit $2,080,347.14 and pay restitution in the amount of $873,891.31.
On May 31, 2018, Christopher Ezeji pled guilty to passport counterfeiting. On October 4, 2018, Judge Failla sentenced Christopher Ezeji to five years of probation, and ordered him to forfeit $500.00 and pay restitution in the amount of $873,891.31.
On June 22, 2018, Peter Abbah pled guilty to aggravated identity theft. On October 2, 2018, Judge Failla sentenced Abbah to 24 months in prison and one year of supervised release, and ordered him pay restitution in the amount of $218,498.76.
On July 27, 2018, Michael Akhiero pled guilty to participating in a conspiracy to commit bank fraud. On April 22, 2019, Judge Failla sentenced Akhiero to seven months in prison and three years of supervised release, and ordered him to forfeit $600.00 and pay restitution in the amount of $143,192.99.
On January 11, 2019, Okechukwu Peter Ezika pled guilty to engaging in monetary transactions in property derived from specified unlawful activity. Ezika’s sentencing has not yet been scheduled.
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Mr. Berman praised the outstanding investigative work of the U.S. Secret Service, and thanked United States Immigration and Customs Enforcement’s Homeland Security Investigations for its assistance.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Juliana N. Murray and Robert B. Sobelman are in charge of the prosecution.
Manhattan U.S. Attorney Announces Additional Distribution of More Than $469 Million to Victims of Madoff Ponzi SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Attorney General Bill Barr, Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today that the Madoff Victim Fund established by the Department of Justice began its fourth distribution to victims funds forfeited to the United States Government in connection with the Bernard L. Madoff Investment Securities LLC (“BLMIS”) fraud scheme. The distribution will include $469.6 million in additional funds, bringing the total distributed to date to approximately $2.4 billion. The funds will be sent to more than 25,000 victims worldwide, the fourth of four payments to victims that will bring their total recovery from all source of compensation to 66.85% of their losses. The Madoff Victim Fund will ultimately return to victims more than $4 billion in assets that have been recovered as compensation for losses suffered by the collapse of BLMIS, following the largest fraud in history. Another $5 billion in assets recovered by the U.S. Attorney’s Office are being separately paid to Madoff victims through the BLMIS Customer Fund administered by the Securities Investor Protection Act Trustee.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Bernie Madoff committed the largest Ponzi scheme in history. Today’s additional payment of more than $469 million by this Office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section represents the fourth in an on-going series of distributions that will leave victims with compensation for more than 65 percent of their losses. This extraordinary level of recovery represents this Office’s tireless commitment to compensating the victims who suffered as a result of Madoff’s heinous crimes.”
Assistant Attorney General Brian A. Benczkowski said: “The upheaval and devastation wrought by Bernie Madoff’s massive fraud continue to reverberate across the United States and the globe. This fourth distribution of payments shows that the Department remains steadfast in its pursuit of proceeds of that fraud through civil forfeiture. Madoff’s victims, many of whom once believed they had lost everything, have now seen close to a 67 percent recovery of their loss amounts.”
Since the early 1970s, BERNARD L. MADOFF (“MADOFF”) used his position as Chairman of BLMIS, the investment advisory business he founded, to steal billions from his clients. On March 12, 2009, MADOFF pled guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family, and select members of his inner circle. On June 29, 2009, United States District Judge Denny Chin sentenced MADOFF to 150 years in prison for running the largest fraudulent scheme in history. Judge Chin ordered MADOFF to forfeit $170,799,000,000 as part of MADOFF’s sentence.
The Madoff Victim Fund is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.
Of the approximately $4.05 billion that will be made available to victims through the Madoff Victim Fund, approximately $2.2 billion was collected as part of the civil forfeiture recovery from the estate of deceased MADOFF investor Jeffry Picower. An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. for MADOFF-related Bank Secrecy Act violations. Additional funds were collected through criminal and civil forfeiture actions against MADOFF and his co-conspirators, and certain MADOFF investors.
Mr. Berman praised the work of the FBI and the Madoff Victim Fund, and thanked the Money Laundering and Asset Recovery Section of the Department of Justice’s Criminal Division for their assistance.
For more information about the Madoff Victim Fund, compensation to victims of BLMIS, eligibility criteria, and payment information, please visit www.madoffvictimfund.com.
The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant United States Attorney Louis A. Pellegrino is in charge of the case. The remission of these forfeited funds is being handled by the Office and the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section.
Department of Justice Begins Fourth Distribution of Funds Recovered Through Asset Forfeiture to Compensate Victims of Bernard Madoff Fraud SchemeRead the Press Release
The Department of Justice today announced that on July 31, the Madoff Victim Fund (MVF) began its fourth distribution of $469.6 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to $2.4 billion to nearly 32,000 victims worldwide. In this distribution, payments will be sent to over 25,000 victims across the globe, bringing their total recovery to 66.85 percent. This distribution represents the fourth in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS. The MVF has received over 65,000 petitions from victims in 136 countries.
“The upheaval and devastation wrought by Bernie Madoff’s massive fraud continue to reverberate across the United States and the globe,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. “This fourth distribution of payments shows that the Department remains steadfast in its pursuit of proceeds of that fraud through civil forfeiture. Madoff’s victims, many of whom once believed they had lost everything, have now seen close to a 67 percent recovery of their loss amounts.”
“Bernie Madoff committed the largest Ponzi scheme in history,” said U.S. Attorney Geoffrey S. Berman for the Southern District of New York. “Today’s additional payment of more than $469 million by this Office represents the fourth in an on-going series of distributions that will leave victims’ with compensation for more than 65 percent of their losses. This extraordinary level of recovery represents this Office’s tireless commitment to compensating the victims who suffered as a result of Madoff’s heinous crimes.”
For decades, Bernard L. Madoff used his position as Chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients. On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle. On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to serve 150 years in prison for running the largest fraudulent scheme in history. Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.
The MVF’s payouts would not have been possible without the extraordinary efforts of the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case. The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.
More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions. Further questions may be directed to the MVF at 866-624-3670 or [email protected].
Bevan Cooney Sentenced to 30 Months in Prison for the Fraudulent Issuance and Sale of More Than $60 Million of Tribal BondsRead the Press Release
Audrey Strauss, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that BEVAN COONEY was sentenced today by the U.S. District Judge Ronnie Abrams to 30 months in prison for defrauding a Native American tribal entity and various investment advisory clients of tens of millions of dollars in connection with the issuance of bonds by the tribal entity and the subsequent sale of those bonds through fraudulent and deceptive means.
Ms. Strauss said: “Bevan Cooney was part of a conspiracy that orchestrated a complex and corrupt scheme to defraud a Native American community and the clients of two asset management firms. Today he learned the cost of committing those crimes. This Office is committed to protecting the investing public by appropriately prosecuting market predators.”
According to the allegations in the charging documents and statements made in court proceedings:
From March 2014 through April 2016, COONEY, John Galanis, Jason Galanis, Gary Hirst, Michelle Morton, Hugh Dunkerley, and others engaged in a fraudulent scheme that involved (a) causing the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity, to issue a series of bonds (the “Tribal Bonds”) through lies and misrepresentations; (b) deceptively causing clients of asset management firms controlled by Hirst, Morton, and others to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market; and (c) misappropriating the proceeds resulting from those bond sales.
The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by John Galanis. Simultaneously, Jason Galanis, with the backing of COONEY and others, worked to acquire Hughes Capital Management (“Hughes”), a registered investment adviser. Morton and Hirst were installed as Hughes’s chief executive officer and chief investment officer, respectively. Within weeks of taking control of Hughes, Morton and Hirst placed the entire $28 million first series of Tribal Bonds with Hughes clients but failed to disclose material facts about the Tribal Bonds, including the fact that the Tribal Bonds fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients. In addition, Hughes’s clients were not told about substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf.
The defendants and their co-conspirators then misappropriated the proceeds of first Tribal Bond issuance. Specifically, although the Tribal Bonds were supposed to be invested in an annuity, Dunkerley, at the direction of Jason Galanis, transferred significant amounts of the bond proceeds to support the defendants’ business and personal interests. John Galanis, for example, secretly received $2.35 million in proceeds of the first bond issuance, which he spent on a variety of personal expenses and luxury items, including cars, jewelry, and hotel expenses. Similarly, Jason Galanis used a portion of the proceeds of the first Tribal Bond issuance to finance the purchase of a $10 million luxury apartment in Tribeca.
In addition, after John Galanis induced the WLCC to issue a second round of Tribal Bonds, COONEY and others used $20 million of bond proceeds from the first issuance to buy the entirety of the second issuance. As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase. The bonds purchased by COONEY and others were then used to meet net capital requirements at two broker dealers in which COONEY and others had interests. COONEY also obtained a $1.2 million loan based on his purported ownership of the bonds, which he subsequently failed to repay. In addition, millions of dollars in bond proceeds from the first and second issuances were used finance the acquisition of companies that the defendants and their co-conspirators acquired as part of a strategy to build a financial services conglomerate.
In the spring of 2015, John Galanis induced the WLCC to issue an additional $16 million worth of Tribal Bonds. Simultaneously, Jason Galanis and others purchased a second investment adviser, Atlantic Asset Management (“Atlantic”), and installed Morton as the chief executive officer. Within days of obtaining control of Atlantic, Morton placed the entirety of the $16 million Tribal Bond issuance with an Atlantic client, without the client’s consent and without disclosing the fact that the Tribal Bonds were outside the client’s investment parameters and that numerous conflicts of interest existed. The proceeds of the $16 million issuance were again not invested in an annuity as promised, but instead were diverted to, among other things, finance the defendants’ acquisition of another company in furtherance of their plan to build a financial services conglomerate, to pay $75,000 to COONEY, and make payments to one of the broker dealers in which COONEY and others had interests.
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In addition to the prison term, COONEY, 46, was sentenced to three years of supervised release. COONEY was also ordered to forfeit $9,527,000 and to make restitution in the amount of $43,785,176.
Jason Galanis, who pled guilty to conspiracy to commit securities fraud, securities fraud, and investment adviser fraud, was sentenced to a term of 173 months in prison on August 11, 2017. Gary Hirst, who pled guilty to securities fraud, conspiracy to commit securities fraud, investment adviser fraud, and conspiracy to commit investment adviser fraud, was sentenced to 84 months in prison on September 7, 2018. John Galanis, who was convicted after trial of securities fraud and conspiracy to commit securities fraud, was sentenced to 120 months in prison on March 8, 2019. Michelle Morton, who pled guilty to conspiracy to commit securities fraud and investment adviser fraud, is awaiting sentencing. Hugh Dunkerley, who pled guilty to conspiracy to commit securities fraud, two counts of securities fraud, bankruptcy fraud, and falsification of records with the intent to obstruct a government investigation, is also awaiting sentencing.
Ms. Strauss praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and 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, Brendan F. Quigley, and Negar Tekeei are in charge of the prosecution.
U.S. Attorney Charges Monroe Prior Sex Felon with Transporting A Minor to West Virginia for Criminal Sexual Activity and with Possession of A GunRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of EDUARDO TALENTINO. TALENTINO is charged with transporting a minor from Monroe, New York, to West Virginia with the intent to engage in criminal sexual activity with the minor. TALENTINO, who was convicted of Rape of a Child in 1997 in Massachusetts, is also charged with being a felon in possession of a firearm. TALENTINO was arrested yesterday and was presented today before U.S. Magistrate Judge Judith McCarthy in White Plains federal court and was detained without bail.
Manhattan U.S. Attorney Geoffrey S. Berman said: “This case underlines the urgent need for law enforcement to continue its efforts to protect children from those who prey on them. As today’s arrest shows, we will use every tool available to law enforcement to investigate and prosecute those who allegedly sexually exploit children.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Talentino sexually abused a minor child, one who had been entrusted to his care, in the most horrifying way imaginable. While today's arrest certainly isn't his first run-in with the law, it is the first time he's been charged with a federal crime – one that carries a maximum sentence of life in prison. There's no excuse for this type of behavior. The FBI is asking victims in this and all cases to come forward with information that could help put child sexual predators behind bars. The number to call is 1-800-CALL-FBI.”
According to the Complaint[1] unsealed today in White Plains federal court:
From in or about June 22, 2018, to June 25, 2018, TALENTINO transported a 16-year-old minor (“Victim-1”) from Monroe, New York, to West Virginia, where he engaged, and attempted to engage, in illegal sexual activity with Victim-1.
From in or about August 2018 up to and including in or about February 2019, TALENTINO possessed a Colt Pocket Positive .32 caliber revolver at his home in Monroe, New York.
On or about February 8, 2019, TALENTINO was arrested and charged in Orange County with unauthorized practice of a profession.
In or about August 1997, TALENTINO was convicted in Massachusetts of Rape of a Child, a felony, and sentenced to a prison term of four years and one day.
If you have information to report, please contact the Federal Bureau of Investigation at 800-CALL-FBI.
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TALENTINO, 54, of Monroe, New York, is charged with one count of transporting a minor with intent to engage in criminal sexual activity, which carries a minimum sentence of 10 years in prison and a maximum sentence of life in prison. The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the efforts of the FBI, the Orange County District Attorney’s Office, the New York State Police, the Orange County Child Abuse Unit, Orange County Child Protective Services, and the Orange County Sheriff’s Office in connection with this investigation. Mr. Berman also thanked the Sullivan County District Attorney’s Office for their assistance. He added that the investigation is ongoing.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
[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.
Robert Pizarro and Juan Rivera Sentenced to Life in Prison for the Kidnapping and Murder of A Federal Cooperating WitnessRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROBERT PIZARRO and JUAN RIVERA were sentenced today for the attempted robbery, kidnapping, and murder of federal cooperating witness Robert Bishun on September 20, 2016. PIZARRO was also sentenced for his role in an earlier 2015 robbery attempt. PIZARRO, 39, of the Bronx, received a sentence of life in prison plus 14 years. RIVERA, 42, also of the Bronx, was sentenced to life in prison plus seven years. PIZARRO and RIVERA were convicted by a jury following a twelve-day trial before U.S. District Judge Alison J. Nathan, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As the evidence at trial established, the defendants viciously kidnapped and murdered Robert Bishun because he was a federal cooperating witness. While we cannot undo the terrible acts committed by these defendants, we firmly believe that today’s sentences further the cause of justice. We thank the DEA, NYPD, and the Special Agents of our Office for their extraordinary and tireless efforts in pursuit of justice.”
According to the evidence introduced at trial:
On September 20, 2016, PIZARRO and RIVERA attempted to rob Robert Bishun at gunpoint inside his auto body shop in the Bronx, during which two customers in his shop were bound with zip ties and locked in the trunks of separate vehicles inside the shop. Upon learning during the robbery that Bishun was a federal cooperating witness, PIZARRO and RIVERA kidnapped Bishun from his shop and strangled him to death with a plastic zip tie, before abandoning Bishun’s body in the back of his own vehicle on the side of the road.
On a prior occasion, in January 2015, PIZARRO and another accomplice stormed into Bishun’s auto body shop and robbed Robert Bishun at gunpoint, taking approximately $10,000 in cash from Bishun. During the course of the robbery, two customers were bound with zip ties.
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Mr. Berman praised the investigative efforts of the Drug Enforcement Administration, the New York City Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jason Swergold, Jessica Fender, Jared Lenow, and Margaret Graham are in charge of the prosecution.
Information Technology Consultant Convicted of Multimillion-Dollar Kickback SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that a federal jury found SHIVANAND MAHARAJ guilty of honest services wire fraud, paying kickbacks in connection with an employee benefit plan, and conspiracy, following a two-week trial before U.S. District Judge John G. Koeltl. MAHARAJ’s co-conspirator, ENRICO RUBANO, a/k/a “Rick Rubano,” who was a director of information technology at a large union pension and health benefit fund (the “Funds”), pled guilty in connection with the same crimes shortly before trial.
Manhattan U.S. Attorney Geoffrey S. Berman said: “For years, Shivanand Maharaj bribed an insider at a pension and health fund to approve hundreds of invoices for information technology work that was never done at all. He now stands rightly convicted for depriving hardworking individuals out of millions of dollars of health and retirement benefits.”
According to the allegations contained in the Indictment and evidence presented during the trial in Manhattan federal court:
From 2009 through 2015, RUBANO was the co-head of information technology for the Funds and had the authority to approve the payment of invoices from third-party vendors. Beginning in at least 2009, and continuing through 2015, MAHARAJ and RUBANO devised a scheme in which three different companies MAHARAJ owned or controlled submitted to the Funds invoices for millions of dollars in information technology services that were never performed or that had, in fact, been performed by employees of the Funds or other vendors. RUBANO, in his position as co-head of information technology, approved these fraudulent invoices and received kickbacks from MAHARAJ. MAHARAJ, by submitting hundreds of invoices and recruiting another co-conspirator to receive additional criminal proceeds, fraudulently received in excess of $2 million through this scheme.
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MAHARAJ, 39, of Cresskill, New Jersey, was convicted of one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; one count of wire fraud, which carries a maximum sentence of 20 years; one count of giving kickbacks to influence the operation of an employee benefit plan, which carries a maximum sentence of three years; and conspiracy to give kickbacks to influence the operation of an employee benefit plan, which carries a maximum sentence of five years.
MAHARAJ will be sentenced by Judge Koeltl on December 6, 2019.
RUBANO, 50, of Tappan, New York, who engaged in additional kickback and fraud schemes with other co-conspirators, pled guilty to three counts of conspiracy to commit wire fraud, each of which carries a maximum sentence of 20 years in prison.
RUBANO will be sentenced by Judge Koeltl on November 8, 2019.
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 thanked the U.S. Postal Inspection Service for their outstanding work in this matter.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Matthew Podolsky and Aline R. Flodr are in charge of the prosecution.