Southern District of New York
Press releases recorded for this federal judicial district.
High-Ranking Member of ‘Nine Trey Gangsta Bloods’ Pleads Guilty in Connection with Manhattan Armed Robbery and Brooklyn ShootingRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that KIFANO JORDAN, a/k/a “Shotti,” pleaded guilty today in Manhattan federal court to firearms offenses in connection with a robbery and a non-fatal shooting carried out as part of his participation in the Nine Trey Gangsta Bloods (“Nine Trey”). U.S. District Judge Paul A. Engelmayer presided over the defendant’s guilty plea.
U.S. Attorney Geoffrey S. Berman said: “Today, Kifano Jordan admitted in open court to committing multiple acts of violence in furtherance of the Nine Trey enterprise. This conduct is simply intolerable. We continue our daily work with our law enforcement partners to keep our communities safe and to vigorously investigate and prosecute those who bring violence to our streets.”
As alleged in the underlying Indictment and statements made in open court:
Nine Trey was a criminal enterprise involved in committing numerous acts of violence, including shootings, robberies, and assaults in and around Manhattan and Brooklyn. Members and associates of Nine Trey engaged in violence to retaliate against rival gangs, to promote the standing and reputation of Nine Trey, and to protect the gang’s narcotics business. Members and associates of Nine Trey enriched themselves by committing robberies and selling drugs, such as heroin, fentanyl, furanly fentanyl, MDMA, dibutylone, and marijuana.
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JORDAN, 36, of Brooklyn, pled guilty to one count of using and possessing a firearm in furtherance of a crime of violence for an assault with a dangerous weapon that occurred in Manhattan on April 3, 2018, which carries a mandatory minimum sentence of five years in prison and must run consecutively to any other sentence imposed; and one count of discharging a firearm in furtherance of a crime of violence for a shooting that occurred in Brooklyn on April 21, 2018, which carries a mandatory minimum sentence of 10 years in prison and must run consecutively to any other sentence imposed.
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 Judge Engelmayer.
Mr. Berman praised the outstanding investigative work of the New York City Police Department, Homeland Security Investigations, and the Bureau of Alcohol, Tobacco, Firearms and Explosives.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Michael Longyear, Jacob Warren, Jonathan Rebold, and Sebastian Swett are in charge of the prosecution.
Former Controller of College of New Rochelle Pleads Guilty to Securities Fraud and Failing to Pay over More Than $20 Million in Payroll TaxesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector-in-Charge of the New York Field Division of the United States Postal Inspection Service (“USPIS”), and Jonathan D. Larsen, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced that KEITH BORGE, the former controller of the College of New Rochelle (“CNR”), pled guilty today before U.S. Magistrate Judge Judith C. McCarthy to one count of failing to pay over federal payroll taxes and one count of securities fraud in White Plains federal court. The case has been assigned to United States District Judge Vincent L. Briccetti.
Manhattan U.S. Attorney Geoffrey S. Berman said: “By covering up CNR’s true financial condition, Keith Borge deprived CNR’s leaders of the opportunity to address the college’s financial problems for two years. Borge defrauded CNR’s bondholders and left CNR with a $20 million tax liability. He committed federal crimes for which he will now pay the price.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Investors rely on accurate financial reporting when deciding on where to invest their hard-earned money. When executives create and distribute inaccurate financial statements, investors are unknowingly steered into making poor investment choices. The United States Postal Inspection Service is committed to protecting American investors and bringing those who manipulate the financial system to justice.”
IRS-CI Acting Special Agent in Charge Jonathan D. Larsen said: “As the tax filing deadline looms, it’s important for the American taxpayer to have confidence that when they are paying their taxes, their neighbor and co-workers are doing the same. And for those individuals who are considering evading their tax duty, they should consider the consequences which include potential imprisonment and civil penalties.”
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. CNR withheld both federal income tax and its employees’ contributions to Social Security and Medicare from its employees’ pay. 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 in 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 overstated 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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BORGE, 62, of Valley Cottage, New York, is charged with one count of failing to pay over payroll taxes, which carries a maximum sentence of five years in prison, and one count of securities fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentence will be determined by the court. BORGE is scheduled to be sentenced July 11, 2019, before Judge Briccetti.
In a related case, the U.S. Securities and Exchange Commission brought a civil action today against BORGE in U.S. District Court in White Plains."
Mr. Berman praised the outstanding investigative work of the Postal Inspection Service and IRS-CI. Mr. Berman also thanked the SEC for their investigative work.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys James McMahon and Daniel Loss are in charge of the prosecution.
Former Chief Operating Officer of Asset Management Company Arrested for Defrauding the Company and Its ClientsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service, announced that RICHARD DIVER was arrested on fraud charges in connection with his embezzlement from the asset management company where he worked as Chief Operating Officer. Specifically, DIVER has been charged with investment advisor fraud in connection with his fraudulently overbilling the company’s clients by hundreds of thousands of dollars in fake management fees and rerouting those funds to his personal account, and with wire fraud for fraudulently diverting millions of dollars from the company’s payroll funds to his personal account over a period of several years. DIVER was arrested today in Manhattan, and was presented before Magistrate Judge Katharine H. Parker in Manhattan Federal Court.
Manhattan U.S. Geoffrey S. Berman said: “Richard Diver occupied a position of great responsibility and great trust at the asset management company that employed him. As alleged, he betrayed that trust, stealing from the company and defrauding its clients, all to fund his lavish personal spending. We will continue to work with our law enforcement partners to root out fraud wherever it is found.”
Inspector-in-Charge Philip R. Bartlett said: “Mr. Diver allegedly used his position of trust to overcharge his clients to fund his spending habits and lavish lifestyle. In situations such as these, no one believes they will get caught; but when you allegedly cheat your clients and use the US Mail to facilitate a lie, be forewarned—Postal Inspectors and their law enforcement partners will eventually uncover your unlawful deeds and bring you to justice.”
As alleged in the Complaint unsealed today in Manhattan Federal Court:
DIVER was the Chief Operating Officer (“COO”) of a Manhattan-based asset management company (“Company-1”) that offers its customers investment planning and wealth management services. As COO, DIVER’s responsibilities included overseeing the company’s payroll and billing functions.
Beginning in 2011 and continuing into December 2018, DIVER fraudulently caused Company-1’s third-party payroll vendor to pay him salary significantly beyond his authorized salary and bonus. Over that period, DIVER caused over $4.5 million to be routed to his personal checking account above and beyond his approved compensation.
In 2017, DIVER also began to defraud Company-1’s clients. Typically, Company-1 billed its clients quarterly, in most cases having been authorized by the clients to deduct its investment advisory fees directly from their custodial accounts. DIVER began to cause an employee to run the billing process, which was based on a fixed percentage of the assets the clients had under the company’s management, at off-cycle intervals as to certain clients in addition to the regularly quarterly billing process. These billings were not accompanied by any notice to the clients. The clients affected by this practice therefore had their accounts debited twice, but were only notified of the single legitimate billing in periodic reports and correspondence from the company. DIVER routed the excess funds to his own personal bank accounts through the company’s payroll system. Through this mechanism, DIVER defrauded the clients of over $700,000.
In December 2018, certain clients noticed the overbilling and complained to Company-1’s president, who confronted him. DIVER admitted to the Company-1 president both fraudulent practices, stating that the funds he had stolen were consumed by his own “wild” spending. More recently, law enforcement agents recorded a conversation in which DIVER acknowledged having defrauded the company of $4.5 million through the payroll fraud and certain clients of over $700,000 through the billing fraud.
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DIVER, 62 of New York New York, is charged with one count of investment advisor fraud and one count of wire fraud. The wire fraud count carries 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 investment advisor fraud count carries a maximum sentence of five years in prison and a maximum fine of $10,000. The maximum potential penalty 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 investigative work of the U.S. Postal Inspection Service and thanked the New York Regional Office of the U.S. Securities and Exchange Commission, which has filed a civil action against DIVER in a separate action.
This case is being handled by the Office’s Securities and Commodities Task Force. Assistant United States Attorney Martin S. Bell is in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Virginia Man Pleads Guilty to Defrauding Investors of $2 Million in Iraqi Dinar Fraud SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that WILLIAM BURANK pled guilty today to defrauding investors in a scheme in which he solicited funds based on false and fraudulent pretenses to purportedly invest in dinar, the currency of Iraq. Upon obtaining the funds, BURBANK either lost or misappropriated them, and then lied to investors about the state of their investments. BURBANK pled guilty to wire fraud before U.S. Magistrate Katharine H. Parker.
U.S. Attorney Geoffrey Berman said: “William Burbank’s fraud is one of the oldest frauds in the book – using his investors’ money to pay back other investors while lining his own pockets. Burbank has now copped to his crimes and faces time in prison for his misdeeds.”
According to the allegations contained in the Indictment filed against BURBANK, and statements made in related court filings and proceedings:
From February 2010 through June 2018, BURBANK engaged in a Ponzi-like scheme to defraud more than 150 individual investors, including many U.S. military veterans and their families, of $2 million by soliciting funds through false and fraudulent pretenses. Specifically, BURBANK falsely claimed to potential investors that their funds would be used to trade in off-exchange foreign currency, namely, to purchase quantities of the Iraqi dinar, through an Iraqi bank headquartered in Bagdad. In truth and in fact, upon receiving investor funds, BURBANK used those funds to trade in his own brokerage accounts, to make payments to earlier investors, and for his personal expenses, among other things. Additionally, during the course of his scheme, BURBANK hid from investors the fact that he had misappropriated and lost their funds. In order to conceal the truth from investors, BURBANK provided them false information regarding the status of their investment, and engaged in a Ponzi-like scheme in which he used money obtained from new investors to make redemption payments to previous investors.
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WILLIAM BURBANK, 63, of Virginia Beach, Virginia, pled guilty to one count of 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.
BURBANK will be sentenced before U.S. District Judge Richard M. Berman on July 22, 2019, at 11:00 a.m.
U.S. Attorney Berman praised the work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Christine I. Magdo is in charge of the prosecution.
Manhattan U.S. Attorney Announces Settlement of Civil Fraud Lawsuit Against Garment Wholesaler for Evading Customs DutiesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Troy Miller, Director, Field Operations, New York, U.S. Customs and Border Protection (“CBP”), announced today that the United States filed and settled a civil fraud lawsuit under the False Claims Act against BYER CALIFORNIA, INC. (“BYER”), a wholesaler of women’s and girls’ apparel. The Government’s complaint alleges that for years one of BYER’s importers, Queen Apparel NY, Inc. (“Queen”), repeatedly falsified customs forms by undervaluing the garments it manufactured in Vietnam and imported into the United States for BYER. This fraudulent practice substantially reduced the amount of import duties owed to the United States. BYER was well aware that Queen was grossly undervaluing BYER’s garments in customs forms submitted to CBP. Yet, BYER chose to continue sending work orders to Queen for garments that it understood would be imported into the country with false customs forms resulting in fraudulent underpayment of customs duties. As part of the settlement, approved yesterday in Manhattan federal court by U.S. District Judge George B. Daniels, BYER admitted to and accepted responsibility for certain conduct alleged in the Government’s complaint and agreed to pay $325,000 to the United States.
Manhattan U.S. Attorney Geoffrey S. Berman said: “This Office is committed to combatting customs fraud. Importers and the merchants who retain them will be held accountable when they evade customs duties by lying about the value of the goods they bring into the United States.”
HSI Special Agent in Charge Angel M. Melendez said: “Byer California, Inc. defrauded the U.S. government for years, turning a blind eye to the fact that its supplier was undervaluing goods to avoid paying proper duties. Because Byer did not take responsibility, U.S. Customs was denied more than a quarter of a million dollars of underpaid duties. We will continue to work with CBP to ensure that businesses import goods in accordance with U.S. law.”
CBP Director of New York Field Operations Troy Miller said: “The approved settlement today is a testament to the dedication of our partners in the United States Attorney's Office, Homeland Security Investigations, and the men and women of CBP in enforcing our nation’s trade laws and punishing those perpetrating this type of fraud.”
BYER, a California corporation headquartered in San Francisco, is a designer, manufacturer, and importer of women’s and girls’ apparel. This business includes purchasing garments that are made overseas and imported into the United States, and selling those garments via department stores and national retail chains in the United States.
From 2009 to 2013, BYER purchased garments from Queen, which manufactured the garments in Vietnam in accordance with BYER’s guidelines and imported them into the United States for BYER. The Government’s complaint alleges that during this time period, BYER knew that Queen repeatedly and falsely undervalued these garments on customs forms in order to evade lawful duties, yet continued to do business with Queen.
As part of the settlement, BYER admitted that:
- Based on its reviews of documents provided by Queen, BYER understood that Queen falsely represented the value of garments in copies of documents that it was presenting to CBP, and that as a result of that undervaluation, Queen paid less than the required amount of import duties.
- Although BYER was substantially certain that during the relevant time period Queen presented entry forms to CBP that contained false valuations of the garments BYER was purchasing, BYER made no attempt to alert CBP or stop supplying Queen with additional work orders.
- In September 2012, Queen’s owner tried to bribe BYER’s compliance manager with an envelope full of cash. BYER rejected this attempted bribe, but continued to provide Queen with more work orders until April 2013, despite multiple warning signs that Queen was filing documents containing false valuations to CBP.
The United States filed a civil fraud lawsuit against Queen and its owner, Hank Choi, on February 20, 2019. That case is pending. The conduct in this matter was first brought to the attention of federal law enforcement by a whistleblower who filed a lawsuit under the False Claims Act.
Mr. Berman praised the investigative work of HSI on this case. He also thanked CBP for its assistance.
This case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorney Kirti Vaidya Reddy is in charge of the case.
Owner of Medical Technology Company Sentenced to 30 Months in Prison for Evading Taxes on over $21 Million in Business IncomeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that LEWIS STAHL, the owner of a Manhattan medical technology company, was sentenced to 30 months in prison for evading federal income taxes on more than $21 million in business income, which resulted in a loss to the U.S. Treasury of more than $6.3 million in taxes due and owing. STAHL pled guilty to one count of tax evasion on September 27, 2018, before U.S. District Judge Ronnie Abrams, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Lewis Stahl flagrantly evaded paying taxes on his business income, denying the federal government more than $6 million in taxes. Knowing full well that he was committing a crime, Stahl will spend time behind bars for his wrongdoing.”
According to the Information to which STAHL pled guilty, court filings, and statements made in public court proceedings:
STAHL is an experienced businessperson who owns and operates a Manhattan medical software company (the “Medical Technology Company”) that develops and sells medical software applications. The Medical Technology Company holds itself out as a provider of “computer ready” and “fully mobile” applications that allow physicians to prescribe medications and to order and view diagnostic information, lab results, and cardiology/radiology images.
Between 2010 and 2014, the Medical Technology Company earned more than $32 million in gross income. Less business expenses, these earnings resulted in over $21 million in business income to STAHL, which he accessed by using business bank accounts and business credit cards. STAHL used this money to fund the purchase of personal items for himself, such as clothing, jewelry, watches, real estate rentals, country club benefits, and a firearms collection. Prior to 2015, despite earning this business income from the Medical Technology Company, STAHL deliberately avoided filing tax returns, and did not report any of the income to the Internal Revenue Service (the “IRS”).
In March of 2015, an IRS revenue agent (the “IRS Revenue Agent”) contacted STAHL regarding his failure to file for the tax years 2010 through 2014, and asked STAHL to address the situation by filing delinquent Forms 1040 for those years (the “Delinquent Returns”). Shortly thereafter, STAHL retained a certified public accountant (the “Accountant”) to file the Delinquent Returns for STAHL. STAHL told the Accountant that he had failed to file tax returns in the past because he had payroll tax problems with the IRS and “stuck his head in the sand.” He also told the Accountant that he did not have any personal bank accounts in his name because he believed the IRS would seize any such accounts. STAHL further stated to the Accountant, falsely, that he was a “W-2” employee only of the Medical Technology Company, that his W-2 income was his only income, and that he had no ownership interest in the Medical Technology Company. In truth and in fact, STAHL had an ownership interest in the Medical Technology Company, and had earned over $21 million in business income from the company, well beyond the income of a few hundred thousand dollars that was reflected on his W-2s.
The Accountant subsequently filed the Delinquent Returns for STAHL, which, as a result of the lies that STAHL told the Accountant, were false and fraudulent. Specifically, the Delinquent Returns falsely claimed that STAHL’s total income was $38,652 in 2010; $7,115 in 2011; $84,615 in 2012; $100,000 in 2013; and $100,000 in 2014. The Delinquent Returns further falsely reported that STAHL did not receive any business income in any of these years, and failed to include a Schedule C detailing the significant amount of business income that STAHL earned from the Medical Technology Company. STAHL’s failure to report over $21 million in business income to the IRS – first by deliberately failing to file returns, and then by causing the false Delinquent Returns to be filed by the Accountant – resulted in a loss to the IRS of over $6.3 million in taxes due and owing.
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In addition to the prison term, Judge Abrams ordered STAHL, 63, of Boca Raton, Florida, to serve three years of supervised release, and to make court-ordered restitution to the IRS.
Mr. Berman praised the outstanding investigative work of the IRS Criminal Investigation Division in this case.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sarah E. Paul is in charge of the prosecution.
U.S. Attorney Announces the Arrest of Michael Avenatti for Engaging in A Scheme to Extort A Public CompanyRead 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 today of MICHAEL AVENATTI on federal extortion and interstate threat charges. As alleged, AVENATTI, an attorney, attempted to extract more than $20 million in payments from a publicly traded company by threatening to use his ability to garner publicity to inflict substantial financial and reputational harm on the company if his demands were not met. AVENATTI was simultaneously arrested on separate charges brought by the U.S. Attorney’s Office for the Central District of California. AVENATTI will be presented today in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Avenatti used illegal and extortionate threats for the purpose of obtaining millions of dollars in payments from a public company. Calling this anticipated payout a retainer or a settlement doesn’t change what it was – a shakedown. When lawyers use their law licenses as weapons, as a guise to extort payments for themselves, they are no longer acting as attorneys. They are acting as criminals, and they will held responsible for their conduct.”
FBI Assistant Director in Charge William F. Sweeney Jr. said: “As alleged, Michael Avenatti approached Nike last week with a list of financial demands in exchange for covering up allegations of misconduct on behalf of the company. The lofty price tag included a $1.5 million payoff for Avenatti’s client and upwards of tens of millions of dollars for the legal services of his firm – services Nike never requested. This is nothing more than a straightforward case of extortion. In the event anyone needs to be reminded, this type of behavior is illegal and it will not be tolerated – especially when committed by a lawyer who is supposed to use his license to practice law, not to willfully violate it.”
According to the allegations in the Complaint unsealed today[1]:
Background to the Extortion Scheme
In a scheme that unfolded in less than a week, AVENATTI and a co-conspirator not named as a defendant in the Complaint (“CC-1”) used threats of economic and reputational harm to extort NIKE, Inc. (“Nike”), a multinational corporation engaged in, among other things, the marketing and sale of athletic apparel, footwear, and equipment. Specifically, AVENATTI threatened to hold a press conference on the eve of Nike’s quarterly earnings call and the start of the annual National Collegiate Athletic Association (“NCAA”) men’s basketball tournament at which he would announce allegations of misconduct by employees of Nike. AVENATTI stated that he would refrain from holding the press conference and harming Nike only if Nike made a payment of $1.5 million to a client of AVENATTI’s in possession of information damaging to Nike (“Client-1), and further agreed to “retain” AVENATTI and CC-1 to conduct an “internal investigation” – an investigation that Nike did not request – for which AVENATTI and CC-1 demanded to be paid, at a minimum, between $15 and $25 million. Alternatively, and in lieu of such a retainer agreement, AVENATTI and CC-1 demanded a total payment of $22.5 million from Nike to resolve any claims Client-1 might have and additionally to buy AVENATTI’s silence.
The March 19 Meeting With Avenatti
As alleged, AVENATTI first met with representatives of Nike last Tuesday, March 19, 2019, in New York, New York. At that meeting, AVENATTI claimed to represent a coach of an amateur youth travel basketball team sponsored by Nike, i.e., Client-1. AVENATTI claimed the team coached by Client-1 had recently lost its sponsorship with Nike, one worth approximately $72,000 a year, and that his client had information that Nike employees had been engaged in illicit payments to the families of high school student athletes. AVENATTI further stated that he planned to hold a press conference the next day announcing allegations of misconduct at Nike, and made clear that he had approached Nike now because he knew that the annual NCAA tournament – an event of significance to Nike and its brand – was about to begin, and further because he was aware that Nike’s quarterly earnings call was scheduled for March 21, 2019, thus maximizing the potential financial and reputational damage his press conference could cause to Nike.
AVENATTI further stated that he would refrain from holding that press conference and damaging Nike if Nike agreed to two demands: (1) Nike must pay $1.5 million to Client-1 as a settlement for any claims Client-1 might have regarding Nike’s decision not to renew its contract with the team coached by Client-1; and (2) Nike must hire AVENATTI and CC-1 to conduct an internal investigation of Nike, with a provision that if Nike hired another firm to conduct such an internal investigation, Nike would still be required to pay AVENATTI and CC-1 at least twice the fees of any other firm hired. AVENATTI made clear that Nike would have to agree to accept those demands on a very short time frame. Nike immediately contacted the United States Attorney’s Office for the Southern District of New York, which launched an investigation in conjunction with the FBI.
The March 20 Call With Avenatti
In a follow-up call on March 20, 2019, recorded by law enforcement, AVENATTI reiterated both his threat, stating, in substance and in part, that unless Nike immediately agreed to his financial demands, he would hold his press conference and, as AVENATTI threatened: “I’ll go and I’ll go take ten billion dollars off your client’s market cap. But I’m not fucking around.” During the same call, AVENATTI made clear that his demands included not simply that he and CC-1 be paid for an “internal investigation,” but that he be paid more than $9 million. As AVENATTI stated during the call: “I’m not fucking around with this, and I’m not continuing to play games. . . . You guys know enough now to know you’ve got a serious problem. And it’s worth more in exposure to me to just blow the lid on this thing. A few million dollars doesn’t move the needle for me. I’m just being really frank with you. So if that’s what, if that’s what’s being contemplated, then let’s just say it was good to meet you, and we’re done. And I’ll proceed with my press conference tomorrow. . . . I’m not fucking around with this thing anymore. So if you guys think that you know, we’re gonna negotiate a million five, and you’re gonna hire us to do an internal investigation, but it’s gonna be capped at 3 or 5 or 7 million dollars, like let’s just be done.”
The March 21 Meeting With Avenatti
On March 21, 2019, at the direction of law enforcement, representatives of Nike met again with AVENATTI and CC-1. During the meeting, AVENATTI reiterated his demand for a
$1.5 million payment for his client and, with respect to his demand to be retained for an internal investigation, AVENATTI stated, in substance and in part, that he and CC-1 would require a $12 million retainer to be paid immediately and to be “deemed earned when paid,” with a minimum guarantee of $15 million in billings and a maximum fee of $25 million, “unless the scope changes.” When informed by an outside attorney for Nike (“Attorney-1”) that Attorney-1 has never received a $12 million retainer from Nike and never done an investigation for Nike “that breaks $10 million,” AVENATTI responded, in substance and in part, by asking whether Attorney-1 has ever “held the balls of the client in your hand where you could take five to six billion dollars market cap off of them?”
When Attorney-1 asked, in substance and in part, whether Nike could resolve the demands just by paying Client-1, rather than retaining AVENATTI and CC-1, AVENATTI and CC-1 conferred privately. AVENATTI then stated: “If [Nike] wants to have one confidential settlement and we’re done, they can buy that for twenty-two and half million dollars and we’re done. . . . Full confidentiality, we ride off into the sunset. . . .” AVENATTI then laid out again his threat of harm to Nike, adding that “as soon as this becomes public, I am going to receive calls from all over the country from parents and coaches and friends and all kinds of people – this is always what happens – and they are all going to say I’ve got an email or a text message or – now, 90% of that is going to be bullshit because it’s always bullshit 90% of the time, always, whether it’s R. Kelly or Trump, the list goes on and on – but 10% of it is actually going to be true, and then what’s going to happen is that this is going to snowball . . . and every time we got more information, that’s going to be the Washington Post, the New York Times, ESPN, a press conference, and the company will die – not die, but they are going to incur cut after cut after cut after cut, and that’s what’s going to happen as soon as this thing becomes public.”
Shortly after the March 21, 2019, meeting ended, and consistent with the threats AVENATTI communicated, AVENATTI posted a message to Twitter writing, in reference to an article about a prior prosecution involving employees of a rival company: “Something tells me that we have not reached the end of this scandal. It is likely far far broader than imagined…”
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AVENATTI, 48, of Los Angeles, California, is charged with one count of conspiracy to transmit interstate communications with intent to extort, which carries a maximum penalty of five years in prison, one count of conspiracy to commit extortion, which carries a maximum penalty of 20 years in prison, one count of transmission of interstate communications with intent to extort, which carries a maximum penalty of two years in prison, and one count of extortion, which carries a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the work of the FBI and the Special Agents of the United States Attorney’s Office for the Southern District of New York, and noted that the investigation is ongoing.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Matthew Podolsky, Robert L. Boone, and Robert B. Sobelman are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Press Conference AdvisoryRead the Press Release
There will be a press conference today at 2:30 p.m. to announce charges against attorney Michael Avenatti for attempting to extract more than $20 million in payments from a publicly traded company by threatening to use his ability to garner publicity to inflict substantial financial and reputational harm on the company if his demands were not met. The press conference will be livestreamed on Facebook @USAOSDNY. Relevant documents are attached.
WHO: Geoffrey S. Berman, United States Attorney for the Southern District of New York
William F. Sweeney, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation
WHAT: Press Conference
WHEN: Monday, March 25, 2019 at 2:30 p.m.
WHERE: U.S. Attorney’s Office, Southern District of New York
1 St. Andrew’s Plaza
New York, NY 10007
CONTACT: James Margolin, Nicholas Biase, Dawn Dearden
(212) 637-2600
NOTE: Due to construction/renovation of the lobby-level entrance, entry is through the ground floor parking-level entrance. Please allow extra time for entry and screening. Please silence all cell phones, PDAs, and pagers before start of press conference.
Patrick Ho, Former Head of Organization Backed by Chinese Energy Conglomerate, Sentenced to 3 Years in Prison for International Bribery and Money Laundering OffensesRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, and Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, announced that CHI PING PATRICK HO, a/k/a “Patrick C.P. Ho,” a/k/a “He Zhiping,” was sentenced today to three years in prison for his role in a multi-year, multimillion-dollar scheme to bribe top officials of Chad and Uganda in exchange for business advantages for CEFC China Energy Company Limited (“CEFC China”). HO was convicted of violations of the Foreign Corrupt Practices Act (“FCPA”), money laundering, and conspiracy to commit the same, in December 2018, after a one-week jury trial before U.S. District Judge Loretta A. Preska, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman stated: “Patrick Ho schemed to bribe the leaders of Chad and Uganda in order to secure unfair business advantages for the Chinese energy company he served. His actions were brazen, including offering the president of Chad $2 million in cash, hidden in gift boxes. Foreign corruption undermines the fairness of international markets, erodes the public’s faith in its leaders, and is deeply unfair to the people and businesses that play by the rules. Today’s sentence recognizes the severe harm caused by Ho’s actions.”
Assistant Attorney General Brian A. Benczkowski stated: “Patrick Ho bribed officials at the highest levels of government in Chad and Uganda in pursuit of lucrative oil deals and other business opportunities, all while using a U.S.-based NGO to conceal his criminal scheme. This kind of corruption undermines world markets and tilts the playing field against law-abiding companies and individuals. The Department will continue to investigate and prosecute individuals and corporations that engage in foreign bribery.”
According to the Indictment, evidence presented at trial, information presented in connection with sentencing, and other publicly available materials:
Overview
HO orchestrated and executed two bribery schemes to pay top officials of Chad and Uganda in exchange for business advantages for CEFC China, a Shanghai-based multibillion-dollar conglomerate that operates internationally in multiple sectors, including oil, gas, and banking. At the center of both schemes was HO, the secretary-general of a non-governmental organization based in Hong Kong and Arlington, Virginia, and registered as a charitable entity in the United States, the China Energy Fund Committee (“CEFC NGO”), which held “Special Consultative Status” with the United Nations (“UN”) Economic and Social Council. CEFC NGO was funded by CEFC China.
In the first scheme (the “Chad Scheme”), HO, on behalf of CEFC China, offered a $2 million cash bribe, hidden within gift boxes, to Idriss Déby, the president of Chad, in an effort to obtain valuable oil rights from the Chadian government. In the second scheme (the “Uganda Scheme”), HO caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by Sam Kutesa, the Minister of Foreign Affairs of Uganda, who had recently completed his term as the president of the UN General Assembly. HO also schemed to pay a $500,000 cash bribe to Yoweri Museveni, the president of Uganda, and offered to provide both Kutesa and Museveni with additional corrupt benefits by “partnering” with them and their families in future joint ventures in Uganda.
The Chad Scheme
The Chad Scheme began in or about September 2014 when HO flew into New York to attend the annual UN General Assembly. At that time, CEFC China – a multibillion-dollar energy company based in Shanghai, China – was working to expand its operations to Chad, and wanted to meet with President Déby as quickly as possible. Through a connection, HO was introduced to Cheikh Gadio, the former Minister of Foreign Affairs of Senegal, who had a personal relationship with President Déby. HO and Gadio met at CEFC China’s suite at Trump World Tower in midtown Manhattan, where HO enlisted Gadio to assist CEFC China in obtaining access to President Déby.
Gadio connected HO and CEFC China to President Déby. In an initial meeting in Chad in November 2014, President Déby described to HO and CEFC China executives certain lucrative oil rights that were available for CEFC China to acquire. Following that meeting, Gadio advised HO and CEFC China to send a technical team to Chad to investigate the oil rights and make an offer to President Déby grounded in factual data. Instead, HO insisted on a prompt second meeting with President Déby. The second meeting took place a few weeks later, in December 2014. HO led a CEFC China delegation, which flew to Chad on a corporate jet with $2 million cash concealed within several gift boxes. At the conclusion of a business meeting with President Déby, HO and the CEFC China executives presented him with the gift boxes.
To the surprise of HO and the CEFC China executives, President Déby rejected the $2 million bribe offer, but later agreed to accept the money as a charitable donation to the country. HO subsequently drafted a letter to President Déby falsely claiming that the cash had really been intended as a donation to the people of Chad all along.
HO and CEFC China did not obtain the unfair advantage that they had sought through the bribe offer, and by mid-2015, HO had turned his attention to a different so-called “gateway to Africa”: Uganda.
The Uganda Scheme
The Uganda Scheme began around the same time as the Chad Scheme, when HO was in New York for the annual UN General Assembly. HO met with Sam Kutesa, who had recently begun his term as the 69th president of the UN General Assembly (“PGA”). HO, purporting to act on behalf of CEFC NGO, met with Kutesa and began to cultivate a relationship with him. During the year when Kutesa served as PGA, HO and Kutesa discussed a “strategic partnership” between Uganda and CEFC China for various business ventures, to be formed once Kutesa returned to Uganda.
In or about February 2016 – after Kutesa had returned to Uganda and resumed his role as Foreign Minister, and Yoweri Museveni (Kutesa’s relative) had been reelected as the president of Uganda – Kutesa solicited a payment from HO, purportedly for a charitable foundation that Kutesa wished to launch. HO agreed to provide the requested payment, but simultaneously requested, on behalf of CEFC China, an invitation to Museveni’s inauguration, business meetings with Museveni and other high-level Ugandan officials, and a list of specific business projects in Uganda in which CEFC China could participate.
In May 2016, HO and CEFC China executives traveled to Uganda. Prior to departing, HO caused CEFC NGO to wire $500,000 to the account provided by Kutesa in the name of the so-called “foundation,” which wire was transmitted through New York, New York. HO also advised his boss, Ye Jianming, the then-chairman of CEFC China, to provide $500,000 in cash to Museveni, ostensibly as a campaign donation, even though Museveni had already been reelected. HO intended these payments to influence Kutesa and Museveni to use their official power to steer business advantages to CEFC China.
HO and CEFC China executives attended President Museveni’s inauguration and obtained business meetings in Uganda with Museveni and top Ugandan officials, including with the Department of Energy and Mineral Resources. After the trip, HO requested that Kutesa and Museveni assist CEFC China in acquiring a Ugandan bank, as an initial step before pursuing additional ventures in Uganda. HO also offered to “partner” with Kutesa and Museveni and/or their “family businesses,” making clear that both officials would share in CEFC China’s future profits. In exchange for the bribes offered and paid by HO, Kutesa thereafter steered a bank acquisition opportunity to CEFC China.
* * *
In imposing sentence, Judge Preska explained that, as the UN Convention Against Corruption states: “Corruption is an insidious plague” that is “found in all countries—big and small, rich and poor—but it is in the developing world that its effects are most destructive.”
In addition to his prison term, HO, 69, a citizen of the People’s Republic of China who resided in Hong Kong prior to his arrest in November 2017 and has been detained since his arrest, was fined $400,000.
Mr. Berman and Mr. Benczkowski praised the outstanding work of the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation. He also thanked the Department of Homeland Security, Homeland Security Investigations, and the Department of Justice, Criminal Division’s Office of International Affairs, for their assistance.
This case is being prosecuted by the Office’s Public Corruption Unit and the Criminal Division’s Fraud Section, FCPA Unit. Assistant U.S. Attorneys Daniel C. Richenthal, Douglas S. Zolkind, and Catherine E. Ghosh, and Trial Attorney Paul A. Hayden of the Fraud Section, are in charge of the prosecution.
Former Head of Organization Backed by Chinese Energy Conglomerate Sentenced to Three Years in Prison for International Bribery and Money Laundering OffensesRead the Press Release
Chi Ping Patrick Ho, aka “Patrick C.P. Ho” and “He Zhiping,” was sentenced today to serve 36 months in prison for his role in a multi-year, multimillion-dollar scheme to bribe top officials of Chad and Uganda in exchange for business advantages for CEFC China Energy Company Limited (“CEFC China”) Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Geoffrey S. Berman for the Southern District of New York announced. Ho was convicted of violations of the Foreign Corrupt Practices Act (FCPA), money laundering, and conspiracy to commit the same, in December 2018, after a one-week jury trial before U.S. District Judge Loretta A. Preska, who imposed today’s sentence.
In addition to his prison term, Ho, 69, a citizen of the People’s Republic of China who resided in Hong Kong prior to his arrest in November 2017 and has been detained since his arrest, was fined $400,000. Following his prison sentence, Ho will be removed from the United States.
“Patrick Ho bribed officials at the highest levels of government in Chad and Uganda in pursuit of lucrative oil deals and other business opportunities, all while using a U.S.-based NGO to conceal his criminal scheme,” said Assistant Attorney General Benczkowski. “This kind of corruption undermines world markets and tilts the playing field against law-abiding companies and individuals. The Department will continue to investigate and prosecute individuals and corporations that engage in foreign bribery. ”
“Patrick Ho schemed to bribe the leaders of Chad and Uganda in order to secure unfair business advantages for the Chinese energy company he served,” said Manhattan U.S. Attorney Berman. “His actions were brazen, including offering the president of Chad $2 million in cash, hidden in gift boxes. Foreign corruption undermines the fairness of international markets, erodes the public’s faith in its leaders, and is deeply unfair to the people and businesses that play by the rules. Today’s sentence recognizes the severe harm caused by Ho’s actions.”
According to the evidence presented at trial, Ho orchestrated and executed two bribery schemes to pay top officials of Chad and Uganda in exchange for business advantages for CEFC China, a Shanghai-based multibillion-dollar conglomerate that operates internationally in multiple sectors, including oil, gas, and banking. During the course of the schemes, Ho served as the secretary-general of a non-governmental organization based in Hong Kong and Arlington, Virginia, and registered as a charitable entity in the United States, the China Energy Fund Committee (“CEFC NGO”), which held “Special Consultative Status” with the United Nations (UN) Economic and Social Council. CEFC NGO was funded by CEFC China.
In the first scheme (the Chad Scheme), Ho, on behalf of CEFC China, offered a $2 million cash bribe, hidden within gift boxes, to Idriss Déby, the president of Chad, in an effort to obtain valuable oil rights from the Chadian government. In the second scheme (the Uganda Scheme), Ho caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by Sam Kutesa, the Minister of Foreign Affairs of Uganda, who had recently completed his term as the president of the UN General Assembly. Ho also schemed to pay a $500,000 cash bribe to Yoweri Museveni, the president of Uganda, and offered to provide both Kutesa and Museveni with additional corrupt benefits by “partnering” with them and their families in future joint ventures in Uganda.
The Chad Scheme
The Chad Scheme began in or about September 2014 when Ho flew into New York to attend the annual UN General Assembly. At that time, CEFC China – a multibillion-dollar energy company based in Shanghai, China – was working to expand its operations to Chad, and wanted to meet with President Déby as quickly as possible. Through a connection, Ho was introduced to Cheikh Gadio, the former Minister of Foreign Affairs of Senegal, who had a personal relationship with President Déby. Ho and Gadio met at CEFC China’s suite at Trump World Tower in midtown Manhattan, where Ho enlisted Gadio to assist CEFC China in obtaining access to President Déby
Gadio connected Ho and CEFC China to President Déby. In an initial meeting in Chad in November 2014, President Déby described to Ho and CEFC China executives certain lucrative oil rights that were available for CEFC China to acquire. Following that meeting, Gadio advised Ho and CEFC China to send a technical team to Chad to investigate the oil rights and make an offer to President Déby grounded in factual data. Instead, Ho insisted on a prompt second meeting with President Déby. The second meeting took place a few weeks later, in December 2014. Ho led a CEFC China delegation, which flew to Chad on a corporate jet with $2 million cash concealed within several gift boxes. At the conclusion of a business meeting with President Déby, Ho and the CEFC China executives presented him with the gift boxes.
To the surprise of Ho and the CEFC China executives, President Déby rejected the $2 million bribe offer, but later agreed to accept the money as a charitable donation to the country. Ho subsequently drafted a letter to President Déby falsely claiming that the cash had really been intended as a donation to the people of Chad all along.
Ho and CEFC China did not obtain the unfair advantage that they had sought through the bribe offer, and by mid-2015, Ho had turned his attention to a different so-called “gateway to Africa”: Uganda.
The Uganda Scheme
The Uganda Scheme began around the same time as the Chad Scheme, when Ho was in New York for the annual UN General Assembly. Ho met with Sam Kutesa, who had recently begun his term as the 69th president of the UN General Assembly (“PGA”). Ho, purporting to act on behalf of CEFC NGO, met with Kutesa and began to cultivate a relationship with him. During the year when Kutesa served as PGA, Ho and Kutesa discussed a “strategic partnership” between Uganda and CEFC China for various business ventures, to be formed once Kutesa returned to Uganda.
In or about February 2016 – after Kutesa had returned to Uganda and resumed his role as Foreign Minister, and Yoweri Museveni (Kutesa’s relative) had been reelected as the president of Uganda – Kutesa solicited a payment from Ho, purportedly for a charitable foundation that Kutesa wished to launch. Ho agreed to provide the requested payment, but simultaneously requested, on behalf of CEFC China, an invitation to Museveni’s inauguration, business meetings with Museveni and other high-level Ugandan officials, and a list of specific business projects in Uganda in which CEFC China could participate.
In May 2016, Ho and CEFC China executives traveled to Uganda. Prior to departing, Ho caused CEFC NGO to wire $500,000 to the account provided by Kutesa in the name of the so-called “foundation,” which wire was transmitted through New York, New York. Ho also advised his boss, Ye Jianming, the then-chairman of CEFC China, to provide $500,000 in cash to Museveni, ostensibly as a campaign donation, even though Museveni had already been reelected. Ho intended these payments to influence Kutesa and Museveni to use their official power to steer business advantages to CEFC China.
Ho and CEFC China executives attended President Museveni’s inauguration and obtained business meetings in Uganda with Museveni and top Ugandan officials, including with the Department of Energy and Mineral Resources. After the trip, Ho requested that Kutesa and Museveni assist CEFC China in acquiring a Ugandan bank, as an initial step before pursuing additional ventures in Uganda. Ho also offered to “partner” with Kutesa and Museveni and/or their “family businesses,” making clear that both officials would share in CEFC China’s future profits. In exchange for the bribes offered and paid by Ho, Kutesa thereafter steered a bank acquisition opportunity to CEFC China.
The investigation was conducted by the FBI and IRS Criminal Investigation. U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the Department of Justice, Criminal Division’s Office of International Affairs provided assistance.
Trial Attorney Paul A. Hayden of the Criminal Division’s Fraud Section, FCPA Unit and Assistant U.S. Attorneys Daniel C. Richenthal, Douglas S. Zolkind, and Catherine E. Ghosh of the U.S. Attorney’s Office for Southern District of New York’s Public Corruption Unit are prosecuting the case.
The Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Manhattan U.S. Attorney Announces the Appointment of Deputy U.S. Attorney and Chief Counsel to the U.S. AttorneyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, today announced the selection of Audrey Strauss as Deputy U.S. Attorney and Craig A. Stewart as Chief Counsel to the U.S. Attorney. Ms. Strauss will replace Robert Khuzami on his departure April 12. Rob will return to his home in Washington DC after commuting to the Office weekly while serving as Deputy U.S. Attorney.
Mr. Stewart, who is leaving his partnership at Arnold & Porter, will return to the Office on March 25, 2019. At that firm, his work consisted primarily of representing companies and individuals in connection with civil and appellate litigation and investigations by federal and state prosecutors and regulators. Mr. Stewart served as an Assistant United States Attorney from August 1987 through October 1998 and worked in both the Civil and Criminal Divisions. During his tenure, Mr. Stewart spent more than three years in the Civil Division, handling a mix of affirmative and defensive litigation, and then eight years in the Criminal Division, where he worked in the General Crimes, Narcotics, Special Narcotics, and Organized Crime units. He also held a number of supervisory positions, including Chief of the Narcotics Unit, Deputy Chief of the Criminal Division and, finally, Chief Appellate Attorney. Mr. Stewart earned his Juris Doctor degree at Harvard Law School in 1983, and also holds bachelor of arts and masters degrees from Yale University, where he graduated suma cum laude and Phi Beta Kappa. Following his graduation from law school, Mr. Stewart worked as a law clerk for the Honorable Constance Baker Motley, then the Chief United States District Judge for the Southern District of New York.
In making the appointments, Manhattan U.S Attorney Geoffrey S. Berman said: “Rob Khuzami is an extraordinary and brilliant lawyer who has upheld the ideals of integrity and professionalism that characterize the work of this Office. There can be no higher praise. As an example of his extraordinary commitment to the Office, Rob has been commuting weekly from Washington, D.C., since January 2018. While his desire to continue to serve remains strong, he understandably has decided to return home to his family. Audrey Strauss, who has been invaluable as Senior Counsel, will undoubtedly continue the important work of the Deputy U.S. Attorney. Additionally, I am pleased that Craig Stewart will be joining my leadership team as Chief Counsel. I am certain that Audrey and Craig will support the Office with excellence and insight.”
Treasurer of Police Charity Arrested for Stealing over $400,000 Meant for Families of NYPD Officers Killed in the Line of DutyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jonathan D. Larsen, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), announced the arrest of LORRAINE SHANLEY today on charges of bank fraud and aggravated identity theft. SHANLEY, the former volunteer treasurer of a nonprofit charity, allegedly participated in a scheme in which she obtained over $410,000 of the charity’s money meant for the families of New York City Police Department (“NYPD”) officers killed in the line of duty. SHANLEY surrendered this morning and will be presented today in Manhattan federal court before U.S. Magistrate Judge James L. Cott.
U.S. Attorney Geoffrey S. Berman said: “Lorraine Shanley allegedly capitalized on tragedy and monetized people’s generosity. As alleged, Shanley stole over 20 percent of the donations to a charity whose sole mission is to help the families of NYPD officers killed in the line of duty. Thanks to the investigative work of the IRS and special agents from our Office, Shanley will be prosecuted for her actions.”
IRS-CI Acting Special Agent in Charge Jonathan D. Larsen said: “As alleged in the complaint, Lorraine Shanley violated her position of trust at a charity and victimized families who have already sacrificed so much. IRS-CI is committed to following the money and investigating those individuals who steal from charities for their own personal gain.”
According to the allegations in the Complaint unsealed today[1]:
For many years, from at least 2010 to 2017, SHANLEY served as a volunteer treasurer for a charity that provides financial support to the families of NYPD officers killed in the line of duty (“Charity-1”). During that time period, Charity-1 received approximately $1.9 million in donations, over 99 percent of which came from NYPD employees, from an average of 5,500 NYPD employees per year.
SHANLEY was an authorized signatory on Charity-1’s bank account and credit card, and was authorized to use them for Charity-1’s operations. But SHANLEY also used the bank account and credit card to benefit herself and her family members, fraudulently obtaining over $410,000 from 2010 to 2017. For example, using Charity-1’s bank account and credit card, SHANLEY:
- Wrote at least $45,000 in checks that were either payable to family members, or that were made out to other people but which SHANLEY double endorsed and deposited into her own accounts;
- Paid approximately $29,000 for her grandchild’s private school tuition;
- Paid approximately $63,000 for legal services and expenses related to criminal charges against SHANLEY’s son;
- Paid approximately $32,000 for personal dental expenses and approximately $25,000 for landscaping on her personal residence; and
- Purchased over $8,000 in event tickets, including over $1,400 for Barbara Streisand concert tickets.
On many of the checks SHANLEY wrote for unauthorized purposes, SHANLEY forged the signature of another authorized signatory on Charity-1’s bank account. SHANLEY’s fraudulent conduct was uncovered when a new volunteer with Charity-1 reviewed the charity’s tax returns and records as part of an effort to modernize the charity’s operations.
* * *
SHANLEY, 68, of Staten Island, New York, is charged with one count of bank fraud, which carries a maximum penalty of 30 years in prison, and one count of aggravated identity theft, which carries a mandatory minimum penalty of two years in prison, which must run consecutively to any other term of imprisonment imposed. The maximum and mandatory minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
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 IRS-CI. He also thanked the New York City Police Department for their assistance.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Brett M. Kalikow is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces Action to Recover Ukrainian Painting Looted by NazisRead 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 filing of a civil forfeiture action seeking the return to its rightful owner of a painting looted from a Kyiv museum in Nazi-controlled Ukraine in the closing days of World War II. The piece, formerly entitled A Family Portrait and currently entitled An Amorous Couple or alternatively A Loving Glance (the “Painting”), painted by Pierre Louis Goudreaux, a student of Jean-Honoré Fragonard, was allegedly stolen from the Bohdan and Varvara Khanenko National Museum of the Arts in Kyiv, Ukraine, around 1943.
Manhattan U.S. Attorney Geoffrey Berman said: “Our Office has a long history of righting wrongs, no matter how long ago a crime was committed. Today’s action is an example of our continued commitment to ensuring that art looted by Nazis more than 75 years ago is returned to its rightful owners.”
FBI Assistant Director in Charge William F. Sweeney Jr. said: “The occupying forces during World War II believed they had the right to surround themselves with the spoils of their invasion, to include art work that didn't belong to them. The Nazis secreted these works away from the public and over the course of decades many were lost forever. The FBI New York Art Crime Team works diligently to restore these paintings and artifacts to their rightful owners because the some of the wounds of that dark time can be mended even decades later.”
According to the Complaint filed today in Manhattan federal court:
Before the outbreak of the World War II in the Soviet Union, the Khanenko Museum maintained the Painting under the name A Family Portrait, after the Painting had been willed to the Museum by art collector Vasilii Aleksandrovich Shchavinskii in 1924 upon his death. The Painting is seen in numerous photographs of the interior of the Khanenko Museum in the 1930s.
As part of the invasion of the Soviet Union during World War II, German troops crossed the Dnieper River into Kyiv in August 1941. To protect its inventory from the invading troops, the Khanenko Museum evacuated some of its artwork eastward into Soviet Russia, but the Painting was not listed in the checklists of the evacuated items. When the German troops occupied Kyiv beginning in 1941, Nazi Germany occupied Ukraine through an administrative entity called the Reichskommissariat Ukraine (the “RKU”). The RKU seized numerous pieces from the Khanenko Museum for display in the residences of occupying authorities. The Painting was not listed in the ledger of such seized pieces. When Soviet troops began approaching Kyiv to try to retake the city in 1943, the German authorities seized artwork for export to Germany, but the Painting was not listed in the German ledger of the exported artworks. Kyiv became a military zone in the final days of the war in Ukraine, and retreating German troops looted many remaining valuables.
In July 1944, after the Soviet Union had re-taken Kyiv from Nazi rule, the Committee for Art under the Soviet of Ministers for the Ukrainian Soviet Socialist Republic began to review pieces stolen from the Khanenko Museum. The Committee listed the Painting, under the title An Amorous Couple, as a missing piece when the review was completed in August 1948.
In January 2013, the Painting resurfaced when it was listed on the official website of a New York auction house (the “New York Auction House”). The provenance accompanying the auction notice stated that the Painting had been held in a private collection in London and then a private collection in Massachusetts. Further investigation by the FBI established that in December 1993, the Painting was purchased from an auction house in Deerfield, Massachusetts, by a New York art dealer (the “Art Dealer”). The Art Dealer held the Painting until consigning it to the New York Auction House in January 2013. The Painting was posted for auction under the alternate title of A Loving Glance.
The U.S. Attorney’s Office and the FBI are seeking forfeiture of the painting so it can be returned to its rightful owners.
Mr. Berman thanked the FBI’s Art Crime Team for their assistance.
The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit. Assistant U.S. Attorney Samuel L. Raymond is in charge of the case.
Cesar Sayoc Pleads Guilty to 65 Felonies for Mailing 16 Improvised Explosive Devices in Connection with October 2018 Domestic Terrorist AttackRead the Press Release
Cesar Altieri Sayoc, aka “Cesar Randazzo,” “Cesar Altieri,” and “Cesar Altieri Randazzo,” pled guilty today to a 65-count Superseding Information in Manhattan federal court before U.S. District Judge Jed S. Rakoff. In connection with the guilty plea, Sayoc admitted to mailing 16 improvised explosive devices (IEDs) to 13 victims throughout the country, including 11 current or former U.S. government officials, and that he intended to use the IEDs as weapons and to cause injuries. Assistant Attorney General John C. Demers for the National Security Division, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Assistant Director Michael McGarrity of the FBI’s Counterterrorism Division, Assistant Director in Charge William F. Sweeney, Jr. of the FBI’s New York Field Office and Police Commissioner James P. O’Neill of the NYPD made the announcement.
“Cesar Sayoc has admitted to acts of domestic terrorism that are repulsive to all Americans who cherish a society built on respectful and non-violent political discourse, no matter how strongly held one’s views,” said Assistant Attorney General Demers. “Our democracy will simply not survive if our political discourse includes sending bombs to those we disagree with. 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 plea.”
“For five days in November 2018, Cesar Sayoc reigned terror across the country, sending high-ranking officials and former elected leaders explosive packages through the mail,” said U.S. Attorney Berman. “Thankfully no one was hurt by these dangerous devices, but his actions left an air of fear and divisiveness in their wake. Sayoc has taken responsibility for his crimes, and will soon be sentenced to significant time in prison.”
“This case shows that the FBI will be tenacious in pursuing all those who wish to intimidate those they disagree with by threatening violence,” said Assistant Director Michael McGarrity of the FBI’s Counterterrorism Division. “When it comes to identifying and stopping those who terrorize our communities, we won’t hesitate to bring the full force of our combined resources of the FBI and our partners.”
“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,” said Assistant Director Sweeney. “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. The announcement of today's plea 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.”
“The NYPD and our law enforcement partners will continue to work tirelessly to keep New York City safe from threats of terror,” said Commissioner O’Neill. “I commend the members of the New York Joint Terrorism Task Force, and the Southern District of New York for their work in this case.”
According to the allegations in the Complaint, Superseding Information, other court filings, and statements made during court proceedings:
In October 2018, Sayoc mailed from Florida 16 padded envelopes, each containing an IED, to addresses in New York, New Jersey, Washington, D.C., Delaware, Atlanta, and California. Sayoc packed each IED with explosive material and glass shards that would function as shrapnel if the IED exploded. Sayoc also attached to the outside of each IED a picture of the intended victim marked with a red “X.” As Sayoc admitted today during his plea, he designed the IEDs for use as weapons and mailed them understanding that they were capable of exploding and causing injuries and property damage. In alphabetical order, Sayoc’s intended 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 Oct. 22 and Nov. 2, 2018, the FBI and the U.S. Postal Service recovered all of the 16 IEDs mailed by Sayoc.
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. The FBI seized a laptop from Sayoc’s van, which contained lists of physical addresses that match many of the labels on the envelopes that Sayoc mailed. The lists were saved at a file path on the laptop that includes a variant of Sayoc’s first name: “Users/Ceasar/Documents.” A document from that path, titled “Debbie W.docx” and bearing a creation date of July 26, 2018, contained repeated copies of an address for “Debbie W. Schultz” in Sunrise, Florida, that is nearly identical, except for typographical errors, to the return address that Sayoc used on the packages. Similar documents bearing file titles that include the name “Debbie,” and creation dates of Sept. 22, 2018, contain exact matches of the return address used by Sayoc on the 16 envelopes.
Sayoc’s laptop also revealed extensive Internet search history related to his investigation of the intended victims and his desire to injure or kill them. For example, Sayoc conducted the following Internet searches, among others, on the dates indicated in 2018:
- July 15: “hilary Clinton hime address”
- July 26: “address Debbie wauserman Shultz”
- Sept. 19: “address kamila harrias”
- Sept. 26: “address for barack Obama”
- Sept. 26: “michelle obama mailing address”
- Sept. 26: “joseph biden jr”
- Oct. 1: “address cory booker new jersey”
- Oct. 20: “tom steyers mailing address”
- Oct. 23: “address kamala harris”
* * *
Sayoc, 57, of Southern Florida, pled guilty to four sets of charges related to each of the 16 IEDs: (1) sixteen counts of using a weapon of mass destruction; (2) sixteen counts of interstate transportation of an explosive device; (3) sixteen counts of conveying a threat in interstate commerce; and (4) sixteen counts of the illegal mailing of explosives with the intent to kill or injure another. Sayoc also pled guilty to using an explosive to commit a felony, which relates to felonies committed in connection with the use and mailing of all 16 IEDs. A chart identifying the charges and maximum penalties applicable to Sayoc is below.
Counts
Charge
Penalties Per Count
1 – 16
Using a weapon of mass destruction
Maximum per count: life
17 – 32
Interstate transportation of an explosive
Maximum per count: 10 years
33 – 48
Conveying a threat in interstate commerce
Maximum per count: 5 years
49 – 64
Illegal mailing of explosives with intent to kill or injure another
Maximum per count: 20 years
65
Carrying an explosive during the commission of a felony
Mandatory minimum: 10 years to run consecutively to any other sentence imposed
The maximum and minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. The defendant is scheduled to be sentenced before Judge Rakoff on Sept. 12, 2019.
Mr. Demers and Mr. Berman praised the outstanding efforts of the Federal Bureau of Investigation’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. Demers and 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.
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.
Cesar Sayoc Pleads Guilty to 65 Felonies 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, John C. Demers, the Assistant Attorney General for National Security, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Philip R. Bartlett, Inspector-in-Charge of the New York Field Division of the United States Postal Inspection Service (“USPIS”), and James P. O’Neill, Police Commissioner of the City of New York (“NYPD”), announced today that CESAR ALTIERI SAYOC, a/k/a “Cesar Randazzo,” “Cesar Altieri,” and “Cesar Altieri Randazzo,” pled guilty today to a 65-count Superseding Information in Manhattan federal court before U.S. District Judge Jed S. Rakoff. In connection with the guilty plea, SAYOC admitted to mailing 16 improvised explosive devices (“IEDs”) to 13 victims throughout the country, including 11 current or former U.S. government officials, and that he intended to use the IEDs as weapons and to cause injuries.
Manhattan U.S. Attorney Geoffrey S. Berman said: “For five days in October 2018, Cesar Sayoc rained terror across the country, sending high-ranking officials and former elected leaders explosive packages through the mail. Thankfully no one was hurt by these dangerous devices, but his actions left an air of fear and divisiveness in their wake. Sayoc has taken responsibility for his crimes, and will soon be sentenced to significant time in prison.”
Assistant Attorney General for National Security John C. Demers said: “Cesar Sayoc has admitted to acts of domestic terrorism that are repulsive to all Americans who cherish a society built on respectful and non-violent political discourse, no matter how strongly held one’s views. Our democracy will simply not survive if our political discourse includes sending bombs to those we disagree with. 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 plea.”
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. The announcement of today’s plea 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.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “Today’s plea represents the hard work of Postal Inspectors and their law enforcement partners to keep USPS employees, customers and the sanctity of the US Mail safe from those who wish to harm the American public based on their distorted political or ideological agenda.”
NYPD Commissioner James P. O’Neill said: “The NYPD and our law enforcement partners will continue to work tirelessly to keep New York City safe from threats of terror. I commend the members of the New York Joint Terrorism Task Force, and the Southern District of New York for their work in this case.”
According to the allegations in the Complaint, Superseding Information, other court filings, and statements made during court proceedings:
In October 2018, SAYOC mailed from Florida 16 padded envelopes, each containing an IED, to addresses in New York, New Jersey, Washington, D.C., Delaware, Atlanta, Georgia, and California. SAYOC packed each IED with explosive material and glass shards that would function as shrapnel if the IED exploded. SAYOC also attached to the outside of each IED a picture of the intended victim marked with a red “X.” As SAYOC admitted today during his plea, he designed the IEDs for use as weapons and mailed them understanding that they were capable of exploding and causing injuries and property damage. In alphabetical order, SAYOC’s intended 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 Waters. Between October 22 and November 2, 2018, the FBI and the U.S. Postal Service recovered all of the 16 IEDs mailed by SAYOC.
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. The FBI seized a laptop from SAYOC’s van, which contained lists of physical addresses that match many of the labels on the envelopes that SAYOC mailed. The lists were saved at a file path on the laptop that includes a variant of SAYOC’s first name: “Users/Ceasar/Documents.” A document from that path, titled “Debbie W.docx” and bearing a creation date of July 26, 2018, contained repeated copies of an address for “Debbie W. Schultz” in Sunrise, Florida, that is nearly identical, except for typographical errors, to the return address that SAYOC used on the packages. Similar documents bearing file titles that include the name “Debbie,” and creation dates of September 22, 2018, contain exact matches of the return address used by SAYOC on the 16 envelopes.
SAYOC’s laptop also revealed extensive Internet search history related to his investigation of the intended victims and his desire to injure or kill them. For example, SAYOC conducted the following Internet searches, among others, on the dates indicated in 2018:
- July 15: “hilary Clinton hime address”
- July 26: “address Debbie wauserman Shultz”
- Sept. 19: “address kamila harrias”
- Sept. 26: “address for barack Obama”
- Sept. 26: “michelle obama mailing address”
- Sept. 26: “joseph biden jr”
- Oct. 1: “address cory booker new jersey”
- Oct. 20: “tom steyers mailing address”
- Oct. 23: “address kamala harris”
* * *
SAYOC, 57, of Southern Florida, pled guilty to four sets of charges related to each of the 16 IEDs: (1) sixteen counts of using a weapon of mass destruction; (2) sixteen counts of interstate transportation of an explosive device; (3) sixteen counts of conveying a threat in interstate commerce; and (4) sixteen counts of the illegal mailing of explosives with the intent to kill or injure another. SAYOC also pled guilty to using an explosive to commit a felony, which relates to felonies committed in connection with the use and mailing of all 16 IEDs. A chart identifying the charges and maximum penalties applicable to SAYOC is below.
Counts
Charge
Penalties Per Count
1 – 16
Using a weapon of mass destruction
Maximum per count: life
17 – 32
Interstate transportation of an explosive
Maximum per count: 10 years
33 – 48
Conveying a threat in interstate commerce
Maximum per count: 5 years
49 – 64
Illegal mailing of explosives with intent to kill or injure another
Maximum per count: 20 years
65
Carrying an explosive during the commission of a felony
Mandatory minimum: 10 years to run consecutively to any other sentence imposed
The maximum and minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. The defendant is scheduled to be sentenced before Judge Rakoff on September 12, 2019 at 4:00 p.m.
Mr. Berman and Mr. Demers praised the outstanding efforts of the Federal Bureau of Investigation’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 and Mr. Demers 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.
United States Settles Suit Against Three Responsible Parties for the Release of Mercury in the Village of Rye BrookRead the Press Release
Robert S. Khuzami, Attorney for the United States, acting under authority conferred by 28 U.S.C. § 515, and Peter D. Lopez, Regional Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today that the United States has filed and simultaneously entered into a consent decree settling a civil lawsuit against COLUMBIA GAS TRANSMISSION LLC (“Columbia”), HENRY SCHEIN, INC. (“Schein”), and UNION CARBIDE CORPORATION (“UCC”) (collectively, the “Defendants”). The lawsuit, brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) – commonly known as the Superfund statute – seeks to collect clean-up costs that EPA has incurred since April 2004 in connection with its clean-up of mercury at the Port Refinery Superfund Site (the “Site”) in the Village of Rye Brook in Westchester County, New York. The consent decree, which will be lodged with the District Court for a period of at least 30 days before it is submitted for the Court’s approval, provides for a combined payment of $179,647 by the Defendants.
Attorney for the United States Robert Khuzami said: “Polluters must pay for the costs they have imposed on the community. Each of these defendants arranged for the treatment or disposal of toxic mercury and contributed to significant contamination in a residential community. Each is now paying a share of the costs.”
Regional Administrator Peter D. Lopez said: “It is crucial for companies to take all necessary steps to limit people’s potential exposure to mercury. Exposure to mercury can harm the heart, kidneys, lungs, immune system and have other health impacts. EPA completed a successful cleanup in Rye Brook, held the parties accountable and continues to remain vigilant to ensure that the public is protected from unsafe releases of mercury.”
As alleged in the complaint filed today in White Plains federal court, each of these defendants arranged for the sale and transport of used or scrap mercury, or mercury-containing products, directly or indirectly to Port Refinery, Inc. (“Port Refinery”). Port Refinery operated a mercury refining business out of a residence in Rye Brook, New York. Port Refinery’s treatment and processing of the scrap mercury sent by the Defendants and other parties led to extensive releases of mercury, a hazardous substance, requiring two separate clean-up actions (“removals”) by EPA. In connection with the second removal, which began in 2004, EPA has incurred costs at the site for a variety of investigative and clean-up activities, including, among other things, excavating and disposing of more than 9,300 tons of mercury-contaminated soil from the Site.
In the consent decree filed today, the Defendants admit and accept responsibility for the following:
- EPA has determined that from the 1970s through the early 1990s, Port Refinery engaged in, among other things, the business of mercury reclaiming, refining, and processing.
- Port Refinery operated in the Village of Rye Brook, Westchester County, New York, out of a two-story garage bordered by private residences on its south, east, and west sides.
- EPA has determined that Port Refinery took virtually no environmental precautions or safety measures during its mercury refinement process.
- EPA has determined that Port Refinery released a significant amount of mercury into the environment, contaminating the Site.
- EPA has determined that the Defendants’ mercury was comingled at the Site and contributed to the mercury released into the environment at the Site.
Pursuant to the consent decree, the Defendants will pay a total of $179,647 in costs incurred by EPA, consisting of $120,198 to be paid by UCC, $54,845 to be paid by Columbia, and $4,604 to be paid by Schein.
* * *
Today’s lawsuit is the United States’ fourth lawsuit against responsible parties to recover clean-up costs for the second removal at the Port Refinery site. Prior to today’s settlement, the United States had recovered $647,582 from other responsible parties. The United States is continuing to pursue its claims against additional potentially responsible parties.
The consent decree will be lodged with the District Court for a period of at least 30 days before it is submitted for the Court’s approval, to provide public notice and to afford members of the public the opportunity to comment on the consent decree.
This case is being handled by the Office’s Environmental Protection Unit. Assistant U.S. Attorneys Anthony J. Sun and Natasha W. Teleanu are in charge of the case.
U.S. Attorney Settles Suit Against Meat Market for Violations of the Poultry Products Inspection ActRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Carmen Rottenberg, Administrator of the U.S. Department of Agriculture’s (“USDA”) Food Safety and Inspection Service (“FSIS”), announced today the entry of a Consent Decree against defendants GEORGE MEAT MARKET, INC. (“GEORGE MEAT MARKET”), KWOK SIN NG, president of GEORGE MEAT MARKET, and ALICE YAN FUNG NG, vice president of GEORGE MEAT MARKET (collectively, “the defendants”), along with settling parties BEN MEAT MARKET, INC. (“BEN MEAT MARKET”), and its incorporator, BENSON NG, for violations of the federal Poultry Products Inspection Act and related regulations at their Manhattan meat market.
U.S. Attorney Geoffrey S. Berman stated: “If it walks like a duck and quacks like a duck, it has to be USDA-inspected like a duck. By disregarding regulations designed to ensure that food remains wholesome and unadulterated on its way to being consumed, the owners and operators of George Meat Market and Ben Meat Market put people at risk. Today’s consent decree ensures that they will comply with the law and consumers can have confidence in the safety of the food they buy.”
USDA Food Safety and Inspection Service Administrator Carmen Rottenberg said: “The defendants repeatedly violated food safety laws and put consumers at risk for foodborne illnesses. The United States enjoys the safest food supply in the world and we will hold the individuals accountable for their actions.”
According to the Complaint filed in Manhattan federal court:
The Poultry Products Inspection Act (PPIA) protects the public health by imposing a set of inspections, labeling, and packaging requirements for poultry. These inspection, labeling, and packaging requirements allow consumers to have confidence in the safety of their poultry products and permit public health officials to trace problems to their source.
Since 2009, the defendants repeatedly violated federal law by selling uninspected and misbranded roast ducks from their facility at 288 Grand Street, New York, New York – then operating under the name GEORGE MEAT MARKET – to wholesalers and retailers in New York City. Although USDA inspectors repeatedly found the defendants in violation, issuing multiple notices of warning and a notice of alleged violation between 2009 and 2017, the defendants continued to violate the law.
In July 2018, the U.S. Attorney’s Office notified the defendants of the government’s intent to file suit to enjoin them from continuing to violate the PPIA. In response, the defendants claimed that GEORGE MEAT MARKET would cease operations at the end of that month. However, a USDA inspector visited the market at the end of July 2018 and found no indication that the market was closing. The U.S. Attorney’s Office then filed this suit.
In the Consent Decree entered today, the defendants and settling parties admit, acknowledge, and accept responsibility for the following:
- Defendants GEORGE MEAT MARKET, KWOK SIN NG, and ALICE YAN FUNG NG have repeatedly sold non-federally inspected and misbranded whole roast duck and other poultry products to retailers for resale, in violation of federal law.
- GEORGE MEAT MARKET, KWOK SIN NG, and ALICE YAN FUNG NG have also failed to keep records that fully and correctly disclose all business transactions respecting such poultry products.
- By letter dated July 16, 2018, the United States notified the defendants of its intent to file suit under the PPIA.
- On July 24, 2018, BENSON NG incorporated BEN MEAT MARKET, a New York corporation with the same address as GEORGE MEAT MARKET, 288 Grand Street, New York, New York.
- In August 2018, the defendants purported to transfer business operations to Ben Meat Market.
- Defendants KWOK SIN NG and ALICE YAN FUNG NG, and settling party BENSON NG, continued to operate the business under the name BEN MEAT MARKET from August 2018 through the entry of this Consent Decree.
Pursuant to the Consent Decree, GEORGE MEAT MARKET, KWOK SIN NG, ALICE YAN FUNG NG, BEN MEAT MARKET, and BENSON NG are enjoined from (1) selling or transporting any poultry products required to be inspected and passed by USDA’s Food Safety and Inspection Service that have not been inspected and passed by USDA inspectors; (2) preparing or processing poultry and poultry products in unsanitary conditions; (3) not keeping records that fully disclose transactions involving poultry products; and (4) engaging in any other conduct that would violate the PPIA and related regulations. The settling parties have also agreed to complete mandatory training in relevant federal law and regulations and agreed to certain conditions on transferring ownership of the meat market. The settling parties are subject to additional actions, including civil monetary penalties, termination of exempt status, contempt sanctions, and other relief, if they violate the provisions of the Consent Decree.
Mr. Berman thanked the USDA for its assistance leading to the Complaint.
This case is being handled by the Office’s Environmental Protection Unit, as part of its Food Safety Initiative. Assistant United States Attorney Samuel Dolinger is in charge of the case.
U.S. Attorney Announces Fraud and Money Laundering Charges Against AccountantRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, J. Russell George, U.S. Treasury Inspector General for Tax Administration, Office of Investigations (“TIGTA”), and Brian M. Hickey, Director, New York State Department of Taxation and Finance, Office of Internal Affairs (“NYSDTF”), announced today the arrest of defendant SALVATORE ARENA, who is charged with defrauding clients who trusted him to prepare and pay their taxes, and with misappropriating at least $600,000 of those clients’ funds for his own use.
U.S. Attorney Geoffrey S. Berman said: “The ability of our government to maintain functions and provide necessary services relies heavily on tax revenue from ordinary Americans. Self-reporting of taxes relies on the honesty of both taxpayers and tax professionals alike. When individuals attempt to pervert the system for their own benefit – as we allege Salvatore Arena has done – law enforcement will be there to bring them to justice.”
TIGTA Treasury Inspector General J. Russell George said: “TIGTA investigates allegations of wrongdoing by tax preparers that impedes tax administration and victimizes their clients. Today’s arrest sends a clear message that TIGTA will work with its law enforcement partners to aggressively investigate and prosecute perpetrators that exploit the tax system to victimize others.”
NYSDTF Director Brian M. Hickey said: “When tax preparers blatantly betray the trust of their clients for personal gain it casts a shadow over an entire industry and can deprive communities of revenue for vital services. We will continue to work with our partners in law enforcement to pursue unscrupulous preparers and hold them accountable for their crimes.”
As alleged in the Complaint unsealed today in Manhattan federal court[1]:
During the relevant time period, defendant SALVATORE ARENA purported to offer tax services, including the preparation and payment of taxes, to clients of an accounting firm in Manhattan. As alleged in the Complaint, instead of making payments on behalf of those clients, as ARENA represented he would, he diverted client funds for his own use. As alleged, 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 multiple victims of at least $600,000 during the period from January 2014 through March 2019.
* * *
ARENA, 46, of Queens, New York, is charged with one count each of mail fraud, money laundering, and wire fraud, each of which carries a maximum sentence of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison. 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 Special Agents from the U.S. Attorney’s Office for the Southern District of New York, Special Agents from TIGTA, and Criminal Investigators from the NYSDTF.
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.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Lithuanian Man Pleads Guilty to Wire Fraud for Theft of over $100 Million in Fraudulent Business Email Compromise SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EVALDAS RIMASAUSKAS, a Lithuanian citizen, pled guilty today to wire fraud arising out of his orchestration of a fraudulent business email compromise scheme that induced two U.S.-based Internet companies (the “Victim Companies”) to wire a total of over $100 million to bank accounts he controlled. RIMASAUSKAS entered his guilty plea today in Manhattan federal court before U.S. District Judge George B. Daniels.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As Evaldas Rimasauskas admitted today, he devised a blatant scheme to fleece U.S. companies out of $100 million, and then siphoned those funds to bank accounts around the globe. Rimasauskas thought he could hide behind a computer screen halfway across the world while he conducted his fraudulent scheme, but as he has learned, the arms of American justice are long, and he now faces significant time in a U.S. prison.”
According to the allegations contained in the Indictment:
From 2013 through 2015, RIMASAUSKAS orchestrated a fraudulent scheme designed to deceive the Victim Companies, including a multinational technology company and a multinational online social media company, into wiring funds to bank accounts controlled by RIMASAUSKAS. Specifically, RIMASAUSKAS registered and incorporated a company in Latvia (“Company-2”) that bore the same name as an Asian-based computer hardware manufacturer (“Company-1”), and opened, maintained, and controlled various accounts at banks located in Latvia and Cyprus in the name of Company-2. Thereafter, fraudulent phishing emails were sent to employees and agents of the Victim Companies, which regularly conducted multimillion-dollar transactions with Company-1, directing that money the Victim Companies owed Company-1 for legitimate goods and services be sent to Company-2’s bank accounts in Latvia and Cyprus, which were controlled by RIMASAUSKAS. These emails purported to be from employees and agents of Company-1, and were sent from email accounts that were designed to create the false appearance that they were sent by employees and agents of Company-1, but in truth and in fact, were neither sent nor authorized by Company-1. This scheme succeeded in deceiving the Victim Companies into complying with the fraudulent wiring instructions.
After the Victim Companies wired funds intended for Company-1 to Company-2’s bank accounts in Latvia and Cyprus, RIMASAUSKAS caused the stolen funds to be quickly wired into different bank accounts in various locations throughout the world, including Latvia, Cyprus, Slovakia, Lithuania, Hungary, and Hong Kong. RIMASAUSKAS also caused forged invoices, contracts, and letters that falsely appeared to have been executed and signed by executives and agents of the Victim Companies, and which bore false corporate stamps embossed with the Victim Companies’ names, to be submitted to banks in support of the large volume of funds that were fraudulently transmitted via wire transfer.
Through these false and deceptive representations over the course of the scheme, RIMASAUSKAS caused the Victim Companies to transfer a total of over $100 million in U.S. currency from the Victim Companies’ bank accounts to Company-2’s bank accounts.
RIMASAUSKAS was arrested by Lithuanian authorities in March 2017, pursuant to a provisional arrest warrant, and was extradited to the Southern District of New York in August 2017.
* * *
RIMASAUSKAS, 50, of Vilnius, Lithuania, pled guilty to one count of wire fraud, which carries a maximum sentence of 30 years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
RIMASAUSKAS is scheduled to be sentenced on July 24, 2019, at 10:00 a.m. before Judge Daniels.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, and thanked the Prosecutor General’s Office of the Republic of Lithuania, the Lithuanian Criminal Police Bureau, the Vilnius District Prosecutor’s Office and the Economic Crime Investigation Board of Vilnius County Police Headquarters, the Prosecutor General’s Office of the Republic of Latvia, and the International Assistance Group at the Department of Justice, Canada, for their assistance in the investigation, arrests, and extradition, as well the Department of Justice’s Office of International Affairs.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Eun Young Choi and Olga Zverovich are in charge of the prosecution.
Former U.S. Marine Sentenced to 10 Years in Prison for Explosives, Firearms, and Narcotics OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that RICHARD LAUGEL was sentenced to 121 months in prison for detonating a pipe bomb in the Bronx on March 2, 2016, along with firearms and narcotics offenses. LAUGEL pled guilty on November 8, 2018, before United States District Judge Paul A. Engelmayer, who also imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Richard Laugel’s dangerous attempt to harm his neighbor by detonating a car bomb was, thankfully, unsuccessful. His cache of weapons was also seized, and his narcotics businesses ended thanks to the extraordinary work of our law enforcement partners, making New York City streets safer. Now Laugel will serve a lengthy prison sentence for his crimes.”
According to the Information, other filings in Manhattan federal court, and evidence presented in court at sentencing:
On March 2, 2016, LAUGEL placed an improvised explosive device (“IED”) under the rear tire well of his neighbor’s car, which was parked near their apartment building in the Bronx, New York. LAUGEL, a former United States Marine, had constructed the IED using a metal pipe bomb, which he packed with nails and explosives and attached to a butane canister to increase the potential lethality of the device. LAUGEL used a remote-detonation device to activate the bomb after his neighbor entered the car and drove several blocks away. The force of the explosion blew out the airbags in the car and buckled the car doors. The neighbor was not injured by the explosion.
On May 22, 2018, agents with the Department of Homeland Security, Homeland Security Investigations (“HSI”), officers with the New York City Police Department (“NYPD”), and agents from the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) executed a search warrant at LAUGEL’s home in the Bronx. Law enforcement recovered from LAUGEL’s home and garage, among other items:
- 575 rounds of assorted ammunition
- 8 silencers and 32 silencer parts
- 5 home-made pistols
- 2 commercially manufactured pistols, one of which had an obliterated serial number
- 2 “switches” to convert pistols into fully automatic weapons
- 1 bump stock
During a subsequent search of LAUGEL’s apartment located near his home, law enforcement recovered evidence consistent with the manufacturing of alprazolam for distribution to customers online, including a powder mixing machine, pill press dies to stamp pills, and boxes of alprazolam packaged for shipment to customers.
* * *
In addition to the prison term, LAUGEL, 39, of the Bronx, New York, was sentenced to three years of supervised release.
Mr. Berman praised the outstanding investigative work of ATF, the NYPD, and HSI.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Alison Moe and Jacob Warren are in charge of the prosecution.
Tax Preparer Sentenced to 2 Years in Prison for Fraudlent Scheme to Steal over $1 Million from His ClientsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that TOM SHIN was sentenced to two years in prison for aiding the preparation of a false tax return and wire fraud. SHIN pled guilty on November 29, 2018, before U.S. District Court Judge Valerie E. Caproni, who imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Instead of honestly performing the tax services he was hired to do, Tom Shin used his expert knowledge in a scheme to defraud his clients of more than $1.3 million that was intended to pay taxes owed to the federal and state governments. Today, Shin has been held accountable for breaching his clients’ trust.”
According to the allegations in the Complaint and Indictment to which SHIN pled guilty:
SHIN was hired to prepare joint federal and state tax returns for two individuals (the “Clients”) for tax year 2017. SHIN showed the Clients completed tax return forms indicating that the Clients owed approximately $1.3 million in taxes. However, SHIN actually filed false returns on behalf of the Clients without their knowledge, which concealed the Clients’ tax liability. SHIN then, in connection with applications for extensions of time to file his personal tax returns, directed tax authorities to withdraw approximately $1.3 million from the Clients’ bank account, and then filed personal tax returns seeking an approximately $1.3 million refund. The net result of the alleged scheme would have been a transfer of approximately $1.3 million from the Clients’ bank account to SHIN.
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In addition to the prison term, SHIN, 36, of Staten Island, New York, was sentenced to two years of supervised release. SHIN was also ordered to forfeit $335,394.
U.S. Attorney Berman thanked the Internal Revenue Service and the New York State Department of Taxation and Finance for their outstanding work.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Brett M. Kalikow is in charge of the prosecution.
Financial Broker Pleads Guilty in Manhattan Federal Court to 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 that RICHARD JOSEPHBERG pled guilty today to one count of tax evasion and three counts of willful failure to file tax returns. In particular, JOSEPHBERG admitted that he deliberately evaded the assessment of hundreds of thousands of dollars in federal income taxes by fraudulently reporting a 2011 commission of approximately $1.5 million as a long-term capital gain, which was taxed at a much lower rate than ordinary income. In addition, he admitted that he willfully failed to timely file any tax returns for the calendar years 2013 through 2015. As part of his plea, JOSEPHBERG agreed to pay at least $1,275,624 in restitution to the IRS and the New York State Department of Taxation and Finance. JOSEPHBERG pled guilty before United States Circuit Judge Richard J. Sullivan.
U.S. Attorney Geoffrey S. Berman said: “As he admitted, Richard Josephberg defrauded the IRS and evaded taxes by disguising more than $1.5 million in income as long-term capital gain. He also admitted he failed to file tax returns for four years. Now Josephberg awaits sentencing for his multifaceted tax dodge.”
According to the Indictment, public filings, and other statements made in open court:
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. While on supervised release for that conviction, he began engaging in the criminal conduct that formed the basis of today’s plea.
Specifically, starting in late 2010, JOSEPHBERG began working for an investor relations firm (“Firm-1”) in Manhattan. Through the individual who operated Firm-1, JOSEPHBERG secured a commission-based arrangement with another investment firm (“Firm-2”), which agreed to pay JOSEPHBERG a commission of approximately 15 percent of any profit generated by Firm-2 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 Firm-2 to issue the remaining commission payments in the name of a newly formed nominee 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 Firm-2. On or about March 27, 2012, JOSEPHBERG formed a second 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 Firm-2, 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 JOSEPHBERG’s 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.
JOSEPHBERG’s tax evasion and failure to file tax returns had a dual purpose: by using corporate entities to conceal personal income, JOSEPHBERG was attempting both to evade paying his substantial outstanding tax liabilities from prior years (1997, 1998, and 2005) and to evade assessment of taxes for 2011 and 2013 through 2016, as charged in the Indictment.
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JOSEPHBERG, 72, of Greenwich, Connecticut, pled guilty to one count of tax evasion for the tax year 2011, which carries a maximum sentence of five years in prison, and three counts of willful failure to file tax returns for the tax years 2013 through 2015, each of which carries a maximum sentence of one year in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of his plea, JOSEPHBERG agreed to pay at least $1,275,624 in restitution to the IRS and the New York State Department of Taxation and Finance. JOSEPHBERG is scheduled to be sentenced by Judge Sullivan on July 15, 2019, at 2 p.m.
Mr. Berman praised the outstanding work of the Internal Revenue Service, Criminal Investigation, in this case. Mr. Berman also thanked the New York State Department of Taxation and Finance for its assistance in the prosecution.
This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Olga I. Zverovich and Andrew D. Beaty are in charge of the prosecution.
Chuck Person, Former Division I Men’s Basketball Coach, Pleads Guilty to Bribery in Manhattan Federal CourtRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that CHUCK CONNORS PERSON, a former men’s basketball coach at Auburn University (“Auburn”), pled guilty in Manhattan federal court today to receiving approximately $91,500 in cash bribes from athlete advisers in exchange for using his influence over Auburn basketball players to retain the services of the advisers paying the bribes. PERSON pled guilty before U.S. District Judge Loretta A. Preska.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As he has now admitted, Chuck Person abused his position as a coach and mentor to student-athletes in exchange for personal gain. In taking tens of thousands of dollars in cash bribes, Person not only placed personal financial gain above his obligations to his employer and the student-athletes he coached, but he broke the law.”
According to the Complaint, the Indictment, statements made in court and publicly available documents:
Over the course of a year, PERSON, a former men’s basketball coach at Auburn University until shortly after his arrest, agreed to accept cash bribes in return for agreeing to exert his influence over student-athletes on the Division I men’s basketball team he coached to retain the services of the bribe-payers, including once the student-athletes entered the National Basketball Association (“NBA”).
Beginning in 2016, and continuing into September 2017, when PERSON was arrested, PERSON received approximately $91,500 in cash bribes from a financial adviser and business manager, who, unbeknownst to PERSON, was providing information to law enforcement (“CW-1”). In exchange for the cash bribes, PERSON agreed to exert his influence over certain student-athletes PERSON coached at Auburn University to retain the services of CW-1 once those players entered the NBA. The bribe payments are alleged to have been initially arranged by a co-conspirator who had a preexisting relationship with PERSON and operated a clothing store that specialized in making bespoke suits for professional athletes.
Over the course of the scheme, and in exchange for the cash bribes described above, PERSON did, in fact, arrange multiple meetings between CW-1 and Auburn players and/or their family members. In those meetings, PERSON falsely touted CW-1’s qualifications as a financial adviser and business manager without disclosing that PERSON was, in fact, being bribed to recommend CW-1. In one recorded meeting, PERSON stressed to an Auburn University player the importance of keeping their relationship with CW-1 a secret. Person stated, “most important part is that you . . . don’t say nothing to anybody . . . don’t share with your sisters, don’t share with any of the teammates, that’s very important cause this is a violation . . . of rules, but this is how the NBA players get it done, they get early relationships, and they form partnerships.” PERSON later told that player that CW-1 would purchase him a separate cell phone over which they could communicate so as to conceal the nature of the scheme.
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PERSON, 54, of Auburn, Alabama, pled guilty to one count of conspiracy to commit bribery. As a condition of his plea, PERSON agreed to forfeit $91,500. The charge carries a maximum term of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Sentencing is scheduled for July 9th, 2019, before Judge Preska.
Mr. Berman praised the work of the FBI and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
The case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Robert L. Boone, Aline R. Flodr, Noah Solowiejczyk, and Eli J. Mark are in charge of the prosecution.
California Man Charged in Manhattan Federal Court with Defrauding Thousands of Donors to Scam Political Action CommitteesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JOHN PIERRE DUPONT, a/k/a “John Gary Rinaldo,” was arrested this morning and charged with wire fraud and aggravated identity theft for his role in a years-long, nationwide scheme to defraud thousands of donors who believed they were donating to political action committees and political campaigns. The defendant is expected to be presented this afternoon in the District Court of Arizona.
U.S. Attorney Geoffrey S. Berman said: “As alleged, John Pierre Dupont operated multiple fake political action committees and falsely claimed to be raising money to support more than a dozen campaigns. Thousands of donors believed their hard-earned money was being used to support the causes described in solicitations, but in reality, the scam PACs had no operations beyond the fundraising itself, and no funds were used to support candidates. My Office will continue to ensure that fraudulent fundraising does not pay – indeed, will result in criminal prosecution – by rooting out scam PACs wherever we find them.”
According to the Complaint[1] unsealed today in Manhattan federal court:
From at least in or about 2015 up to and including the present, JOHN PIERRE DUPONT defrauded thousands of donors who believed they were donating to three political action committees established by DUPONT (the “Scam PACs”),[2] or to campaigns the Scam PACs falsely claimed to support. DUPONT’s scheme resulted in more than $250,000 being donated through websites he controlled and operated, all of which was retained by DUPONT, both to enrich himself personally and to perpetuate the alleged crime.
The websites purported to be raising money in support of Democratic congressional and senate campaigns generally, as well as approximately 10 particular Senate candidates, a candidate for governor, and a candidate for president. None of the money raised went either to those campaigns or to support those candidates whatsoever. Another website operated by DUPONT purported to be raising money “to unite immigrant families” and provide services in connection with certain immigration policies. In particular, the Foundation for Sanity in Politics PAC website claimed that donations would “go to help pay our volunteer attorneys’, doctors’, nurses’ and social workers’ costs and pay for transportation to unite immigrant families.” In fact, that PAC had no volunteers, and dedicated no funds to paying for doctors, social workers, or any other professionals, advocacy, or political operations.
The scheme targeted victims across the country, raising funds on the basis of fraudulent representations that the donations would support the relevant causes, candidates, and campaigns. Instead, virtually all of the money raised was paid to DUPONT or used to perpetuate the fraud through additional fundraising and overhead expenditures. None of the money donated to the Scam PACs was spent on political contributions during the relevant time period, and DUPONT failed to report the donations, as required, in filings with the Federal Election Commission.
Donations collected by DUPONT during the relevant period totaled more than $250,000, none of which went to campaigns or support for any candidate or cause.
* * *
JOHN PIERRE DUPONT, 80, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and aggravated identity theft, which carries a mandatory two years in prison consecutive to any other sentence imposed.
The statutory maximum and mandatory penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.
Mr. Berman praised the outstanding investigative work of the Special Agents of the United States Attorney’s Office for the Southern District of New York.
If you think you are a victim of the scheme alleged in this press release, please contact Wendy Olsen, Victim & Witness Services for the U.S. Attorney’s Office for the Southern District of New York, at 866-874-8900.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Alex Rossmiller and Ryan Finkel are in charge of the prosecution.
The charges contained in the Complaint are merely accusations. The defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint constitutes only allegations, and every fact described herein should be treated as an allegation.
[2] Businessmen for a Businessman President PAC, Foundation for Sanity in Politics PAC, and Democrats for Congress PAC.
U.S. Attorney Reaches Settlement with Developer, Builder, and Architect of Mount Kisco Condominium to Increase Accessibility for People with DisabilitiesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the United States has settled its federal Fair Housing Act (“FHA”) lawsuit against BEDFORD DEVELOPMENT LLC, CARNEGIE CONSTRUCTION CORP., JOBCO INC., ROBERT PASCUCCI, and WARSHAUER MELLUSI WARSHAUER ARCHITECTS, P.C. (collectively, “Defendants”). The settlement requires Defendants to pay up to $195,000 for retrofits at the Sutton Manor condominium in Mount Kisco, New York, in order to make the individual units and the common areas of the building more accessible to individuals with disabilities, and to pay $330,000 to compensate aggrieved persons and to reimburse attorneys’ fees. The resolution of this lawsuit was approved today by U.S. District Judge Kenneth M. Karas.
U.S. Attorney Geoffrey S. Berman said: “For almost 30 years, the Fair Housing Act has required newly built residential buildings to be accessible to people with disabilities, but some housing providers continue to disregard that requirement. The flouting of the accessibility requirements was particularly egregious here, where the condominium was specifically advertised to older New Yorkers. This Office will continue to use all legal tools available to enforce the Fair Housing Act and ensure that persons with disabilities have full access to residential buildings in this district.”
The Fair Housing Act’s accessible design and construction provisions require new multifamily housing complexes constructed after 1991 to have basic features accessible to persons with disabilities. According to the allegations in the complaint, Sutton Manor was designed and constructed by Defendants with numerous inaccessible features, including insufficiently wide door openings, lobby doors requiring excessive force to operate, excessively high thresholds at the entrances to the patios or balconies, insufficiently wide doors leading to patios or balconies in individual units, excessively high thresholds at the entrance to showers, and insufficiently clear floor space in the hallways and kitchens for maneuvering by persons who use wheelchairs.
Among the aggrieved persons who will be compensated through this settlement are Michael and Linda Tracey, Mark and Gloria Koller, and Ina Grober (“Intervenor-Plaintiffs”), who each purchased and moved into units at Sutton Manor in 2007, in part because certain of the Defendants advertised Sutton Manor as being accessible to persons with disabilities. The Intervenor-Plaintiffs initiated this action by filing an administrative complaint with the U.S. Department of Housing and Urban Development (“HUD”) and then, after HUD determined that there was reasonable cause to believe that the Fair Housing Act had been violated, electing to have HUD’s determination resolved in federal court. In these circumstances, the Fair Housing Act authorizes the Department of Justice to commence an action in the United States District Court on behalf of the complainants and assert other claims as warranted.
Other aggrieved persons may be entitled to monetary compensation from the fund created through today’s settlement. Aggrieved persons may include those who:
- Were discouraged from living at Sutton Manor because of the lack of accessible features;
- Have been hurt in any way by the lack of accessible features at Sutton Manor;
- Paid to have an apartment at Sutton Manor made more accessible to persons with disabilities; or
- Otherwise were discriminated against on the basis of disability at Sutton Manor as a result of the inaccessible design and construction of the properties.
Any individual who may be entitled to compensation can file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, emailing us at [email protected], or by sending a written claim to:
U.S. Attorney’s Office, Southern District of New York
86 Chambers Street, 3rd Floor
New York, New York 10007
Attention: Chief, Civil Rights Unit
Since 2010, the Office has filed nearly 30 lawsuits to enforce the FHA to combat racial, gender, and disability discrimination in housing, including in the areas of design and construction, sexual harassment, and fair lending.
Mr. Berman thanked HUD for its efforts in the investigation.
The case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorney Christine S. Poscablo is in charge of the case.
Fraudulent Political Action Committee Operator Sentenced to Two Years in PrisonRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that WILLIAM TIERNEY was sentenced to two years in prison for conspiring to defraud tens of thousands of victims of more than $1 million in connection with political action committees falsely purporting to support causes including autism awareness, law enforcement support, and the pro-life movement. TIERNEY was also ordered to pay more than $1.5 million in forfeiture and restitution to victims, as well as an additional $50,000 fine. TIERNEY pled guilty on November 2, 2018, before United States District Judge Jesse M. Furman, who also imposed the sentence.
U.S. Attorney Geoffrey S. Berman said: “The successful prosecution of William Tierney demonstrates the commitment of the federal government to rooting out fraud and corruption in political action committees. Today’s sentence sends a clear warning to anyone engaged in fraudulent political fundraising: Scam PACs are a crime and those perpetrating them will go to prison.”
According to the Information, other filings in Manhattan federal court, and evidence presented in court at sentencing:
TIERNEY defrauded tens of thousands of donors to six political action committees that he established, controlled, and operated. These scam PACs were fraudulent entities operated to enrich the defendant, targeting victims across the country to raise funds on the basis of false and misleading representations. The scam PACs purported to support voter education regarding – and the political campaigns of those who supported – various causes, including autism awareness, law enforcement, and pro-life causes, including through purported “coast to coast” education and advocacy campaigns, working with local groups and organizations, and “investing every penny . . . in the big races to come.” In truth, virtually all of the money raised was either paid to TIERNEY or used to perpetuate the fraud through additional telemarketing, fundraising, and overhead expenditures. Less than 1 percent of the money obtained by the scam PACs was contributed to candidates for office.
TIERNEY carried out the fraud through a web of shell pass-through entities utilized to conceal and disguise the scheme. Donated funds were transferred to these shell entities, which were given names that suggested activities related to marketing, consulting, and communications efforts, including for issue-specific causes. As a result, payments to the shell entities appeared to be for legitimate expenditures, including when publicly disclosed in Federal Election Commission (“FEC”) filings. In at least one instance, a website was created for one of the shell entities, falsely stating that the entity provided direct marketing and political consulting services to trade associations, candidate campaigns, political action committees, and nonprofit organizations. In fact, these and the other shell entities TIERNEY created had no active operations or employees, were retained by no outside “clients,” and served only to funnel and disguise financial transactions involving money donated to certain scam PACs.
To facilitate the fraud, TIERNEY used the false identity “Bill Johnson” when meeting and corresponding with certain vendors. Another fake identity, “Emma Smith,” was used in fundraising solicitations, and was described as a “Volunteer Coordinator” for one of the PACs. In fact, neither Emma Smith nor the position of “Volunteer Coordinator” actually existed. TIERNEY also undertook efforts to avoid press coverage of the scam PACs more generally, despite the scam PACs’ claims in solicitation materials of national advocacy and awareness campaigns.
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In addition to the prison term, Judge Furman ordered TIERNEY, 47, to pay restitution in the amount of $1,175,417.23, forfeiture in the amount of $410,649.18, and a fine in the amount of $50,000. TIERNEY was also sentenced to one year of supervised release.
TIERNEY pled guilty on November 2, 2018, to one count of conspiracy to commit wire fraud.
Mr. Berman praised the outstanding investigative work of the Special Agents of the United States Attorney’s Office for the Southern District of New York, and thanked the Federal Bureau of Investigation for its contributions to the investigation.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Alex Rossmiller and Alison Moe are in charge of the prosecution.
Two Charged in White Plains Federal Court for Visa Fraud Conspiracy Involving Moroccan Consulate and Mission in New YorkRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Christian J. Schurman, Director of the U.S. Department of State’s Diplomatic Security Service (“DSS”) at the United States Department of State, announced today the arrest of MARIA LUISA ESTRELLA JAIDI (“JAIDI”), who was charged by complaint along with her brother, RAMON SINGSON ESTRELLA (“ESTRELLA”), for their involvement in a conspiracy to commit visa fraud, make materially false statements, and induce aliens to illegally come to, enter, and reside in the United States. JAIDI was arrested today in Ancramdale, New York, and will be presented this afternoon in White Plains federal court before the U.S. Magistrate Judge Paul E. Davison. ESTRELLA remains at large.
U.S. Attorney Geoffrey S. Berman stated: “As alleged, the defendants abused our nation’s process for admitting consular officials in order to bring domestic workers into this country for their own monetary gain and lifestyle. On top of that, Maria Luisa Estrella Jaidi exploited these workers by not providing them the critical protections and benefits they would have been entitled to had they been properly brought to this country with the appropriate visas. Today’s charges demonstrate that fraud and abuse of this type will not be tolerated.”
DSS Director Christian J. Schurman said: “DSS demonstrated its commitment to protecting the integrity of U.S. travel documents and the rights of foreign nationals visiting the United States. We will continue to pursue those who abuse domestic worker visas to manipulate and exploit their employees for personal gain. DSS’s strong relationship with our law enforcement partners and the U.S. Attorney’s Office for the Southern District of New York, continues to be essential in the pursuit of justice.”
According to the allegations in the Complaint unsealed in White Plains federal court[1]:
From approximately 2006 up to 2016, JAIDI and ESTRELLA conspired with an individual not named as a defendant in the Complaint (“CC-1”) to fraudulently procure visas for at least seven Filipino domestic workers (the “Domestic Workers”). CC-1 is a diplomatic agent accredited to the Permanent Mission of the Kingdom of Morocco to the United Nations (the “Moroccan Mission”) with the rank of Ambassador. From approximately 1980 through approximately 2016, CC-1 and JAIDI were married.
In order to fraudulently obtain visas for the Domestic Workers, JAIDI and CC-1 caused the Domestic Workers to submit visa applications containing materially false statements and to submit fraudulent employment contracts in support of those visa applications. ESTRELLA – who is JAIDI’s brother and who resides in the Philippines – helped recruit several of the Domestic Workers in the Philippines to work for JAIDI and CC-1 in the United States and instructed the Domestic Workers to make false statements in their visa applications and to officials at the U.S. Embassy in Manila.
In particular, ESTRELLA, JAIDI, and CC-1 caused five of the Domestic Workers to falsely state in their visa applications that they would be employed as secretaries, administrative assistants, or technicians at the Moroccan Mission or at the Consulate General of the Kingdom of Morocco in Manhattan. In addition, ESTRELLA, JAIDI, and CC-1 caused each of the Domestic Workers to submit fraudulent employment contracts to the State Department in support of their visa applications. The fraudulent employment contracts also overstated the Domestic Workers’ salaries, understated their hours, and falsely guaranteed benefits, including, among others, sick leave, dental insurance, and medical insurance.
Once the Domestic Workers arrived in the United States, JAIDI and CC-1 employed the workers as their personal drivers, domestic helpers, farmhands, and assistants at their residence in Bronxville, New York, as well as at their farm in Ancramdale, New York. JAIDI and CC-1 paid the Domestic Workers significantly less than the minimum salary required by law and regularly compelled them to work far in excess of 40 hours per week. In addition, JAIDI and CC-1 generally denied the Domestic Workers the benefits set forth in their employment contracts, compelled the Domestic Workers to work seven days a week, and required the Domestic Workers to surrender their passports.
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JAIDI, 60, of Bronxville, New York, and ESTRELLA 55, of Manila, Philippines, are each charged with one count of conspiracy to commit visa fraud and make materially false statements, which carries a maximum sentence of five years, and one count of conspiracy to induce aliens to illegally come to, enter, and reside in the United States, 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 defendants will be determined by the judge.
Mr. Berman praised the outstanding work of the DSS Criminal Fraud Investigations Branch, the DSS Saint Albans Resident Office, the DSS New York Field Office, Homeland Security Investigations, the U.S. Department of Labor’s Wage and Hour Division from the Albany District Office, the Yonkers Police Department, and the New York State Police. In addition, Mr. Berman thanked the U.S. Attorney’s Office in the Northern District of New York, the Community Development Project at the Urban Justice Center, and the Human Trafficking Program at the Worker Justice Center of New York for their assistance in this investigation.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Sam Adelsberg and Gillian Grossman are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the descriptions of the Complaint constitute only allegations, and every fact described should be treated as an allegation.
Five Members of Violent Bronx Gang Charged in Connection with Shooting of Off-Duty NYPD OfficerRead 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 New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging five members and associates of the “Jack Boyz” street gang with racketeering and firearm offenses in connection with the shooting of an off-duty NYPD officer. PATRICK AVILA, a/k/a “Pat,” JALEN COLDS, a/k/a “Jay Gunz,” NAZAE BLANCHE, a/k/a “Zae,” and DONNELL JENKINS, a/k/a “Nellz,” were taken into custody this morning and will be presented before U.S. Magistrate Judge Gabriel W. Gorenstein later today. LEON SMALLS, a/k/a “Smoove,” remains at large. The case is assigned to U.S. District Judge Valerie E. Caproni.
U.S. Attorney Geoffrey S. Berman said: “As alleged in the indictment, this gang committed a brazen act of violence, and one of New York City’s finest was struck by their gunfire. Thanks to the extraordinary work of the NYPD, these defendants will now face justice in federal court.”
NYPD Commissioner James P. O’Neill said: “When an off-duty cop was driving home from work in October, he was struck in the chest during a gang-related shooting. This further highlighted our efforts to precisely investigate and rid from New York City streets such brazen criminals. We stand with our local, state and federal law enforcement partners ready to identify and bring to justice drug dealers and gang members who are at the root of crime and violence in our city. With these arrests, we continue to make significant progress in our work to make the streets of New York safer for everyone.”
As alleged in the Indictment unsealed today in Manhattan federal court[1]:
The Jack Boyz are a criminal enterprise involved in committing numerous acts of violence, including shootings, in and around the Bronx. Members and associates of the Jack Boyz engage in violence to retaliate against rival gangs, to promote the standing and reputation of the Jack Boyz, and to protect the gang’s narcotics business. Members and associates of the Jack Boyz enrich themselves by committing robberies and selling drugs.
On October 30, 2018, AVILA, COLDS, BLANCHE, JENKINS, and SMALLS shot at gang rivals in the vicinity of East 137th Street and Brown Place. During the course of that shooting, an off-duty NYPD officer was struck in the chest.
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A chart containing the names, charges, and maximum penalties for the defendants are set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the NYPD.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Karin Portlock and Michael Longyear are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
COUNT
CHARGE
DEFENDANTS
AGES
MAX. SENTENCE
1
Attempted murder in aid of racketeering
18 U.S.C. § 1959
PATRICK AVILA
JALEN COLDS
NAZAE BLANCHE
DONNELL JENKINS
LEON SMALLS
19
19
19
19
23
20 years in prison
2
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence, which firearm was discharged
18 U.S.C. § 924(c)
PATRICK AVILA
JALEN COLDS
NAZAE BLANCHE
DONNELL JENKINS
LEON SMALLS
Life in prison
Mandatory minimum of 10 years in prison
[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.
Bronx Man Charged with MurderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, 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 unsealing of a federal indictment charging JAMAL BRISSETT, a/k/a “Trigger” with murdering Leshaun Gordon, 19, in the Bronx, New York, on June 30, 2009. BRISSETT was arrested yesterday and is expected to be presented before Chief U.S. Magistrate Judge Gabriel W. Gorenstein in federal court later today.
U.S. Attorney Geoffrey Berman said: “As alleged, Jamal Brissett killed 19-year-old Leshaun Gordon during a drug deal. Ten years may have passed, but we have not forgotten. Thanks to the determination of our partners at HSI and the NYPD, Brissett must now answer for his alleged crimes.”
HSI Special Agent in Charge Angel M. Melendez said: “In a scheme for revenge, Brissett is alleged to have robbed and shot a man, then later set the car on fire to cover up the crime. Nearly ten years ago a man was slain on the streets of New York City, but the crime was not forgotten. No matter how long it takes or how cold the case, HSI and its law enforcement partners will not stop pursuing perpetrators who threaten the safety of this great city.”
Police Commissioner James P. O’Neill said: “The ability of investigators to achieve justice for this young man and provide a sense of closure to his family is paramount. The identification and arrest of the suspect in this case was a team effort that resulted from the close partnership that exists between the NYPD and our law-enforcement partners. I thank and commend the Southern District of New York, and the investigators of HSI and the NYPD whose hard work in the case demonstrate that our efforts remain determined, and precisely-focused.”
According to the allegations in the Indictment unsealed in Manhattan federal court[1]:
On or about June 30, 2009, BRISSETT shot and killed Gordon in the course of a drug-trafficking crime and a robbery in the vicinity of Mickle Avenue and Chester Street in the Bronx, New York. BRISSETT then caused the car where the murder occurred to be set on fire in order to destroy evidence of his crime.
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BRISSETT, 30, of the Bronx, New York, is charged with one count of using a firearm to commit murder during a crime of violence and a drug-trafficking crime, which carries a maximum penalty of death or life imprisonment, and one count of using arson to obstruct justice, which carries a maximum penalty of 20 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 HSI and the NYPD.
The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Hagan Scotten and Danielle Sassoon are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless proved guilty.
[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.
Prolific Dark Web Dealer of Carfentanil and Fentanyl ArrestedRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced today that RICHARD CASTRO, a/k/a “Chemsusa,” a/k/a “Chems_usa,” a/k/a “Chemical_usa,” and LUIS FERNANDEZ, have been charged with participating in a conspiracy to distribute carfentanil, fentanyl, and a fentanyl analogue over the “dark web,” including on AlphaBay and Dream Market. Fentanyl is a synthetic opioid that is significantly stronger than heroin, and carfentanil is a fentanyl analogue that is approximately 100 times stronger than fentanyl. CASTRO was arrested this morning in Windermere, Florida, and appeared before Magistrate Judge Leslie Hoffman in Orlando. FERNANDEZ was arrested this morning in the Bronx, New York, and is expected to be presented today before Chief U.S. Magistrate Judge Gabriel W. Gorenstein.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Fentanyl is a chief culprit in the opioid crisis and carfentanil is 100 times stronger than fentanyl. Carfentanil is intended to be a tranquilizer for large animals. These were two of the terrifying drugs that Richard Castro and Luis Fernandez allegedly distributed in large quantities, including over the dark web, where they thought they could hide. I want to thank our partners at the FBI, USPIS, and NYPD for bringing this dark web conspiracy to light.”
FBI Assistant Director William F. Sweeney Jr. said: “Carfentanil is 10,000 more times potent than morphine. Nothing that dangerous and potentially lethal should be in the hands of users who don’t know what they’re taking, and don’t realize how quickly it can kill someone. The FBI New York and our law enforcement partners use sophisticated methods to seek out these secret and well-hidden operations, to stop the deadly epidemic sweeping through our communities and country right now.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “The defendants allegedly thought they could use the mail to distribute deadly narcotics, specifically carfentanil and fentanyl, for their own profit, without concern for the communities they destroy. Their customers allegedly placed orders on the Dark Web, and encrypted email. As alleged, the defendants were counting on the anonymity of the Dark Web to conceal their crimes. Despite their best attempts at hiding their crimes, today they learned the price for using the mail to ship drugs – JUSTICE and possibly JAIL.”
NYPD Commissioner James P. O’Neill said: “As long as individuals – wherever they operate – are involved in narcotics trafficking, the NYPD and our partners will relentlessly work to stop the threat to public safety. Anyone who deals in illegal opioids should understand that the nation’s best investigators will stop at nothing to keep our community safe. I commend our colleagues at the Southern District of New York, and the investigators of the New York Office of the U.S. Postal Inspection Service, and the Joint Organized Crime Task Force for their work in this investigation.”
According to the allegations contained in the Complaint[1] charging RICHARD CASTRO and LUIS FERNANDEZ:
From at least in or about November 2015 through the present, CASTRO and FERNANDEZ conspired to distribute carfentanil, fentanyl, and phenyl fentanyl (an analogue of fentanyl). For most of this period, the conspiracy dealt drugs over the dark web, using the monikers “Chemsusa,” “Chems_usa,” and “Chemical_usa.” CASTRO was an operator of these online monikers and was paid in bitcoin. On one dark web marketplace, Dream Market, “Chemsusa” boasted that it had completed more than 3200 transactions on other dark web markets, including more than 1,800 on AlphaBay. The customer feedback for “Chemsusa” included, “Extremely potent and definitely the real Carf,” as well as “The Carfent is unbelievably well synthesized, keep up the amazing work.”
In June 2018, “Chems_usa” informed its customers that it was moving its business off dark net marketplaces and would accept purchase requests for narcotics only via encrypted email. To learn the off-market email address, “Chems_usa” required willing customers to pay a fee. An undercover law enforcement officer paid this fee, obtained the encrypted email address, and placed orders with CASTRO. CASTRO’s co-conspirator, FERNANDEZ, shipped narcotics on behalf of the conspiracy, including from New York City. From November 2018 to the present, at least 94 packages have been linked to this conspiracy; several of them have tested positive for carfentanil or fentanyl. All of these packages were shipped using USPS Priority Mail envelopes, and for most of them, the sender’s purported return address was a law office or a governmental entity.
CASTRO also laundered his narcotics proceeds, including by funneling more than approximately $1.77 million through bitcoin wallets of his, and by buying approximately 100 quadrillion Zimbabwe bank notes, among other valuables, which were shipped to his residence.
* * *
RICHARD CASTRO, 36, of Windermere, Florida, and LUIS FERNANDEZ, 41, of the Bronx, New York, are each charged with one count of conspiracy to distribute and possess with the intent to distribute three controlled substances – carfentanil, phenyl fentanyl, and fentanyl – as well as one count of distributing these controlled substances via the Internet. Each of these counts carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. CASTRO is also charged with one count of laundering narcotics proceeds, which carries a maximum sentence of 20 years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the FBI, USPIS, and NYPD for their outstanding work on the investigation. Mr. Berman also thanked the Internal Revenue Service and the Orange County, Florida Sheriff’s Office for their assistance in this investigation. He added that the investigation is continuing.
This matter is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Michael D. Neff, Aline R. Flodr, and Ryan B. Finkel are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Georgia Woman Arrested for Conspiring to Provide Material Support to ISISRead the Press Release
Kim Anh Vo, a.k.a. “F@ng,” a.k.a. “SyxxZMC,” a.k.a. “Zozo,” a.k.a. “Miss.Bones,” a.k.a. “Sage Pi,” a.k.a. “Kitty Lee,” was arrested this morning in Hephzibah, Georgia. Vo was charged by a criminal Complaint with conspiring to provide material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization. Vo is expected to be presented later today before Magistrate Judge Brian K. Epps in Augusta, Georgia, federal court.
Assistant Attorney General John C. Demers for National Security, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Assistant Director-in-Charge William F. Sweeney Jr. of the FBI New York Field Office and Commissioner James P. O’Neill of the Police Department for the City of New York (NYPD) made the announcement.
As alleged in the criminal Complaint, unsealed today:
In April 2016, Vo joined the United Cyber Caliphate (UCC), an online group that pledged allegiance to ISIS and committed to carrying out online attacks and cyber intrusions against Americans. Since that time, the UCC and its sub-groups have disseminated ISIS propaganda online, including “kill lists,” which listed the names of individuals – for example, soldiers in the United States Armed Forces and members of the State Department – whom the group instructed their followers to kill. For example, on or about April 21, 2016, the UCC posted online the names, addresses, and other personal identifying information of approximately 3,602 individuals in the New York City area and included a message that stated: “List of most important citizens of #New York and #Brooklyn and some other cities . . . We Want them #Dead.”
Between April 2016 and May 2017, Vo worked on behalf of the UCC to recruit others to join the group and assist with the group’s hacking efforts. Between January and February 2017, Vo recruited other individuals – including a minor residing in Norway – to create online content in support of ISIS, including a video (Video-1) threating a non-profit organization based in New York, New York, which was formed to find and combat the online promotion of extremist ideologies. Video-1 contained messages such as, “You messed with the Islamic State, SO EXPECT US SOON,” followed by a scene displaying a photograph of the organization’s chief executive officer and former U.S. Ambassador (CEO), along with the words: “[CEO], we will get you.”
On or about April 2, 2017, the UCC posted online a kill list containing the names and personal identifying information of over 8,000 individuals, along with a links to another video (Video-2). Video-2 displayed messages stating, in part: “We have a message to the people of the U.S., and most importantly, your president Trump: Know that we continue to wage war against you, know that your counter attacks only makes stronger. The UCC will start a new step in this war against you. . . .” and “We will release a list with over 8000 names, addresses, and email addresses, of those who fight against the US. Or live amongst the kuffar. Kill them wherever you find them!” In subsequent scenes, Video-2 contains what appears to be a graphic depiction of the decapitation of a kneeling man.
* * *
Vo, 20, of Georgia, is charged with one count of conspiring to provide material support to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Demers and Mr. Berman praised the outstanding efforts of the FBI New York Field Office, New York Joint Terrorism Task Force, and Atlanta Field Office’s Augusta Resident Agency. Mr. Demers and Mr. Berman also thanked the United States Attorney’s Office for the Southern District of Georgia.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Shawn G. Crowley, Sidhardha Kamaraju, and Jane Kim are in charge of the prosecution, with assistance from Trial Attorney Elisabeth Poteat of the Counterterrorism Section.
The charges contained in the Complaint are merely
Georgia Woman Arrested for Conspiring to Provide Material Support to IsisRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John C. Demers, the Assistant Attorney General for National Security, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that KIM ANH VO, a/k/a “F@ng,” a/k/a “SyxxZMC,” a/k/a “Zozo,” a/k/a “Miss.Bones,” a/k/a “Sage Pi,” a/k/a “Kitty Lee,” was arrested this morning in Hephzibah, Georgia. VO was charged by a criminal Complaint with conspiring to provide material support to the Islamic State of Iraq and al-Sham (“ISIS” or the “Islamic State”), a designated foreign terrorist organization. VO is expected to be presented later today before Magistrate Judge Brian K. Epps in Augusta, Georgia, federal court.
As alleged in the criminal Complaint,[1] unsealed today:
In April 2016, VO joined the United Cyber Caliphate (the “UCC”), an online group that pledged allegiance to ISIS and committed to carrying out online attacks and cyber intrusions against Americans. Since that time, the UCC and its sub-groups have disseminated ISIS propaganda online, including “kill lists,” which listed the names of individuals – for example, soldiers in the United States Armed Forces and members of the State Department – whom the group instructed their followers to kill. For example, on or about April 21, 2016, the UCC posted online the names, addresses, and other personal identifying information of approximately 3,602 individuals in the New York City area and included a message that stated: “List of most important citizens of #New York and #Brooklyn and some other cities . . . We Want them #Dead.”
Between April 2016 and May 2017, VO worked on behalf of the UCC to recruit others to join the group and assist with the group’s hacking efforts. Between January and February 2017, VO recruited other individuals – including a minor residing in Norway – to create online content in support of ISIS, including a video (“Video-1”) threating a non-profit organization based in New York, New York, which was formed to find and combat the online promotion of extremist ideologies. Video-1 contained messages such as, “You messed with the Islamic State, SO EXPECT US SOON,” followed by a scene displaying a photograph of the organization’s chief executive officer and former U.S. Ambassador (the “CEO”), along with the words: “[CEO], we will get you.”
On or about April 2, 2017, the UCC posted online a kill list containing the names and personal identifying information of over 8,000 individuals, along with links to another video (“Video-2”). Video-2 displayed messages stating, in part: “We have a message to the people of the U.S., and most importantly, your president Trump: Know that we continue to wage war against you, know that your counter attacks only makes stronger. The UCC will start a new step in this war against you. . . .” and “We will release a list with over 8000 names, addresses, and email addresses, of those who fight against the US. Or live amongst the kuffar. Kill them wherever you find them!” In subsequent scenes, Video-2 contains what appears to be a graphic depiction of the decapitation of a kneeling man.
* * *
VO, 20, of Georgia, is charged with one count of conspiring to provide material support to a designated foreign terrorist organization, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Berman praised the outstanding efforts of the FBI New York Field Office, New York Joint Terrorism Task Force, and Atlanta Field Office’s Augusta Resident Agency. Mr. Berman also thanked the United States Attorney’s Office for the Southern District of Georgia and the Counterterrorism Section of the Department of Justice’s National Security Division.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Shawn G. Crowley, Sidhardha Kamaraju, and Jane Kim are in charge of the prosecution, with assistance from Trial Attorney Elisabeth Poteat of the Counterterrorism Section.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below are only allegations, and every fact described should be treated as an allegation.
Former KPMG Executive and Former PCAOB Employee Convicted of Wire Fraud for Scheme to Steal and Use Confidential PCAOB InformationRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID MIDDENDORF, who was the National Managing Partner for audit quality at the accounting firm KPMG LLP (“KPMG”), and JEFFREY WADA a former employee of the Public Company Accounting Oversight Board (the “PCAOB”), were convicted of wire fraud charges in connection with their scheme to defraud the PCAOB by obtaining, disseminating, and using confidential lists of which KPMG audits the PCAOB would be reviewing so that KPMG could improve its performance in PCAOB inspections.
U.S. Attorney Geoffrey S. Berman said: “As this trial revealed, David Middendorf and Jeffrey Wada were two links in a chain of corruption, where confidential PCAOB inspection information was taken at the behest of high-level executives at KPMG so they could cheat on inspections. This confidential information was critical to the PCAOB and its core mission of ensuring audit quality. As a unanimous jury found, the actions of Middendorf and Wada defrauded the PCAOB.”
According to the evidence presented during the trial:
The PCAOB is a nonprofit corporation overseen by the SEC that inspects the audit work performed by registered accounting firms (“Auditors”) with respect to the financial statements of publicly traded companies (“Issuers”). The PCAOB inspects the largest U.S. accounting firms on an annual basis. As part of the inspection process, the PCAOB chooses a selection of audits performed by the accounting firm for a closer review, commonly referred to as an inspection. Until shortly before an inspection occurs, the PCAOB does not disclose which audits are being inspected, or the focus areas for those inspections, because it wants to ensure that an Auditor does not perform additional work or modify its work papers in anticipation of an inspection. Following the completion of an inspection, the PCAOB issues an Inspection Report containing any negative findings or “comments” with respect to both the specific audits reviewed and the accounting firm more generally.
KPMG is one of the largest accounting firms in the world. In recent years, KPMG fared poorly in PCAOB inspections, and in 2014 received approximately twice as many comments as its competitor firms. By at least in or about 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel. At the time, MIDDENDORF was head of KPMG’s National Office, also known as the Department of Professional Practice (the “DPP”), which was broadly responsible for the quality of KPMG’s audits and KPMG’s performance in PCAOB inspections.
KPMG’s efforts to improve inspection results, however, were not limited to legitimate means. Instead, between 2015 and 2017, MIDDENDORF and others worked illicitly to acquire valuable confidential PCAOB information concerning which KPMG audits would be inspected in an effort to game the system and improve inspection results. For example, beginning in 2015, Brian Sweet, a former PCAOB employee who had joined KPMG, provided MIDDENDORF, Thomas Whittle, and others with the PCAOB’s confidential 2015 list of inspection selections, at MIDDENDORF’s request, so that the information could be used by MIDDENDORF, Whittle, and others, to improve KPMG’s performance on PCAOB inspections.
WADA was an Inspections Leader at the PCAOB, who was obligated to keep confidential the PCAOB’s nonpublic information. WADA joined the conspiracy in the fall of 2015 and began passing confidential information to KPMG. In March 2016, WADA provided Cynthia Holder, a KPMG employee, with confidential information on certain of the PCAOB’s 2016 inspection selections. Holder, in turn, provided the 2016 inspection selections to Sweet, who passed them to MIDDENDORF, Whittle, and others. MIDDENDORF, Whittle, Sweet, and others then agreed to launch a stealth program to “re-review” the audits that had been selected, and agreed to keep their stealth re-reviews within their “circle of trust.” In order to cover up their illicit conduct, other KPMG engagement partners were given a false explanation for the re-reviews. The stealth re-review program allowed KPMG to strengthen its work papers.
In January 2017, WADA, who had been passed over for promotion at the PCAOB, again stole valuable confidential PCAOB information, misappropriating a preliminary list of confidential 2017 inspection selections for KPMG audits and passing it on to Holder, referring to it in a voicemail as the “grocery list.” At the same time, WADA provided Holder with his resume and sought her assistance in helping him to acquire employment at KPMG. Sweet internally shared the preliminary inspection selections provided by WADA with Whittle, another co-conspirator, who in turn shared it with MIDDENDORF, who approved its use to improve the audits on the list.
In February 2017, WADA texted Holder saying, “I have the grocery list. . . . All the things you’ll need for the year.” WADA then spoke to Holder and provided her with the full confidential 2017 final inspection selections. Holder again shared the stolen information with Sweet, who shared it with MIDDENDORF, Whittle, and others, so that it could be acted upon to improve the audits on the list.
In 2017, a KPMG partner learned from Sweet that one of her audits was on the PCAOB inspection list, and she reported the matter to her supervisor. The matter was then ultimately reported to KPMG’s Office of General Counsel.
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MIDDENDORF, 54, was convicted of one count of conspiracy to commit wire fraud (Count Two) and three counts of wire fraud (Counts Three, Four, and Five). WADA, 43, was convicted of one count of conspiracy to commit wire fraud (Count Two) and two counts of wire fraud (Counts Four and Five). The conspiracy to commit wire fraud and wire fraud charges each carry a maximum prison term of 20 years. MIDDENDORF and WADA were each acquitted of one count of conspiracy to defraud the United States (Count One).
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Berman praised the outstanding investigative work of the United States Postal Inspection Service and also thanked the Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein, Amanda Kramer, and Jordan Estes are in charge of the prosecution.
Driver of Ridesharing Service Pleads Guilty in White Plains Federal Court to Kidnapping A RiderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that HARBIR PARMAR pled guilty in White Plains federal court to kidnapping and wire fraud. PARMAR was arrested on October 16, 2018, and pled guilty today before U.S. District Judge Vincent L. Briccetti.
U.S. Attorney Geoffrey S. Berman said: “Last year, Harbir Parmar took advantage of a vulnerable woman who utilized a ridesharing service by kidnapping and terrorizing her. In addition, he charged many of his ridesharing customers with fraudulent fees. Today, he admitted his guilt in open court, and will now be held accountable for his brazen crimes.”
According to the Indictment and statements made during today’s plea proceedings:
On February 21, 2018, PARMAR, who worked as a driver for a ridesharing company (“Company-1”), picked up an individual (“Victim-1”) in Manhattan, New York, who sought to be driven to White Plains, New York. After Victim-1 fell asleep in the backseat of the vehicle, PARMAR changed Victim-1’s destination in Company-1’s mobile application to an address in Boston, Massachusetts, and proceeded to drive toward that location. When Victim-1 awoke, the vehicle was in Connecticut. Victim-1 requested that she be taken to White Plains or to the police station, but PARMAR refused. PARMAR instead dropped Victim-1 off on the side of I-95 in Branford, Connecticut. Victim-1 went to a nearby convenience store where she sought assistance.
In addition, from December 2016 through February 2018, PARMAR sent false information about the destinations of Company-1’s customers through Company-1’s mobile application on several occasions. At times, he also sent false information about the application of a cleaning fee to be applied to the accounts of Company-1’s customers. In these instances, customers of Company-1 filed complaints with Company-1 about being overcharged for their rides. These instances have resulted in thousands of dollars in improper charges to the accounts of Company-1’s customers.
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PARMAR, 25, of Howard Beach, New York, pled guilty to one count of kidnapping, which carries a maximum sentence of life in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
PARMAR is scheduled to be sentenced by United States District Judge Vincent L. Briccetti Honorable Vincent L. Briccetti on June 24, 2019.
Mr. Berman praised the outstanding investigative work of FBI’s Westchester County Safe Streets Task Force, which comprises investigators from the FBI, U.S. Probation Office, New York State police, Westchester County Department of Public Safety, Westchester County District Attorney’s Office, the New York City Police Department, Yonkers Police Department, Greenburgh Police Department, Mount Vernon Police Department, and the Peekskill Police Department.
The case is being handled by the Office’s White Plains Division. Assistant United States Attorney Jamie Bagliebter is in charge of the prosecution.
Venezuelan Minister and Former Vice President Tareck Zaidan El Aissami Maddah Charged with Violations of the Foreign Narcotics Kingpin Designation ActRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent in Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today that former Venezuelan Vice President TARECK ZAIDAN EL AISSAMI MADDAH (“EL AISSAMI”) and Venezuelan businessman SAMARK JOSE LOPEZ BELLO were charged in Manhattan federal court with criminal violations of the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”) and sanctions imposed in February 2017 by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) pursuant to the Kingpin Act. Related charges under the Kingpin Act were also filed against VICTOR MONES CORO, ALEJANDRO MIGUEL LEON MAAL, MICHOLS ORSINI QUINTERO, and ALEJANDRO ANTONIO QUINTAVALLE YRADY. The case is assigned to U.S. District Judge Alvin K. Hellerstein. MONES CORO and ORSINI QUINTERO were arrested this morning in Florida. MONES CORO appeared this morning before a United States Magistrate Judge in West Palm Beach, and ORSINI QUINTERO appeared this morning before a United States Magistrate Judge in Fort Lauderdale.
Manhattan U.S. Attorney Geoffrey S. Berman said: “International sanctions restrain the activities of individuals and countries deemed to have policies and practices incompatible with the U.S. from receiving the full benefit of economic, political, humanitarian, and other support the U.S. provides globally. Former Venezuelan Vice President Tareck Zaidan El Aissami Maddah allegedly evaded the sanctions imposed by OFAC by employing U.S. companies to provide international transport via private jet. The enforcement of these sanctions is critical to the national security interests of the U.S., and I commend our law enforcement partners for their vigilance and assistance in bringing today’s charges.”
Special Agent in Charge Melendez said: “Tareck Zaidan El Aissami Maddah has held key positions in the Government of Venezuela, including that of former Vice President and current Minister of Industry and National Production. He has used his position of power to engage in international drug trafficking, earning him the designation of Specially Designated Narcotics Trafficker, along with his business partner Samark Lopez Bello. It is alleged that those arrested today, looking to fill their pockets with dirty money, aided El Aissami and Lopez Bello in circumventing sanctions and violating the Kingpin Act, an OFAC designation targeting those who pose a threat to the national security, foreign policy, and economy of the United States. El Aissami and Lopez Bello allegedly used private jets to set up private meetings around the globe including Turkey and Russia. It is necessary to impose sanctions against foreign persons seeking to gain power and control by circumventing the law, and today’s indictments reflect HSI New York’s El Dorado Task Force resolve in holding those willing to violate such sanctions accountable. Both El Aissami and Lopez Bello will have to think twice before leaving Venezuela, as they are wanted to face justice here in New York.”
As alleged in the Indictment and Superseding Indictments unsealed in federal court:[1]
EL AISSAMI became the Vice President of Venezuela in approximately January 2017. In February 2017, OFAC designated EL AISSAMI and LOPEZ BELLO as Specially Designated Narcotics Traffickers pursuant to the Kingpin Act and related regulations. As a result of OFAC’s designations, U.S. persons are generally prohibited from, among other things, engaging in transactions with or providing services to EL AISSAMI and LOPEZ BELLO absent authorization from OFAC. EL AISSAMI and LOPEZ BELLO nevertheless worked with, among others, U.S. citizens MONES CORO and LEON MAAL, as well as ORSINI QUINTERO and QUINTAVALLE YRADY, who held U.S. visas at the time of the crimes, in an effort to violate and evade OFAC’s sanctions by obtaining travel services, including private jet charters for EL AISSAMI, LOPEZ BELLO, and their relatives and associates. EL AISSAMI and LOPEZ BELLO paid for these services at times through intermediaries who delivered bulk cash in Venezuela.
EL AISSAMI, LOPEZ BELLO, MONES CORO, and LEON MAAL used American Charter Services LLC and its affiliates, all U.S. companies, in connection with the transportation services provided to EL AISSAMI and LOPEZ BELLO in violation of the Kingpin Act and the OFAC sanctions. For example, in September 2018, MONES CORO used an American Charter Services account in the United States to pay expenses for an upcoming private flight by LOPEZ BELLO. EL AISSAMI, LOPEZ BELLO, MONES CORO, and LEON MAAL also used SVMI Solution, LLC, another U.S. company, to receive payments for transportation services provided to EL AISSAMI and LOPEZ BELLO in violation of the Kingpin Act and the OFAC sanctions, such as a July 2018 funds transfer sent from Manhattan, New York to an SVMI Solution account in Florida. Earlier this year, LEON MAAL helped EL AISSAMI charter a private flight from Vnukovo International Airport in Russia to Simón Bolívar International Airport in Venezuela on February 23, 2019.
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EL AISSAMI, 44, of Venezuela, LOPEZ BELLO, 44, of Venezuela, MONES CORO, 51, of Florida, and LEON MAAL, 41, of Florida, are each charged in five counts: (1) conspiring to use American Charter Services LLC and SVMI Solution, LLC to engage in transactions prohibited by the Kingpin Act and related regulations, and to evade sanctions imposed by OFAC pursuant to the Kingpin Act and related regulations, (2) using American Charter Services LLC to engage in transactions prohibited by the Kingpin Act and related regulations, (3) using American Charter Services LLC to evade and attempt to evade sanctions imposed by OFAC pursuant to the Kingpin Act and related regulations, (4) using SVMI Solution, LLC to engage in transactions prohibited by the Kingpin Act and related regulations, and (5) using SVMI Solution, LLC to evade and attempt to evade sanctions imposed by OFAC pursuant to the Kingpin Act and related regulations. If convicted, each of the five counts carries a maximum penalty of 30 years in prison, for a total maximum of 150 years in prison on all accounts faced by EL AISSAMI, LOPEZ BELLO, MONES CORO, and LEON MAAL.
ORSINI QUINTERO, 42, of Florida, and QUINTAVALLE YRADY, 36, of Panama, are each charged with one count of conspiring to use American Charter Services LLC and SVMI Solution, LLC to engage in transactions prohibited by the Kingpin Act and related regulations, and to evade sanctions imposed by OFAC pursuant to the Kingpin Act and related regulations. If convicted, this count carries a maximum penalty of 30 years in prison.
Mr. Berman praised the outstanding efforts of U.S. Customs and Border Protection, the DEA’s Special Operations Division Bilateral Investigations Unit, the DEA’s Miami Field Division, and the U.S. Attorney’s Office for the Southern District of Florida. Mr. Berman also thanked the Counterintelligence and Export Control Section of the Department of Justice’s National Security Division, and OFAC.
This case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Emil J. Bove III and Amanda L. Houle are in charge of the prosecution.
The charges contained in the Indictment and Superseding Indictments are merely allegations, and the defendants are presumed innocent unless and until proven guilty. The potential maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
[1] As the introductory phrase signifies, the entirety of the text of the Indictments and the description of the Indictments set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Manhattan U.S. Attorney Announces Charges Against Leaders of “OneCoin,” A Multibillion-Dollar Pyramid Scheme Involving the Sale of A Fraudulent CryptocurrencyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Cyrus R. Vance Jr., the District Attorney for the County of New York, John R. Tafur, the Special Agent in Charge of the Newark Field Office of the Internal Revenue Service-Criminal Investigation (“IRS-CI”), William F. Sweeney Jr., and the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that KONSTANTIN IGNATOV was arrested March 6, 2019, at the Los Angeles International Airport, on a wire fraud conspiracy charge stemming from his role as the leader of an international pyramid scheme that involved the marketing of a fraudulent cryptocurrency called “OneCoin.” An Indictment charging IGNATOV’s sister, RUJA IGNATOVA – a founder and original leader of OneCoin – with wire fraud, securities fraud, and money laundering offenses was unsealed yesterday. As a result of misrepresentations that IGNATOV, IGNATOVA, and others made about OneCoin, victims invested billions of dollars worldwide in the fraudulent cryptocurrency. Following his arrest, IGNATOV appeared in Magistrate Court in the Central District of California, and was detained on the charge contained in the Complaint.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, these defendants created a multibillion-dollar ‘cryptocurrency’ company based completely on lies and deceit. They promised big returns and minimal risk, but, as alleged, this business was a pyramid scheme based on smoke and mirrors more than zeroes and ones. Investors were victimized while the defendants got rich. Our Office has a history of successfully targeting, arresting, and convicting financial fraudsters, and this case is no different.”
New York County District Attorney Cyrus R. Vance Jr., said: “As alleged in the indictment, these defendants executed an old-school pyramid scheme on a new-school platform, compromising the integrity of New York’s financial system and defrauding investors out of billions. Our Office urges all crypto investors to scrutinize investment opportunities, recognize the prevalence of fraud in this underregulated space, and proceed with caution. I commend U.S. Attorney Berman and my Office’s Major Economic Crimes Bureau for their globe-spanning investigative work and shared commitment to protecting our markets from sophisticated white-collar fraudsters.”
IRS Special Agent in Charge John R. Tafur said: “This is an old scam with a virtual twist. As alleged in court documents, the cryptocurrency OneCoin was established for the sole purpose of defrauding investors. IGNATOV and IGNATOVA allegedly convinced victims to invest in OneCoin based on complete lies about the virtual currency. IRS Criminal Investigation is committed to investigating cryptocurrency scams in an effort to protect the American public and bring cryptocurrency crooks to justice.”
FBI Assistant Director-in-Charge William Sweeney Jr. said: “As we allege, OneCoin was a cryptocurrency existing only in the minds of its creators and their co-conspirators. Unlike authentic cryptocurrencies, which maintain records of their investors’ transaction history, OneCoin had no real value. It offered investors no method of tracing their money, and it could not be used to purchase anything. In fact, the only ones who stood to benefit from its existence were its founders and co-conspirators. Whether you’re dealing with virtual currency or cold, hard cash, we urge the public to exercise due diligence with any investment.”
According to the allegations contained in the Complaint charging KONSTANTIN IGNATOV and the Indictment charging RUJA IGNATOVA, and in other court papers, and other documents in the public record:[1]
IGNATOV currently serves as the top leader of OneCoin Ltd., a company marketing a purported cryptocurrency named “OneCoin,” which the investigation has revealed is in fact a fraudulent pyramid scheme. OneCoin Ltd. was co-founded in 2014 by IGNATOVA, and is based in Sofia, Bulgaria. IGNATOVA served as OneCoin’s top leader until her disappearance from public view, in October 2017. Starting in late 2017, IGNATOV, who is IGNATOVA’s younger brother, assumed high-level positions at OneCoin, rising to the top leadership position by mid-2018.
OneCoin Ltd. operates as a multi-level marketing network through which members receive commissions for recruiting others to purchase cryptocurrency packages. This multi-level marketing structure appears to have influenced rapid growth of the OneCoin member network. Indeed, OneCoin Ltd. has claimed to have more than 3 million members worldwide, including victims living and/or working within the Southern District of New York. OneCoin continues to operate to this day.
As a result of misrepresentations made by IGNATOV, IGNATOVA, and other OneCoin representatives, victims throughout the world wired investment funds to OneCoin-controlled bank accounts in order to purchase OneCoin packages. Records obtained in the course of the investigation show that, between the fourth quarter of 2014 and the third quarter of 2016 alone, OneCoin Ltd. generated €3.353 billion in sales revenue and earned “profits” of €2.232 billion.
Among a number of other representations, OneCoin Ltd. has claimed that the OneCoin cryptocurrency is “mined” using mining servers maintained and operated by the company, and that the value of OneCoin is based on market supply and demand. The purported value of a OneCoin has steadily grown from €0.50 to approximately €29.95 per coin, as of January 2019. In fact, the value of OneCoin is determined internally and not based on market supply and demand; and OneCoins are not mined using computer resources. Moreover, the investigation has revealed that IGNATOVA and her co-founder conceived of and built the OneCoin business fully intending to use it to defraud investors. For example, in one email between IGNATOVA and her co-founder, IGNATOVA described her thoughts on the “exit strategy” for OneCoin. The first option that IGNATOVA listed was, “Take the money and run and blame someone else for this . . . .”
Additionally, OneCoin Ltd. has claimed to have a private “blockchain,” or a digital ledger identifying OneCoins and recording historical transactions. The investigation has revealed that OneCoin lacks a true blockchain, that is, a public and verifiable blockchain.[2] Moreover, by approximately March 2015, IGNATOVA and her co-founder had started allocating to OneCoin members coins that did not even exist in OneCoin’s purported private blockchain, referring to those coins as “fake coins.”
As the founder and leader of OneCoin Ltd., IGNATOVA participated in efforts to market OneCoin to U.S. victim-investors. For example, on July 4, 2015, IGNATOVA participated in an online webinar, later posted to YouTube.com, in which IGNATOVA announced the official opening of the United States market for OneCoin.
Since taking over leadership of OneCoin following IGNATOVA’s disappearance from publicly running the company, IGNATOV has himself made false representations to OneCoin members to solicit trader package purchases and investments into the company. For example, IGNATOV has repeatedly represented that an “initial public offering” of OneCoin would occur on various dates in 2018 and 2019, in an effort to generate excitement and solicit additional investments from member victims. However, the purported offering was repeatedly postponed, and no such offering has taken place. Moreover, IGNATOV has been personally involved in manually setting and increasing the purported Euro value of OneCoin, contradicting claims that the value is set by supply and demand. Finally, the investigation has revealed that IGNATOV is aware that OneCoin-derived funds have been routed through a series of purported “investment fund” accounts used to hide the origin of the money, i.e., to launder OneCoin fraud proceeds.
Between February 27, 2019, and March 6, 2019, IGNATOV travelled to the United States to conduct OneCoin-related business, including in Las Vegas, Nevada, where he stayed at a casino resort. While in Las Vegas, IGNATOV met with a number of OneCoin affiliates. During the meeting, one of the first questions posed to IGNATOV was when OneCoin members would be able to monetize, or “cash out,” their OneCoins. IGNATOV reportedly responded, “if you are here to cash out, leave this room now, because you don’t understand what this project is about.”
IGNATOVA, a third defendant, MARK S. SCOTT, and others agreed to launder the proceeds of the OneCoin fraud scheme. Specifically, IGNATOVA, SCOTT, and others agreed with others to conduct transactions involving OneCoin fraud proceeds in order to conceal and disguise the nature, location, source, ownership, and control of the proceeds. SCOTT, a former partner of a major United States law firm, assisted IGNATOVA and others in laundering more than $400 million through a series of purported investment funds holding bank accounts at financial institutions in the Cayman Islands and the Republic of Ireland, among other locations. The indictment charging SCOTT was previously unsealed, and SCOTT was arrested in Barnstable, Massachusetts, on September 5, 2018. SCOTT’s case is currently pending before U.S. District Judge Edgardo Ramos.
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IGNATOVA, 38, of Sofia, Bulgaria, is charged with one count each of wire fraud, conspiracy to commit wire fraud, securities fraud, and conspiracy to commit money laundering, each of which carries a maximum sentence of 20 years sentence, and one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison. IGNATOVA remains at large.
IGNATOV, 33, of Sofia, Bulgaria, is charged by Complaint with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.
SCOTT, 50, of Coral Gables, Florida, is charged by Indictment with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman and Mr. Vance praised the outstanding investigative work of IRS-CI and the FBI, which jointly conducted this investigation with the Special Agents from the U.S. Attorney’s Office and analysts from the New York County DA’s Office Major Economic Crimes Bureau.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Securities and Commodities Fraud Task Force. Assistant United States Attorneys Christopher J. DiMase and Nicholas Folly, and Special Assistant United States Attorney Julieta V. Lozano of the New York County District Attorney’s Office, are in charge of the prosecution.
The charges contained in the Indictments and Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
If you think you may have been a victim in this case or have additional information, please contact the United States Attorney’s Office at 866-874-8900, or by email at [email protected].
[1] As the introductory phrase signifies, the entirety of the texts of the Complaint and Indictment constitute only allegations, and every fact described herein should be treated as an allegation.
[2] OneCoin Ltd.’s private blockchain may be contrasted with Bitcoin’s blockchain, which is decentralized and public.
John Galanis Sentenced to 10 Years in Prison for His Participation in A Scheme to Defraud A Native American Tribe and Various InvestorsRead the Press Release
Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that JOHN GALANIS was sentenced today by the U.S. District Judge Ronnie Abrams to 10 years 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.
Mr. Khuzami said: “This complex and brazen securities fraud scheme lined the pockets of John Galanis and his co-defendants but left the Native American tribal entity, the Wakpamni Lake Community Corporation, $60 million in debt, and numerous pension funds with bonds they never wanted and could not sell. A jury saw the defendant’s lies for what they were, and John Galanis, a career fraudster, now faces a significant prison term as a result of his crimes.”
According to the allegations contained in the Indictment filed against JOHN GALANIS and statements made in related court filings and proceedings, including the trial of JOHN GALANIS and two co-defendants in May and June of 2018:
From March 2014 through April 2016, JOHN GALANIS, Jason Galanis, Gary Hirst, Bevan Cooney, Michelle Morton, Hugh Dunkerley, and others engaged in a fraudulent scheme to misappropriate the proceeds of bonds issued by the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity (the “Tribal Bonds”), and to use funds in the accounts of clients of asset management firms controlled by 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.
The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by JOHN GALANIS. Simultaneously, Jason Galanis, JOHN GALANIS’s son, with the backing of other co-conspirators, worked to acquire Hughes Capital Management (“Hughes”), a registered investment adviser. Hirst and Morton were installed as Hughes’s chief investment officer and chief executive officer, respectively. Within weeks of taking control of Hughes, Hirst and Morton placed the entire $28 million first series of Tribal Bonds with Hughes clients but failed to disclose material facts about the Tribal Bonds, including that the Tribal Bonds fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients. In addition, Hughes’ 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.
JOHN GALANIS and his co-conspirators then misappropriated the proceeds of the first Tribal Bond issuance. Specifically, although the Tribal Bonds were supposed to be invested in an annuity, the proceeds were deposited into an account opened by Hirst and over which both Hirst and Dunkerley had signatory authority. Hirst and Dunkerley, at the direction of Jason Galanis, then transferred significant amounts of the bond proceeds from that account to support the defendants’ business and personal interests. Jason Galanis, for example, used a portion of the proceeds of the first Tribal Bond issuance to finance the purchase of a $10 million luxury apartment in Tribeca. JOHN GALANIS, similarly, 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.
In addition, JOHN GALANIS induced the WLCC to issue a second round of Tribal Bonds, which were purchased using $20 million of bond proceeds from the first 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. In addition, millions of dollars in bond proceeds from the bond issuances were used to finance the acquisition of companies that the defendants and their co-conspirators acquired as part of their aspiration to build a financial 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 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 hope to build a financial conglomerate and to make payments to one of the broker dealers in which certain co-conspirators had interests.
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In addition to the prison term, JOHN GALANIS, 75, was sentenced to three years of supervised release. JOHN GALANIS was also ordered to forfeit $2,585,000 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 96 months in prison on September 7, 2018. Michelle Morton, who pled guilty to conspiracy to commit securities fraud and investment adviser fraud, is awaiting sentencing. Bevan Cooney, who was convicted with JOHN GALANIS at trial of conspiracy to commit securities fraud and securities fraud, is scheduled to be sentenced on April 4, 2019. 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 scheduled to be sentenced on July 19, 2019.
This conviction represents JOHN GALANIS’s fourth conviction in this District for fraud-related offenses. JOHN GALANIS is currently serving a 72-month sentence imposed by the Honorable P. Kevin Castel in February 2017, resulting from GALANIS’s involvement in a scheme to manipulate the stock price of Gerova Financial Group, a publicly traded company listed on the New York Stock Exchange, and to defraud the shareholders of that company. At today’s sentencing, Judge Abrams directed that 48 months of the sentence she imposed today be served consecutive to the sentence in the Gerova matter. Previously, in July 1988, JOHN GALANIS was convicted after trial of offenses related to his involvement in another fraudulent scheme and sentenced to 324 months’ in prison. In February 1973, JOHN GALANIS was convicted of conspiring to make false statements to the Securities and Exchange Commission and committing mail fraud.
Mr. Khuzami 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.
Third Mercenary Sentenced to Life in Prison for Conspiring to Kidnap and Murder as Part of A Murder-For-Hire Scheme OverseasRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JOSEPH MANUEL HUNTER was sentenced to life in prison in connection with his participation in the murder of a woman in the Philippines. HUNTER and his co-defendants, Adam Samia and Carl David Stillwell, were convicted on April 18, 2018, following a 12-day trial before U.S. District Judge Ronnie Abrams of the Southern District of New York. Judge Abrams sentenced HUNTER today and had previously sentenced both Stillwell and Samia to mandatory life terms.
U.S. Attorney Geoffrey S. Berman said: “With zero regard for human life, Joseph Hunter callously helped to arrange the murder of a Filipino woman in exchange for money. He and his co-defendants have now been sentenced to life behind bars for their heartless crimes.”
According to the Superseding Indictment against HUNTER, Samia, and Stillwell, other filings in Manhattan federal court, and the evidence admitted at trial:
HUNTER served from 1983 to 2004 in the U.S. Army, where he attained the rank of sergeant first class. While in the Army, HUNTER led air-assault and airborne infantry squads; served as a sniper instructor; and trained soldiers in marksmanship and tactics as a senior drill sergeant. Since leaving the Army in 2004, HUNTER arranged for the murders of multiple victims in exchange for money, among other completed acts of violence undertaken for pay.
Samia was a self-described “Personal Protection/Security Industry” professional. According to Samia’s résumé, he worked as an “Independent Contractor” for clients in the Philippines, China, Papua New Guinea, the Democratic Republic of the Congo, and the Republic of the Congo; and had training in tactics and weapons, including handguns, shotguns, rifles, sniper rifles, and machineguns. Stillwell also purported to have training and experience in the field of information technology and to have worked at a firm in North Carolina that provides firearms training.
In 2011 and 2012, HUNTER, Samia, and Stillwell agreed to commit murders-for-hire in overseas locations in exchange for salaries and bonus payments for each victim. In early 2012, Samia and Stillwell traveled from North Carolina to the Philippines, where HUNTER provided them with, among other things, information about their intended victims and firearms to use to commit the murders.
In January and February 2012, Samia and Stillwell surveilled their intended victims in the Philippines as they formulated their murder plans. On February 12, 2012, Samia and Stillwell killed one of their intended victims – a Filipino woman – in the Philippines by shooting her multiple times in the face (“Victim-1”). After killing Victim-1, Samia and Stillwell disposed of her body on a pile of garbage, where it was later found by local authorities. HUNTER paid Samia and Stillwell $35,000 each for completing the murder, and Samia and Stillwell sent thousands of dollars from the payments they received to the United States using, among other methods, structured wire transfers in amounts under $10,000.
In late February and early March 2012, Samia and Stillwell returned from the Philippines to North Carolina, where they continued to reside until their July 2015 arrests on these charges.
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HUNTER, 53, of Owensboro, Kentucky, Samia, 44, of Roxboro, North Carolina, and Stillwell, 51, of Roxboro, North Carolina, were each convicted of one count of conspiring to commit murder-for-hire and one count of committing murder-for-hire, each of which carries a maximum sentence of life in prison and mandatory minimum sentence of life in prison; and one count of conspiring to murder and kidnap in a foreign country and one count of using and carrying a firearm during and in relation to a crime of violence, each of which carries a maximum sentence of life in prison. Samia and Stillwell were also each convicted of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison.
The charges against the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division, Bilateral Investigations Unit; DEA’s Manila Country Office; DEA’s Atlanta Field Division, Raleigh Resident Office; DEA’s Louisville Field Division; the Durham Police Department; the Raleigh Police Department; the Harnett County Sherriff’s Office; the Wake County Sherriff’s Office; the Person County Sherriff’s Office; the Cary Police Department; the North Carolina State Bureau of Investigations; the Bureau of Alcohol, Tobacco, Firearms and Explosives, Greensboro Field Office; the Customs and Border Protection’s National Targeting Center; the Royal Thai Police; the Philippines National Bureau of Investigation; and the Philippines National Police; and the Department of Justice’s Office of International Affairs. Mr. Berman also thanked the United States Attorney’s Office for the Middle District of North Carolina and the Department of Justice’s Computer Crime and Intellectual Property Section for their support and assistance.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Patrick Egan, Emil J. Bove III, and Rebekah Donaleski were in charge of the prosecution.
New Jersey Man Sentenced to 21 Months Prison for Participation in Ticket Investment SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MICHAEL WRIGHT was sentenced to 21 months in federal prison for his participation in a scheme to defraud investors who invested millions of dollars based on false representations that their funds would be used to purchase tickets to various live events for re-sale at a profit on the secondary market. WRIGHT pled guilty on September 27, 2018 before Magistrate Judge Stewart D. Aaron to one count of wire fraud. His plea was accepted by Chief U.S. District Judge Colleen McMahon, who also imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Michael Wright previously admitted to his conduct related to an elaborate ticket-buying scheme to defraud investors of millions of dollars. Wright and his co-defendants induced their clients to invest in their phony business through false representations and lies, when in fact, it was a Ponzi-like enterprise. While Michael Wright’s ticket-buying business operated as a fiction, now a 21 month term in federal prison will be his stark reality.”
According to allegations in an Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:
WRIGHT participated in a scheme along with Craig Carton and Joseph Meli to induce investors to provide them with millions of dollars, based on representations that the investor funds would be used to purchase blocks of tickets to concerts and other live events, which would then be re-sold on the secondary market. Carton and Meli purportedly had access to those blocks of tickets based on agreements that Meli had with a company that promotes live music and entertainment events (the “Concert Promotion Company”) and that Carton had with a company that operates two arenas in the New York metropolitan area (the “Sports and Entertainment Company”). In fact, neither the Concert Promotion Company nor the Sports and Entertainment Company had any such agreement with Carton, Wright, or Meli, or any entity associated with them. After receiving the investor funds, Carton, Wright, and Meli misappropriated those funds, using them to, among other things, pay personal debts and repay prior investors as part of a Ponzi-like scheme.
For example, on December 8, 2016, a New York-based hedge fund (the “Hedge Fund”) and Carton executed a revolving loan agreement (the “Revolving Loan Agreement”), under which the Hedge Fund agreed to provide Carton with up to $10 million, for the purpose of funding investments in the purchase of tickets of events. The Revolving Loan Agreement provided, in sum and substance, that the proceeds of the loan would be used only to purchase tickets pursuant to agreements for the acquisition of tickets and for limited business expenses. The Hedge Fund would receive a share of the profits from the resale of the tickets.
Later in December 2016, Carton induced the Hedge Fund to wire $2 million to the Sports and Entertainment Company, based on a purported agreement he had with the Sports and Entertainment Company (the “Sports and Entertainment Company Agreement”). Under this supposed agreement, the Sports and Entertainment Company Agreement gave an entity controlled by Carton (the “Carton Entity”) the right to purchase $2 million of tickets to concerts at one of the venues operated by the Sports and Entertainment Company. Carton, among other things, sent the Hedge Fund a copy of the Sports and Entertainment Company Agreement that purportedly had been signed by the chief executive officer of the Sports and Entertainment Company. However, this agreement was fraudulent and had never been entered into by the Sports and Entertainment Company or signed by the chief executive officer.
On December 20, 2016, when the Hedge Fund wired the $2 million to the Sports and Entertainment Company for the purchase of tickets, Carton contacted the Sports and Entertainment Company and told them, in sum and substance, that the wire had been sent in error and should be sent to the bank account for an entity operated by Carton and WRIGHT, for which WRIGHT is the signatory. The prior day, December 19, 2016, WRIGHT had e-mailed Carton wire information for this account. After the Sports and Entertainment Company’s $2 million investment was diverted to that account, WRIGHT wired $966,000 to WRIGHT’s bank account, of which WRIGHT sent approximately $690,000 to repay a gambling loan of Carton’s which WRIGHT had guaranteed and approximately $250,000 to repay WRIGHT’s personal home equity line of credit. WRIGHT further diverted $40,000 of the Hedge Fund’s investment for his own personal expenses, including to pay off credit card debt, and nearly $1 million to Carton’s personal bank account.
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WRIGHT, 42, of Upper Saddle River, New Jersey, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Carton was convicted on November 7, 2018, of securities fraud, wire fraud, and conspiracy to commit those offenses, and will be sentenced before Chief U.S. District Court Judge Colleen McMahon on April 5, 2019.
Meli pled guilty to securities fraud in October 2017 and is currently serving a 78-month sentence imposed by U.S. District Court Judge Kimba M. Wood in April 2018.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation and thanked the Boston Regional Office of the U.S. Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brendan F. Quigley and Elisha J. Kobre are in charge of the prosecution.
NYPD Officer Convicted of Drug Trafficking and Firearms Offenses in Manhattan Federal CourtRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that YESSENIA JIMENEZ, an officer in the New York City Police Department (“NYPD”), was found guilty today of conspiring to distribute heroin, fentanyl, and cocaine, possession of heroin and fentanyl, and using a firearm in furtherance of drug trafficking. A unanimous jury convicted JIMENEZ on all three counts after a one-week trial before United States District Judge Valerie E. Caproni.
U.S. Attorney Geoffrey S. Berman said: “As proven at trial, Yessenia Jimenez, an NYPD officer, trafficked heroin, fentanyl, and cocaine in New York City, a city she took an oath to serve and protect, and used her NYPD service firearm to carry out her drug dealing. Simply put, Jimenez was a drug dealer in a cop’s uniform. Thankfully, Jimenez now stands convicted and faces at least 15 years in prison.”
According to court documents and the evidence at trial:
This case arises from a Drug Enforcement Administration (“DEA”) investigation into a large-scale narcotics trafficking operation that brought heroin, fentanyl, and cocaine across the border from Mexico into the United States, and then into New York City. From at least June 2017 through March 2018, JIMENEZ, an NYPD officer, participated in the conspiracy. JIMENEZ used her apartment in the Bronx, New York, to store multiple kilograms of heroin, fentanyl, and cocaine that were brought into the city by other members of the conspiracy. Along with other co-conspirators, JIMENEZ distributed these drugs in New York and also in the Boston area. Over the course of the conspiracy, she collected hundreds of thousands of dollars in drug profits, which she also stored in her apartment, and delivered large amounts of cash to other co-conspirators to bring back to drug suppliers in Mexico. On March 13, 2018, the DEA and NYPD apprehended JIMENEZ and a co-conspirator as they returned to her apartment carrying approximately $52,000 in U.S. currency, which represented the proceeds from narcotics transactions in Boston. JIMENEZ, who was not in uniform and was off duty, was carrying her loaded NYPD service firearm in her purse, alongside approximately $25,000 of the drug proceeds. At the time of her arrest, JIMENEZ lied to law enforcement, telling them she was “on the job,” meaning on official NYPD business at the time. Following the arrest, law enforcement agents obtained a search warrant for JIMENEZ’s apartment and discovered approximately 250 grams of heroin and fentanyl.
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JIMENEZ, 32, of the Bronx, New York, was convicted of one count of conspiracy to distribute at least one kilogram of heroin and fentanyl, and at least five kilograms of cocaine, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years in prison, one count of possession of at least 100 grams of heroin and fentanyl with intent to distribute, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of five years in prison, and one count of using a firearm in furtherance of narcotics trafficking, which carries a maximum sentence of life in prison and a consecutive mandatory minimum sentence of five years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the investigative work of the DEA, NYPD, and New York State Police in this investigation.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Thane Rehn and Louis Pellegrino are in charge of the prosecution.
Mobile Telesystems Pjsc and Its Uzbek Subsidiary Enter into Resolutions of $850 Million with the Department of Justice for Paying Bribes in UzbekistanRead the Press Release
Moscow-based Mobile TeleSystems PJSC (MTS), the largest mobile telecommunications company in Russia and an issuer of publicly traded securities in the United States, and its wholly owned Uzbek subsidiary, KOLORIT DIZAYN INK LLC (KOLORIT), have entered into resolutions with the Department of Justice and Securities and Exchange Commission (SEC) and agreed to pay a combined total penalty of $850 million to resolve charges arising out of a scheme to pay bribes in Uzbekistan. In addition, charges were unsealed today against a former Uzbek official who is the daughter of the former president of Uzbekistan and against the former CEO of Uzdunrobita LLC, another MTS subsidiary, for their participation in a bribery and money laundering scheme involving more than $865 million in bribes from MTS, VimpelCom Limited (now VEON) and Telia Company AB (Telia) to the former Uzbek official in order to secure her assistance in entering and maintaining their business operations in Uzbekistan’s telecommunications market.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman of the Southern District of New York, Special Agent in Charge Raymond Villanueva of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Washington, D.C. and Chief Don Fort of IRS Criminal Investigation (IRS-CI) made the announcement.
Gulnara Karimova, 46, a citizen of Uzbekistan, was charged in an indictment filed in the Southern District of New York on March 7 with one count of conspiracy to commit money laundering. Karimova is a former Uzbek official who allegedly had influence over the Uzbek governmental body that regulated the telecom industry. Bekhzod Akhmedov, 44, a citizen of Uzbekistan and the former Uzbek executive, was charged in the same indictment with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA), two counts of violating the FCPA, and one count of conspiracy to commit money laundering. Karimova’s and Akhmedov’s case is assigned to U.S. District Judge Kimba Wood of the Southern District of New York.
“Gulnara Karimova stands accused of exploiting her official position to solicit and accept more than $865 million in bribes from three publicly traded telecom companies, and then laundering those bribes through the U.S. financial system,” said Assistant Attorney General Benczkowski. “The indictment and corporate resolution announced today, together with two prior corporate resolutions involving bribes allegedly paid to Karimova, demonstrate the Department’s comprehensive approach to foreign corruption: we will aggressively pursue both corrupt foreign officials and the companies and individuals who bribe them in order to gain unfair business advantages, and we will do everything we can to keep the proceeds of that corruption out of the U.S. financial system.”
“This is the third installment in a trilogy of cases arising from an almost $1 billion bribery scheme that reached the highest echelons of the Uzbekistan government and was orchestrated by some of the largest telecommunications companies in the world,” said U.S. Attorney Berman. “By funneling multimillion-dollar bribe payments through the U.S. financial system, the companies and individual defendants corruptly tried to tip the global economy in their favor and line their own pockets. But they are now paying the price. Today, my Office and our law enforcement partners are sending a bold, unequivocal message that the U.S. financial system is not in business to enable foreign bribery or money laundering. This Office stands ready to prevent, prosecute, and penalize foreign corrupt practices wherever in the world we find them.”
“Corruption of this level and reach poisons our integrity as a participant in the global marketplace,” said HSI Washington Special Agent in Charge Villanueva. “Thanks to our skillful and collaborative investigators at HSI and the IRS-CI, Karimova and Ahkmedov’s exploitive crimes will be presented before the just eye of our courts and no longer will such corruption be permitted to metastasize across our borders.”
“With the increase in globalization and ease with which funds can be moved, criminals think their financial transactions cannot be tracked—but they would be wrong,” said IRS-CI Chief Fort. “We will continue to investigate violations of the Foreign Corrupt Practices Act to ensure our country’s financial institutions are not used for devious purposes. We are committed to aggressively pursuing all who engage in corruption, money laundering, and bribery for their own personal gain and at the expense of the U.S. government.”
According to the indictment against Karimova and Akhmedov, in or around the early 2000s, they agreed that Akhmedov would solicit and facilitate corrupt bribe payments from telecommunications companies seeking to enter the Uzbek market. In exchange, Karimova allegedly used her influence over Uzbek authorities to help the telecommunications companies obtain and retain lucrative business opportunities in the Uzbek telecommunications market. In total, Akhmedov conspired with the telecom companies and others to pay Karimova more than $865 million in bribes, and Akhmedov and Karimova conspired with others to launder and conceal those funds to, from and through bank accounts in the United States, in order to promote the ongoing bribery scheme, the indictment alleges.
The charges in the indictment are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
MTS entered into a deferred prosecution agreement with the Department of Justice in connection with a criminal information filed yesterday in the Southern District of New York charging the company with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the internal controls provisions of the FCPA. KOLORIT pleaded guilty to a one-count criminal information filed in the Southern District of New York, charging the company with conspiracy to violate the anti-bribery and books and records provisions of the FCPA. Pursuant to its agreement with the department, MTS agreed to pay a total criminal penalty of $850 million to the United States, including a $500,000 criminal fine and $40 million in criminal forfeiture that MTS agreed to pay on behalf of KOLORIT. MTS also agreed to the imposition of an independent compliance monitor for a term of three years and to implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals such as Akhmedov and Karimova. The case against MTS and KOLORIT is assigned to U.S. District Judge J. Paul Oetken of the Southern District of New York.
In related proceedings, MTS reached a settlement with the SEC. Under the terms of its agreement with the SEC, MTS agreed to pay a $100 million civil penalty. Consistent with Coordination of Corporate Resolution Penalties in Parallel and/or Joint Investigations and Proceedings Arising from the Same Misconduct (Justice Manual 1-12.100), the Department of Justice agreed to credit the civil penalty paid to the SEC as part of its agreement with MTS. Thus, the combined total amount of criminal and regulatory penalties paid by MTS and KOLORIT to U.S. authorities will be $850 million.
According to the companies’ admissions, MTS and KOLORIT, through various managers and employees within MTS, MTS’s Uzbek subsidiaries Uzdunrobita LLC and KOLORIT, and other affiliated entities, paid approximately $420 million in bribes to Karimova, who had influence over the Uzbek governmental body that regulated the telecom industry. The bribes were paid on multiple occasions between 2004 and 2012 so that MTS could enter the Uzbek market through the acquisition of Uzdunrobita and so that Uzdunrobita could gain valuable telecom assets and continue operating in Uzbekistan. The companies admittedly structured and concealed the bribes through payments to shell companies that members of MTS’s and Uzdunrobita’s management knew were beneficially owned by Karimova. MTS and Uzdunrobita also acquired KOLORIT, knowing that the price MTS and Uzdunrobita paid was inflated, in order to bribe Karimova in exchange for Uzdunrobita’s continuing to operate in Uzbekistan. Uzdunrobita made payments to purported charities and for sponsorships to entities related to Karimova. The Uzbek government expropriated Uzdunrobita in 2012 as a result of MTS’s, Uzdunrobita’s and KOLORIT’s failure to meet Karimova’s demands for additional payments.
A number of factors contributed to the Department’s criminal resolution with the companies, including (1) the companies did not voluntarily disclose; (2) the companies’ level of cooperation and remediation was lacking, not proactive; (3) the nature and seriousness of the office, including $420 million in bribes to a high-level Uzbek official; and (4) the mitigating factors present in this case, including that the Uzbek government expropriated the companies’ telecommunications assets in Uzbekistan, resulting in no realized pecuniary gain to the companies as a result of the misconduct.
The resolution, reached in coordination with the SEC’s resolution, marks the third such resolution by a major international telecommunications provider for bribery in Uzbekistan. On Feb. 18, 2016, Amsterdam-based VimpelCom and its Uzbek subsidiary, Unitel LLC, entered into resolutions with the Department of Justice and admitted to a conspiracy to make more than $114 million in bribery payments to Karimova between 2006 and 2012. On Sept. 21, 2017, Stockholm-based Telia and its Uzbek subsidiary, Coscom LLC, also entered into resolutions with the Department and admitted to a conspiracy to make more than $331 million in bribery payments to Karimova. The investigation has thus far yielded a combined total of over $2.6 billion in global fines and disgorgement, including over $1.3 billion in criminal penalties to the United States. In related actions, the Department has also filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg and Ireland, which constitute bribe payments made by MTS, VimpelCom and Telia, or funds involved in the laundering of those corrupt payments to Karimova.
The IRS-CI and HSI are investigating the cases as part of the IRS Global Illicit Financial Team in Washington, D.C. Assistant Chief Ephraim Wernick and Senior Litigation Counsel Nicola J. Mrazek of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Edward Imperatore and Daniel Noble of the Southern District of New York are prosecuting the case against MTS and KOLORIT. Assistant Chief Wernick and Trial Attorney Elina Rubin-Smith of the Fraud Section and Assistant U.S. Attorneys Imperatore and Noble are prosecuting the case against Karimova and Akhmedov. Trial Attorney Michael Khoo of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) is prosecuting the forfeiture case with substantial assistance from former MLARS Trial Attorney Marie M. Dalton, now an Assistant U.S. Attorney in the Western District of Washington.
Law enforcement authorities in Austria, Belgium, Cyprus, France, Ireland, Isle of Man, Latvia, Luxembourg, Norway, the Netherlands, Switzerland, Sweden and the United Kingdom have provided valuable assistance in this case. The Criminal Division’s Office of International Affairs provided significant assistance as well. The SEC referred the matter to the Department and also provided extensive cooperation and assistance.
The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to [email protected].
Manhattan U.S. Attorney Files Fraud Suit Against Three Painting Contractors for Lying About Disadvantaged Business Participation on Federal ProjectsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Douglas Shoemaker, regional Special Agent-in-Charge of the United States Department of Transportation Office of Inspector General (“USDOT-OIG”), Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), and Barry L. Kluger, Inspector General of the Metropolitan Transportation Authority (“MTA-OIG”), announced that the United States filed a civil fraud lawsuit against three New York-area painting contractors, AHERN PAINTING CONTRACTORS CO. (“AHERN”), SPECTRUM PAINTING CORP. (“SPECTRUM”), and TOWER MAINTENANCE CORP. (“TOWER”). The lawsuit alleges that these companies fraudulently obtained payments on two federally funded projects in New York City by lying about compliance with Disadvantaged Business Enterprise (“DBE”) rules, which require participation of businesses owned by women or minorities. Specifically, as alleged in the complaint, the defendants made it appear that TOWER, a certified disadvantaged business enterprise, was executing millions of dollars of steel painting work at the Brooklyn Bridge and the Queens Plaza transit line when in fact much of the work was performed by SPECTRUM, a non-DBE. In return for being included in the projects, SPECTRUM paid kickbacks to AHERN in the form of a $10,000 “commission payment” and a free trip to Atlantic City. By repeatedly submitting false statements to the New York City Department of Transportation (“NYC-DOT”) mischaracterizing Tower’s work at these projects, the defendants received millions of dollars in federal funds to which they were not entitled.
Manhattan U.S. Attorney Geoffrey Berman said: “Disadvantaged Business Enterprise regulations serve the important purpose of increasing legitimate participation by businesses owned by women and minorities that have been historically disadvantaged in federal contracting. We will not tolerate fraudulent schemes that exploit the DBE program and undermine its purpose. Contractors who lie about who is actually doing the work will be held to account.”
USDOT-OIG regional Special Agent-in-Charge Douglas Shoemaker said: “Disadvantaged Business Enterprise (DBE) fraud harms law-abiding contractors by disrupting the level playing field in which legitimate disadvantaged businesses seek to fairly compete for contracts. We remain steadfast in our commitment to preserve the integrity of the Department’s DBE program. Working with our law enforcement and prosecutorial partners, we will continue to protect the taxpayers’ investment in our nation’s infrastructure from DBE fraud schemes that undermine DOT-funded programs and projects and the public trust.”
DOI Commissioner Margaret Garnett said: “These defendants used trickery, false documents, and a kickback scheme to game the Disadvantaged Business Enterprise program – stealing millions of dollars in federal funds. DOI was proud to assist in this investigation with our federal and state partners to ensure guidelines that empower legitimate Disadvantaged Business Enterprises are obeyed and businesses who attempt to take advantage of these programs are made to pay for their actions. DOI remains committed to the shared City and federal mission of protecting programs that safeguard inclusive hiring practices on public construction projects.”
MTA Inspector General Barry L. Kluger said: “Today’s filing of a civil complaint alleging Disadvantaged Business Enterprise fraud clearly reflects the firm commitment of our prosecutorial and investigative partners to utilize all avenues to ensure compliance with DBE requirements. I wish to thank the U.S. Attorney for devoting substantial resources and efforts to create and maintain a level playing field on which all qualified DBEs have a fair and equal opportunity to bid for and participate in construction projects.”
In 1980, the United States Department of Transportation (“USDOT”) issued regulations in connection with a program to increase the participation of minority and disadvantaged business enterprises in federally funded public construction contracts. To become certified as a DBE, a company must, among other things, be owned and controlled by socially and economically disadvantaged individuals, be an independent business whose viability does not depend on its relationship with other firms, employ its own work force and own equipment necessary to perform its work, and be able to meet its financial obligations.
Recipients of USDOT construction grants, such as the New York City Department of Transportation (“NYC-DOT”) and the MTA, are required to establish a DBE program that sets goals for the percentage of a project’s work that should be awarded to DBEs (“DBE goals”). NYC-DOT and MTA both have established DBE programs aimed at increasing the participation of minority- and women-owned businesses. Pursuant to the DBE programs, general contractors on federally funded public construction projects must make good faith efforts to encourage participation of DBEs in public works contracts.
General contractors can count funds paid to DBEs toward the attainment of the DBE goals only if the DBEs performed a “commercially useful function.” A DBE subcontractor performs a commercially useful function only when it is responsible for the execution of the work of the contract; actually performs, manages, and supervises the work involved; and furnishes the supervision, equipment, and labor necessary to perform its work.
As set forth in the complaint, AHERN, a steel painting company, was a contractor on the Brooklyn Bridge and Queens Plaza projects. Contracts for both projects required AHERN to hire DBEs to do a percentage of the work involved and adhere to the DBE regulations. Instead of making good faith efforts to hire qualified DBEs to do this work, AHERN agreed with SPECTRUM and TOWER to use TOWER’s status as a DBE to take credit for millions of dollars of DBE work. But TOWER did not perform a “commercially useful function” on the projects, as required under the DBE regulations. Rather, it was SPECTRUM, a non-DBE, that did much of the work, including directing, managing, and supervising the DBE work on the projects.
Defendants concealed their violations of the DBE regulations by, among other things, repeatedly having SPECTRUM employees pretend to be TOWER employees, wearing Tower vests, carrying Tower identification, and telling others on the worksites that they were Tower employees. In addition, AHERN and TOWER repeatedly submitted false statements and records to NYC-DOT and MTA misrepresenting that TOWER alone did all of the DBE work allocated to it and that TOWER did not hire a subcontractor to perform any of that work. SPECTRUM also paid kickbacks to AHERN in the form of a $10,000 “commission payment” and a free trip to Atlantic City. As a result of the false statements and records, the defendants obtained millions of dollars of federal money to which they were not entitled.
Mr. Berman praised the outstanding investigative work of the USDOT-OIG, DOI, and MTA-OIG.
This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Mónica Folch and Li Yu are in charge of this case.
Manhattan U.S. Attorney Announces Charges Against Former NYC Department of Homeless Services Police Sergeant for Violating the Constitutional Rights of NYC ResidentRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Margaret Garnett, the Commissioner of the New York City Department of Investigation (“DOI”), announced today the unsealing of a criminal complaint charging CORDELL FITTS, a former New York City Department of Homeless Services (“DHS”) police sergeant, in the assault of an individual at a homeless shelter. FITTS was charged with using excessive force against an individual seeking services (“Victim-1”) at the Bellevue Men’s Homeless Shelter in Manhattan (the “Bellevue Shelter”), in violation of Victim-1’s rights under the United States Constitution, and for filing a false report in order to cover up the assault. During an altercation with Victim-1, FITTS used excessive and unnecessary force, including by kicking, punching, and stomping on the head of Victim-1 more than 10 times. FITTS was arrested today and is expected to be presented before the U.S. Magistrate Judge Debra Freeman in federal court later today.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Cordell Fitts, a former sergeant in the New York City Department of Homeless Services Police Department, used excessive force against an individual seeking services at a city facility. Fitts’s alleged conduct not only betrayed his duty as an officer to protect those under his charge, but also violated the law. When the constitutional rights of individuals experiencing homelessness are violated, particularly by law enforcement officers, we will act aggressively to bring wrongdoers to justice.”
DOI Commissioner Margaret Garnett said: “Instead of upholding the law, this sworn officer allegedly broke it by violently attacking a man seeking assistance at a Manhattan homeless shelter, according to the charges. Shelters should provide a safe environment for the homeless of our City, not one where clients fear the officers employed to protect them. DOI thanks the Office of the U.S. Attorney for the Southern District of New York for its partnership on this investigation and prosecution.”
According to the Complaint[1] unsealed today in Manhattan federal court:
The Bellevue Shelter is a men’s homeless shelter located in Manhattan, New York. It is maintained by DHS and its security is provided for by, among others, DHS police officers. On the night of March 6, 2017, Victim-1 was seeking services at the Bellevue Shelter.
At the time of the incident Victim-1 was in the lobby of the Bellevue Shelter and interacting with approximately three DHS officers, including FITTS. In the initial moments of the interaction, FITTS and Victim-1 exchanged words for approximately five to ten seconds, and FITTS gestured toward an exit area of the Bellevue Shelter. FITTS then reached toward Victim-1, putting his hands on or about the chest area of Victim-1, and Victim-1 responded by swinging at FITTS with what appear to be closed fists.
For approximately 30 seconds, FITTS and other officers struggled with Victim-1 in a physical altercation, which resulted in Victim-1 being taken to the floor of the lobby. When Victim-1 was taken to the ground, two officers were on the legs and back of Victim-1, and FITTS was standing next to Victim-1. At this point, with Victim-1 on the ground and two other officers on top of Victim-1, FITTS punched Victim-1 in the area of his head approximately two times. Subsequently, while Victim-1 remained on the ground, FITTS kicked and stomped on the head of Victim-1 approximately 11 times.
After kicking and stomping on Victim-1’s head, FITTS backed away from Victim-1 for approximately 10 seconds, as two other officers were attempting to place handcuffs on Victim-1 while he was face-down on the floor. Following that brief period of disengagement, FITTS walked back to Victim-1 and punched him in the area of his head approximately two additional times.
In connection with this incident, FITTS dictated a report about the incident that stated, among other things, that “necessary force” was used to “safely detain” Victim-1. The Report also stated: “After initial medical assessment [Victim-1] stated ‘I am off my psych medication and going through a lot.’” These statements were false and were included in the report by FITTS in order to cover up and justify the assault.
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CORDELL FITTS, 34, of Manhattan, New York, is charged with one count of deprivation of rights under color of law through use of excessive force, which carries a maximum penalty of 10 years in prison, and one count of falsifying a report, which carries a maximum penalty of 20 years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Berman praised the investigative work of the Special Agents at the United States Attorney’s Office and thanked the New York City Department of Investigations for its assistance.
This case is being handled by the Office’s Civil Rights and Public Corruption Units. Assistant U.S. Attorneys Alex Rossmiller and Jennifer Jude are in charge of the prosecution.
The charges and allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Former Uzbek Government Official and Uzbek Telecommunications Executive Charged in Bribery and Money Laundering Scheme Involving the Payment of Nearly $1 Billion in BribesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York (“SDNY”), Brian A. Benczkowski, the Assistant Attorney General for the Criminal Division of the Department of Justice (“DOJ”), Don Fort, Chief of the Criminal Investigation Division, Internal Revenue Service (“IRS-CI”), and Patrick J. Lechleitner, Special Agent in Charge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”) Washington, D.C, announced today the filing of criminal charges against GULNARA KARIMOVA, a former Uzbek government official who is the daughter of the former president of Uzbekistan, and BEKHZOD AKHMEDOV, the former general director of Uzdunrobita, an Uzbek subsidiary of Moscow-based MOBILE TELESYSTEMS PJSC (“MTS”), the largest mobile telecommunications company in Russia and an issuer of publicly traded securities in the United States, in connection with one of the largest Foreign Corrupt Practices Act (“FCPA”) bribery schemes ever charged, a decade-long corrupt scheme to pay KARIMOVA more than $865 million in bribes. AKHMEDOV, who helped orchestrate the massive bribery scheme on behalf of MTS and two other telecommunications companies, VimpelCom Ltd. (“VimpelCom”) and Telia Company AB (“Telia”), and their Uzbek subsidiaries, is charged with one count of conspiracy to violate the FCPA and two counts of violating the FCPA. KARIMOVA and AKHMEDOV are each charged with one count of conspiracy to commit money laundering based on numerous international financial transactions they conducted to promote and conceal the bribery scheme. The case is assigned to U.S. District Judge Kimba Wood.
Yesterday afternoon, criminal charges were filed against MTS and another of its Uzbek subsidiaries, KOLORIT DIZAYN INK LLC (“KOLORIT”), for conspiring to violate the FCPA by paying more than $420 million in bribes through AKHMEDOV to KARIMOVA. KOLORIT pled guilty yesterday in Manhattan federal court before U.S. District Judge J. Paul Oetken to a criminal Information charging the company with conspiracy to violate the anti-bribery and books and records provisions of the FCPA. MTS entered into a deferred prosecution agreement (“DPA”) with SDNY and DOJ in connection with a criminal Information charging the company with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the internal controls provisions of the FCPA. Pursuant to the DPA, MTS agreed to pay a total criminal penalty of $850 million to the United States, including a $500,000 criminal fine and $40 million in criminal forfeiture that MTS agreed to pay on behalf of KOLORIT. MTS also agreed to the imposition of an independent compliance monitor for a term of three years and to implement rigorous internal controls and cooperate fully with SDNY’s and DOJ’s ongoing investigation, including their investigation of individuals such as KARIMOVA and AKHMEDOV.
In related proceedings, MTS reached a civil settlement with the SEC. Under the terms of its agreement with the SEC, MTS agreed to pay a $100 million civil penalty, which SDNY and DOJ agreed to credit toward the financial penalties imposed as part of their agreement with MTS. Thus, the combined total amount of criminal and regulatory penalties paid by MTS to U.S. authorities in connection with the FCPA bribery scheme will be $850 million.
U.S. Attorney Berman said: “This is the third installment in a trilogy of cases arising from an almost $1 billion bribery scheme that reached the highest echelons of the Uzbekistan government and was orchestrated by some of the largest telecommunications companies in the world. By funneling multimillion-dollar bribe payments through the U.S. financial system, the companies and individual defendants corruptly tried to tip the global economy in their favor and line their own pockets. But they are now paying the price. Today, my Office and our law enforcement partners are sending a bold, unequivocal message that the U.S. financial system is not in business to enable foreign bribery or money laundering. This Office stands ready to prevent, prosecute, and penalize foreign corrupt practices wherever in the world we find them.”
Assistant Attorney General Benczkowski said: “Gulnara Karimova stands accused of exploiting her official position to solicit and accept more than $865 million in bribes from three publicly traded telecom companies, and then laundering those bribes through the U.S. financial system. The indictment and corporate resolution announced today, together with two prior corporate resolutions involving bribes allegedly paid to Karimova, demonstrate the Department’s comprehensive approach to foreign corruption: we will aggressively pursue both corrupt foreign officials and the companies and individuals who bribe them in order to gain unfair business advantages, and we will do everything we can to keep the proceeds of that corruption out of the U.S. financial system.”
IRS-CI Chief Don Fort said: “With the increase in globalization and ease with which funds can be moved, criminals think their financial transactions cannot be tracked – but they would be wrong. We will continue to investigate violations of the Foreign Corrupt Practices Act to ensure our country’s financial institutions are not used for devious purposes. We are committed to aggressively pursuing all who engage in corruption, money laundering, and bribery for their own personal gain and at the expense of the United States government.”
HSI Special Agent in Charge Lechleitner said: “Corruption of this level and reach poisons our integrity as a participant in the global marketplace. Thanks to our skillful and collaborative investigators at ICE and the IRS-CI, Karimova and Ahkmedov’s exploitive crimes will be presented before the resolute and just eye of our courts and no longer will such corruption be permitted to metasticize across our borders.”
According to allegations contained in the Indictment filed today against KARIMOVA and AKHMEDOV and criminal Informations filed yesterday against MTS and KOLORIT, the Statement of Facts set forth in the DPA, and statements made during public proceedings in Manhattan federal court:
Between approximately 2001 and 2012, KARIMOVA and AKHMEDOV agreed that AKHMEDOV would solicit and obtain corrupt bribes for KARIMOVA from telecommunications companies, including MTS and KOLORIT, so that the companies could obtain and retain telecommunications business in Uzbekistan. The bribes were paid to KARIMOVA, who, in exchange, exercised her corrupt influence over Uzbek telecommunications industry regulators to allow the telecommunications companies to obtain lucrative business and operate in the Uzbek market. MTS and KOLORIT structured and concealed the bribes through various payments to shell companies that certain members of MTS and KOLORIT management knew were beneficially owned by KARIMOVA. In total, AKHMEDOV and others conspired to pay KARIMOVA more than $865 million in bribes. KARIMOVA, AKHMEDOV, and others agreed to launder those funds in order to promote and conceal the bribery scheme. For their part, MTS, KOLORIT, and affiliated entities paid KARIMOVA more than $420 million in bribes. A substantial portion of the illicit funds were transmitted through financial institutions in the Southern District of New York before they were deposited into bank accounts controlled by KARIMOVA in various countries around the world.
The resolution with MTS and KOLORIT, reached in coordination with the SEC, marks the third such resolution by a major international telecommunications company for bribery in Uzbekistan. On February 18, 2016, Amsterdam-based VimpelCom and its Uzbek subsidiary, Unitel LLC, entered into a resolution with SDNY and DOJ and admitted to conspiring to pay more than $114 million in bribes to KARIMOVA between 2005 and 2012. On September 21, 2017, Stockholm-based Telia and its Uzbek subsidiary, Coscom LLC, entered into a resolution with SDNY and DOJ and admitted to conspiring to pay more than $331 million in bribes to KARIMOVA between 2007 and 2010.
The investigation has thus far yielded a combined total of more than $2.6 billion in global fines and disgorgement, including more than $1.3 billion in criminal penalties paid to the United States. In related actions, DOJ has also filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg, and Ireland, which constitute bribe payments made by MTS, VimpelCom, and Telia, or funds involved in the laundering of those bribes, to KARIMOVA
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KARIMOVA, 46, a citizen of Uzbekistan, was charged with one count of conspiracy to commit money laundering. AKHMEDOV, 44, a citizen of Uzbekistan currently residing in Russia, was charged with one count of conspiracy to violate the FCPA, two counts of violating the FCPA, and one count of conspiracy to commit money laundering. KARIMOVA and AKHMEDOV remain at large.
KOLORIT was charged with, and pled guilty to, one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA. MTS was charged with one count of conspiracy to violate the anti-bribery and books and records provisions of the FCPA and one count of violating the internal controls provisions of the FCPA.
Mr. Berman thanked the Fraud Section of the DOJ’s Criminal Division for their collaboration and praised the outstanding investigative work of IRS-CI, the IRS Global Illicit Financial Team, and HSI. Mr. Berman also thanked the SEC’s Division of Enforcement for its assistance and cooperation in the investigation. Mr. Berman expressed his appreciation to the DOJ’s Office of International Affairs for its significant assistance in this matter and to law enforcement colleagues in Austria, Belgium, Cyprus, France, Ireland, Isle of Man, Latvia, Luxembourg, Norway, the Netherlands, Switzerland, Sweden, and the United Kingdom.
The prosecution of this case is being handled by SDNY’s Complex Frauds and Cybercrime Unit and the FCPA Unit of the Fraud Section of DOJ’s Criminal Division. Assistant U.S. Attorney Edward A. Imperatore, Assistant Chief Ephraim Wernick, Senior Litigation Counsel Nicola Mrazek, and Trial Attorney Elina Rubin-Smith are in charge of the prosecution. Trial Attorney Michael Khoo of the DOJ Criminal Division’s Money Laundering and Asset Recovery Section (“MLARS”) is prosecuting the forfeiture case with substantial assistance from former MLARS Trial Attorney Marie M. Dalton, now an Assistant U.S. Attorney in the Western District of Washington.
The charges contained in the Indictment against KARIMOVA and AKHMEDOV are merely accusations, and the defendants are presumed innocent unless proved guilty.
Bronx Gang Member Convicted of Racketeering and Related Offenses, Including 2014 Shooting of Three IndividualsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CHRISTOPHER HOWARD, a/k/a “Juju,” a member of a violent, Bronx-based street gang known as “Money, Bitches, Guns” (“MBG”), was convicted yesterday of racketeering conspiracy, assault with a deadly weapon in aid of racketeering, and a firearms offense. HOWARD was convicted following a one-week trial before U.S. District Judge Robert W. Sweet.
U.S. Attorney Geoffrey S. Berman said: “Christopher Howard was a member of a violent street gang that operated in and around NYCHA’s Mill Brook Houses. In August 2014, he shot into a crowd of people in the Mill Brook Houses, injuring three individuals. Now he stands convicted for his crimes. We thank the New York City Police Department and the Drug Enforcement Administration for their tireless efforts to secure this important conviction.”
As reflected in the Indictment, documents previously filed in the case, and evidence introduced at trial:
From 2007 through October 2017, HOWARD was a member of MBG, a local street gang based in the Mill Brook Houses in the Bronx that was responsible for narcotics trafficking and several acts of violence. As part of his membership in MBG, Howard boasted about his gang membership on social media and shot at a rival gang member. Specifically, in the early morning hours of August 17, 2014, HOWARD, aiming for a rival gang member who had previously broken HOWARD’s jaw, shot into a crowd of people gathering in a small courtyard in the Mill Brook Houses. Three people were injured as a result of the shooting, including HOWARD’s intended target.
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HOWARD, 26, of the Staten Island, New York, faces a mandatory minimum sentence of 10 years in prison and a maximum potential sentence of life in prison.
Mr. Berman praised the outstanding investigative work of the New York City Police Department and the Drug Enforcement Administration.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Alexandra Rothman, Christopher Clore, and Jordan Estes are in charge of the prosecution.
7 Defendants Charged in White Plains Federal Court with Participating in A Jamaican Lottery Scheme ConspiracyRead 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 charges today against seven individuals in fraud and money laundering conspiracies dating from July 2017 through September 2018. LINKOY BENNETT, RENNEIL WILLIAMS, DWAYNE BORELAND, TIFFANY RANDOLPH, and OSHANE ROYE, and their associates allegedly engaged in a scheme to defraud elderly victims by telling them they won the Publishers Clearing House Sweepstakes, but needed to prepay their taxes to obtain their winnings. BENNETT, WILLIAMS, BORELAND, and RANDOLPH, as well as FABIAN ROBINSON, and HARRIANN MITCHELL, were also charged in a money laundering conspiracy related to the fraudulent scheme. Seven defendants were arrested in the Southern District of New York and will be presented today before United States Magistrate Judge Paul E. Davison.
U.S. Attorney Geoffrey S. Berman said: “These seven defendants allegedly engaged in the scheme to contact elderly victims under the guise of winning a sweepstakes, imploring them to prepay taxes on their ‘winnings’ before they could collect. In reality, this was a coldhearted scheme to bilk over $1 million from over 30 victims. Linkoy Bennet and his co-defendants played the lottery with the law and their luck has run out, as they now face up to 20 years in federal prison.”
FBI Assistant Director in Charge William F. Sweeney Jr. said: “Unfortunately, many elderly citizens find themselves in less than desirable financial situations, creating within them a constant worry about money. This is one of the many reasons they’re targeted by criminals as attractive victims. Crimes like the one our defendants are charged with today not only provide false hope for their prey, but have the potential to inflict severe emotional wounds. An important step in avoiding being victimized is educating the public about the many scams targeting the elderly. If you believe you are a victim of fraud, or know a senior who may be, regardless of financial loss, immediately report the incident to your local FBI field office or law enforcement agency.”
According to the allegations in the Complaint unsealed today:[1]
From at least in or about July 2017 through in or about September 2018, LINKOY BENNETT, RENNEIL WILLIAMS, DWAYNE BORELAND, TIFFANY RANDOLPH, OSHANE ROYE, FABIAN ROBINSON, and HARRIANN MITCHELL, collected the proceeds of a fraudulent scheme. During the scheme, unnamed co-conspirators called elderly victims throughout the United States, and falsely told the victims they won the Publishers Clearing House Sweepstakes, but needed to prepay taxes and fees to receive their winnings. The victims sent cash, postal money orders, wire transfers, personal and cashier’s checks to the defendants at various addresses in the Southern District of New York. The defendants collected the proceeds of the scheme, and remitted them to an unnamed co-conspirator.
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BENNETT, 22, of the Bronx, New York, WILLIAMS, 32, of the Bronx, New York, BORELAND, 37, of the Bronx, New York, RANDOLPH, 30, of White Plains, New York, and ROYE, 23, of the Bronx, New York, are each charged with one count of conspiracy to commit wire fraud and mail fraud. BENNETT, WILLIAMS, BORELAND, and RANDOLPH, as well as FABIAN ROBINSON, 33, of the Bronx, New York, and HARRIANN MITCHELL, 38, of the Bronx, New York, are charged with a conspiracy launder the proceeds of the scheme. Each charge carries a maximum penalty of 20 years in prison. The maximum potential sentence in this case is prescribed by Congress and 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 Federal Bureau of Investigation for their assistance.
The case is being handled by the Office’s White Plains Division. Assistant United States Attorney Lindsey Keenan is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
District Court Rules That MTA’s Renovation of Subway Station Triggered MTA’s Obligation Under Americans with Disabilities Act to Install Elevators Unless Technically InfeasibleRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that partial summary judgment has been granted in favor of plaintiffs and the Government in a lawsuit brought under the Americans with Disabilities Act (“ADA”) by private plaintiffs (Bronx Independent Living Services et al. v. MTA) in which the United States intervened. U.S. District Judge Edgardo Ramos ruled that the Metropolitan Transportation Authority’s (the “MTA”) replacement of the stairways at the Middletown Road subway station in the Bronx affected the station’s usability, thus triggering the MTA’s obligation under the ADA to install elevators, without regard to cost, unless it is technically infeasible to do so.
U.S. Attorney Geoffrey S. Berman said: “The MTA is now on notice that whenever it renovates a subway station throughout its system so as to affect the station’s usability, the MTA is obligated to install an elevator, regardless of the cost, unless it is technically infeasible. Individuals with disabilities have the same rights to use the New York City subway system as every other person. The Court’s decision marks the end of the MTA treating people with disabilities as second-class citizens. My Office will continue to work to ensure that the provisions of the Americans with Disabilities Act are enforced, and that everyone enjoys equal access to public transit in this District.”
The ADA, signed into law in 1990, prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public. Under its provisions, the ADA requires state and local government agencies to make alterations to public transit facilities readily accessible to, and usable by, individuals with disabilities, including those who use wheelchairs.
In March 2018, this Office intervened in a private lawsuit brought by Disability Rights Advocates regarding the MTA’s refusal to install elevators at the Middletown Road station, despite undertaking a substantial renovation of the entire station, including the staircases. The Department of Transportation, Federal Transit Authority (“FTA”), had declined the MTA’s request for federal funds for the renovation because the MTA’s refusal to install elevators violated the ADA.
Judge Ramos ruled that MTA’s renovation of the Middletown Road station was an alteration that triggered the ADA’s requirement to install an elevator unless it is technically not feasible to do so. Specifically, Judge Ramos concluded that when a public transit authority alters a station in a way that affects its “usability,” the public transit authority must follow the requirements in 49 C.F.R. § 37.43(a)(1), requiring the installation of an elevator where technically feasible regardless of cost. The Court rejected the MTA’s argument that the governing regulation permitted it to avoid installing an elevator based on cost considerations.
Mr. Berman thanked Disability Rights Advocates for its work in this case, as well as FTA for its continued assistance with this matter.
This case is being handled by the Civil Rights Unit of the Office’s Civil Division. Assistant U.S. Attorneys Ellen Blain and Lara Eshkenazi are in charge of the case.
Disbarred Orange County Attorney Sentenced to 7 Years in Prison for Mail Fraud, Tax Evasion, Obstruction of Justice, Perjury, and Other CrimesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that former Orange County attorney JOSEPH SCALI was sentenced to seven years in prison in connection with SCALI’s conviction for mail fraud, structuring cash transactions, making false statements to the IRS, obstructing the IRS, tax evasion, obstruction of justice, and perjury following a four-week jury trial. SCALI was sentenced today by U.S. District Judge Nelson S. Román, who presided over the trial.
U.S. Attorney Geoffrey S. Berman said: “Joseph Scali, a former attorney, was convicted of embezzling $850,000 from his attorney trust account that held third party funds from an uncompleted real estate transaction. Instead of returning the funds – which he was required to do by law – Scali used them on his personal expenses, including sports tickets and international travel. Scali also filed false tax returns and made false sworn statements to the court. Joseph Scali violated his responsibilities as a lawyer and a taxpayer, and now will have seven years in federal prison to reflect on his wide array of financial crimes and failure to act ethically before the court.”
According to the Indictment, court filings, and statements made in public court proceedings:
From January 2011 through August 2012, SCALI – then a licensed, practicing attorney – perpetrated a scheme to defraud a prospective buyer of land and mineral rights in Pennsylvania. SCALI represented the seller in the land transaction and was entrusted to hold the buyer’s funds in his attorney trust account pending closing, which never took place. Instead of preserving the buyer’s funds and returning them when the transaction fell through, SCALI embezzled $850,000 of the buyer’s money from his attorney trust account and spent the majority on personal expenses, including season sports tickets, luxury clothing items, and trips abroad.
After defrauding the buyer, SCALI engaged in tax evasion for the years 2011 and 2012 by, among other things, deliberately withholding from the IRS his attorney trust account records, which would have revealed the funds he had misappropriated and made him liable for hundreds of thousands of dollars in unpaid federal income taxes.
In addition, between 2006 and November 2013, SCALI corruptly endeavored to obstruct the IRS by (a) providing materially false, incomplete, and misleading information to an IRS Revenue Officer about his tax filing history and income; (b) commingling client funds and personal funds in his attorney trust account; (c) paying for personal items directly out of his attorney trust account; (d) structuring $32,400 in cash deposits into his attorney trust account. In addition, SCALI failed to timely file U.S. Individual Income Tax Returns, Forms 1040, for the years 2006 through 2012, as well as U.S. Corporate Income Tax Returns, Forms 1120, for his law firm, Joseph G. Scali, P.C., for the years 2007 through 2012, notwithstanding that he was required by law to file a return for each year. SCALI was also separately convicted of making false statements to the IRS and structuring cash deposits.
In all, SCALI caused the IRS to incur losses of over $500,000, not including penalties and interest.
SCALI also committed obstruction of justice and perjury when, in seeking to set aside his disbarment by the U.S. District Court for the Southern District of New York, he lied under oath to that court about the reason for his 2013 suspension from the practice of law in New York State.
In 2014 and 2015, SCALI perpetrated a second mail fraud scheme by fraudulently undertaking a legal representation of a client for a fee without disclosing his 2013 suspension from the practice of law in New York State.
On July 6, 2016, SCALI was disbarred by the Second Judicial Department of the Appellate Division of the New York State Supreme Court.
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In addition to the prison term, Judge Román ordered SCALI to serve three years of supervised release and to pay restitution totaling $1,511,534.73 to the victims of his mail fraud schemes and the IRS.
Mr. Berman praised the work of the IRS, the U.S. Postal Inspection Service, and the Special Agents of the U.S. Attorney’s Office in this investigation. Mr. Berman also thanked the Orange County District Attorney’s Office, the New York State Department of Taxation and Finance, the New York State Police, the Counsel for the Grievance Committee for the Ninth Judicial District of New York State, the Counsel for the Committee on Grievances for the U.S. District Court for the Southern District of New York, and the Counsel for the IOLA Fund of New York for their assistance and cooperation in the investigation.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Olga Zverovich, Vladislav Vainberg, and Daniel Noble are in charge of the prosecution.
New Jersey Man Convicted in Manhattan Federal Court of Three Counts in Connection with Theft of over $2 Million in Stock Certificates from Deceased Manhattan WomanRead 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 Field Office of the Federal Bureau of Investigation (“FBI”), announced the conviction yesterday of ROBERT MERLO, a New Jersey-based insurance agent who participated in a scheme to steal more than $2 million in stock certificates from the apartment of a deceased Manhattan woman, open a brokerage account in her name in order to liquidate the stocks, and then use those stolen assets to attempt to purchase over $2 million worth of gold coins, following a four-day trial before the Honorable Lewis A. Kaplan.
U.S. Attorney Geoffrey S. Berman said: “We are gratified that the jury reached a swift and just verdict in this case. The conduct of the defendant was the financial equivalent of grave-robbing.”
FBI Assistant Director William F. Sweeney Jr. said: “There are few things more disturbing than stealing from the deceased. The conviction of Robert Merlo is a welcome conclusion – one that highlights our resolve to defend the truly defenseless.”
As reflected in the Indictment, documents previously filed in the case, and evidence introduced at trial:
From approximately March 2016 to February 2017, MERLO engaged in a scheme with others known and unknown designed to steal over $2 million from a deceased Manhattan woman (the “Victim”). As part of the scheme, MERLO’s co-conspirators stole stock certificates valued at over $2 million from the Victim’s Manhattan apartment after the Victim’s death. In August 2016, MERLO agreed with others to make false representations to a financial institution (“Company-1”) in order to open a brokerage account (the “Account”) in the Victim’s name, deposit the stolen stock certificates into the Account, and sell the shares in the brokerage account, resulting in a cash balance of over $2 million. MERLO agreed to help launder the cash balance in the brokerage account, approaching several individuals to carry out his plan. MERLO and his co-conspirators then attempted to purchase $2 million in gold coins using the assets in the Account. MERLO and his co-conspirators met several times over the course of months and communicated using prepaid or “burner” phones regarding the fraudulent scheme.
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MERLO, 55, of Secaucus, New Jersey, was convicted of one count of wire fraud and one count of conspiracy to commit wire fraud, each of which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendant will be determined by the judge. Sentencing before Judge Kaplan is scheduled for June 10, 2019.
Mr. Berman praised the outstanding investigative work of the FBI.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Cecilia Vogel, Sarah Mortazavi, Dina McLeod, and Alexandra Rothman are in charge of the prosecution.
Former Adidas Executive, Former Adidas Consultant, and Aspiring Manager All Sentenced to Prison Terms for Their Roles in Defrauding Adidas-Sponsored NCAA Division I UniversitiesRead the Press Release
Robert S. Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced today that former Adidas director of global sports marketing for basketball, JAMES GATTO, a/k/a “Jim,” was sentenced to nine months in prison, former Adidas consultant MERL CODE was sentenced six months in prison, and sports business manager CHRISTIAN DAWKINS was sentenced to six months in prison, after having been found guilty in October 2018 by a federal jury of wire fraud and wire fraud conspiracy charges. The defendants were sentenced in Manhattan federal court by U.S. District Judge Lewis A. Kaplan, who also presided over the jury trial.
Attorney for the United States Robert Khuzami said: “The sentences imposed today only begin to reflect the magnitude of the harm these defendants caused through a scheme that not only defrauded multiple public universities but upended the lives of young student-athletes and corrupted a game cherished by so many. Today’s sentences send a clear message to those who might be similarly tempted to corrupt collegiate athletics for their own personal gain that defrauding schools in connection with athletic scholarships is not just a rules violation but a crime, one that will result in a prison term.”
According to the allegations contained in the Complaint, Indictment, Superseding Indictment, evidence presented during the trial, and statements made in Manhattan federal court:
Overview of the Scheme
GATTO, CODE, and DAWKINS, including with the assistance of Thomas Gassnola, a former Adidas consultant, and Munish Sood, a financial adviser, brokered and facilitated payments funded by Adidas to the families of high school and college-aged basketball players in connection with decisions by those players to commit to Adidas-sponsored schools and a promise that the players also would retain the services of DAWKINS and sign lucrative endorsement deals with Adidas upon turning professional. The payments, which the defendants took great lengths to conceal from the victim-universities, served to defraud the relevant universities in several ways.
First, because the illicit payments to the families of student-athletes rendered those student-athletes ineligible to participate in collegiate athletics, scheme participants conspired to conceal these payments from the universities, thereby causing them to provide or agree to provide athletic-based scholarships and financial aid under false and fraudulent pretenses. Indeed, the defendants and their co-conspirators, who included the families of the student-athletes and, in certain instances, one or more corrupt coaches at the universities, knew that, for the scheme to succeed and the athletic scholarships to be awarded, the illicit payments had to be concealed from the universities, and that certifications would be submitted to the universities falsely representing that the student-athletes were eligible to compete in Division I athletics.
Second, the scheme participants further defrauded the universities by depriving the universities of significant and necessary information regarding the non-compliance with NCAA rules by the relevant student-athletes and their families, and, in some cases, by certain corrupt coaches involved in the scheme. In doing so, the scheme participants interfered with the universities’ ability to control their assets and created a risk of tangible economic harm to the universities, including, among other things, decision-making about the distribution of their limited athletic scholarships; the possible disgorgement of certain profit-sharing by the NCAA; monetary fines; restrictions on athlete recruitment and the distribution of athletic scholarships; and the potential ineligibility of the universities’ basketball teams to compete in NCAA programs generally, and the ineligibility of certain student-athletes in particular.
The University of Louisville Scheme
Beginning in approximately May 2017, GATTO, CODE, DAWKINS, and others worked together to illicitly funnel approximately $100,000 from Adidas to the father of Brian Bowen, then a top-rated high school basketball player, in connection with Bowen’s commitment to play at the University of Louisville, a school whose athletic programs are sponsored by Adidas. Because the payments to the family of Bowen were both in violation of NCAA rules and illegal, the defendants took steps to conceal them from the University, including funneling the money indirectly through an amateur team affiliated with CODE and a corporation controlled by DAWKINS. The payments were all funded by Adidas pursuant to phony invoices approved by GATTO, and the first installment was delivered to Bowen’s father in cash in July 2017 in a parking lot in New Jersey.
The University of Kansas Scheme
Between 2016 and 2017, GATTO and Gassnola worked together to funnel approximately $90,000 from Adidas to the family of Billy Preston, then a high school basketball player, in connection with Preston’s commitment to play at the University of Kansas, a university whose athletic programs are sponsored by Adidas. To conceal the payments from the University, GATTO routed the money to Billy Preston’s family indirectly, through an Adidas-sponsored amateur team affiliated with Gassnola, and pursuant to sham invoices approved by GATTO.
In addition, in the summer of 2017, GATTO and Gassnola agreed to funnel money to the legal guardian of Silvio De Sousa, then a high school basketball player, in connection with De Sousa’s commitment to play at the University of Kansas. In one instance, GATTO and Gassnola were intercepted over a wiretap discussing a $20,000 payment to the legal guardian.
The North Carolina State University Scheme
In approximately November 2015, GATTO and Gassnola agreed to funnel approximately $40,000 from Adidas to the family of Dennis Smith Jr., then a high school basketball player, in order to stop Smith Jr. from de-committing from North Carolina State University, a university whose athletic programs are sponsored by Adidas. Gassnola flew to North Carolina to personally deliver the money in cash to a basketball coach at North Carolina State University, who then routed the money to Smith Jr.’s family. After Gassnola made the payment, GATTO reimbursed Gassnola via his Adidas-sponsored amateur team.
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In addition to the prison sentences, Judge Kaplan ordered CODE, 45, of Greer, South Carolina, and DAWKINS, 26, of Atlanta, Georgia, to each pay restitution to the University of Louisville in the amount of $28,261. The court reserved the decision on the restitution for GATTO, 48, of Wilsonville, Oregon, and set a conference for April 9, 2019, at 10 a.m. Each of the three defendants was sentenced to two years of supervised release.
Gassnola and Sood have previously pled guilty and are awaiting sentence.
Mr. Khuzami thanked the FBI and the Special Agents of the U.S. Attorney’s Office of the Southern District of New York for their tireless efforts during the investigation and prosecution of this case.
The case was prosecuted by the Office’s Public Corruption Unit. Assistant United States Attorneys Edward B. Diskant, Noah Solowiejczyk, Eli J. Mark, and Aline R. Flodr are in charge of the prosecution.