Southern District of New York
Press releases recorded for this federal judicial district.
Five Defendants Charged with Murder in Aid of Racketeering and Other CrimesRead 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 U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of superseding federal indictments charging RICHARD DRAYTON, a/k/a “Rad,” FRANKIE REYES, a/k/a “Biscuit,” ALFREDO RODRIGUEZ, a/k/a “Fetti,” TEVIN MABLE, a/k/a “Tot,” and JORGE IRIZARRY, a/k/a “Gito,” with gang-related crimes, including the March 13, 2015, murder of Johnathan Martinez, 18, in the Bronx, New York.
U.S. Attorney Geoffrey Berman said: “As alleged, the defendants were members of a violent gang who killed a young man from their neighborhood in a pointless, gang-related dispute. We thank HSI and the NYPD for their outstanding work investigating this terrible murder. We will continue our efforts with our law enforcement partners to prevent such senseless acts of violence.”
HSI Special Agent in Charge Angel M. Melendez said: “As alleged, the individuals charged are members of the Crips gang who gunned down an 18-year-old man in the Bronx to bolster their street credibility. For this alleged violent crime, if convicted, they could face life sentences that would put an end to their racketeering and murderous ways. HSI remains committed to working alongside NYPD’s Bronx Violent Crime Squad.”
NYPD Commissioner James P. O’Neill said: “The ability of investigators to bring about justice for this young man and provide a sense of closure to his loved ones is paramount. The identification and arrest of these defendants was a team effort that would not have been possible without the close partnership that exists between the NYPD and our law-enforcement partners. I thank and commend the NYPD investigators, the Southern District of New York, and Homeland Security Investigations for their relentless work in this case.”
According to the Indictment[1]:
DRAYTON, REYES, RODRIGUEZ, MABLE, and IRIZARRY were members of the “Wild Card” set of the Crips gang. The defendants sold drugs and used guns to further the aims of the Wild Cards. On March 13, 2015, the defendants took part in the shooting murder of Johnathan Martinez in order to maintain and increase their reputation in the Wild Cards.
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IRIZARRY, 25, of the Bronx, New York, was arrested on March 2, 2019, near Ocala, Florida. He was presented in federal court in the Middle District of Florida earlier today, and will be transported to the Southern District of New York to face charges. MABLE, 26, of the Bronx, New York, was arrested on February 28, 2019, near Kinston, North Carolina. He was presented in federal court in the Eastern District of North Carolina, and will also be transported to the Southern District of New York to face charges. DRAYTON, 43, of the Bronx, New York, was arrested in the Bronx on Friday, February 22, 2019, and presented in this District before United States Magistrate Judge Ona Wang the same day. REYES, 24, and RODRIGUEZ, 27, both of the Bronx, New York, were already in federal custody on other charges. This case is assigned to United States District Judge Loretta A. Preska.
Charts 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’s Bronx Violent Crime Squad and HSI’s Violent Gang Unit.
The prosecution of this case is being handled by the Office’s Violent and Organize Crime Unit. Assistant United States Attorneys Hagan Scotten, Gina Castellano, and Adam Hobson are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless proved guilty.
COUNT
DEFENDANT(S)
MAX. TERM OF IMPRISONMENT
Count One: Conspiracy to Commit Racketeering
(18 U.S.C. § 1962(d))
Richard Drayton
Frankie Reyes
Alfredo Rodriguez
Tevin Mable
Jorge Irizarry
Life Imprisonment
Count Two: Murder in Aid of Racketeering
(18 U.S.C. § 1959(a)(1))
Richard Drayton
Frankie Reyes
Alfredo Rodriguez
Tevin Mable
Jorge Irizarry
Mandatory Minimum Sentence of Death or Life Imprisonment
Count Three: Use of a Firearm to Commit Murder (18 U.S.C. § 924(j)(1))
Richard Drayton
Frankie Reyes
Alfredo Rodriguez
Tevin Mable
Jorge Irizarry
Death or Life Imprisonment; Mandatory Minimum Sentence of 5 Years
Count Four: Use and Discharge of Firearms in Furtherance of Racketeering Conspiracy (18 U.S.C. § 924(c)(1)(A)(iii))
Richard Drayton
Frankie Reyes
Alfredo Rodriguez
Jorge Irizarry
Life Imprisonment; Mandatory Minimum Sentence of 10 Years
Count Five: Conspiracy to Distribute Narcotics (21 U.S.C. §§ 846 and 841(b)(1)(A))
Richard Drayton
Frankie Reyes
Jorge Irizarry
Tevin Mable
Life Imprisonment; Mandatory Minimum Sentence of 10 Years
Count Six: Use and Discharge of Firearms in Furtherance of Narcotics Conspiracy (18 U.S.C. § 924(c)(1)(A)(iii))
Richard Drayton
Frankie Reyes
Jorge Irizarry
Tevin Mable
Life Imprisonment; Mandatory Minimum Sentence of 10 Years
[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.
U.S. Attorney Announces Charges Against 11 Defendants for Sex Trafficking and Related OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), and Geraldine Hart, Commissioner of the Suffolk County Police Department, announced today the unsealing of an indictment charging 11 defendants with 15 counts of participating in the sex trafficking of, and related conduct victimizing, at least 10 young women. Nine defendants were arrested today and will be presented this afternoon before the Honorable Ona T. Wang, United States Magistrate Judge. Two additional defendants are in state custody and will be presented in federal court on a future date.
U.S. Attorney Geoffrey S. Berman said: “The alleged conduct of these 11 defendants against women is as callous as it is alarming. Today’s indictment alleges they operated a pay-for-sex business with their clients, while they threatened, intimidated, and coerced their female ‘employees’ to participate in commercial sex acts for money. The unconscionable crime of sex trafficking is a societal problem that disproportionally preys upon our communities’ most vulnerable: women and children. If you have knowledge of sex trafficking crimes, you should immediately call 212-384-5000.”
FBI Assistant Director William F. Sweeney Jr. said: “There is a common belief that the victims of human sex trafficking aren’t truly victims. However evidence in this investigation shows the suspects allegedly used whatever means necessary to control and abuse these victims just to make money. The FBI New York Child Exploitation and Human Trafficking Task Force not only goes after the pimps and others involved in human trafficking, but we do all we can to help those girls who are being sold to start their lives again.”
Suffolk County Police Commissioner Geraldine Hart said: “The takedown of this alleged sex trafficking ring in Suffolk County is crucial in stopping predators who target the vulnerable for financial gain as well as support the victims in getting the necessary assistance they deserve. The success of this operation is why we work with our law enforcement partners and I commend the commitment of our department’s Human Trafficking Investigations Unit, NYPD, and the FBI, which led the investigation.”
New York City Police Commissioner James P. O'Neil said: “Today’s charges further affirm the NYPD’s unwavering commitment to protecting the survivors of sex trafficking. This crime is among the most heinous in our society. Our job is to ensure that anyone who would seek to profit through the abuse and exploitation of another human being be brought to justice swiftly and successfully. To that end, I thank and commend the U.S. Attorney’s Office for the Southern District, the FBI, and the Suffolk County Police Department for their support in building this critical case. Together, we will continue to make the safest large city in the nation even safer.”
As alleged, defendants LORENZO RANDALL, JUSTIN RIVERA, DWAYNE ANTHONY CONLEY, RICARDA DIAMOND, and BRIAN SMITH conspired to commit sex trafficking through force, threats of force, fraud, or coercion. In furtherance of the conspiracy, RANDALL allegedly punched, choked, and spit on certain of the victims. The indictment further alleges that RIVERA physically assaulted and brandished a dangerous weapon at a second victim. Allegedly knowing that this second victim was addicted to heroin, RIVERA withheld heroin from her unless she engaged in commercial sex acts at his direction and for his profit. Similarly, CONLEY is alleged to have physically assaulted a third victim, who was also a heroin addict, and provided her with heroin in exchange for her engagement in commercial sex acts on his behalf.
DIAMOND allegedly conspired with RANDALL to transport a victim to locations where she engaged in commercial sex acts caused by RANDALL’s force and threats of force. And SMITH allegedly arranged for hotels rooms to be used by women, including the first victim, who were engaging in commercial sex acts on RANDALL’s behalf.
Defendants RANDALL, CARL ANDREWS, GERALDINE FAUSTIN, and FRANKLYN FRANCISCO are alleged to have been members of a second conspiracy to commit sex trafficking through force, threats of force, fraud, or coercion. As alleged, FRANCISCO recruited a victim to engage in commercial sex acts on behalf of ANDREWS, knowing that the victim was addicted to controlled substances. ANDREWS is alleged to have falsely represented to that victim that ANDREWS would compensate her financially for engaging in commercial sex acts on his behalf. ANDREWS is also alleged to have withheld from that victim the controlled substances to which she was addicted unless she engaged in commercial sex acts at his direction and for his profit. RANDALL allegedly reserved a hotel room for the purpose of the fourth victim engaging in a commercial sex act, and FAUSTIN allegedly transported the fourth victim to locations where she engaged in commercial sex acts.
In addition, RANDALL is charged with four separate counts of sex trafficking by force, threats of force, fraud, or coercion, in connection with the trafficking of three victims. ANDREWS is also charged with one count of sex trafficking of a victim by force, threats of force, fraud, or coercion.
Defendants ANTHONY DARBY and KARI PARKER are charged with two counts of violating the Mann Act for knowingly transporting two victims to multiple states, including New York and Connecticut, with the intent that those victims engage in prostitution. DIAMOND is also charged with a violation of the Mann Act for knowingly transporting a victim to multiple states, including New York and Connecticut, with the intent that the victim engage in prostitution.
Along with defendant MAGEN MOREAU, DARBY is further charged with conspiracy to violate the Travel Act. Specifically, MOREAU and DARBY allegedly published advertisements on the Internet offering commercial sex acts in the Southern District of New York and elsewhere.
DARBY and PARKER are also charged with conspiracy to violate the Travel Act. As alleged, DARBY and PARKER used an account held by PARKER with a classifieds website to publish advertisements on the Internet offering commercial sex acts in the Southern District of New York and elsewhere.
In addition to the six charges against him discussed previously, RANDALL is charged with two counts of conspiring to violate the Travel Act. With respect to the first of those conspiracies, RANDALL allegedly used a telephone to direct a co-conspirator not named in the indictment to promote, manage, establish, carry on, and facilitate the promotion, management, establishment, and carrying on of prostitution. Regarding the second, RANDALL allegedly instructed ANDREWS – who is also charged in the second Travel Act conspiracy – how to purchase and publish an advertisement for a commercial sex act on the Internet, which ANDREWS ultimately did. Lastly, in the ninth charge filed against him in the indictment, RANDALL is charged with violating the Travel Act, with respect to illegal prostitution.
According to the indictment, at least 10 young women were victims of the defendants’ crimes. The charged conduct occurred, as detailed in the indictment, between 2012 and 2018.
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Charts 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 Special Agents from the U.S. Attorney’s Office for the Southern District of New York, detectives from the Suffolk County Police Department, and Special Agents from the FBI’s New York Child Exploitation and Human Trafficking Task Force.
The prosecution of this case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Daniel H. Wolf and Benjamin Woodside Schrier 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
DEFENDANT(S)
AGE & PLACE OF RESIDENCE
MAX. TERM OF IMPRISONMENT
Count One: Conspiracy to Commit Sex Trafficking
(18 U.S.C. § 1594(c))
Lorenzo Randall
Justin Rivera
Dwayne Conley
Ricarda Diamond
Brian Smith
Age 29, Bay Shore, NY
Age 29, Bay Shore, NY
Age 50, Bay Shore, NY
Age 37, Mastick, NY
Age 30, Central Islip
Life
Count Two: Conspiracy to Commit sex Trafficking
(18 U.S.C. § 1594(c))
Lorenzo Randall
Carl Andrews
Geraldine Faustin
Franklyn Francisco
Age 29, Bay Shore, NY
Age 45, Bay Shore, NY
Age 30, West Babylon, NY
Age 38, Central Islip, NY
Life
Count Three: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)
Lorenzo Randall
Age 29, Bay Shore, NY
Life; Mandatory Minimum Sentence of 15 Years
Count Four: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)
Lorenzo Randall
Age 29, Bay Shore, NY
Life; Mandatory Minimum Sentence of 15 Years
Count Five: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)
Lorenzo Randall
Age 29, Bay Shore, NY
Life; Mandatory Minimum Sentence of 15 Years
Count Six: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)
Lorenzo Randall
Age 29, Bay Shore, NY
Life; Mandatory Minimum Sentence of 15 Years
Count Seven: Sex Trafficking by Force, Threats of Force, Fraud, or Coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)
Carl Andrews
Age 45, Bay Shore, NY
Life; Mandatory Minimum Sentence of 15 Years
Count Eight: Mann Act (18 U.S.C. §§ 2421(a) and 2)
Anthony Darby
Kari Parker
Age 26, Mastick, NY
Age 22, Mastick, NY
10 Years
Count Nine: Mann Act (18 U.S.C. §§ 2421(a) and 2)
Anthony Darby
Kari Parker
Age 26, Mastick, NY
Age 22, Mastick, NY
10 Years
Count Ten: Mann Act (18 U.S.C. §§ 2421(a) and 2)
Ricarda Diamond
Age 37, Mastick, NY
10 Years
Count Eleven: Conspiracy to Violate the Travel Act (18 U.S.C. § 371)
Anthony Darby
Magen Moreau
Age 26, Mastick, NY
Age 29, Bay Shore, NY
5 Years
Count Twelve: Conspiracy to Violate the Travel Act (18 U.S.C. § 371)
Anthony Darby
Kari Parker
Age 26, Mastick, NY
Age 22, Mastick, NY
5 Years
Count Thirteen: Conspiracy to Violate the Travel Act (18 U.S.C. § 371)
Lorenzo Randall
Age 29, Bay Shore, NY
5 Years
Count Fourteen: Conspiracy to Violate the Travel Act (18 U.S.C. § 371)
Lorenzo Randall
Carl Andrews
Age 29, Bay Shore, NY
Age 45, Bay Shore, NY
5 Years
Count Fifteen: Travel Act (18 U.S.C. § 371)
Lorenzo Randall
Age 29, Bay Shore, NY
5 Years
9 Members of Bronx Drug Trafficking Organization Charged with Distributing Heroin, Fentanyl, and Cocaine Out of Auto Body ShopsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Raymond Donovan, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), James D. Robnett, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division, (“IRS-CI”), Angel M. Melendez, Special Agent in Charge of the New York Office of Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), Keith M. Corlett, Acting Superintendent of the New York State Police (“NYSP”), and James P. O’Neill, Police Commissioner of the City of New York (“NYPD”), announced today that ADALBERTO VELAZQUEZ, a/k/a “Joe,” RAYMOND RESTO, a/k/a “Tone,” SAL CASTRO, a/k/a “Floss,” JOEL LOPEZ, a/k/a “Rompiendoe,” a/k/a “Paul,” a/k/a “Po,” WILLIS LLERAS, a/k/a “Willy,” REINALDO ROMAN, a/k/a “Papo,” JAIME GARCIA, a/k/a “Jimmy,” ANTONIO BURGOS, a/k/a “Anthony,” and MARILYN ADINO have been charged with participating in a conspiracy to distribute heroin, fentanyl, and cocaine. The defendants arrested today are expected to be presented this afternoon before United States Magistrate Judge Ona T. Wang. The case has been assigned to United States District Judge Ronnie Abrams.
U.S. Attorney Geoffrey S. Berman said: “As alleged, these defendants were a network that outwardly offered to fix cars but was really an organization that would supply a fix of heroin or cocaine. Thanks to the work of the DEA and its Strike Force partners, we have delivered a body blow to these allegedly drug-peddling body shops.”
DEA Special Agent in Charge Raymond Donovan said: “These arrests will have a significant impact on the heroin/fentanyl supply in the Bronx. DEA’s goal is to keep the public safe from the dangers of drug abuse. One way of doing that is to target local distribution organizations responsible for attracting new users, enabling addiction and contributing to overdoses in our city. I applaud the Strike Force and U.S. Attorney’s Office, Southern District of New York, for their diligent work throughout this investigation.”
According to the allegations in the Indictment[1] and statements made in Court:
The defendants were members of a drug trafficking organization (the “DTO”) that packaged and sold narcotics out of multiple auto body shops and garages in the Bronx, New York. From 2015 to February 2019, the DTO is estimated to have distributed hundreds of kilograms of cocaine and heroin. Much of the heroin that the DTO distributed was mixed with fentanyl.
* * *
VELAZQUEZ, 50, RESTO, 43, CASTRO, 39, LLERAS, 63, ROMAN, 55, GARCIA, 53, BURGOS, 46, and ADINO, 49, each of the Bronx, New York, and LOPEZ, 39, of New York, New York, are each charged with one count of conspiring to distribute cocaine, heroin, and fentanyl, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the DEA. The arrest was the result of an investigation by the New York Strike Force, a crime-fighting unit comprising federal, state, and local law enforcement agencies supported by the Organized Crime Drug Enforcement Task Force (OCDETF) and the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA).
The Strike Force is housed at the DEA’s New York Division and includes agents and officers of the DEA, the New York City Police Department, the New York State Police, Immigration and Customs Enforcement – Homeland Security Investigations, the U. S. Internal Revenue Service Criminal Investigation Division, the Bureau of Alcohol, Tobacco, Firearms, and Explosives , U.S. Customs and Border Protection, U.S. Secret Service, the U.S. Marshals Service, New York National Guard, the Clarkstown Police Department, U.S. Coast Guard, Port Washington Police Department, and New York State Department of Corrections and Community Supervision.
The prosecution is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Michael K. Krouse and Adam S. Hobson are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Hacker “AlfabetoVirtual” Sentenced to Prison for Hacking Websites of the Combating Terrorism Center at West Point and the New York City ComptrollerRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that BILLY RIBEIRO ANDERSON, a/k/a “Anderson Albuquerque,” a/k/a “AlfabetoVirtual,” was sentenced today to three months in prison for obtaining unauthorized access to and committing defacements of the websites for the Combating Terrorism Center at the United States Military Academy in West Point, New York (“West Point”), and the Office of the New York City Comptroller (the “NYC Comptroller”). ANDERSON pled guilty on October 2, 2018, to two felony counts of computer fraud before U.S. District Judge Laura Taylor Swain, who also imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Billy Anderson was a sophisticated hacker who compromised and defaced the websites of the New York City Comptroller, West Point, and more than 11,000 other military, government, and business websites around the world under his online pseudonym “AlfabetoVirtual.” Anderson will now serve time in federal prison under his true name. This case demonstrates that those who seek to commit cyber intrusions of government websites will be prosecuted to the fullest extent of the law.”
According to the Indictment and other public court filings and proceedings:
Website defacements are acts of computer intrusion during which a hacker obtains unauthorized access to computers hosting Internet websites and then replaces the publicly available contents of the website with content generated by the hacker, thereby “defacing” the website. Hackers frequently claim responsibility for defacements by listing their online pseudonyms as part of the defaced content.
From in or about 2015 through at least March 13, 2018, ANDERSON took responsibility for obtaining unauthorized access to, and committing more than 11,000 defacements of, various U.S. military, government, and business websites around the world under the online pseudonym “AlfabetoVirtual,” including websites for the NYC Comptroller and the Combating Terrorism Center at West Point.
On or about July 10, 2015, a website owned by the NYC Comptroller was defaced, and ANDERSON, using the online pseudonym “AlfabetoVirtual,” claimed responsibility for the intrusion and defacement. The contents of the NYC Comptroller website were modified to display the text “Hacked by AlfabetoVirtual,” “#FREEPALESTINE” and “#FREEGAZA.” The defacement was performed by exploiting security vulnerabilities associated with the version of a plugin being used on the website.
On or about October 4, 2016, a website for the Combating Terrorism Center at West Point was defaced, and ANDERSON, using the online pseudonym “AlfabetoVirtual,” claimed responsibility for the intrusion and defacement. The content of the Combating Terrorism Center website was modified to display the text “Hacked by AlfabetoVirtual.” The defacement was performed by an unauthorized administrative account that exploited a known cross-site script vulnerability, thereby enabling ANDERSON to bypass access controls and target an internal Combating Terrorism Center website address.
* * *
In addition to the prison term, ANDERSON, 42, of Torrance, California, was sentenced to three years of supervised release, 200 hours of community service, and ordered to pay restitution to victims of his offense.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation. Mr. Berman also thanked the Computer Crime Investigative Unit of the United States Army Criminal Investigation Command and the Brazilian Federal Police Cyber Crime Unit for their assistance with the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
Gang Member Sentenced to Life in Prison for His Role in Murder of Mother on Bronx PlaygroundRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that STIVEN SIRI-REYNOSO was sentenced today to life plus five years in prison for his role in the June 11, 2016, murder of Jessica White. Ms. White, 28, was killed by a stray bullet while sitting next to her mother and watching her three young children play in the playground of the John Adams Houses in the Bronx, New York. SIRI-REYNOSO gave the order for that shooting, which targeted a gang rival. On July 30, 2018, SIRI-REYNOSO was convicted of conspiring to commit racketeering, conspiring to sell narcotics, murder in aid of racketeering, and murder through the use of a firearm after an eight-day trial before Chief U.S. District Judge Colleen McMahon.
U.S. Attorney Geoffrey S. Berman said: “On June 11, 2016, Jessica White was murdered in a playground before her mother and her children, the victim of horrific and senseless gang violence. Stiven Siri-Reynoso ordered that shooting and was responsible for Jessica’s death. As a result, he will now spend the rest of his life in a federal prison. We extend our deepest condolences to the members of Jessica’s family, who have experienced tragedy beyond words. We thank our partners at the FBI and NYPD, who worked tirelessly to achieve this measure of justice for Jessica and her family. And we affirm our continued efforts to rid our neighborhoods of intolerable gang violence.”
According to the allegations in the Indictment and the evidence at trial:
On June 11, 2016, Jessica White was struck and killed by a stray bullet while sitting on a bench next to her mother and watching her three children play on a playground at the John Adams Houses, where her mother lived. SIRI-REYNOSO was a member of the “Dominicans Don’t Play” or “DDP” street gang. The DDP gang was engaged in a dispute between with the rival Trinitarios street gang involving, among other things, SIRI-REYNOSO’s drug sales near the John Adams Houses.
On the night of June 11, 2016, Trinitarios members tried to attack SIRI-REYNOSO. In retaliation, SIRI-REYNOSO sent another individual to shoot at the Trinitarios. SIRI-REYNOSO ensured the shooter had a gun and a mask, and arranged for other gang members to be waiting in a getaway car nearby. As the shooter began firing, Jessica White got up and called out for her children. She was struck by one of the bullets and killed.
SIRI-REYNOSO also committed other crimes in connection with his membership in the DDPs, including drug selling and robbery.
* * *
In addition to the prison term, SIRI-REYNOSO, 26, of the Bronx, was sentenced to five years of supervised release.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Drew Skinner, Allison Nichols, and Frank Balsamello are in charge of the prosecution.
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Stock Broker Sentenced to Prison for Insider Trading Scheme Based on Confidential Information Misappropriated from an Investment BankRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that MICHAEL SIVA, a former stock broker, was sentenced today to eighteen months in prison for his involvement in an insider trading scheme based on material, nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank. SIVA pled guilty on October 18, 2018, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer before U.S. District Judge Alison J. Nathan, who also imposed today’s sentence.
U.S. Attorney Geoffrey Berman said: “Michael Siva corrupted his position as a stock broker to place trades in the accounts of his brokerage clients based on inside information misappropriated from an investment bank. Siva committed insider trading to make himself look like a talented stock selector. The illegal trading by Siva resulted in millions in illicit profits. This Office is committed to identifying and prosecuting inside information-sharing networks that undermine our nation’s securities markets.”
According to the Indictment, other filings in Manhattan federal court, and statements made in court filings and proceedings:
In August 2017, SIVA, Roberto Rodriguez, Rodolfo Sablon, Jhonatan Zoquier, and Jeffrey Rogiers were arrested and charged in a 54-count Indictment for their involvement in three overlapping insider trading schemes, generating more than $5 million in illicit profits, all stemming from information misappropriated by Rivas. Prior to the unsealing of the Indictment last year, Rivas and an additional participant, James Moodhe, pled guilty and both have been cooperating with the Government in this investigation. Since the unsealing of the Indictment, all of the charged defendants have pled guilty.
The Investment Bank and Rivas
From August 2013 through May 2017, Rivas was employed as a technology consultant in the Research and Capital Markets Technology Group of an investment bank (the “Investment Bank”). In this role, Rivas had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing material, nonpublic information (“Inside Information”) about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank. The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included Inside Information. Rivas had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information.
Overview of Insider Trading Schemes
From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material, nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades. On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities. In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities. The Inside Information was passed through three tipping chains.
The Rivas-Moodhe-Siva Tipping Chain
SIVA was a member of the first of three tipping chains outlined in the Indictment. In this tipping chain, Rivas passed inside information to Moodhe, the father of the woman with whom Rivas was living and dating. Moodhe then passed the inside information to SIVA, a broker and financial adviser at a global investment bank headquartered in Manhattan, New York. Moodhe and SIVA had known each other for more than a decade and SIVA also became Moodhe’s broker.
Between 2015 and 2017, Moodhe shared with SIVA the inside information he received from Rivas so that SIVA could execute profitable trades on behalf of his financial advisory clients and himself. By at least early 2016, SIVA understood that the source of the stock tips provided by Moodhe was a corporate insider at an investment bank with whom Moodhe was friends.
In order to keep their scheme from being exposed, including by SIVA’s employer, Moodhe and SIVA developed code phrases to use on the telephone so that Moodhe could surreptitiously provide SIVA with updated inside information. To further hide their scheme, SIVA and Moodhe began going to various diners outside of New York City so that Moodhe could provide stock tips to SIVA in person. During these meetings, Moodhe read from pieces of paper provided to him by Rivas, which contained detailed information about confidential impending deals, including ticker symbols, deal values and expected announcement dates. In order to hide the fact that SIVA was placing trades in his client accounts based on illicit stock tips from Moodhe, SIVA also instructed Moodhe to mark his dirty trades “solicited” in his firm’s online trading platform, so that it would appear that SIVA had directed the trades as opposed to the suggestion coming from Moodhe. On occasion, SIVA also instructed Moodhe to wait to trade on a tip from Rivas until SIVA could first trade in the security on behalf of his financial advisory clients, thereby making it look like SIVA had originated the idea.
In total, between 2015 and 2017 SIVA and Moodhe used Inside Information Rivas provided to trade ahead of the public announcements of more than two dozen transactions, including numerous tender offers, allowing SIVA and Moodhe to generate illicit profits in excess of $3 million. SIVA also earned thousands of dollars in commissions on the illegal trades entered on behalf of his clients.
* * *
In addition to the prison term, SIVA, 57, of Morristown, New Jersey, was sentenced to 2 years of supervised release and ordered to forfeit $35,000.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for their assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Andrea M. Griswold and Samson Enzer are in charge of the prosecution.
Russian Hacker Who Used Neverquest Malware to Steal Money from Victims’ Bank Accounts Pleads Guilty in Manhattan Federal CourtRead 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 that STANISLAV VITALIYEVICH LISOV, a/k/a “Black,” a/k/a “Blackf” (“LISOV”), pled guilty today to conspiring to deploy and use a type of malicious software known as NeverQuest to infect the computers of unwitting victims, steal their login information for online banking accounts, and use that information to steal money out of the victims’ accounts. NeverQuest has been responsible for millions of dollars’ worth of attempts by hackers to steal money out of victims’ bank accounts. LISOV pled guilty before United States District Judge Valerie E. Caproni.
U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Stanislav Vitaliyevich Lisov used malware to infect victims’ computers, obtain their login credentials for online banking accounts, and steal money out of their accounts. This type of cybercrime extends across borders, poses a malicious threat to personal privacy, and causes widespread financial harm. For his audacious crime, this Russian hacker now faces justice in an American court.”
FBI Assistant Director William F. Sweeney Jr. said: “'In addition to creating and maintaining a botnet infected with NeverQuest malware, Stanislav Lisov, a Russian national, gathered personally identifiable information of NeverQuest victims and discussed illegally trafficking that information. As today's plea should demonstrate, the FBI and our partners will continue to bring these actors to justice, regardless of where they may hide.”
According to the Indictment, Complaint, and other statements made during public court proceedings:
NeverQuest is a type of malicious software, or malware, known as a banking Trojan. It can be introduced to victims’ computers through social media websites, phishing emails, or file transfers. Once surreptitiously installed on a victim’s computer, NeverQuest is able to identify when a victim attempts to log onto an online banking website and transfer the victim’s login credentials – including his or her username and password – back to a computer server used to administer the NeverQuest malware. Once surreptitiously installed, NeverQuest enables its administrators remotely to control a victim’s computer and log into the victim’s online banking or other financial accounts, transfer money to other accounts, change login credentials, write online checks, and purchase goods from online vendors.
Between June 2012 and January 2015, LISOV was responsible for key aspects of the creation and administration of a network of victim computers known as a “botnet” that was infected with NeverQuest. Among other things, LISOV maintained infrastructure for this criminal enterprise, including by renting and paying for computer servers used to manage the botnet that had been compromised by NeverQuest. Those computer servers contained lists of millions of stolen login credentials – including usernames, passwords, and security questions and answers – for victims’ accounts on banking and other financial websites. LISOV had administrative-level access to those computer servers.
LISOV also personally harvested login information from unwitting victims of the NeverQuest malware, including usernames, passwords, and security questions and answers. In addition, LISOV discussed trafficking in stolen login information and personally identifiable information of victims.
On January 13, 2017, LISOV was arrested in Spain pursuant to a provisional arrest warrant. On January 19, 2018, LISOV was extradited from Spain to the United States.
* * *
LISOV, 33, a citizen of Russia, pled guilty to one count of conspiracy to commit computer hacking, which carries a maximum sentence of five years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. LISOV’s sentencing is scheduled for June 27, 2019 at 11:00 a.m. before Judge Caproni.
Mr. Berman praised the outstanding investigative efforts of the FBI. Mr. Berman also thanked the DOJ Office of International Affairs for its assistance in this case.
The matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Michael D. Neff is in charge of the prosecution.
Doctor Convicted in Manhattan Federal Court of Nine Counts in Connection with Oxycodone and Fentanyl Diversion SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the conviction yesterday of ERNESTO LOPEZ, a New York-licensed medical doctor who wrote thousands of medically unnecessary prescriptions for oxycodone and fentanyl over an approximately three-year period, following an eight-day trial before the Honorable Denise L. Cote. LOPEZ was remanded into custody following his conviction. Audra Baker, a medical assistant who worked in one of LOPEZ’s medical offices, and who was tried with LOPEZ, was acquitted of all charges against her.
U.S. Attorney Geoffrey S. Berman stated: “As the jury unanimously recognized, Ernesto Lopez betrayed his patients and the public, peddling dangerous opioids to addicts and drug dealers for his own personal financial profit. His flagrant drug dealing is all the more shocking coming as it did from a licensed medical professional who has taken an oath to do no harm to his patients.”
As reflected in the Indictment, documents previously filed in the case, and evidence introduced at trial:
From approximately 2015 until his arrest in November 2017, LOPEZ operated medical clinics in New York, New York, Jackson Heights, New York, and Franklin Square, New York, where LOPEZ, who purported to specialize in pain management, wrote thousands of prescriptions for oxycodone and fentanyl in exchange for cash payments. In total, LOPEZ wrote prescriptions for nearly one million oxycodone pills, with a street value of approximately $20 million. LOPEZ typically charged $200 to $300 in cash for patient visits, despite the fact that nearly 80 percent of his patients had health insurance. During many patient visits, LOPEZ neither performed a meaningful physical examination of patients, nor attempted to diagnose them. Instead, a typical such patient visit consisted primarily of recording a patient’s vital signs and sometimes involved the brief movement of a patient’s limbs. LOPEZ then prescribed large quantities of oxycodone, most frequently 120 30-milligram tablets, and fentanyl patches.
In addition to prescribing oxycodone and fentanyl patches to patients without a legitimate medical need, LOPEZ also prescribed to many patients a fentanyl-based spray, called Subsys, which was intended to treat breakthrough cancer pain, for which those patients – many of whom did not have cancer – had no legitimate medical need. In connection with these prescriptions, LOPEZ submitted an application to INSYS Therapeutics to join a so-called “speaker’s program,” where doctors received payments in exchange for prescribing the fentanyl-based spray to patients.
LOPEZ also provided loose oxycodone pills, without a prescription, directly to at least one patient on multiple occasions, instructed an employee to fill a prescription for oxycodone pills and then to give the pills to LOPEZ, and instructed the same employee to crush an oxycodone pill and put the resulting powder into a urine sample, so as to cheat a drug test.
At the time of LOPEZ’s arrest, law enforcement agents recovered, among other things, hundreds of fentanyl sprays and patches from his residence, along with approximately $729,000 in cash in boxes.
After the verdict was announced, Judge Cote said: “Lives were destroyed and damaged. People have suffered enormously because of what the doctor chose to do for those years.”
* * *
LOPEZ, 75, of Flushing, New York, was convicted of one count of conspiring to distribute oxycodone and fentanyl outside the usual course of professional practice and without legitimate medical need, and eight counts of distributing oxycodone outside the usual course of professional practice and without legitimate medical need. Each count 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 the sentencing of the defendant will be determined by Judge Cote on June 11, 2019.
Mr. Berman praised the outstanding investigative work of the Drug Enforcement Administration’s New York Tactical Diversion Squad. Mr. Berman also thanked the New York City Police Department, the Department of Health and Human Services, the New York City Department of Investigation, the New York State Office of the Medicaid Inspector General, the New York City Human Resources Administration, the Nassau County Police Department and Asset Forfeiture Unit, the Nassau County District Attorney’s Office, the New York County District Attorney’s Office, and the New York State Department of Financial Services for their work on the investigation.
Parts of this case were conducted under the auspices of the Organized Crime Drug Enforcement Task Force (OCDETF), a partnership between federal, state, and local law enforcement agencies. The principal mission of the OCDETF program is to identify, disrupt, and dismantle the most serious drug trafficking, weapons trafficking, and money laundering organizations and those primarily responsible for the nation’s illegal drug supply.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Nicholas Folly, Elizabeth Hanft, and Michael McGinnis are in charge of the prosecution.
Baggage Handler at Newark International Airport Convicted of Narcotics 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 TYRONE WOOLASTON was found guilty yesterday of conspiring to distribute more than five kilograms of cocaine, and using a firearm in furtherance of cocaine trafficking, in connection with a multi-year scheme to smuggle cocaine into the United States through Newark International Airport. A unanimous jury convicted WOOLASTON after a two-week trial before United States District Judge Robert W. Sweet.
U.S. Attorney Geoffrey S. Berman said: “As proven at trial, Tyrone Woolaston abused his position as an airline employee with secure access to restricted areas of Newark International Airport. In reality, Woolaston was also a drug dealer, who smuggled large cocaine shipments through the airport and into the United States. To protect his drug dealing operation, Woolaston possessed an arsenal of weapons, including a .40 caliber Glock pistol equipped with a laser sight. Thankfully, Woolaston now stands convicted and faces at least 15 years in prison.”
According to court documents and the evidence at trial:
WOOLASTON was a lead baggage handler for a commercial airline at Newark Liberty International Airport (the “Airport”). From in or about 2013 through February 2018, WOOLASTON conspired to smuggle shipments of cocaine into the United States. WOOLASTON abused his secure access to the restricted areas of the airport to remove suitcases containing shipments of multiple kilograms of cocaine from international flights and smuggle them through the Airport for distribution in the New York City area.
In 2017 and 2018, agents from the New Jersey Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”) conducted an undercover operation to investigate cocaine smuggling at the Airport. As part of the investigation, a confidential source met with WOOLASTON to arrange a cocaine shipment, and WOOLASTON agreed to bring a suitcase containing five kilograms of cocaine through the Airport. On February 10, 2018, HSI agents placed a suitcase containing approximately five kilograms of sham cocaine on an international flight from the Cayman Islands to the Airport. WOOLASTON was working on the tarmac when the flight arrived at the Airport, and took possession of the suitcase and carried the sham cocaine shipment through the Airport, evading customs screening. The following day, WOOLASTON carried a .40 caliber Glock pistol, equipped with a laser sight, to deliver the sham cocaine to the confidential source.
* * *
WOOLASTON, 35, of Orange, New Jersey, was convicted of one count of conspiracy to distribute at least five kilograms of cocaine, which carries a maximum sentence of life in prison and a mandatory minimum sentence of ten 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 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 Newark Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. The U.S. Customs and Border Protection and Port Authority Police Department assisted in the investigation.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorneys Thane Rehn and Alison Moe are in charge of the prosecution.
Manhattan U.S. Attorney Announces Indictment of Former Vice President of Teamsters Labor Union for BriberyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeny Jr., Assistant Director-in-Charge, New York Division, Federal Bureau of Investigation (“FBI”), Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor Office of Inspector General (“DOL-OIG”); Darren Cohen, New York Regional Director, U.S. Department of Labor Employee Benefits Security Administration (“DOL-EBSA”); and Andriana Vamvakas, New York Regional Director, U.S. Department of Labor Office of Labor-Management Standards (“DOL-OLMS”), announced that JOHN ULRICH, who previously served as the vice president of International Brotherhood of Teamsters Local 812 (the “Union”) and as a trustee of the Union’s employee health benefit plan (the “Plan”), was charged in an indictment unsealed today with soliciting tens of thousands of dollars in bribe payments from an executive with the Plan’s Third Party Administrator (the “TPA-1”), in exchange for using his influence to ensure the Union’s continued retention of TPA-1 as its Plan administrator. ULRICH was arrested this morning, and will be presented this afternoon in Manhattan federal court before United States Magistrate Judge Ona T. Wang. ULRICH’s case is assigned to United States District Judge Analisa Torres.
U.S. Attorney Geoffrey S. Berman said: “As alleged, John Ulrich abused his position as the vice president of a labor union and trustee for its health plan by selling his influence to the Union’s health care administrator. As part of this alleged scheme, Ulrich betrayed the trust of the Union members who elected him in order to line his pockets with bribe money. This Office is committed to prosecuting those who abuse their positions of trust for their own financial benefit.”
FBI Assistant Director William F. Sweeny Jr. said: “Instead of advocating for the best possible benefit programs for the union members he represented, Ulrich allegedly entered into a quid-pro-quo arrangement that served to advance his needs and the needs of the Plan’s third-party administrator. In his official role, he was charged with protecting the interests of his fellow union employees, but as we allege today, this trustee couldn’t be trusted.”
DOL-OIG New York Region Special Agent-in-Charge Michael C. Mikulka said: “An important mission of the Office of Inspector General is to investigate allegations relating to corruption within labor unions and their affiliated employee benefit plans. We will continue to work with our law enforcement partners to investigate these types of allegations.”
DOL-EBSA New York Regional Director Darren Cohen said: “Trustees of union sponsored health benefit plans have a fiduciary obligation to perform their duties solely in the interests of union members and plan participants. In this case, the plan trustee allegedly abdicated this responsibility in order to serve his own interest. EBSA will pursue plan trustees and other officials when they engage in criminal schemes to defraud private sector benefit plans. EBSA is very pleased to have had the opportunity to work collaboratively with our law enforcement partners in the Labor Department’s Office of the Inspector General and Office of Labor-Management, the Federal Bureau of Investigation, and the U.S. Attorney’s Office to protect plan participants.”
DOL-OLMS New York Regional Director Andriana Vamvakas said: “Investigating corruption and ensuring financial integrity in labor organizations is a major priority for the U.S. Department of Labor’s Office of Labor-Management Standards. We will continue to work with our investigative partners to ensure that those who are affiliated with labor organizations adhere to the highest standards of conduct to protect the assets of union members and do not misuse their positions of trust for their own personal gain.”
According to the allegations in the Indictment[1]:
The Union has more than approximately 3,000 members, and represents workers in the beverage industry throughout the New York metropolitan area. The Union’s members are covered by the Plan, which provides, among other things, life insurance, health insurance, dental, vision, and disability benefits to Union members and their families. As the Plan’s third-party administrator, TPA-1 processed health insurance claims for participants in the Plan. At all times relevant to the Indictment, ULRICH was a member and officer of the Union and a trustee of the Plan.
In or about 2013, ULRICH was experiencing financial difficulties, and solicited bribe payments from an executive with TPA-1 (“Executive-1”) of $5,000 per quarter in exchange for using his influence to maintain TPA-1 as the Plan’s third-party administrator. Before ULRICH solicited these bribes, the Plan had issued a request for proposals for a new third-party administrator, and TPA-1 was at risk of losing the Plan’s business. ULRICH told Executive-1 that ULRICH would use his influence with the Union to ensure that the Plan continued to use TPA-1 to administer the Union’s health care plan. Executive-1 agreed to make $5,000 quarterly payments to ULRICH, and began doing so. Subsequently, despite receiving multiple bids from other third-party administrators, the Plan then continued to work with TPA-1.
In or about 2014, ULRICH demanded increased bribe payments from Executive-1. In part, ULRICH told Executive-1 that these increased bribe payments were needed for another trustee of the Plan, and Executive-1 began making such increased payments. On or about September 19, 2015, ULRICH again solicited additional bribe payments for this trustee.
After a special board meeting convened by the Plan in February 2016, ULRICH was terminated as vice president and trustee of the Union and Plan, respectively. In total, ULRICH demanded, and Executive-1 paid, tens of thousands in bribes before ULRICH was removed from office.
* * *
ULRICH, 48, of Newburgh, New York, is charged in four counts with conspiracy to solicit and receive bribe payments to influence the operation of an employee benefit plan, which carries a maximum penalty of five years in prison; soliciting and receiving bribe payments to influence the operation of an employee benefit plan, which carries a maximum penalty of three years in prison; conspiracy to commit honest services health care fraud, which carries a maximum penalty of 10 years in prison; and honest services health care fraud, which carries a maximum penalty of 10 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the FBI, DOL-OIG, DOL-EBSA, and DOL-OLMS for their outstanding investigative work in this case.
This matter is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Eli J. Mark and Louis A. Pellegrino are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Former “Hot Boys” Robbery Crew Member Sentenced to 279 Months in Prison in Connection with the Murder of Kelly Diaz and Other CrimesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ALVARADO DOMINGUEZ, a/k/a “Jochi,” 32, was sentenced today to 279 months in prison for his participation in the “Hot Boys” robbery crew, including an October 27, 2006, robbery that resulted in the murder of Kelly Diaz. DOMINGUEZ pled guilty on August 13, 2018, before Magistrate Judge Stewart D. Aaron to participating in a racketeering conspiracy and conspiring to distribute marijuana. His plea was accepted today by U.S. District Judge Valerie E. Caproni, who also imposed sentence.
U.S. Attorney Geoffrey Berman said: “Alvarado Dominguez and the members of his crew conducted terrifying, armed home invasions in upper Manhattan and the Bronx. During one of those robberies, Kelly Diaz was murdered. Today’s sentence protects the public from Dominguez for a long time to come.”
According to the Indictment, other filings in Manhattan federal court, and evidence presented in court in connection with the sentencing:
From at least 2006 through 2017, ALVARADO DOMINGUEZ, a/k/a “Jochi,” and other members and associates of a racketeering enterprise known as the “Hot Boys,” committed murder, assault, robbery and burglary, used firearms, and distributed controlled substances, including cocaine, heroin, marijuana, and prescription opiates.
On October 27, 2006, DOMINGUEZ and other members of the Hot Boys robbed Diaz and his wife in their home in Washington Heights. In the course of that robbery, Diaz was shot and killed.
* * *
Mr. Berman praised the outstanding work of the FBI and the NYPD’s Grand Larceny Division in this investigation.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Hagan Scotten and David W. Denton Jr. are in charge of the prosecution.
Bronx Man Charged with Murder-For-Hire ConspiracyRead 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 U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging SYDNEY SCALES, a/k/a “Sid,” a/k/a “Moe Black,” with conspiracy to commit murder for hire, as well as narcotics and firearms offenses. A second defendant on the Indictment, ERNEST HORGE, a/k/a “Ern,” a/k/a “Mac,” is charged with narcotics and firearms offenses.
SCALES was arrested this morning in the Middle District of Pennsylvania and will be presented today in Manhattan federal court before U.S. Magistrate Judge Ona T. Wang. Horge was arrested in the Northern District of New York, and he will be presented there today. The case has been assigned to the Honorable Laura Taylor Swain.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged in the indictment, Scales and Horge were responsible for significant narcotics – including fentanyl – and firearms offenses. Scales allegedly then conspired to kill a rival drug dealer. This alleged drug dealing and violence are intolerable, and thanks to the outstanding work of HSI and the NYPD, Scales and Horge now face significant federal charges.”
HSI Special Agent-in-Charge Angel M. Melendez said: “This man is alleged to have contracted the killing of a rival drug dealer to further his position in the dark world of narcotics distribution and gun wielding. There is no place in our communities for an individual pushing drugs onto our streets and using guns for intimidation. Law enforcement has strengthened partnerships across to board to rid our neighborhoods of those who choose to plague our city with violence and drugs.”
As alleged in the Indictment unsealed today in Manhattan federal court and in other court papers and proceedings[1]:
From in or about 2016 through in or about 2019, both SCALES and HORGE participated in a narcotics conspiracy involved in the distribution of crack cocaine, cocaine, heroin, and fentanyl, in the Bronx and elsewhere. SCALES and HORGE also used, carried, and possessed firearms, which were brandished and discharged, in connection with the narcotics conspiracy. In addition, in or about June 2017, SCALES conspired to commit murder for hire, agreeing to compensate other individuals in return for their locating and killing at least one rival drug dealer. SCALES also used, carried, and possessed firearms in connection with the conspiracy to commit murder for hire.
A chart containing the names and maximum penalties for each defendant is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of HSI and the NYPD’s Bronx Violent Crimes Squad.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Frank Balsamello, Sarah Krissoff, and Gina Castellano 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.
19-048
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Narcotics
Conspiracy
21 U.S.C. § 846
SYDNEY SCALES
ERNEST HORGE
Life in prison
Mandatory minimum of 10 years in prison
2
Using, Carrying, and Possession of Firearms, which were Brandished and Discharged, in Connection with a Drug Trafficking Crime
18 U.S.C. §§ 924(c)(1)(A)(iii), 2
SYDNEY SCALES
ERNEST HORGE
Life in prison
Mandatory minimum of 10 years in prison
3
Conspiracy to Commit Murder For Hire
18 U.S.C. § 1958(a)
SYDNEY SCALES
10 years in prison
4
Using, Carrying, and Possession of Firearms, in Connection with the Conspiracy to Commit Murder for Hire
18 U.S.C. §§ 924(c)(1)(A)(i), 2
SYDNEY SCALES
Life in prison
Mandatory minimum of 5 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.
Manhattan U.S. Attorney Announces $5.3 Million Proposed Settlement of Lawsuit Against New York City for Fraudulently Obtaining FEMA Funds Following Superstorm SandyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Mark Tasky, Special Agent in Charge of the New York Regional Office of the Department of Homeland Security Office of Inspector General (“DHS-OIG”), and Margaret Garnett, Commissioner, New York City Department of Investigation (“DOI”), announced today that the United States filed a civil fraud lawsuit today against the CITY OF NEW YORK (the “City”) alleging that the NEW YORK CITY DEPARTMENT OF TRANSPORTATION (“NYCDOT”) fraudulently obtained millions of dollars from the Federal Emergency Management Agency (“FEMA”) by falsely claiming that numerous NYCDOT vehicles were damaged during Superstorm Sandy (“Sandy”). The United States also submitted a proposed settlement of the lawsuit to the U.S. District Court for review and approval. Under the proposed settlement, the City agreed to pay and revert to the United States a total of $5,303,624 and admitted to conduct alleged in the Government’s complaint, including seeking reimbursement from FEMA for vehicles that were not damaged by Sandy.
Manhattan U.S. Attorney Geoffrey S. Berman said: “FEMA serves a critical role in providing emergency relief to those who are tragically struck by disaster. When people lie to FEMA about the cause of property damage in order to reap a windfall, it compromises FEMA’s ability to provide financial assistance to legitimate disaster victims in desperate need. This Office will take decisive enforcement action to protect FEMA and its vital programs from fraud, waste, and abuse.”
DHS-OIG Special Agent in Charge Mark Tasky said: “Taking advantage of Federal funds intended for disaster relief misappropriates taxpayer dollars, reduces funds available to true victims, and erodes public confidence in relief efforts. Through DHS OIG’s criminal and civil investigative oversight function of DHS programs, and working closely with our partners in the New York City’s Department of Investigation and the United States Attorney’s Office for the Southern District of New York, we ensured that over $5.3 million in disaster relief funds were repaid to the United States, and ultimately the U.S. taxpayer. With so many New York residents impacted by Superstorm Sandy, it is critical to ensure every dollar of appropriated relief funds are properly used and accounted for.”
DOI Commissioner Margaret Garnett said: “Today’s settlement is the successful outcome of a joint investigation with our federal partners, which uncovered falsified submissions by the City to the federal government that allowed the City to wrongly obtain millions of dollars in federal emergency funds. Our investigation found that a lack of vigilant management and inadequate training of City personnel at the City Department of Transportation led to this wrongdoing in connection with a federal public assistance program. As New York City’s independent watchdog, DOI is grateful for our effective partnership with the United States Attorney’s Office for the Southern District of New York and the New York Regional Office of the United States Department of Homeland Security Office of the Inspector General on this investigation.”
According to the Government’s Complaint, the City participated in FEMA’s Public Assistance program, which allows municipalities to obtain indemnification funds from FEMA to repair or replace property damaged by natural disasters, such as Sandy. As part of the program, the City was required to certify that the property damage was incurred as a direct result of the disaster. The City was also required to provide training to employees on program rules and requirements, including the importance of ensuring that costs for which indemnification is sought are directly attributable to a disaster.
Following Sandy, the NYCDOT created a list of vehicles within the agency’s fleet that had been damaged by the storm and submitted it to FEMA for indemnification pursuant to the Public Assistance program. The NYCDOT personnel responsible for generating the list of damaged vehicles, to whom the City provided no training on the Public Assistance program, made no effort to inspect the vehicles or otherwise determine whether any reported damage was attributable to Sandy. In fact, a number of the vehicles included on this list were inoperable long before Sandy.
In 2014, based on this faulty list, the City submitted a request for indemnification to FEMA seeking to recover the full cost of replacing 132 NYCDOT vehicles. The City submitted a certification to FEMA as part of the program and a request for indemnification that falsely attested that all costs were incurred as a direct result of Sandy. Many of the vehicles for which the City sought full replacement costs had been nonoperational or not in use prior to the storm. As a result of these false certifications, FEMA paid the City millions of dollars to which it was not entitled.
As part of the proposed settlement, the City will pay the United States a total of $5,303,624. Specifically, the City will make a cash payment of $4,126,227.34 and relinquish rights to an additional $1,177,396.66 that FEMA had previously approved for disbursement. During this Office’s investigation, the City withdrew another $3,196,376 in indemnity requests, acknowledging that the costs were ineligible for reimbursement.
In connection with the proposed settlement, the City also admitted conduct alleged in the Complaint, including:
- The Deputy Commissioner from NYCDOT who signed the certification lacked personal knowledge about the vehicles sufficient to make a certification about how and when they were damaged and did not personally undertake or direct others to undertake any investigation of the vehicles prior to signing the certification.
- The list of vehicles for which the City was seeking reimbursement included a number of vehicles that were not damaged as a direct result of Sandy to a state beyond repair. A number of the vehicles that the City included had not been operational prior to Sandy.
- Prior to making the submission and certification to FEMA, neither the City nor NYCDOT undertook a sufficient review to ascertain whether all of the vehicles listed had been operational and in use prior to Sandy; or whether the amounts presented to FEMA for reimbursement accurately represented the losses the City incurred from Sandy.
- In June 2014, a NYCDOT employee notified the Deputy Commissioner that certain of the vehicles for which the City had sought reimbursement from FEMA were not eligible. Yet, it was not until after it became aware of this Office’s investigation that the City took steps to notify FEMA.
The proposed settlement must be approved by the District Court.
Mr. Berman praised the outstanding investigative work of DHS-OIG and DOI. This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Jessica Jean Hu is in charge of the case.
- The Deputy Commissioner from NYCDOT who signed the certification lacked personal knowledge about the vehicles sufficient to make a certification about how and when they were damaged and did not personally undertake or direct others to undertake any investigation of the vehicles prior to signing the certification.
Florida Man Sentenced to One Year in Prison for Insider Trading Scheme Based on Confidential Information Misappropriated from an Investment BankRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that ROBERTO RODRIGUEZ was sentenced today one year and one day in prison for his involvement in an insider trading scheme based on material, nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank. RODRIGUEZ pled guilty on September 7, 2018, to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer before Magistrate Judge Henry B. Pitman. His plea was thereafter accepted by U.S. District Judge Alison J. Nathan, who also imposed today’s sentence.
U.S. Attorney Geoffrey Berman said: “Roberto Rodriguez reaped millions of dollars trading on confidential corporate information stolen by a longtime friend at an investment bank. Our Office is committed to identifying and prosecuting insider trading networks that undermine our nation’s securities markets.”
According to the Indictment, other filings in Manhattan federal court, and statements made in court filings and proceedings:
In August 2017, RODRIGUEZ, Michael Siva, Rodolfo Sablon, Jhonatan Zoquier, and Jeffrey Rogiers were arrested and charged in a 54-count Indictment for their involvement in three overlapping insider trading schemes, generating more than $5 million in illicit profits, all stemming from information misappropriated by Rivas. Prior to the unsealing of the Indictment last year, Rivas and an additional participant, James Moodhe, pled guilty and both have been cooperating with the Government in this investigation. Since the unsealing of the Indictment, all of the charged defendants have pled guilty.
The Investment Bank and Rivas
From August 2013 through May 2017, Rivas was employed as a technology consultant in the Research and Capital Markets Technology Group of an investment bank (the “Investment Bank”). In this role, Rivas had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing material, nonpublic information (“Inside Information”) about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank. The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included Inside Information. Rivas had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information.
Overview of Insider Trading Schemes
From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material, nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades. On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities. In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities. The Inside Information was passed through three tipping chains.
The Rodriguez Tipping Chain
RODRIGUEZ was a member of the second of three tipping chains outlined in the Indictment. In this tipping chain, Rivas passed inside information to RODRIGUEZ, a childhood friend of Rivas with whom Rodriguez had maintained a close relationship as adults, and Sablon.
Since 2014, RODRIGUEZ lived and worked in Miami, Florida, with Sablon, with whom he was also friends. In 2015, RODRIGUEZ introduced Rivas to Sablon. Rivas and Sablon then communicated with each other directly and developed an independent relationship.
In the fall of 2015, Rivas disclosed to RODRIGUEZ that Rivas had access to Inside Information by virtue of his position as a corporate insider at the Investment Bank. At RODRIGUEZ’s request, Rivas also agreed to share Inside Information with Sablon. While Rivas had originally agreed to divulge Inside Information to RODRIGUEZ because of their history of friendship, Rivas also learned that RODRIGUEZ and Sablon intended to start an investment fund with the proceeds of the insider trading scheme. Rivas understood that in exchange for the Inside Information Rivas was providing to RODRIGUEZ and Sablon, Rivas would be invited to join the investment fund as a partner once it was successfully launched.
At first, Rivas communicated with RODRIGUEZ and Sablon primarily via phone and text message. As the scheme progressed, however, RODRIGUEZ and Sablon increased their efforts to hide their illegal activity. On several occasions, Rivas met personally with RODRIGUEZ and/or Sablon in Miami in order to provide them with Inside Information. Rivas also provided RODRIGUEZ and Sablon with Inside Information using an encrypted mobile messaging application, which allows users to set a timer to messages to irretrievably “self-destruct.”
In order to maximize the illicit profits that could be earned using Rivas’s Inside Information, RODRIGUEZ and Sablon, in consultation with Rivas, initiated an aggressive strategy of purchasing short-term, out-of-the money call options. In total, from 2015 through April 2017, RODRIGUEZ and Sablon earned more than $2 million in illicit profits through insider trading in more than two dozen securities based on Inside Information divulged by Rivas.
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In addition to the prison term, RODRIGUEZ, 34, of Miami, Florida, was sentenced to two years of supervised release.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for their assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Andrea M. Griswold and Samson Enzer are in charge of the prosecution.
Former Public Utility Manager Sentenced to 7 Years in Prison for Theft of More Than $6 Million from Public Utility and CustomersRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOHN FARCHIONE, a former manager at a public utility company, was sentenced last Friday to seven years in prison for fraud and identity theft offenses in connection with his theft of more than $6 million from his employer and its customers. FARCHIONE pled guilty on August 6, 2018, following the commencement of trial, before United States District Judge J. Paul Oetken, who also imposed the sentence.
U.S. Attorney Geoffrey S. Berman said: “John Farchione exploited his position to steal millions of dollars from his employer, a public utility company relied upon by millions of New Yorkers. His conduct was corrosive to the integrity of the utility, and today’s sentence sends an important message to any other person in a position of financial trust that fraud and abuse of those positions will lead to severe consequences.”
According to the Indictment, other filings in Manhattan federal court, and evidence presented in court at sentencing:
From at least 2005 through November 2016, FARCHIONE engaged in fraudulent schemes resulting in the theft of more than $6 million from his public utility employer (the “Public Utility”) and its customers.
FARCHIONE, who was employed by the Public Utility as a manager in Customer Operations, devised and implemented the schemes using his knowledge of the Public Utility’s billing and payment processes. FARCHIONE carried out the scheme with a co-conspirator who also has pled guilty in connection with the scheme. FARCHIONE’s co-conspirator operated a business that aggregated payments from customers of the Public Utility for the purpose of passing such payments on to the Public Utility. FARCHIONE conspired to submit fraudulent checks and payments to the Public Utility, in amounts owed by customers who provided cash believing the payments would be submitted to the Public Utility on their behalf.
In fact, however, FARCHIONE and his co-conspirator kept the customer cash for themselves and submitted fraudulent checks to the Public Utility that purported to convey aggregated payments by multiple customers of the Public Utility. FARCHIONE, by virtue of his position as an employee of the Public Utility, was able to conceal the nature of the fraudulent checks, and thereby perpetuate the fraudulent scheme, through his knowledge of and access to the Public Utility’s account payment system.
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In addition to the prison term, Judge Oetken ordered FARCHONE, 66, to pay restitution in the amount of $7,223,641.46. FARCHIONE was also sentenced to three years of supervised release.
FARCHIONE pled guilty on August 6, 2018, to one count each of honest services fraud, mail fraud, conspiracy to commit honest services and mail fraud, and aggravated identity theft.
Mr. Berman praised the outstanding work of the Federal Bureau of Investigation in this investigation.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Alex Rossmiller and Sidhardha Kamaraju are in charge of the prosecution.
Manhattan Man Pleads Guilty to 2018 Murder of 17-Year-OldRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that GARY TURNER pled guilty this afternoon in Manhattan federal court to the murder of Samuel Ozuna, 17, outside the George Washington Carver Houses in New York, New York on April 24, 2018. United States District Judge Jesse M. Furman presided over the defendant’s guilty plea today.
U.S. Attorney Geoffrey S. Berman said: “Last April, Gary Turner murdered 17-year-old Samuel Ozuna. Today, Turner admitted in open court to committing that terrible act of violence. We will continue our daily work with the NYPD to keep the streets safe and vigorously to investigate and prosecute those who bring murder and mayhem to our communities.”
As alleged in the Indictment and statements made in open court:
On April 24, 2018, GARY TURNER shot and killed Samuel Ozuna in the vicinity of 60 East 104th Street in Manhattan. TURNER committed this killing in order to maintain his position in a violent gang that was operating in the residential neighborhood surrounding the George Washington Carver Houses.
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TURNER, 24, of Manhattan, pled guilty to using a firearm to commit murder in aid of racketeering, which carries a maximum sentence of death or life in prison, and a mandatory minimum term of five years in prison. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Berman praised the outstanding investigative work of the New York City Police Department.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Lauren Schorr and Jacob Warren are in charge of the prosecution.
Manhattan Doctor Pleads Guilty to Accepting Bribes and Kickbacks from Pharmaceutical Company in Exchange for Prescribing Fentanyl DrugRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ALEXANDRU BURDUCEA, a doctor who practiced in Manhattan, pled guilty today to conspiracy to violate the Anti-Kickback Statute in connection with a scheme to prescribe Subsys, a potent fentanyl-based spray, in exchange for bribes and kickbacks from Subsys’s manufacturer, Insys Therapeutics (“Insys”). BURDUCEA pled guilty before U.S. Magistrate Judge Kevin Nathaniel Fox. The case is assigned to U.S. District Judge Kimba M. Wood.
U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Alexandru Burducea, a prominent Manhattan pain management doctor, accepted tens of thousands of dollars in speaker fees from Insys in exchange for prescribing large volumes of Insys’s powerful fentanyl-based spray, Subsys. The corrupting influence of money has no place in medicine, especially when it comes to prescribing fentanyl and other dangerous opioids. Like many other doctors around the country, Dr. Burducea is now being held to account for his participation in this corrupt kickback scheme.”
According to the allegations contained in the Indictment against BURDUCEA and filings in related proceedings:
The Insys Speakers Bureau
Subsys, which is manufactured by Insys, is a powerful painkiller approximately 50 to 100 times more potent than morphine. The U.S. Food and Drug Administration (“FDA”) approved Subsys only for the management of breakthrough pain in cancer patients. Prescriptions of Subsys typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by BURDUCEA.
In or about August 2012, Insys launched a “Speakers Bureau,” a roster of doctors who would conduct programs (“Speaker Programs”) purportedly aimed at educating other medical practitioners about Subsys. In reality, Insys used its Speakers Bureau to induce the doctors who served as speakers to prescribe large volumes of Subsys by paying them Speaker Program fees. Speakers were supposed to conduct an educational slide presentation for other health care practitioners at each Speaker Program. In reality, many of the Speaker Programs were predominantly social affairs where no educational presentation about Subsys occurred. Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of medical practitioners who were not present.
BURDUCEA’s Participation in the Scheme
BURDUCEA, a doctor certified in pain management and anesthesiology, was an Assistant Professor of Anesthesiology at a large Manhattan hospital. BURDUCEA also practiced at an anesthesiology and pain management office associated with the hospital. From in or about September 2014 until in or about June 2015, BURDUCEA received approximately $68,400 in Speaker Program fees from Insys in exchange for prescribing large volumes of Subsys. In addition, Insys hired BURDUCEA’s then-girlfriend, now wife, to work as BURDUCEA’s sales representative, and the company paid her large commissions based on the volume of Subsys prescribed by her assigned doctors, including BURDUCEA.
BURDUCEA, who had never prescribed Subsys before in or about September 2014, became approximately the 14th-highest prescriber of Subsys nationally in the second quarter of 2015, accounting for total net sales of the drug of approximately $621,345 in that quarter.
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BURDUCEA, 42, of Little Neck, New York, pled guilty to one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. BURDUCEA is scheduled to be sentenced by Judge Wood on May 22, 2019, at 11:00 a.m.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and thanked the U.S. Department of Health and Human Services Office of Inspector General for its assistance in the investigation.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Noah Solowiejczyk and David Abramowicz are in charge of the prosecution.
Manhattan Art Gallery Owner Mary Boone Sentenced to 30 Months in Prison for Filing False Tax ReturnsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that Manhattan art gallery owner MARY BOONE was sentenced to 30 months in prison for filing false tax returns as part of a multi-year tax fraud scheme that cost the U.S. Treasury over $3 million. BOONE previously pled guilty to two counts of filing false tax returns in 2011 before U.S. District Judge Alvin K. Hellerstein, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As Manhattan art gallery owner Mary Boone has admitted, her personal tax returns were more a work of impressionism than realism. Seemingly in order from afar, the picture Boone painted of her profits, losses, and expenses was, upon closer inspection, a palette of lies and misrepresentations mixed together to avoid paying over $3 million in taxes. Today, Boone was sentenced to 30 months in prison for failing to pay her fair share in taxes.”
According to allegations in the Information to which BOONE pled guilty, court filings, and statements made in public court proceedings:
BOONE, the owner of Mary Boone Gallery (the “Gallery”) in Manhattan, engaged in a multi-year scheme to evade paying millions of dollars in federal income taxes for the calendar years 2009 through 2011. During each of these years, BOONE regularly provided false records to her accountant and thereby caused the accountant to prepare false tax returns for BOONE and the Gallery.
BOONE’s tax fraud scheme had two principal components. First, BOONE converted the Gallery’s funds to her own personal use and then falsely claimed these personal expenses as business deductions. In 2011, BOONE used business funds to pay approximately $1.28 million in personal expenses, including $793,003 to remodel BOONE’s Manhattan apartment; $120,856 for rent and expenses for a second Manhattan apartment; and approximately $300,000 in personal credit card charges. To evade paying federal income taxes on this personal income, BOONE fraudulently characterized these expenses as tax-deductible business expenses on the handwritten check registers that BOONE provided to her accountant. For example, BOONE falsely characterized a $500,000 payment to a contractor for remodeling BOONE’s apartment as a “commission.” In addition, BOONE withdrew over $560,000 in cash from the Gallery’s accounts between 2009 and 2011. BOONE either falsely reported the withdrawals as business payments to a printing company or failed to report them at all.
Second, BOONE artificially inflated the Gallery’s stated expenses and, to a lesser degree, the Gallery’s stated income, in order to fraudulently generate business losses when, in reality, the Gallery was generating profits each year. In furtherance of this aspect of the tax fraud scheme, BOONE engaged in complex financial machinations and further falsification of the check registers that BOONE provided to her accountant. For example, in 2011, BOONE transferred approximately $9.5 million from one business bank account to another, and falsely characterized these transfers as tax-deductible business expenses, such as commissions to artists, on the check registers that Boone provided to the accountant.
In all, BOONE caused the Internal Revenue Service (“IRS”) to incur losses of over $3 million, not including penalties and interest.
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In addition to the prison term, Judge Hellerstein ordered BOONE to serve one year of supervised release, including 180 hours of community service. Boone previously paid court-ordered restitution to the IRS in the amount of $3,097,160, which represents the additional tax due and owing as a result of BOONE’s filing of false individual and corporate income tax returns for calendar years 2009, 2010, and 2011.
Mr. Berman praised the outstanding investigative work of IRS Criminal Investigation in this case.
This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution.
Physical Therapist and Acupuncturist Sentenced in Manhattan Federal Court for Their Roles in Million Dollar Scheme to Defraud Medicare and MedicaidRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ASHRAF HASAN-HAFEZ and ILYA KOGAN were sentenced yesterday to 45 and 50 months, respectively, in prison for their participation in a scheme to defraud the Medicare and Medicaid programs. HASAN-HAFEZ, the owner of a physical therapy practice in Brooklyn, and KOGAN, the owner of an acupuncture company in Brooklyn, received approximately $1.3 million from Medicare and the New York State Medicaid Program after falsely submitting bills for services that were not provided as billed, or which were rendered by unlicensed and unsupervised individuals. In a separate scheme, KOGAN also obtained nearly $300,000 from no-fault insurance companies based on billing by fraudulently incorporated acupuncture companies. HASAN-HAFEZ and KOGAN were sentenced yesterday by United States District Judge Robert W. Sweet.
According to the Indictment filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:
Between at least January 2010 and August 2013, HASAN-HAFEZ was the owner of a physical therapy practice which operated out of a basement on East 18th Street in Brooklyn, New York. HASAN-HAFEZ employed individuals who provided physical therapy services to patients, and was involved in the clinic’s management and billing. KOGAN was the owner of an acupuncture company which operated its practice out of the same location on East 18th Street.
HASAN-HAFEZ and KOGAN committed fraud against Medicare and Medicaid by pressuring employees to add services to the bills that were submitted to these entities so that Medicare and Medicaid were billed for physical therapy services that were never in fact provided; billed for reimbursable physical therapy services even though only unreimbursable acupuncture had been provided; and billed for physical therapy services provided by unlicensed practitioners. When the employees resisted KOGAN’s directions to create such fraudulent billing, HASAN-HAFEZ directed the employees to follow KOGAN’s instructions. HASAN-HAFEZ had leverage over these employees because he sponsored their employment in the United States and they were therefore dependent on him for continued employment—and legal status—in the United States.
In total, Medicare and Medicaid suffered actual losses of $1,297,000 as a result of this fraudulent scheme.
In addition, KOGAN participated in a separate scheme to defraud no-fault insurance companies. No-fault insurance provides benefits to individuals injured in motor vehicle accidents under certain conditions. Between approximately March 2014 and June 2016, KOGAN controlled two acupuncture businesses that had been set up, at his request, under the name of another acupuncturist (“Individual-1”). KOGAN coached Individual-1 how to lie under oath about KOGAN’s involvement in the businesses when Individual-1 was questioned by representatives of a no-fault insurer. KOGAN had previously entered into settlement agreements with two of the largest no-fault insurance providers to resolve certain claims against him. Pursuant to one of the settlement agreements, KOGAN agreed not to submit any future billing—under his name, or under the name of any entity in which he had direct or indirect ownership or control—without giving advance notice to the insurer.
A total of $293,851 was paid to two no-fault insurers for services performed by Individual-1’s companies. Had the insurers known the truth—that the acupuncture clinics were in fact controlled by KOGAN despite being registered in Individual-1’s name—they would not have paid the claims due to the fraudulent incorporation of the companies.
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ASHRAF HASAN-HAFEZ, 47, of Brooklyn, New York, pled guilty to health care fraud and conspiracy to commit health care fraud on March 16, 2018. ILYA KOGAN, 44, of Watchung, New Jersey, pled guilty to health care fraud and conspiracy to commit health care fraud on March 16, 2018, and pled guilty to conspiracy to commit mail fraud on June 25, 2018. In addition to the prison terms, Judge Sweet ordered HASAN-HAFEZ and KOGAN to forfeit $1,297,000 and pay restitution of $1,297,000 to Medicare and Medicaid. KOGAN was also ordered to forfeit $293,851 and pay restitution of $293,851 to victims of the no-fault insurance fraud scheme.
Mr. Berman praised the outstanding investigative efforts of FBI and HHS-OIG.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Noah Solowiejczyk, Catherine Ghosh, and Jessica Greenwood are in charge of the prosecution.
Owner of New York Investment Fund Pleads Guilty to Committing $22 Million Scheme to Defraud InvestorsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that BRENT BORLAND, the owner and principal of a New York-based investment fund known as Belize Infrastructure Fund I LLC (“Belize Fund”), pled guilty to perpetrating a $22 million investment fraud scheme against dozens of Belize Fund investors. BORLAND pled guilty today before U.S. District Judge Katherine Polk Failla to conspiring to commit, and the commission of, securities fraud and wire fraud.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Brent Borland solicited funds from investors for a project to build a new airport in Belize. In doing so, Borland promised a high rate of return and assured investors that their funds were secured by real property. Not only was he not truthful about the collateral for their investments, Borland used a substantial portion of investors’ funds to support his own lavish lifestyle. Today, Brent Borland admitted to investor fraud to the tune of $22 million, and faces substantial time in federal prison.”
According to the Complaint and Indictment:
From 2014 through March 2018, BORLAND and others solicited and received approximately $21.9 million through Belize Fund from approximately 40 investors based upon representations that BORLAND would use the investors’ money to construct an airport in Belize. BORLAND promised investors high rates of return on their investments, which he represented were temporary “bridge financing.” BORLAND also represented to investors that their investments would be fully secured by real property in Belize that was unencumbered by any liens or obligations.
In fact, however, BORLAND misappropriated millions of dollars of investors’ funds and used those funds for his own personal benefit. BORLAND diverted at least approximately 30 percent of the approximately $21.9 million invested by victims to himself to pay for a variety of personal expenses, including his mortgage payments, credit card bills, luxury automobiles, a beach club membership, and private school tuition for his children. In contrast to BORLAND’s representations that investors would receive high rates of return within a specified time frame, all known investors in the scheme lost money. And while BORLAND represented that the investments would be secured by real property, the property purportedly serving as collateral was improperly pledged to multiple investors and, in some cases, did not even exist.
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BORLAND, 48, pled guilty to one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum potential sentence of five years in prison; one count of securities fraud, which carries a maximum potential sentence of 20 years in prison; and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison. The maximum potential 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. BORLAND is scheduled to be sentenced before Judge Failla on June 21, 2019.
Mr. Berman praised the investigative work of the U.S. Postal Inspection Service and thanked the Securities and Exchange Commission.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore and Negar Tekeei are in charge of the prosecution.
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10 Defendants Arrested in International Operation and Charged in Manhattan Federal Court with International Wire Fraud and Money Laundering SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Troy Miller, Director, Field Operations, New York, U.S. Customs and Border Protection (“CBP”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced a multinational operation involving 10 arrests in the United States and three other countries, and the unsealing of Indictments and filing of a related Complaint charging MARTINS APSKALNS, PAVELS BERNCS, JANIS BERNS, RAITIS GRIGORJEVS, SERGEJS LOGINS, DIANA MAKSIMOVIC, AGRIS PETROVS, IGORS PIRINS, VALTERS VOLKSONS, and VLADISLAV ZAPOLSKIJ with conspiracy to commit wire and bank fraud and conspiracy to commit money laundering. PAVELS BERNCS was arrested in Helsinki, Finland, and VLADISLAV ZAPOLSKIJ was arrested in Vilnius, Lithuania, and both are pending extradition to the United States; MARTINS APSKALNS and IGORS PIRINS were arrested in Kuldiga, Latvia, extradited to the United States, and arraigned before U.S. Magistrate Judge Debra Freeman on December 21, 2018; DIANA MAKSIMOVIC was arrested in Vilnius, Lithuania, and SERGEJS LOGINS was arrested in Riga, Latvia, and both were extradited to the United States and arraigned before U.S. District Judge Jesse M. Furman on February 4, 2019; and JANIS BERNS, RAITIS GRIGORJEVS, AGRIS PETROVS, and VALTERS VOLKSONS were arrested in Queens, New York, and presented before Magistrate Judge Ona T. Wang on December 3, 2018. APSKALNS, BERNCS, LOGINS, MAKSIMOVIC, PIRINS, and ZAPOLSKIJ are charged by Indictment, and BERNS, GRIGORJEVS, PETROVS, and VOLKSONS are charged by Complaint. The case has been assigned to United States District Judge Jesse M. Furman.
U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendants used an elaborate network of fictitious classic car dealers and collectors to take their victims for a ride financially. Thinking they were remitting money to purchase rare automobiles, victims were instead sending large sums to bogus auto transport companies that were really just vehicles from which the defendants allegedly vacuumed up the proceeds of their fraudulent scheme. Thanks to our law enforcement partners here in New York and in Latvia, Lithuania, and Finland, the defendants’ once-lucrative joyride is over.”
FBI Assistant Director William F. Sweeney Jr. said: “Victims of this fraud not only believed they were getting what they paid for, they were often stuck paying for the classic automobiles they never received. The FBI New York Eurasian Organized Crime Task Force would never have been able to bring these criminals to justice without the help of our task force partners, but also the work and partnership with our international partners in Latvia, Lithuania and Finland. We cannot stress enough how important it is for these suspects to understand the FBI has the ability to bring them back to the United States to face justice and punishment for their crimes.”
CBP New York Director of Field Operations Troy Miller said: “CBP, working in partnership with U.S. Attorney’s office, FBI, and the New York Police Department, demonstrated vigilance and exceptional skill in targeting and detecting this scheme, directly leading to the apprehension and prosecution of the alleged conspirators.”
NYPD Commissioner James P. O’Neill said: “In this increasingly connected world, it has never been more important for the NYPD and our law enforcement partners, in America and abroad, to work in concert toward our shared public-safety goals. It is due to that close cooperation that – after more than two years and across multiple continents – this investigation into international wire fraud and money laundering has successfully resulted in arrests. I commend and thank the attorneys from the Southern District for bringing this case forward, and all the FBI, CBP, and NYPD investigators for their dedication. Together, we will continue to be relentless in fighting crime that impacts the people we serve wherever, and however, it occurs.”
According to the allegations in the Indictments and the Complaint:[1]
From at least January 2016 through December 2018, the defendants participated in a fraudulent scheme that most commonly operated as follows: first, co-conspirators impersonated automotive dealers and collectors and claimed to be selling classic cars on various well-known internet auction and trading websites. Victims responding to the ads were in fact corresponding with a fraud scheme participant. After the victims and co-conspirators came to terms on a sale price, including down payment and shipping costs, victims were next directed to purported automotive transportation companies and were told that these companies would accept payment and transport the cars. These companies were in fact shell corporations established by the conspiracy to help perpetrate the fraud, whose corporate bank accounts were established and controlled by the defendants and co-conspirators, awaiting wired funds from the fraud’s victims. After victims had wired payment, the defendants and co-conspirators went to the banks to drain the victim’s funds, often starting the same day payment had been transmitted, withdrawing from different bank branches in numerous withdrawals on the same day, and withdrawing in denominations that were varied and often kept to an amount that they believed would prevent the financial institutions from recording and reporting the fraud. The defendants and other co-conspirators then sent the fraud proceeds outside the United States to Eastern European countries, from where the defendants and many of their co-conspirators originated. Some of the defendants maintained managerial roles, recruiting co-conspirators to participate and providing directions and victim information to scheme participants once the co-conspirators were inside the United States. Victims never received the goods they believed they had purchased, and many were unable to recover their money or were left paying loans for cars that were never truly for sale.
Each of the defendants is charged with one count of conspiracy to commit wire fraud and bank fraud, which carries a maximum sentence of 30 years in prison, and 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 defendants will be determined by the judge. The charges contained in the Indictments and the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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The investigation was conducted in close cooperation with the International Cooperation Department and the Criminal Investigation Department of the Central Criminal Police Department, State Police of Latvia; Prosecutor’s General Office of Latvia, International Cooperation Division; Police Department of Lithuania, Vilnius County Police Headquarters, Crimes Against Property Board; Lithuanian Criminal Police Bureau, International Liaison Board; Prosecutor General’s Office of the Republic of Lithuania; Vilnius Regional Prosecution Office; and the National Bureau of Investigation of Finland. The Department of Justice Criminal Division’s Office of International Affairs also provided significant assistance.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Jeffrey Coffman, Matthew Hellman, Emily Johnson, Daniel Nessim, and Thane Rehn are in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the texts of the Indictments and the Complaint, and the descriptions of the Indictments and the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Individual Charged in White Plains with Murder of 24-Year-Old VictimRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Anthony A. Scarpino, Jr., the Westchester County District Attorney, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Joseph F. Schaller, Commissioner of the New Rochelle Police Department, and James J. Heavey, Town of Greenwich Chief of Police, announced today the arrest of JAVIER ENRIQUE DA SILVA ROJAS (the “defendant” or “Da Silva”), who was charged by complaint with the kidnapping of Valerie Reyes (the “Victim”) in New Rochelle, New York, and unlawfully transporting her to Greenwich, Connecticut. The defendant was arrested in Flushing, Queens, on February 11, 2019, and was presented in White Plains federal court before the U.S. Magistrate Judge Lisa Margaret Smith today.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Javier Da Silva is charged with committing a gruesome kidnapping that resulted in the death of a young woman. Thanks to the excellent work of the FBI and its local law enforcement partners, Da Silva will need to answer for his alleged actions in court.”
District Attorney Anthony A. Scarpino, Jr. said: “From the start of this investigation into the death of Valerie Reyes, the Westchester County District Attorney’s Office has worked closely with Greenwich and New Rochelle Police Departments and the Connecticut State’s Attorney. The Assistant District Attorney and investigators assigned to the case worked tirelessly in an effort to bring swift justice for the victim of this horrendous crime and her family here in Westchester. We will continue to work with our law enforcement partners, including the FBI and the U.S. Attorney for the Southern District, to ensure the strength of the case.”
FBI Assistant Director William F. Sweeney Jr. said: “Together with our partners from the Greenwich and New Rochelle Police Departments, we were able to swiftly identify Javier Da Silva, an alleged murderer, and place him behind bars. But while today’s arrest is certainly a welcome conclusion, it in no way alleviates the pain and suffering Valerie’s family will continue to feel for years to come. The reality of their situation is utterly unimaginable, as is the crime with which Da Silva is charged.”
New Rochelle Deputy Police Chief Robert Gazzola said: “The arrest of Javier Da Silva is a result of the outstanding work and cooperation between members of the New Rochelle Police Department, the Greenwich Police Department, and the F.B.I. Safe Streets Task Force. This was a complicated case, and the efforts of the members who worked tirelessly on it should be applauded. I hope that this arrest will bring some degree of closure to the family of Valerie Reyes.”
Town of Greenwich Chief of Police James J. Heavey said: “From the moment Valerie was found in Greenwich, detectives from New Rochelle and Greenwich have worked tirelessly pursuing multiple investigative leads. We are pleased that this investigation and subsequent prosecution may bring justice for Valerie and some level of peace to her family. The New Rochelle and Greenwich communities can be proud of the collaborative work of their detectives and how they brought this investigation to a successful conclusion.”
According to the allegations in the Complaint unsealed in White Plains federal court:[1]
On or about January 30, 2019, the Victim was reported missing to the New Rochelle Police Department by her mother, father, and boyfriend. A few days later, on or about February 5, 2019, her body was recovered in a suitcase alongside a public road in the Town of Greenwich, Connecticut.
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DA SILVA, 24, of Flushing, Queens, is charged with one count of kidnapping resulting in death, which carries a sentence of death or life in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding work of the FBI Westchester County Safe Streets Task Force, the FBI New Haven Division, the New Rochelle Police Department, the Greenwich Police Department, the Westchester County District Attorney’s Office, the Westchester County Department of Public Safety, and the Westchester County Real Time Crime Center.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Mathew Andrews and Sam Adelsberg are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Hedge Fund Founder Sentenced to 30 Months in Connection with Bribery of Former Correction Officers Union LeaderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MURRAY HUBERFELD was sentenced to 30 months in prison for his role in a scheme to submit false paperwork to Platinum Partners (“Platinum”), a hedge fund founded by HUBERFELD, in order to facilitate a bribe to Norman Seabrook, the former president of the nation’s largest municipal correction officers union. HUBERFELD previously pled guilty to conspiring to commit wire fraud and thereby causing Platinum to fund a $60,000 bribe payment to Seabrook, which HUBERFELD intentionally concealed by falsely documenting the payment as one for courtside tickets to New York Knicks basketball games. As a result of the bribe, Seabrook caused the investment of millions of dollars of union funds into Platinum. Today’s sentence was imposed by U.S. District Judge Alvin K. Hellerstein.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Not content with being a successful businessman, Murray Huberfeld sought to grow his fund through fraud and deception, playing a critical role in a pernicious kickback scheme. His conduct was not only corrupt and criminal, but led to the loss of millions of dollars of union retirement benefits. The sentence imposed today reflects the magnitude of his crimes and untold pain his conduct caused to others.”
According to the Superseding Information, Superseding Indictment, Indictment, and Complaint filed in this case, other public filings, statements made during the plea proceeding, and evidence and testimony presented at trial proceedings in the fall of 2017 and the summer of 2018:
HUBERFELD was a founder of Platinum, a hedge fund that he had founded and continued to control unofficially even after his formal affiliation with the fund had ceased. In late 2013, HUBERFELD and Jona Rechnitz, an acquaintance and real estate businessman, sought to attract public and institutional investors to the fund. In late 2013, Rechnitz told HUBERFELD that a contact of his – Norman Seabrook president of the Correction Officers’ Benevolent Association (“COBA” or the “Union”) – would likely invest COBA money in Platinum if HUBERFELD were willing to pay Seabrook money. Over the next few months, Seabrook caused COBA to invest approximately $20 million of its funds into Platinum, including $15 million from a retirement benefits program funded by the City of New York that invests money for correction officers’ retirements.
In or around December 2014, arrangements were made to pay Seabrook for the millions of dollars the Union had invested over the course of that year. Rechnitz paid Seabrook $60,000 in cash, delivered to Seabrook in a men’s luxury handbag. HUBERFELD and Rechnitz arranged for Platinum’s management company to receive a fraudulent invoice for $60,000 – generated by Rechnitz – that, on its face, billed Platinum for seven pairs of courtside tickets to New York Knick games given to Platinum by Rechnitz, who owned Knicks season tickets. In truth, and as HUBERFELD knew, the reason given to Platinum was false, and no Knicks tickets had changed hands. The real purpose of the payment was to reimburse Rechnitz, who had paid Seabrook for his efforts in securing COBA’s investments. Three days later, Platinum issued Rechnitz a $60,000 check. Over the next few months, Rechnitz, HUBERFELD, and Jeremy Reichberg, another co-conspirator, continued to work together to lobby Seabrook for more money. However, after a lawsuit filed by a former COBA board member referred to the Platinum investments, and the U.S. Attorney’s Office grand jury investigation resulted in subpoenas to Platinum and COBA in May 2015, no further investments were made. Ultimately, Platinum collapsed, and COBA lost $19 million of its investment.
Seabrook was convicted of honest services fraud and conspiracy on August 18, 2018, after a 10-day trial in Manhattan federal court. On February 8, 2019, Judge Hellerstein sentenced Seabrook to 58 months in prison and ordered him to pay restitution in the amount of $19 million.
On January 2, 2019, Reichberg was found guilty of honest services fraud, conspiracy, and obstruction of justice in connection with a separate scheme in which he and Rechnitz provided gifts and benefits to a number of high-level officers of the New York City Police Department (“NYPD”) in exchange for official police action for themselves and their associates. He is due to be sentenced by U.S. District Judge Gregory H. Woods on April 4, 2019.
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In addition to the prison term, HUBERFELD, 58, of Lawrence, New York, was sentenced to three years of supervised release, and ordered to pay restitution in the amount of $19 million.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the NYPD Internal Affairs Division.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Martin S. Bell, Russell Capone, and Lara Pomerantz are in charge of the prosecution.
Fifth Bronx Man Pleads Guilty in Multimillion-Dollar Ghana-Based Fraud Scheme Involving Business Email Compromises and Romance Scams Targeting ElderlyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and 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 MUFTAU ADAMU, a/k/a “Muftau Adams,” a/k/a “Muftau Iddrissu,” pled guilty today to one count of conspiracy to commit wire fraud in connection with a fraud scheme based in the Republic of Ghana (“Ghana”) involving the theft of over $10 million through business email compromises and romance scams that targeted the elderly from at least in or about 2014 through in or about 2018. ADAMU is the fifth defendant to plead guilty in the case. Four other defendants – TOUREY AHMED RUFAI, a/k/a “Joe Thompson,” a/k/a “Joe Terry,” a/k/a “Rufai A Tourey,” a/k/a “Ahmed Rufai Tourey,” PRINCE NANA AGGREY, ABDUL RASHID MASOUD, and MUBARAK BATURI, a/k/a “Eben Karsah,” were arrested in 2018 and also pled guilty earlier this year. RUFAI, AGGREY, and BATURI pled guilty on January 9, January 28, and February 8, 2019, respectively, to one count of conspiracy to commit wire fraud. MASOUD pled guilty on January 18, 2019, to one count of receiving stolen property. ADAMU pled guilty before U.S. Magistrate Judge Kevin Nathaniel Fox. The case is assigned to U.S. District Judge Denise L. Cote.
Manhattan U.S. Attorney Geoffrey S. Berman said: “These five defendants admitted to participating in a conspiracy that involved stealing millions of dollars from U.S. businesses and individuals across the United States and laundering that money to their co-conspirators in Ghana through a network of bank accounts in the Bronx, many of which were opened using fake names and businesses. The conspiracy’s commission of fraud through business email compromises and the targeting of elderly victims through romance scams is particularly egregious. These defendants now await sentencing for their crimes.”
FBI Assistant Director William F. Sweeney Jr. said: “There’s often a misconception that financial schemes, such as those detailed in this case, are easy to spot. This is especially true for companies with a high level of awareness about business email compromises, and those individuals who are caught off guard by a scammer willing to capitalize on their trust and compassion. This fraud alone involved the alleged theft of more than $10 million, proving there’s often a way around the general safeguards put in place by businesses and individuals alike. Today’s announcement is a good reminder for all to stay alert and remember, if something doesn’t feel right, chances are it’s the wrong thing to do.”
IRS-CI Acting Special Agent in Charge Jonathan D. Larsen said: “Every defendant in today’s announcement shares one trait in common – greed. This desire for money drove them to prey upon the vulnerable in our society. Thanks to the financial expertise and diligence of IRS-CI special agents, who worked side-by-side with our law enforcement partners to uncover these schemes, these criminals are off the street and will now face the consequences of their actions.”
According to allegations in the Complaints and the Indictment filed in the case:
Between 2014 and 2018, ADAMU, RUFAI, AGGREY, MASOUD, and BATURI were members of a criminal enterprise (the “Enterprise”) based in Ghana that committed a series of business email compromises and romance scams against individuals and businesses located across the United States, including in the Southern District of New York.
The objective of the Enterprise’s business email compromise fraud scheme was to trick and deceive businesses into wiring funds into accounts controlled by the Enterprise. First, members of the Enterprise created email accounts with slight variations of email accounts used by employees of a victim company or third parties engaged in business with a company, to “spoof” or impersonate those employees or third parties. These fake email accounts were specifically designed to trick other employees of the company with access to the company’s finances into thinking the fake email accounts were authentic. The fake email accounts were used to send instructions to wire money to certain bank accounts and also included fake authorization letters for the wire transfers that contained forged signatures of company employees. By using this method of deception, the Enterprise sought to trick the victims into transferring hundreds of thousands of dollars to bank accounts the victims believed were under the control of legitimate recipients of the funds as part of normal business operations, when in fact the bank accounts were under the control of members of the Enterprise, including ADAMU, RUFAI, AGGREY, MASOUD, and BATURI.
The Enterprise conducted the romance scams by using electronic messages sent via email, text messaging, or online dating websites that deluded the victims, many of whom were vulnerable men and women over the age of 60 who lived alone, into believing the victims were in romantic relationships, when in fact the correspondents were members of the Enterprise using fake identities. Once members of the Enterprise had gained the trust of the victims using the fake identity, they used false pretenses, such as a shipment of gold or receiving a portion of an investment, to cause the victims to wire money to bank accounts the victims believed were controlled by their romantic interests, when in fact the bank accounts were controlled by members of the Enterprise. At times, the members of the Enterprise also used false pretenses to cause the victims to receive funds into the victims’ bank accounts, which, unbeknownst to the victims, were fraud proceeds, and to transfer those funds to accounts under the control of members of the Enterprise. The members of the Enterprise, posing as the romantic interests of the victims, also introduced the victims to other individuals purporting to be, for example, consultants or lawyers, who then used false pretenses to cause the victims to wire money to bank accounts controlled by members of the Enterprise.
ADAMU, RUFAI, AGGREY, MASOUD, BATURI, and their co-conspirators received or otherwise directed the receipt of over $10 million in fraud proceeds from victims of the Enterprise in bank accounts that they controlled in the Bronx, New York. Some of these bank accounts were opened using fake names, stolen identities, or shell companies in order to avoid detection and hide the true identities of the members of the Enterprise controlling those accounts. Once the defendants received the fraud proceeds in bank accounts under their control, the defendants withdrew, transported, and laundered those fraud proceeds to other members of the Enterprise, including those located in Ghana.
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ADAMU, 30, RUFAI, 33, AGGREY, 43, and BATURI, 29, all of the Bronx, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. MASOUD, 36, of the Bronx, New York, pled guilty to one count of conspiracy to receive stolen money, which carries a maximum sentence of five years.
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.
ADAMU is scheduled to be sentenced on June 7, 2019, at 10:30 a.m. RUFAI is scheduled to be sentenced on April 12, 2019, at 11:00 a.m. MASOUD is scheduled to be sentenced on April 19, 2019, at 11:00 a.m. BATURI and AGGREY are scheduled to be sentenced on May 10, 2019, at 10:30 a.m. and 2:00 p.m., respectively. Each of the defendants will be sentenced by Judge Cote.
Any businesses or individuals who believe they may have been the victim of a business email compromise or a romance scam or have information regarding such crimes should file a complaint with the FBI’s Internet Crime Complaint Center (“IC3”) at https://www.ic3.gov or contact their local FBI office.
Mr. Berman praised the outstanding investigative work of the FBI and IRS-CI. Mr. Berman also thanked U.S. Customs and Border Protection, Ghana’s Economic and Organised Crime Office, and the FBI Legal Attaché in Accra, Ghana, for their helpful assistance with the investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Sagar K. Ravi and Andrew D. Beaty are in charge of the prosecution.
Army Reservist Charged with Participating in Bank Fraud and Money Laundering SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and David E. Beach, the Special Agent-in-Charge of the New York Field Office of the United States Secret Service (“USSS”), announced today that EMEKA NNAWUBA, a/k/a “Benjamin Alabie,” who is a member of the United States Army Reserves, has been charged with participating in a scheme to defraud banks and launder the proceeds of frauds perpetrated against dozens of victims. NNAWUBA was arrested late yesterday, and will be presented today before Chief United States Magistrate Judge Erin L. Wiedemann in Fayetteville, Arkansas. The case has been assigned to United States District Judge Katherine Polk Failla.
U.S. Attorney Geoffrey S. Berman said: “Emeka Nnawuba allegedly laundered money for a scheme that trolled dating websites in order to steal money from the accounts of unsuspecting women. Especially so close to Valentine’s Day, this case serves as a cautionary reminder to be especially wary of those who view dating sites as a predatory opportunity. Nnawuba’s alleged luck in love has run out, as he potentially faces a lengthy period of time alone . . . in federal prison.”
U.S. Secret Service White Plains Resident Agent-in-Charge Julie Goodwin said: “The charges announced today illustrate the Secret Service's commitment to aggressively investigating financial crimes. I would like to thank HSI and the U.S. Attorney's Office for their cooperation and partnership in this case.”
According to the allegations in the Superseding Indictment[1]:
From at least 2016 until 2018, NNAWUBA participated in a scheme to defraud banks and launder the proceeds of frauds perpetrated against dozens of victims. Among other things, NNAWUBA used false identities and false passports to open bank accounts; received or attempted to receive nearly $1,000,000 in fraud proceeds; withdrew tens of thousands of dollars of fraud proceeds in cash; and transferred hundreds of thousands of dollars of fraud proceeds to bank accounts controlled by co-conspirators in an effort to conceal the source of funds.
The funds laundered by NNAWUBA were procured principally by (a) romance scams, in which members of the scheme trolled dating websites to find unsuspecting women and stole their money on false pretenses; and (b) business compromise scams, in which members of the scheme impersonated individuals, professionals, or businesses in the course of otherwise ordinary financial transactions, and then fraudulently induced the counterparties to those transactions to transfer funds to bank accounts controlled and operated by NNAWUBA or other members of the scheme.
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NNAWUBA, 29, of Fayetteville, Arkansas, is charged with one count of participating in a conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison, and one count of participating in a 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.
Five other individuals previously were charged and pled guilty in connection with their participation in the scheme.
On February 12, 2018, Ifeanyi Ezeji pled guilty to participating in a conspiracy to commit money laundering. On May 31, 2018, Judge Failla sentenced IFEANYI EZEJI to 40 months in prison and three years of supervised release, and ordered him to forfeit $2,080,347.14 and pay restitution in the amount of $873,891.31.
On May 31, 2018, Christopher Ezeji pled guilty to passport counterfeiting. On October 4, 2018, Judge Failla sentenced Christopher Ezeji to five years of probation, and ordered him to forfeit $500.00 and pay restitution in the amount of $873,891.31.
On June 22, 2018, Peter Abbah pled guilty to aggravated identity theft. On October 2, 2018, Judge Failla sentenced Abbah to 24 months in prison and one year of supervised release, and ordered him pay restitution in the amount of $218,498.76.
On July 27, 2018, Michael Akhiero pled guilty to participating in a conspiracy to commit bank fraud. Akhiero is scheduled to be sentenced by Judge Failla on March 14, 2019.
On January 11, 2019, Okechukwu Peter Ezika pled guilty to engaging in monetary transactions in property derived from specified unlawful activity. Ezika is scheduled to be sentenced by Judge Failla on April 10, 2019.
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Mr. Berman praised the outstanding investigative work of the USSS, and thanked United States Immigration and Customs Enforcement’s Homeland Security Investigations for its assistance.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Juliana N. Murray and Robert B. Sobelman are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Former Ceo of Alaska-Based Fiber Optic Cable Company Pleads Guilty to Wire Fraud and Aggravated Identity Theft for Defrauding New York Investment CompaniesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ELIZABETH ANN PIERCE, the former Chief Executive Officer of a telecommunications company based in Anchorage, Alaska, pled guilty today in Manhattan federal court to wire fraud and aggravated identity theft in connection with a scheme to use forged guaranteed revenue contracts fraudulently to induce investors to invest more than $250 million into her company for the construction of a fiber optic cable network in Alaska. PIERCE pled guilty before U.S. District Judge Edgardo Ramos.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As she admitted today, Elizabeth Ann Pierce engaged in a brazen, multi-year scheme to obtain over $250 million from investors by misrepresenting that she had guaranteed revenue contracts with multiple telecommunications services companies. But in fact, the defendant faked those contracts, forged other people’s signatures on them, and then lied to cover up her fraud. She abused her executive position and is now being held accountable for her crimes.”
According to the Complaint, the Indictment, statements made in court, and publicly available documents:
Until July 2017, PIERCE was the chief executive officer of Quintillion, a telecommunications company based in Anchorage, Alaska that built, operates, and markets a high-speed fiber optic cable system (the “Fiber Optic Cable System”). This System consists of three segments: a subsea segment that spans the Alaskan Arctic; a terrestrial segment that runs north to south along the Dalton Highway; and a land-based network of fibers that connects the subsea and terrestrial segments. The Fiber Optic Cable System is connected to the lower 48 states through other existing networks.
Between May 2015 and July 2017, PIERCE engaged in a scheme to induce two investment companies to provide more than $250 million to construct the Fiber Optic Cable System by providing them with eight forged broadband capacity sales contracts and related order forms under which Quintillion would obtain guaranteed revenue once the Fiber Optic Cable System was built (the “Fake Revenue Agreements”). Under the Fake Revenue Agreements, four telecommunications services companies appeared to have made binding commitments to purchase specific wholesale quantities of capacity from Quintillion at specified prices. The cumulative value of the Fake Revenue Agreements was more than $24 million during the first year of the subsea segment’s operation, approximately $10 million during the first year of the terrestrial segment’s operation, and approximately $1 billion over the life of the Fake Revenue Agreements. In reality, the Fake Revenue Agreements were completely worthless because PIERCE had forged the counterparties’ signatures.
Certain of the Fake Revenue Agreements never existed at all, while others were falsified versions of genuine revenue agreements. PIERCE fabricated the terms of the false versions of the agreements to make them more favorable to Quintillion and, therefore, more appealing to investors than the genuine agreements. For example, under one of the Fake Revenue Agreements, the customer purportedly agreed to buy increasing amounts of gigabits per second of capacity over a period of 20 years from Quintillion. That agreement, if genuine, would have assured Quintillion hundreds of millions of dollars in future revenue. In reality, negotiations over that deal had ended unsuccessfully, which fact PIERCE never disclosed to the investors. Under another Fake Revenue Agreement, the customer purportedly agreed to buy a fixed, predetermined amount of capacity from Quintillion regardless of subsequent market conditions. In truth, that customer was not obligated to buy any capacity.
After the terrestrial system was built, PIERCE attempted to prevent the discovery of the Fake Revenue Agreements by accelerating the timing of incoming payments under certain genuine agreements to make those payments appear to be based on the Fake Revenue Agreements. PIERCE also sought to prevent Quintillion and the investors from invoicing one of the customers that had no real contract with Quintillion by fabricating e-mail correspondence PIERCE purportedly had with that customer. PIERCE’s scheme started to unravel when a customer disputed invoices that it received from Quintillion pursuant to one of the Fake Revenue Agreements. Shortly thereafter, in the midst of Quintillion’s internal investigation, PIERCE abruptly resigned. Quintillion self-reported PIERCE’s conduct to the Department of Justice.
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PIERCE, age 55, now of Austin, Texas, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison, and eight counts of aggravated identity theft, each of which carries a mandatory 2-year term of imprisonment, of which at least 2 years must be consecutive to any term of imprisonment imposed on the wire fraud count.
PIERCE is scheduled to be sentenced by U.S. District Judge Edgardo Ramos on May 16, 2019, at 11:00 a.m.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Sarah Lai and Vladislav Vainberg are in charge of the prosecution.
Alleged Gang Member Charged with 2014 Manhattan MurderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John B. Devito, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an indictment charging FRANK BRANDON, a/k/a “Trizzy,” an alleged member of the “Milla Bloods” gang, with the February 23, 2014, murder of Gashier Mendy, 24, inside the Saint Nicholas Houses in Manhattan, and related offenses. BRANDON was taken into federal custody this morning in Gloversville, New York, and was presented this afternoon before United States Magistrate Judge Kevin Nathaniel Fox. The case is assigned to U.S. District Judge Edgardo Ramos.
U.S. Attorney Geoffrey S. Berman said: “Almost five years ago, Gashier Mendy was shot dead, her life tragically and brutally taken. As alleged in today’s indictment, Frank Brandon killed her. Thanks to the outstanding efforts of the NYPD and ATF, Brandon now faces murder charges for his heinous crime.”
ATF Special Agent-in-Charge John B. Devito said: “Frank Brandon, an alleged member of the ‘Milla Bloods’ gang, was charged with a number of federal offenses including the murder of a young woman. ATF and our law enforcement partners stand united at the frontline in the fight against violent crime. We will aggressively pursue and bring to justice any individual bent on bringing heinous acts of violence into their communities. I would like to thank the members of the ATF/ NYPD Joint Robbery Task Force for their tireless efforts on this case. I would also like to thank the United States Attorney’s Office for their work in prosecuting this case.
According to the allegations in the Indictment[1]:
BRANDON was a member of the “Milla Bloods,” a gang that operated in Manhattan and engaged in racketeering activity, including acts of violence and narcotics distribution. On February 23, 2014, in furtherance of his gang activity, BRANDON shot and killed Gashier Mendy inside 240 West 129th Street.
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BRANDON, 32, of Gloversville, New York, is charged in the Indictment with one count of murder in aid of racketeering, in violation of Title 18, United States Code, Sections 1959(a)(1) and 2; one count of murder through the use of a firearm, in violation of Title 18, United States Code, Sections 924(j) and 2; one count of being a felon in possession of ammunition, in violation of Title 18, United States Code, Sections 922(g)(1) and 2; and one count of conspiracy to distribute and possess with intent to distribute methamphetamines and marijuana, in violation of Title 21, United States Code, Section 846. BRANDON faces a mandatory minimum penalty of death or life in prison.
The maximum potential sentence in this case is prescribed by Congress and is provided here for information purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding work of the NYPD and ATF.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Dominic A. Gentile is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[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.
Norman Seabrook, President of Correction Officers Benevolent Association, Sentenced to 58 Months in Prison for Accepting Bribes in Exchange for Investing Union Money in New York-Based Hedge FundRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that NORMAN SEABROOK, the former president of the Correction Officers’ Benevolent Association (“COBA”) was sentenced to 58 months in prison for his role in a bribery scheme in which he accepted a $60,000 bribe payment, and the promise of future bribe payments, in exchange for SEABROOK’s investment of millions of dollars of COBA money in a hedge fund. SEABROOK was found guilty of honest services fraud offenses on August 18, 2018, after a 10-day trial in Manhattan federal court. Today’s sentence was imposed by U.S. District Judge Alvin K. Hellerstein.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Tens of thousands of hardworking correction officers once looked to Norman Seabrook as their leader and champion. Seabrook now stands convicted of betraying them for a bag full of cash and the promise of more. His conduct resulted not simply in the membership’s loss of faith in its leader, but the loss of millions of dollars in retirement benefits due to union members. My Office has worked tirelessly with our law enforcement partners to hold Seabrook and those who conspired with him to account. Today’s sentence sends an important message to any other person in a position of power that no one is above the law, and that violating a sacred trust in return for a cash payoff will land you on the wrong side of a prison door.”
According to the allegations in the Indictment, Superseding Indictment, and Complaint, other filed documents, and the evidence at trial:
COBA is New York City’s largest correction officers union and the largest municipal jail union in the United States. COBA represents over 20,000 active and retired correction officers in New York City, including at Rikers Island. NORMAN SEABROOK, the defendant, was the president of COBA for over 20 years. SEABROOK wielded enormous power over the affairs of COBA, and was rarely questioned by his executive board, as he had the ability to affect their assignments, pay, and hours. SEABROOK’s control extended to the union’s finances, including the administration of its “Annuity Fund,” a retirement benefits program funded by the City of New York that invests more than $70 million for correction officers’ retirements.
Toward the end of 2013, on a trip to the Dominican Republic with, among others, Jona Rechnitz, a real estate businessman who is now a cooperating witness for the Government, SEABROOK told Rechnitz that he worked hard to invest COBA’s money and was not getting anything out of it, and it was time that “Norman Seabrook got paid.” Rechnitz was friendly with and had done business with Murray Huberfeld, a founder and part owner of Platinum Partners (“Platinum”), a Manhattan-based hedge fund that principally ran two funds. Rechnitz was aware that Platinum was looking to attract public and institutional investors – as opposed to its more typical investor set of high net-worth individuals – and told Huberfeld that SEABROOK would likely invest COBA money in Platinum if Huberfeld were willing to pay SEABROOK money on the side. Huberfeld agreed to the proposition, and Huberfeld worked out a formula in which SEABROOK would be paid a kickback of a portion of the profits from COBA’s investment that Huberfeld estimated would be between $100,000 and $150,000 per year.
SEABROOK then began investing COBA’s money, at first going through the motions of having Platinum make a pitch to COBA’s Annuity Fund board and having advisers conduct diligence. Those advisers included attorneys who wrote letters expressing concern that public pensions like COBA do not typically invest in higher-risk vehicles like hedge funds. SEABROOK concealed those letters from the other members of COBA’s Annuity Fund Board in order to secure their approval for the investment. In March 2014, COBA’s Annuity Fund made a $10 million investment in one of Platinum’s funds. In June 2014 – this time without running the investment by the COBA Board or seeking any approval – SEABROOK invested $5 million, or 40 percent, of COBA’s own assets in the same fund, money that had been set aside for use in the event of a union emergency. In August 2014, the Annuity Fund invested another $5 million in Platinum. By that point, COBA was the largest investor in that Platinum fund for all of 2014, and amounted to more than half of all incoming investments for the fund. At the same time, Platinum was experiencing significant redemptions by other investors.
Toward the end of 2014, SEABROOK wanted the first of his kickback payments, and demanded it from Rechnitz. Huberfeld told Rechnitz that the fund had not performed as well as expected, and that he could pay SEABROOK only $60,000. Rechnitz agreed to lay out the cash, and Huberfeld agreed to reimburse Rechnitz on Platinum’s behalf. Huberfeld suggested that to paper over the reimbursement, Rechnitz invoice Platinum for a number of Rechnitz’s courtside tickets to New York Knicks games, in the amount of $60,000, and Platinum would then cut a check to Rechnitz.
Rechnitz paid SEABROOK the first $60,000 kickback on December 11, 2014. Before meeting SEABROOK that evening, Rechnitz went to one of SEABROOK’s favorite stores, Salvatore Ferragamo on Fifth Avenue in Manhattan, and bought an expensive men’s handbag for SEABROOK. Rechnitz put the money in the bag, and met SEABROOK a few blocks away in SEABROOK’s COBA sport utility vehicle with tinted windows, where he handed SEABROOK the bag. Rechnitz and SEABROOK had dinner with two other persons nearby, then attended a Torah dedication ceremony nearby, after which SEABROOK left Manhattan. These events have been corroborated by, among other things, phone records, emails, license plate reader records, surveillance footage, and a receipt from Salvatore Ferragamo. On the same day, Rechnitz’s assistant prepared a $60,000 invoice to Platinum for Knicks tickets, which Rechnitz forwarded by email to Huberfeld. Three days later, Platinum paid Rechnitz by check.
Huberfeld, through another associate, Jeremy Reichberg, continued to lobby SEABROOK for more money in 2015. However, after a lawsuit filed by a former COBA board member referred to the Platinum investments, and the U.S. Attorney’s Office grand jury investigation resulted in subpoenas to Platinum and COBA in May 2015, no further investments were made. As part of the lawsuit, SEABROOK filed a false affidavit in which he claimed that COBA’s board members had authorized his unilateral and unauthorized June 2014 transfer of $5 million of union funds to Platinum. He also claimed that he himself had paid for his March 2014 trip to Israel when it had, in fact, been paid for by Rechnitz. This lie under oath served to hide SEABROOK’s connection to the Platinum Partners investment and the bribe arrangement behind it.
On May 25, 2018, Huberfeld pled guilty to one count of conspiracy to commit wire fraud in connection with the use of the sham invoice as part of his role in the conspiracy. He is due to be sentenced by Judge Hellerstein on February 12, 2019, and faces a maximum sentence of five years in prison.
On January 2, 2019, Reichberg was found guilty of honest services fraud, conspiracy, and obstruction of justice in connection with a separate scheme in which he and Rechnitz provided gifts and benefits to a number of high-level officers of the New York City Police Department (“NYPD”) in exchange for official police action for themselves and their associates. He is due to be sentenced by U.S. District Judge Gregory H. Woods on April 4, 2019.
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In addition to the prison term, SEABROOK, 58, of the Bronx, New York, was sentenced to three years of supervised release, and ordered to pay restitution in the amount of $19 million.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the NYPD Internal Affairs Bureau.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Martin Bell, Russell Capone, and Lara Pomerantz are in charge of the prosecution.
Manhattan Man Arrested for Attempting and Conspiring to Provide Material Support to Terrorist OrganizationRead 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 JESUS WILFREDO ENCARNACION, a/k/a “Jihadistsoldgier,” “Jihadinhear,” “Jihadinheart,” “Lionofthegood,” was arrested last night at John F. Kennedy International Airport (“JFK Airport”) in Queens, New York. ENCARNACION was charged by a criminal Complaint earlier today with attempting and conspiring to provide material support to Lashkar e-Tayyiba (“LeT”), a Pakistan-based designated foreign terrorist organization responsible for multiple high-profile attacks, including the infamous Mumbai attacks in November 2008. ENCARNACION is expected to be presented later today before Magistrate Judge Henry B. Pitman in Manhattan federal court.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Jesus Encarnacion, a Manhattan man, plotted to travel to Pakistan to join and train with the terrorist organization Lashkar e-Tayyiba, which is infamous around the world for perpetrating the lethal 2008 Mumbai terror attacks and other atrocities. The excellent work of the FBI and NYPD stopped Encarnacion’s alleged plan to support this deadly terrorist organization before he took flight, and now he will face federal terrorism charges.”
Assistant Attorney General John C. Demers said: “Encarnacion allegedly attempted to travel to Pakistan to join a foreign terrorist organization and conspired with another individual to provide that organization with material support. The National Security Division is committed to identifying and holding accountable those who seek to join and support designated foreign terrorist organizations.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, not only did Mr. Encarnacion express a desire to execute and behead people, he scheduled travel and almost boarded a plane so he could go learn how to become a terrorist. These organizations are using the internet and social media to appeal to the most barbaric impulses in people, and train them to kill. The FBI New York Joint Terrorism Task Force will continue to do all it can to stop these alleged criminals before innocent people are killed.”
NYPD Police Commissioner James P. O’Neill said: “As alleged, Jesus Encarnacion had expressed his desire to commit a terrorist attack while living in New York City and never abandoned those plans. Allegedly, one of his stated motives for traveling overseas was to get the training and experience he believed he needed to someday return to the United States and carry out attacks. I want to commend the FBI Agents, NYPD Detectives and representatives of 54 other agencies that make up the Joint Terrorism Task Force for the investigation that led to this arrest.”
As alleged in the criminal Complaint,[1] filed today in Manhattan federal court:
In November 2018, ENCARNACION expressed his desire to join a terrorist group in an online group chat, where he met another individual (“CC-1”). CC-1 introduced ENCARNACION to an individual who, unbeknownst to CC-1 or ENCARNACION, was in fact an undercover FBI employee (“UC-1”). ENCARNACION repeatedly expressed, in the course of recorded communications through a social media service with CC-1 and through an encrypted messaging service with UC-1, his allegiance to and support for LeT, which, since approximately 2001, has been designated as a Foreign Terrorist Organization by the United States Secretary of State.
Over the past several months, ENCARNACION has discussed his desire and plans to join LeT overseas so that he could receive training and participate in violent acts of terrorism. For example, ENCARNACION told UC-1 that he was “ready to kill and die in the name of Allah” and sought UC-1’s assistance to help ENCARNACION travel to abroad to serve as an “executioner” for LeT, stating, “I want to execute. I want to behead. Shoot.” ENCARNACION further stated that he aspired to commit terrorist attacks (“a bombing and shooting”) in the United States, but lacked “guidance” and “guns” to do so.
During the months that followed, ENCARNACION and UC-1 agreed on a plan that ENCARNACION believed would allow him to join LeT in Pakistan. ENCARNACION told UC-1 that he had made arrangements to travel to a particular city in Europe (the “European City”), as the first step of traveling to Pakistan to join LeT. ENCARNACION purchased an airline ticket for a flight scheduled to depart on February 7, 2019, from JFK Airport, to the European City. On February 7, ENCARNACION traveled to JFK Airport, where he was arrested by the FBI after he attempted to board that flight.
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ENCARNACION, 29, of Manhattan, is charged with one count of attempting to provide material support to a designated foreign terrorist organization and one count of conspiring to provide material support to a designated foreign terrorist organization, each of which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which consists of agents from the FBI, detectives from the NYPD, and officers from numerous other agencies, including U.S. Customs and Border Protection, which assisted significantly in this case. Mr. Berman also thanked the Counterterrorism Section of the Department of Justice’s National Security Division.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys David W. Denton Jr. and Kimberly J. Ravener are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below are only allegations, and every fact described should be treated as an allegation.
Upper West Side Heroin Dealer Arrested for Causing Overdose DeathRead 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 that JOSE LOPEZ, a/k/a “Joey,” was arrested yesterday for selling heroin that caused the death of Luxi Gong in October 2018. LOPEZ was presented yesterday in Manhattan federal court before U.S. Magistrate Judge Henry B. Pitman.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, with little regard for human life, Jose Lopez lined his pockets by allegedly advertising and selling a highly potent form of heroin. In fact, as alleged, even after he learned that the drugs he sold killed a 25-year-old woman, he continued to sell his poison. Now, Lopez faces life in prison for his alleged crimes.”
According to the allegations in the Complaint unsealed yesterday in Manhattan federal court:[1]
LOPEZ used online bulletin boards and social media to advertise and sell a particularly potent form of heroin. On October 27, 2018, one of LOPEZ’s customers, a 25-year-old Manhattan woman named Luxi Gong, was found dead in her apartment. Following an investigation by the NYPD, LOPEZ was identified as the person who had distributed heroin to Gong, resulting in her death. LOPEZ continued to sell heroin even after he was informed that Gong had overdosed from the drugs he sold.
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LOPEZ, 26, of Manhattan, New York, was charged with distribution and possession with intent to distribute heroin, which carries a maximum sentence of life in prison and a mandatory minimum sentence 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.
U.S. Attorney Berman praised the outstanding work of the NYPD.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Adam S. Hobson is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Rikers Inmate Arrested for Attempting to Hire Hitman to Murder His Half-BrotherRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, John B. Devito, Special Agent-in-Charge of the New York Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), and Cynthia Brann, Commissioner of the New York City Department of Correction, announced that ANTHONY TEJADA, a/k/a “YM,” an inmate at the Rikers Island correctional facility, was arrested yesterday for attempting to hire a hitman to murder his half-brother. TEJADA was presented today in Manhattan federal court before U.S. Magistrate Judge Ona T. Wang.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, while incarcerated at Rikers Island, Anthony Tejada attempted to hire a hitman to murder his half-brother. Now, thanks to the dedicated work of our law enforcement partners, Tejada’s alleged plan has been foiled, he faces federal charges, and his intended victim is safe.”
ATF Special Agent-in-Charge John B. Devito said: “As alleged, Tejada’s actions could have resulted in serious bodily harm and or the death of an innocent individual. Thanks to the efforts of the ATF/ NYPD Joint Robbery Task Force and our partners in the Department of Correction, a crime of violence was averted. ATF stands with its law enforcement partners’ commitment to ridding the streets of individuals seeking to spread violence in their community. I would like to thank the United States Attorney’s Office for its leadership and guidance throughout this investigation.”
NYC Department of Correction Commissioner Cynthia Brann said: “This investigation and the resulting arrest, yet again sends a very clear message to those in DOC custody. You will be prosecuted if you commit crimes in custody, and if convicted you will face prison time. I am proud of our Correction Intelligence Bureau’s steadfast commitment to keeping our officers, those in our custody, and the people of New York City safe. And I want to thank our fellow law enforcement partners for working to help bring this individual to justice.”
According to the allegations in the Complaint filed today in Manhattan federal court:[1]
On October 1, 2018, TEJADA was arrested and charged in New York State court with the attempted murder of TEJADA’s half-brother (“Victim-1”). TEJADA was detained at the Rikers Island correctional facility.
While an inmate at Rikers, TEJADA hired an individual he believed to be a hitman to murder Victim-1. In fact, the person he hired to commit this murder was an undercover ATF agent. TEJADA had multiple recorded conversations with the undercover agent, both over the phone and in person, in which TEJADA discussed the intended murder, and TEJADA agreed to pay the undercover agent $5,000 to commit the murder.
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TEJADA, 19, of Brooklyn, New York, is charged with one count of murder-for-hire, which carries a maximum sentence of 10 years in prison, and one count of solicitation to commit a crime of violence, 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.
Mr. Berman praised the outstanding work of the ATF, NYPD, and the New York City Department of Correction’s Intelligence Bureau.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Frank J. Balsamello and Adam S. Hobson are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint constitutes only allegations, and every fact described herein should be treated as an allegation.
Postal Worker and Massachusetts Man Charged with Importing and Distributing Synthetic CannabinoidsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), Ruth M. Mendonça, Acting Inspector-in-Charge of the New York Field Division of the United States Postal Inspection Service (“USPIS”), and Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of United States Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today that DANIEL BORER and JOSEPHINE McLAUGHLIN, who is an employee of the United States Postal Service, have been charged with importing synthetic cannabinoids from China and then using them to manufacture and distribute massive wholesale quantities of smokeable synthetic cannabinoids (“SSC”) throughout the United States. Both defendants were arrested this morning, and will be presented this afternoon before United States Magistrate Judge David H. Hennessey in Boston, Massachusetts. The case has been assigned to United States District Judge Naomi Reice Buchwald. In addition, Mr. Berman announced today that JONATHAN RIENDEAU, who operated several websites on which he sold SSC, pled guilty and is cooperating with the Government.
U.S. Attorney Geoffrey S. Berman said: “Trafficking of synthetic cannabinoids – sometimes called K2 or Spice – poses a serious threat to public health and safety. Packaged attractively to appeal to teenagers and young adults, synthetic cannabinoids are in reality a toxic cocktail that can be very dangerous to consume. As alleged, Daniel Borer and Josephine McLaughlin imported massive quantities of synthetic cannabinoids and distributed them in smokeable form to retail dealers throughout the United States. Thanks to our law enforcement partners, Borer and McLaughlin have been arrested and their dangerous business has been dismantled.”
USPIS Acting Inspector in Charge Ruth M. Mendonça said: “Josephine McLaughlin’s alleged violation of the employee code of conduct and ethics rules is appalling. As an employee, she is entrusted to uphold the sanctity of the U.S. Mail and her alleged breach of trust has led to today’s arrest. United States Postal Inspectors are committed to protecting the U.S. Mail and will ensure that those who violate this sanctity are brought to justice.”
HSI Special Agent-in-Charge Angel M. Melendez said: “These two defendants are alleged to distribute large quantities of synthetic cannabinoids, a dangerous product that could affect the brain much more powerfully than marijuana. When it comes to a synthetic drug, it is rarely a harmless alternative. Borer and McLaughlin are now out of business, making the communities we serve that much safer.”
NYPD Police Commissioner James P. O’Neill said: “Anyone who seeks to profit by selling so-called designer drugs on America’s streets can expect the full weight of local, state, and federal law enforcement to bear down upon them. In recent years, thousands of New York City emergency room visits have been linked to the use of synthetic marijuana. And in just one three-day period last May, dozens of people in northern Brooklyn were hospitalized as a result of a what was described as an especially toxic batch. As for this specific investigation, I commend all of the NYPD’s partners, whose primary mission is to fight crime and keep people safe. Together, we are relentless in bringing justice to those responsible for this nationwide scourge.”
According to the allegations in the Superseding Indictment[1]:
From at least February 2014 until February 2019, BORER and McLAUGHLIN operated a scheme to import synthetic cannabinoids from China and then use them to manufacture and distribute massive wholesale quantities of SSC, containing controlled substances and controlled substance analogues, throughout the United States. SSC, which can be addictive, are often marketed as safe, legal alternatives to marijuana. In fact, SSC are not safe and may affect the brain much more powerfully than marijuana; their actual effects can be unpredictable and, in some cases, more dangerous or even life-threatening.
BORER and McLAUGHLIN shipped SSC, colloquially referred to as “K2” or “Spice,” through the U.S. Mail to locations throughout the Unitd States. Some of the SSC distributed by the scheme were branded with colorful graphics and distinctive names, including “Dead Man Walking,” “Klimax,” “Zero Gravity,” “Twilite,” “Psycho,” and “Get Real.” The branded SSC were sometimes marked “not for human consumption,” or “potpourri.” Other of the SSC were distributed in bulk quantities.
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On January 31, 2019, JONATHAN RIENDEAU, 38, of Port Saint Lucie, Florida, pled guilty before Judge Buchwald to six counts: three counts of conspiracy unlawfully to distribute controlled substances and controlled substance analogues; two counts of unlawful importation of controlled substances and controlled substance analogues; and one count of unlawfully distributing a controlled substance. Each count carries a maximum sentence of 20 years in prison.
BORER, 42, of Adams, Massachusetts, and McLAUGHLIN, 65, of Stoneham, Massachusetts, are each charged with three counts of conspiring unlawfully to import and distribute controlled substances and controlled substance analogues. Each count carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of NYPD, USPIS, and HSI, and thanked the United States Postal Service’s Office of the Inspector General, the Berkshire County (Massachusetts) Law Enforcement Taskforce, the Berkshire County (Massachusetts) District Attorney’s Office, and the Massachusetts State Police for their assistance. The long-term investigation of this case was partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (“HIDTA”), which is a federally funded crime fighting initiative and part of the Organized Crime Drug Enforcement Task Force program.
The prosecution is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Robert B. Sobelman is in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Founder and President of Online Gaming Company Charged in Manhattan Federal Court for Participating in Multimillion-Dollar Fraud SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that ROBERT ALEXANDER was arrested this morning on securities fraud and wire fraud charges stemming from his participation in a scheme to defraud investors by soliciting investments in his online gaming company (the “Company”) through false representations and using investor funds for his own personal use.
ALEXANDER is expected to be presented today in Manhattan federal court before the U.S. Magistrate Judge Ona T. Wang.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Robert Alexander lied to investors in his online gaming company, fabricating information about his professional background and promising to use investor money solely to further the aims of the business. Instead, Alexander allegedly used more than $1.3 million in investor funds on, among other things, gambling excursions, entertainment venues, and other personal expenses. As this arrest demonstrates, fraud on investors is no game, and we will continue to partner with the FBI to investigate and prosecute those who defraud investors.”
FBI Assistant Director-in-Charge William F. Sweeney, Jr. said: “Time and time again, we come across evidence of investment funds being misappropriated to pay off personal debts or fund extravagant lifestyles. As evidenced by today’s arrest, those who allegedly use these funds for other than their intended purpose are taking a gamble—the bigger the risk does not always mean the greater the reward.”
According to the Complaint[1]:
Beginning in at least 2013 and continuing through in or about 2017, ALEXANDER engaged in a scheme to defraud investors in the Company. Specifically, ALEXANDER solicited and maintained investments in the Company through numerous false representations, including concerning his own professional background, the Company’s financial condition, expected returns on investment, and assurances to investors that their investments would be used solely for the Company’s business purposes.
Also in furtherance of his scheme and contrary to representations made to investors, ALEXANDER used more than approximately $1.3 million of the funds he obtained from investors for his own personal expenses instead of for the Company’s business purposes. For example, ALEXANDER used investor funds to make payments toward his personal credit cards, to fund his gambling excursions to multiple casinos, to make rental payments for his personal residence, and to make car payments for a luxury car purchased for one of ALEXANDER’s family members.
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ALEXANDER, 49, of Las Vegas, Nevada, was arrested this morning. ALEXANDER is charged with one count of securities fraud and one count of wire fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential 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. He 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 Elisha J. Kobre and Margaret Graham are in charge of the prosecution.
The 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.
Manhattan U.S. Attorney Announces Extradition of OFAC- Sanctioned Afghan Man for Narco-Terrorism OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Christopher Tersigni, Special Agent in Charge of the United States Drug Enforcement Administration (“DEA”) Special Operations Division, announced today the extradition of HAJI ABDUL SATAR ABDUL MANAF, a/k/a “Haji Abdul Sattar Barakzai,” for attempting to import heroin into the United States, engaging in narco-terrorism for the benefit of the Taliban, and attempting to engage in narco-terrorism for the benefit of the Haqqani Network. MANAF was taken into custody by Estonian authorities in Tallinn, Estonia, on October 9, 2018, and extradited to the United States today. MANAF will be presented in Manhattan federal court later today. The case is assigned to United States District Judge Paul A. Crotty.
U.S. Attorney Geoffrey Berman stated: “As alleged, Manaf, already sanctioned by the Treasury Department for assisting the Taliban, attempted to import large quantities of heroin into the U.S., funneled heroin trafficking proceeds to the Taliban, and attempted to provide financial assistance to the Haqqani terrorist network. Thanks to the DEA and international law enforcement partners, Manaf is in the U.S. and facing justice in this District.”
Special Agent in Charge Christopher Tersigni stated: “This action highlights the DEA’s ability to hold accountable not only those who reside within our borders, but also those operating in other countries. Drug traffickers that bring harm to the citizens of this country must answer for their unlawful activities that have fueled the opioid epidemic.”
According to the allegations contained in the Complaint and Indictment[1] which were unsealed today:
In June 2012, the United States Treasury Department sanctioned MANAF pursuant to the United States’ terrorism sanctions authority, Executive Order No. 13224, for storing or moving money for the Taliban through his money remitting business, the Haji Khairullah Haji Sattar Money Exchange.
Beginning in January 2018, MANAF attempted to import large quantities of heroin into the United States; used the proceeds of heroin trafficking to benefit the Taliban; and attempted to provide financial support to the Haqqani Network. Specifically, MANAF participated in in-person meetings, recorded telephone calls, and electronic communications with five men whom MANAF understood to be affiliated with an international drug trafficking organization. During those meetings, MANAF helped arrange to import large quantities of heroin into the United States with the assistance of – and recognizing that some of the proceeds of that narcotics trafficking would be provided to – the Taliban and the Haqqani Network. Four of these men were, in fact, DEA confidential sources. The fifth was an undercover DEA agent (the “UC”).
The Haqqani Network and the Taliban have been and are engaged in highly public acts of terrorism against U.S. interests, including U.S. and coalition forces in Afghanistan. In August 2018, MANAF sold the UC a 10-kilogram shipment of heroin (the “10 Kilo Shipment”) in Afghanistan, after the UC told MANAF that the heroin would ultimately be imported into the United States for sale in New York. MANAF repeatedly told the UC that MANAF had paid the Taliban in connection with the production of the 10 Kilo Shipment, and reported that armed members of the Taliban would guard and transport future heroin shipments for MANAF and the UC. In August 2018, MANAF facilitated the transfer of thousands of dollars of what he believed to be narcotics proceeds to individuals MANAF had been advised were members of the Haqqani Network. MANAF subsequently agreed to supply the UC with thousand-kilogram loads of heroin for importation into the United States.
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The Indictment charges MANAF, 53, a citizen of Afghanistan, in three counts: (1) attempting to import heroin into the United States, (2) narco-terrorism, and (3) attempted narco-terrorism. If convicted, MANAF faces a maximum sentence of life imprisonment and a mandatory minimum sentence of 10 years in prison on Count One, and a maximum sentence of life imprisonment and a mandatory minimum sentence of 20 years in prison on each of Counts Two and Three. The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Berman praised the outstanding investigative efforts of the DEA’s Special Operations Division’s Bilateral Investigations Unit; the DEA European Regional Director; the DEA Copenhagen, Canberra, Dubai, Islamabad, Kabul, New Delhi, and Sydney Country Offices; the Government of Estonia; and the Australian Criminal Intelligence Commission. The defendant’s arrest and subsequent extradition are also the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York and the Department of Justice’s Office of International Affairs.
The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Rebekah Donaleski and Kimberly J. Ravener are in charge of the prosecution.
The allegations contained in the Complaint and the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the texts of the Complaint and Indictment and the descriptions of the Complaint and Indictment set forth below constitute only allegations and every fact described should be treated as an allegation.
Four Individuals Charged for Their Participation in Schemes to Attempt to Defraud Victims of Nearly $46 MillionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the unsealing today of an Indictment charging four individuals, CHRISTOPHER HAMMATT, a/k/a “Craig Johnson,” SUSAN HAMMATT, JOSEPH HOATS, and EDWIN TANGLAO, with participation in multiple fraud schemes. HOATS was arrested today in California and will be presented later this afternoon before U.S. Magistrate Judge Shashi H. Kewalramani. The HAMMATTs are expected to surrender later today in Oregon and will be presented this afternoon in federal court there. TANGLAO was already in custody on state charges in Texas. The case is assigned to U.S. District Judge Paul G. Gardephe.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged in the Indictment, the defendants fraudulently enriched themselves at the expense of others, including small businesses in New York. Equally disturbing is the Hammatts’ alleged use of the federal courts to perpetrate their fraud. Now, as a consequence of their alleged conduct, the Hammatts will return to the Southern District of New York not as civil plaintiffs but as criminal defendants.”
The Indictment unsealed today in Manhattan federal court alleges two fraud schemes. As alleged in the Indictment[1]:
The first scheme arises from a civil lawsuit in the United States District Court for the Southern District of New York, in which CHRISTOPHER HAMMATT, a/k/a “Craig Johnson,” and SUSAN HAMMATT were plaintiffs. The HAMMATTs’ lawsuit against a multinational car company based in Detroit, Michigan (“Car Company-1”), alleged that CHRISTOPHER HAMMATT, a lawyer by training, sustained “traumatic brain injury” when the airbags suddenly deployed in his vehicle, which was manufactured by Car Company-1. While the HAMMATTs’ lawsuit was pending, the HAMMATTs created a fake $16.5 million settlement agreement, which included a forged signature of Car Company-1’s attorney, and used the fake settlement agreement to borrow approximately $75,000 from a litigation funding company.
To carry out their fraud scheme, and to conceal their identities when communicating with victims, the HAMMATTs created the fake identity, “Craig Johnson,” who purported to be a “legal coordinator” who represented the HAMMATTs. In that capacity, “Johnson” negotiated directly with legal funding companies to induce them to lend money to the HAMMATTs, using the fraudulent settlement agreement as collateral. In one email, “Johnson” wrote to a legal funding company, “I know that they [the HAMMATTs] will be getting a large sum of money in about six months, but it is so sad to see this family suffer. They are on food stamps and get donations from the Church for their kids clothing.”
When the HAMMATTs’ fraud came to light, SUSAN HAMMATT submitted a declaration to the Court that contained numerous false statements regarding her and her husband’s involvement in the fraud.
The Indictment also alleges that each of the defendants participated in a scheme to defraud oil and gas trading companies. Specifically, the defendants induced victims to transmit money to the defendants in exchange for large orders of oil and gas products that the defendants could not fulfill. To conceal the nature of the fraud, the defendants created fake companies and fraudulent documents. For example, the Indictment alleges that JOSEPH HOATS, an attorney, and SUSAN HAMMATT created the company “Shell Western Supply & Trading,” and used the Shell Oil Company logo without permission, as a means to trick victims. The defendants succeeded in defrauding a New York-based victim of nearly $1.5 million as part of their oil and gas scheme.
* * *
Charts 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 Special Agents with the United States Attorney’s Office for the Southern District of New York.
This case is being prosecuted by the Office’s General Crimes Unit. Assistant U.S. Attorney Nicholas W. Chiuchiolo is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Wire fraud conspiracy
18 U.S.C. § 1349
CHRISTOPHER HAMMATT, a/k/a “Craig Johnson” (age 49)
SUSAN HAMMATT (age 44)
20 years in prison
2
Wire fraud
18 U.S.C. § 1343
CHRISTOPHER HAMMATT, a/k/a “Craig Johnson”
SUSAN HAMMATT
20 years in prison
3
Perjury
18 U.S.C. § 1621
SUSAN HAMMATT
5 years in prison
4
Wire fraud conspiracy
18 U.S.C. § 1349
CHRISTOPHER HAMMATT, a/k/a “Craig Johnson”
SUSAN HAMMATT
JOSEPH HOATS (age 69)
EDWIN TANGLAO (age 54)
20 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.
Brazilian Man Pleads Guilty to Wire Fraud Conspiracy and Aggravated Identity Theft for Defrauding Manhattan Financial InstitutionsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MARCOS ELIAS, a Brazilian citizen and resident, pled guilty today to conspiracy to commit wire fraud and aggravated identity theft for participating in a scheme to fraudulently obtain more than $750,000 at financial institutions headquartered in Manhattan using false representations and the stolen identities of Brazilian account holders at those institutions. ELIAS was extradited from Switzerland to the Southern District of New York on August 28, 2018, and entered his pleas of guilty today in Manhattan federal court before U.S. District Judge Laura Taylor Swain.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Marcos Elias engaged in a sophisticated fraud scheme from Brazil to steal over $750,000 from a Manhattan financial institution. He committed this truly international crime through a front company in Panama, a bank account in Luxembourg, and by using the stolen identity of a Brazilian account holder. Elias now awaits sentencing for his crimes.”
According to allegations in the Complaint and the Indictment:
Since at least 2012, a Brazilian company (the “Client”) held an account at a financial institution headquartered in Manhattan (the “Firm”). Beginning in or about June 2014, ELIAS was in correspondence with a Senior Vice President at the Firm (the “Firm Employee”) regarding the Client’s account. The Firm Employee then began receiving emails purportedly from an employee of the Client (the “Client Employee”) instructing the Firm Employee to transfer the Client’s money to a bank account in Luxembourg (the “Luxembourg Account”) that appeared to be in the name of the Client. Those emails were later determined to have been sent from an email address created the same day that was never used by the Client Employee and contained bogus wire instructions with the forged signature of the Client Employee. As a result of the false documentation provided to the Firm Employee, on July 15, 2014, the Firm transferred approximately $752,000 from the Client’s account at the Firm to the Luxembourg Account (the “Fraudulent Transfer”), believing it to be a legitimate transfer requested by the Client.
In actuality, the Client did not authorize the Fraudulent Transfer, did not have any bank or brokerage accounts in Luxembourg, and did not send the emails to the Firm Employee requesting the transfer. Instead, the Luxembourg Account that received the Fraudulent Transfer was beneficially owned by ELIAS and opened in the name of a company formed in Panama the week prior to the Fraudulent Transfer. The Luxembourg Account was held in the name of a company containing the name of the Client in order to create the false impression that the Client’s funds were being transferred to an account beneficially owned by the Client when in fact such account was beneficially owned by ELIAS.
In addition to the scheme to defraud the Firm, ELIAS also attempted to fraudulently obtain money from a second financial institution headquartered in Manhattan using the name and purported passport of an account holder without authority.
* * *
ELIAS, 47, of São Paulo, Brazil, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years, and one count of aggravated identity theft, which carries a mandatory consecutive minimum sentence of two years. 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.
ELIAS is scheduled to be sentenced by U.S. District Judge Laura Taylor Swain on April 4, 2019, at 11:00 a.m.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation. Mr. Berman also thanked Switzerland’s Federal Office of Justice, the Zurich Police (Kantonspolizei Zürich), and the U.S. Department of Justice’s Office of International Affairs for their assistance with the extradition.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
Westchester Attorney Pleads Guilty to Mail Fraud for Attempting to Embezzle from A Decedent’s Estate for Which He Was Court-Appointed AdministratorRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that GUY PARISI, a Westchester attorney, pled guilty today to a mail fraud charge arising from his attempt to embezzle funds from a decedent’s estate for which he served as a court-appointed administrator. PARISI entered the plea in White Plains federal court before U.S. Magistrate Judge Lisa Margaret Smith.
U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Guy Parisi, a Westchester attorney, flouted his fiduciary duty to the estate for which he was administrator. He attempted to direct fees from the estate to a company he himself formed with a relative. Now Parisi awaits sentencing for his crime.”
According to the allegations contained in the Indictment:
PARISI was appointed administrator of the estate of a former resident of Mt. Vernon, in or about April 2017. His duties as administrator included collecting the assets of the estate. As an administrator, PARISI had a fiduciary duty to the estate and to the decedent’s son, the sole beneficiary of his father’s will. New York law provided for a fee for estate administrators like PARISI based on a percentage of the value of the estate’s assets.
A substantial part of the estate’s assets escheated to the State of New York as abandoned property between 2000 and 2008, when the estate was first presented to the Surrogate’s Court. These assets were held in the custody of the New York State Comptroller.
In or about June 2017, PARISI, on behalf of the estate, retained Stokes Asset Recovery Services (“Stokes”) as the estate’s abandoned property location service in exchange for a fee of 15 percent of the value of the estate’s assets held by the Comptroller, which is the maximum fee allowed by New York law. PARISI did not disclose, and actively concealed, that Stokes was owned by his relative, and that he and the relative had formed Stokes less than two weeks before he notified the Comptroller of his retention of Stokes, as he was required to do under New York law. PARISI and the relative named Stokes after a Southampton, New York, street on which PARISI owned a waterfront vacation home. At the time he retained Stokes, PARISI knew that the estate’s assets held by the Comptroller were worth several million dollars.
* * *
PARISI, 71, of Rye, New York, pled guilty to one count of mail fraud, which carries a maximum sentence of 20 years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentence will be determined by the court.
PARISI is scheduled to be sentenced by U.S. District Judge Kenneth M. Karas on May 29, 2019.
Mr. Berman praised the outstanding investigative work of the Postal Inspection Service and the New York State Comptroller.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorney James McMahon is in charge of the prosecution.
Three Additional Members and Associates of Violent New York City Gang Charged in Manhattan Federal Court with Racketeering and Firearms OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), John B. Devito, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of a Superseding Indictment charging three additional individuals, ANTHONY ELLISON, a/k/a “Harv,” DENARD BUTLER, a/k/a “Drama,” and KINTEA MCKENZIE, a/k/a “Kooda B,” with racketeering and firearms offenses in connection with their membership in and association with the Nine Trey Gangsta Bloods, also known as “Nine Trey.” A fourth defendant, KIFANO JORDAN, a/k/a “Shotti,” who was named in the original indictment, faces additional racketeering and firearms charges.
BUTLER was arrested yesterday. ELLISON was already in custody on federal charges. MCKENZIE is still at large. The case is assigned to U.S. District Judge Paul A. Engelmayer.
U.S. Attorney Geoffrey S. Berman said: “As alleged in the superseding indictment, the new defendants in this case, like those previously charged, engaged in brazen acts of gun violence. Thanks to our remarkable partners at HSI, ATF, and the NYPD, these defendants now face federal charges for their serious crimes.”
HSI Special Agent in Charge Angel M. Melendez said: “Nine Trey has engaged in a pattern of racketeering reinforced by a reputation of extreme violence, best known for shootings, assaults and robberies in our city. The new arrests in this case and the additional charges as part of this ongoing investigation should send a clear message to members of any gang that carry out acts of violence, that we are resolved in our joint efforts to promote a safe environment for our communities in New York City.”
ATF Special Agent in Charge John B. Devito said: “Today’s charges demonstrate ATF’s and our law enforcement partners’ commitment to identify and investigate individuals that drive violent crime within our communities. The members and associates of the Nine Trey Gangsta Bloods, also known as ‘Nine Trey,’ allegedly terrorized the public via a variety of crimes including violent armed robberies, assaults and shootings. The ATF/ NYPD Joint Firearms Task Force will continue to work diligently with all of our partner agencies in order to best serve the community and protect the public. I would like to personally thank the United States Attorney’s Office for their leadership and guidance throughout this investigation.”
NYPD Commissioner James P. O’Neill said: “In working to reduce crime past already record-lows in New York City, the NYPD is relentless in our pursuit of the relatively small percentage of the population driving the violence and disorder. We are achieving this, with pinpoint accuracy, because of the full and willing partnership of New Yorkers in every neighborhood and the unrivaled assistance of our law-enforcement partners. I commend the U.S. Attorney for the Southern District, and the members of Homeland Security Investigations and the ATF, for helping us dismantle groups responsible for shootings, robberies, drug-dealing, and more. Together, we are making the safest large city in America even safer.”
As alleged in the Superseding Indictment unsealed today in Manhattan federal court[1]:
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, furanyl fentanyl, MDMA, dibutylone, and marijuana.
The Superseding Indictment charges JAMEL JONES, a/k/a “Mel Murda,” ROLAND MARTIN, a/k/a “Ro Murda,” KIFANO JORDAN, a/k/a “Shotti,” ANTHONY ELLISON, a/k/a “Harv,” DENARD BUTLER, a/k/a “Drama,” JESNEL BUTLER, a/k/a “Ish,” FUGUAN LOVICK, a/k/a “Fu Banga,” KINTEA MCKENZIE, a/k/a “Kooda B,” FAHEEM WALTER, a/k/a “Crippy,” and AARON YOUNG, a/k/a “Bat,” with racketeering and firearms offenses.
Count One of the Superseding Indictment charges JONES, MARTIN, JORDAN, ELLISON, DENARD BUTLER, JESNEL BUTLER, WALTER, and YOUNG with participating in a racketeering conspiracy for their criminal involvement in Nine Trey. Count Two charges JONES, MARTIN, JORDAN, ELLISON, DENARD BUTLER, JESNEL BUTLER, WALTER, and YOUNG with using and carrying firearms, which were brandished and discharged, in connection with the racketeering conspiracy. Counts Three through Five charge MARTIN, JORDAN, DENARD BUTLER, JESNEL BUTLER, and WALTER in connection with a gunpoint robbery in the vicinity of West 40th Street and 8th Avenue in Manhattan on April 3, 2018. Counts Six and Seven charge LOVICK in connection with his shooting at rivals of Nine Trey in the Barclays Center in Brooklyn on April 21, 2018. Counts Eight through Ten charge JORDAN and MCKENZIE in connection with a shooting at a rival of Nine Trey at a hotel in Times Square in Manhattan on June 2, 2018. Counts Eleven and Twelve charge MARTIN, JORDAN, JESNEL BUTLER, and WALTER with agreeing to shoot an individual who had shown disrespect to Nine Trey, resulting in an innocent bystander being shot, in the vicinity of Fulton Street and Utica Avenue in Brooklyn on July 16, 2018. Counts Thirteen through Fifteen charge ELLISON in connection with his kidnapping and assaulting another member of Nine Trey near the intersection of Bedford Avenue and Atlantic Avenue in Brooklyn on July 22, 2018. Count Sixteen charges JONES and YOUNG with conspiracy to distribute heroin, fentanyl, MDMA, and marijuana from 2015 to 2018. Count Seventeen charges YOUNG with using and carrying firearm in connection with the narcotics conspiracy. Count Eighteen charges JONES with possessing with intent to distribute one kilogram and more of mixtures and substances containing a detectable amount of heroin on November 15, 2018.
* * *
Charts 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 HSI, ATF, and the NYPD. He also thanked the United States Attorney’s Office for the Eastern District of New York, the Manhattan District Attorney’s Office, the Brooklyn District Attorney’s Office, and the New York City Department of Correction’s Intelligence Bureau for their assistance in the investigation.
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.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Racketeering conspiracy
18 U.S.C. § 1962(d)
JAMEL JONES (age 38)
ROLAND MARTIN (age 37)
KIFANO JORDAN (age 36)
ANTHONY ELLISON (age 31)
DENARD BUTLER (age 26)
JESNEL BUTLER (age 36)
FAHEEM WALTER (age 29)
AARON YOUNG (age 28)
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 was discharged
18 U.S.C. § 924(c)
JAMEL JONES
ROLAND MARTIN
KIFANO JORDAN
ANTHONY ELLISON
DENARD BUTLER
JESNEL BUTLER
FAHEEM WALTER
AARON YOUNG
Life in prison
Mandatory minimum of 10 years in prison
3
Violent crime in aid of racketeering (April 3, 2018)
18 U.S.C. § 1959
ROLAND MARTIN
KIFANO JORDAN
DENARD BUTLER
JESNEL BUTLER
FAHEEM WALTER
20 years in prison
4
Violent crime in aid of racketeering (April 3, 2018)
18 U.S.C. § 1959
ROLAND MARTIN
KIFANO JORDAN
DENARD BUTLER
JESNEL BUTLER
FAHEEM WALTER
3 years in prison
5
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence, which was brandished
18 U.S.C. § 924(c)
ROLAND MARTIN
KIFANO JORDAN
DENARD BUTLER
JESNEL BUTLER
FAHEEM WALTER
Life in prison
Mandatory minimum of 7 years in prison
6
Violent crime in aid of racketeering (April 21, 2018)
18 U.S.C. § 1959
FUGUAN LOVICK (age 40)
20 years in prison
7
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence, which was discharged
18 U.S.C. § 924(c)
FUGUAN LOVICK
Life in prison
Mandatory minimum of 10 years in prison
8
Violent crime in aid of racketeering (June 2, 2018)
18 U.S.C. § 1959
KIFANO JORDAN
KINTEA MCKENZIE (age 21)
20 years in prison
9
Violent crime in aid of racketeering (June 2, 2018)
18 U.S.C. § 1959
KIFANO JORDAN
KINTEA MCKENZIE
3 years in prison
10
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence, which was discharged
18 U.S.C. § 924(c)
KIFANO JORDAN
KINTEA MCKENZIE
Life in prison
Mandatory minimum of 10 years in prison
11
Violent crime in aid of racketeering
(July 16, 2018)
18 U.S.C. § 1959
ROLAND MARTIN
KIFANO JORDAN
JESNEL BUTLER
FAHEEM WALTER
10 years in prison
12
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence, which was discharged
18 U.S.C. § 924(c)
ROLAND MARTIN
KIFANO JORDAN
JESNEL BUTLER
FAHEEM WALTER
Life in prison
Mandatory minimum of 10 years in prison
13
Violent crime in aid of racketeering
(July 22, 2018)
18 U.S.C. § 1959
ANTHONY ELLISON
Life in prison
14
Violent crime in aid of racketeering
(July 22, 2018)
18 U.S.C. § 1959
ANTHONY ELLISON
20 years in prison
15
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence, which was brandished
18 U.S.C. § 924(c)
ANTHONY ELLISON
Life in prison
Mandatory minimum of 7 years in prison
16
Conspiracy to distribute narcotics
21 U.S.C. § 846
JAMEL JONES
AARON YOUNG
Life in prison
Mandatory minimum of 10 years in prison
17
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a narcotics trafficking offense
18 U.S.C. § 924(c)
AARON YOUNG
Life in prison
Mandatory minimum of 5 years in prison
18
Possession of a controlled substance with intent to distribute
21 U.S.C. § 841
JAMEL JONES
Life in prison
Mandatory minimum of 10 years in prison
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment constitutes only allegations, and every fact described herein should be treated as an allegation.
Manhattan U.S. Attorney Announces New Agreement for Fundamental Reform at NYCHARead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York (“SDNY”), Ben Carson, Secretary of the U.S. Department of Housing and Urban Development (“HUD”), and Andrew Wheeler, Acting Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today the signing of an administrative agreement (“Agreement”) with the NEW YORK CITY HOUSING AUTHORITY (“NYCHA”) and the CITY OF NEW YORK (the “City”) requiring NYCHA, under the supervision of a federal monitor, to fundamentally reform its operations and remedy living conditions for its residents, including lead paint hazards, mold growth, pest infestations, lack of heat, and inadequate elevator service. The Agreement, which went into effect immediately and does not require court approval, resolves the United States’ claims against NYCHA detailed in the Complaint filed in United States District Court on June 11, 2018 (the “Complaint”), which will be dismissed without prejudice. The Complaint alleged that for years NYCHA had violated and was continuing to violate basic federal health and safety regulations, including regulations requiring NYCHA to protect children from lead paint and otherwise provide decent, safe, and sanitary housing. The Complaint further alleged that NYCHA repeatedly made false statements to HUD and the public regarding its lead paint compliance, and intentionally deceived HUD inspectors.
U.S. Attorney Geoffrey S. Berman stated: “NYCHA’s failure to provide decent, safe, and sanitary housing is simply unacceptable, and illegal. Children must be protected from toxic lead paint, apartments must be free of mold and pest infestations, and developments must provide adequate heat in winter and elevator service. This Office has not wavered from its commitment to better living conditions for NYCHA residents. Today’s Agreement will improve the lives of the more than 400,000 New Yorkers who call NYCHA home. The Agreement goes beyond the prior proposed Consent Decree by providing strict, enforceable standards that NYCHA must meet by particular deadlines for the five critical living conditions, including requiring both the immediate remediation of lead paint in apartments with children under 6 years old and, over time, 100 percent abatement of all lead paint in all NYCHA developments, as well as a change in NYCHA leadership.”
HUD Secretary Ben Carson said: “This is a very positive outcome, one that I believe can bring meaningful change to living conditions of the many thousands of families who depend upon NYCHA for their housing. But there is still a lot of work to be carried out. We look forward to continuing what has been a productive working relationship with the Mayor and his team. HUD will continue to advocate for the hundreds of thousands of children, women, and men in New York City whose lives and livelihoods depend on having safe, fair, and affordable housing. They deserve nothing less.”
Acting EPA Administrator Andrew Wheeler said: “Under today’s agreement, New York City commits to provide the resources and institutional reforms needed to end NYCHA’s pattern and practice of endangering the health of children living in New York’s public housing. EPA will be vigilant and is prepared to reinstate our litigation should they fail to meet those commitments and continue to harm children by violating lead paint safety regulations.”
Based on NYCHA’s misconduct as detailed in the Complaint, the Secretary of HUD declared today that NYCHA is in substantial default of its covenant to provide decent, safe, and sanitary housing. The purpose of the Agreement is to remedy the deficient physical conditions in NYCHA properties, ensure that NYCHA complies with its obligations under federal law, reform the management structure of NYCHA, and facilitate cooperation and coordination between HUD, NYCHA, and the City.
Specifically, the Agreement requires NYCHA to remediate living conditions at NYCHA properties by specific deadlines and meet strict, objective compliance standards regarding lead paint hazards, mold growth, pest infestations, and inadequate heating and elevator service. With respect to lead paint hazards, for example, the Agreement requires NYCHA to take action within 30 days to visually inspect all non-exempt units built before 1978 where NYCHA believes a child under 6 resides or routinely visits and remediate any deteriorated lead-based paint in the apartment, and, over time, to abate all lead paint in all NYCHA developments. The Agreement further obligates NYCHA to establish three new critical functions: a Compliance Department, an Environmental Health and Safety Department, and a Quality Assurance Unit. In addition, the Agreement requires the City to select a new chief executive officer for NYCHA from a list of qualified professionals jointly compiled by HUD, the U.S. Attorney’s Office, and the City.
The Agreement also renews the City’s commitment, reflected in the June 2018 proposed Consent Decree, to provide an additional $1 billion in capital funds to NYCHA over the next four years and an additional $200 million in capital funds each subsequent year for the duration of the Agreement. Also, the agreement locks in an additional $4 billion in City funds budgeted through 2027.
Pursuant to the Agreement, a federal monitor, selected by HUD and the U.S. Attorney’s Office in consultation with NYCHA and the City, will oversee NYCHA’s reform efforts. Beyond the specifically enumerated remedial actions required under the Agreement, NYCHA will develop action plans, subject to the monitor’s approval, to remediate living conditions at NYCHA and meet the compliance standards set forth in the Agreement. The monitor and NYCHA also will collaboratively develop a plan to overhaul NYCHA’s organizational, management, and workforce structure, informed by a new comprehensive study from an independent third-party consultant. Throughout the term of the Agreement, the monitor is required to engage with the community, including NYCHA residents, resident groups, and stakeholders, regarding matters covered by the Agreement, and provide public reports detailing NYCHA’s progress. The cost of the monitor shall be paid by the City.
* * *
Mr. Berman thanked HUD, HUD Office of Inspector General, and EPA for their invaluable assistance in this matter.
This case is being handled by the Office’s Environmental Protection Unit in the Civil Division. Assistant United States Attorneys Robert William Yalen, Mónica P. Folch, Jacob Lillywhite, Talia Kraemer, and Sharanya Mohan are in charge of the case.
Former New York City Police Department Official Sentenced to 18 Months for Conspiring to Bribe Fellow Officers in Connection with Gun License Bribery SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that PAUL DEAN was sentenced to 18 months in prison by the U.S. District Judge Edgardo Ramos today in connection with a bribery scheme involving the approval of gun licenses by the New York City Police Department (“NYPD”) License Division. Specifically, DEAN, who as second-in-command of the License Division had accepted gifts and favors in connection with his approval of gun licenses, conspired upon his retirement from the NYPD to open his own “expediting” business in which he would pay bribes to his fellow NYPD officers, once his subordinates in the License Division, to issue gun licenses to DEAN’s clients.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As a high-ranking officer and supervisor in the NYPD’s License Division, Paul Dean was entrusted with ensuring the integrity of the process for issuing gun licenses in New York City. Instead of embracing that trust and focusing on the safety of New Yorkers, he monetized it for his own benefit, and enabled officers under his command to do the same. Together with our partners in law enforcement, my office has worked tirelessly to make sure those efforts by Dean and others involved ended not with dollar signs, but in prison cells. We will continue to root out corrupt law enforcement officers where we find them, while commending the vast majority of officers who, unlike Dean, serve the City of New York honestly and honorably.”
According to the Indictment and Complaint filed in this case, other public filings, and statements made during the plea proceeding:
DEAN was a member of the NYPD from 1994 through 2016, and was assigned to the License Division from 2008 through 2016. DEAN, a lieutenant, was one of the highest-ranking members of the License Division and, from approximately November 2014 through November 2015, regularly ran its day-to-day operations. Co-defendant Robert Espinel was a member of the NYPD from 1995 through his retirement in 2016, and was assigned to the License Division from 2011 through 2016.
From at least 2013 through 2016, multiple NYPD officers in the License Division serving under DEAN’s command, including David Villanueva and Richard Ochetal, solicited and accepted bribes from gun license expediters – including Frank Soohoo, Alex Lichtenstein, a/k/a “Shaya,” and co-defendant Gaetano Valastro, a former NYPD detective – in exchange for providing assistance to the expediters’ clients in obtaining gun licenses quickly and often with little to no diligence. DEAN, aware of this bribery arrangement, approved many of the gun license applications submitted by these expediters, despite the fact that no substantial due diligence had been performed on them. As part of the scheme, licenses were issued for individuals with substantial criminal histories, including arrests and convictions for crimes involving weapons or violence, and for individuals with histories of domestic violence.
DEAN accepted things of value from the expediters whose applications he approved, including $1,000 cash from Lichtenstein, catered meals and alcohol from Soohoo, and gun equipment from Valastro. DEAN also accepted gifts and favors directly from applicants whose licenses he approved, including free meals at restaurants, free liquor from a liquor distributor, free beer and soda from a beverage distributor, free car repairs from car shops, and free entertainment.
In 2015, dissatisfied with the fact that private gun expediters were profiting thousands of dollars per gun license applicant when DEAN and others did the work to approve those applications, DEAN and Espinel decided to retire and go into the expediting business themselves. In order to ensure the success of their business, DEAN and Espinel planned to bribe Villanueva and Ochetal, who were still in the License Division, to enable their clients to get special treatment. They also agreed with Valastro to run their expediting and bribery scheme out of Valastro’s gun store. According to the plan, Valastro would benefit from the scheme because DEAN and Espinel would steer successful applicants to Valastro’s store to buy guns. They also tried to corner the expediting market by forcing other expediters to work through them. Specifically, DEAN and Espinel attempted to coerce Frank Soohoo, another gun license expediter, into sharing his expediting clients with them by threatening to use their influence in the License Division to shut down Soohoo’s expediting business if Soohoo refused to work with, and make payments to, DEAN and Espinel.
Espinel and Valastro have previously pled guilty and are awaiting sentence. Villanueva, Ochetal, Lichtenstein, and Soohoo have also pled guilty in case number 16 Cr. 342 (SHS). Lichtenstein was sentenced by the U.S. District Judge Sidney H. Stein to 32 months in prison, and the remaining defendants are awaiting sentence.
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In addition to the prison term, DEAN, 46, was sentenced to two years of supervised release, a fine of $7,500, and forfeiture of $1,000.
Mr. Berman thanked the Federal Bureau of Investigation and the New York City Police Department, Internal Affairs Division, for their outstanding investigative work in this matter.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorney Kimberly Ravener is in charge of the prosecution.
Bronx Man Sentenced to 10 Years in Prison for Possessing Child PornographyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that Lancelot Paul Lutchman was sentenced to 10 years in prison for his possession of files containing sexually explicit images of a minor. Lutchman pled guilty on September 12, 2018, before U.S. District Judge Paul A. Crotty, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “For Lancelot Lutchman’s crimes against children, he will spend 10 years in federal prison. Our Office remains committed to finding and prosecuting criminals who prey on and abuse children.”
According to documents filed in this case and statements made in related court proceedings:
Between January 31, 2016, and January 21, 2017, LUTCHMAN used a peer-to-peer file sharing network to share approximately 845 unique video files known to contain child pornography. The child pornography included depictions of prepubescent children engaged in sexual activity with other children or adults. On January 26, 2017, law enforcement officers executed a search warrant for LUTCHMAN’s apartment and recovered his laptop computer, which contained numerous files of child pornography. As officers were entering the apartment, LUTCHMAN hid the laptop in his oven.
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In addition to the prison term, LUTCHMAN, 44, of the Bronx, was sentenced to five years of supervised release.
Mr. Berman praised the New York City Police Department for its outstanding investigative work. Mr. Berman also thanked the Bronx District Attorney’s Office for its invaluable assistance with this matter.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Kyle A. Wirshba and Daniel Loss are in charge of the prosecution.
Two Individuals Arrested for Fraud Targeting Actors and OthersRead 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 U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today that THOMAS IRIGOYEN and NICHOLAS OFEI COFIE were charged with conspiring to commit wire and mail fraud in connection with a scheme to defraud actors in New York City and elsewhere. IRIGOYEN was arrested in California and will be presented today before a U.S. Magistrate Judge of the Central District of California, and COFIE was arrested in New York City and will be presented this afternoon before U.S. Magistrate Judge Barbara C. Moses in federal court in Manhattan.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Irigoyen and Cofie preyed on actors in New York and elsewhere, falsely offering their victims the chance to act in commercials, and ‘paying’ them upfront fees with fictitious money orders or checks. The victims were then allegedly duped into paying phantom ‘wardrobe consultants’ by withdrawing funds against the bogus money orders, and left liable for the withdrawals. The defendants’ own alleged role-playing performances have earned them arrests on federal charges.”
HSI Special Agent-in-Charge Angel M. Melendez said: “As alleged, this fraudulent scheme, operating out of New York and California, sought to exploit the aspirations of young actors, defrauding them of thousands of dollars. These two individuals allegedly used professional actors, misled them for their own gain while crushing their dreams in the process. But now, thanks to the diligent work of law enforcement, they will face the consequences of their alleged crimes.”
NYPD Commissioner James P. O’Neill said: “These charges reflect the increasingly sophisticated ways criminals target people eager to find success in new and potentially lucrative careers. Something that will never change, however, is the focused determination of the NYPD and our law enforcement partners to keep people safe by fighting crime wherever it may lurk – including in the dark corners of cyberspace. I thank the U.S. Attorney for the Southern District and Homeland Security Investigations, whose members helped us uncover and identify the individuals named in this complaint. Together, we demonstrate time and again that we are patient and that our collaborative forces have a long reach. We will continue to be relentless in our mission to dismantle these types of operations and bring those who run them to justice.”
According to the allegations in the Complaint sworn out in Manhattan federal court:[1]
Between approximately December 2016 and the present, IRIGOYEN and COFIE participated in a conspiracy that took advantage of aspiring actors. As part of the scheme, IRIGOYEN and COFIE offered aspiring actors the opportunity to act in a commercial, provided those actors with an upfront payment in the form of a fake money order or check, and persuaded the actors to withdraw money against the fake money orders or checks and to transfer a substantial portion of the withdrawn money to so-called “wardrobe consultants” via wire transfer, the mail, and converting the money into cryptocurrency.
In the end, the jobs promised to the actors were fictitious, the financial instruments provided to the actors were fake, and the wardrobe consultants were non-existent. The victims of the scheme were left liable for the value of the fake financial instruments they had deposited into and transferred out of their respective bank accounts.
In the course of the conspiracy, IRIGOYEN purchased postage and mailed more than 450 envelopes from fictitious production companies to actors. IRIGOYEN also received payments that actors believed they were sending to “wardrobe consultants.” A bank account controlled by COFIE was presented to at least one actor-victim as an account affiliated with a “wardrobe consultant.”
In addition to the scheme described above, COFIE is also charged with one count of wire fraud for his role in defrauding a female who was tricked into believing she was entering a romantic relationship with a third party and who then transferred thousands of dollars into bank accounts under COFIE’s control.
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IRIGOYEN, 51, of Kingsburg, California, and COFIE, 36, of the Bronx, New York, are each charged with one count of conspiring to commit mail fraud and wire fraud, which carries a maximum sentence of 20 years. COFIE is separately charged with an additional count of wire fraud, which carries a maximum sentence of 20 years.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of HSI and NYPD.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Daniel H. Wolf 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.
Lamont Evans, 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 LAMONT EVANS, a former men’s basketball coach at the University of South Carolina (“South Carolina”) and later at Oklahoma State University (“OSU”), pled guilty in Manhattan federal court today to taking approximately $22,000 in cash bribes from athlete advisers in exchange for using his influence over South Carolina and OSU basketball players to retain the services of the advisers paying the bribes. EVANS pled guilty before U.S. District Judge Edgardo Ramos.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Lamont Evans, formerly a men’s basketball coach at South Carolina and Oklahoma State, abused his position as a mentor and coach for personal gain. Evans took bribes from unscrupulous agents and financial advisers to steer his players to those agents and advisers. A scheme Evans apparently thought was a slam-dunk actually proved to be a flagrant foul.”
According to the Complaint, the Indictment, statements made in court, and publicly available documents:
EVANS was a men’s basketball coach at South Carolina until on or about April 2016, and then at OSU until shortly after his arrest. Beginning in 2016, and continuing into September 2017, when EVANS was arrested, EVANS received approximately $22,000 in cash bribes from current and aspiring financial advisers and/or managers for professional athletes in exchange for EVANS’s agreement to exert his influence over certain student-athletes EVANS coached at South Carolina and OSU to retain the services of the bribe payers once those players entered the National Basketball Association (“NBA”).
In one meeting recorded during the investigation, Evans explained how “every guy I recruit and get is my personal kid,” and that “the parents believe in me and what I do … that’s why I say, if I need X, so if I do take X for that, it’s going to generate [business] toward you guys,” referring to the bribers. Evans also stated in a call recorded during the investigation how this arrangement was “generating more wealth” for the scheme participants, because they were “able to scratch my back, scratch yours, and help each other with different things and . . . at the same time get compensated and then . . . just go from there.” In return for the cash bribes EVANS received, EVANS facilitated a meeting between the bribe payers and a player at OSU, and a meeting between the bribe payers and a relative of a different player attending South Carolina, for the purpose of pressuring those players to retain the financial services of the bribe payers.
In addition to today’s plea, Emanuel Richardson, a/k/a “Book,” a former men’s basketball coach at the University of Arizona, and Anthony Bland, a/k/a “Tony,” a former men’s basketball coach at the University of Southern California, both previously pled guilty, pursuant to plea agreements with the Government, in connection with this scheme. Munish Sood, a financial adviser, also previously pled guilty, pursuant to a cooperation agreement with the Government, in connection with this scheme.
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EVANS, 41, of Stillwater, Oklahoma, pled guilty to one count of conspiracy to commit bribery. As a condition of his plea, EVANS agreed to forfeit $22,000. 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 May 10, 2019, before Judge Ramos.
Mr. Berman praised the work of the Federal Bureau of Investigation 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 Boone, Noah Solowiejczyk, and Eli J. Mark are in charge of the prosecution.
Former President of Labor Union Sentenced for Embezzlement, False Filings, and Kickback SchemesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROCCO FAZZOLARI, who previously served as the president of a labor union (the “Union”) and a trustee of the Union’s employee welfare benefit plan (the “Plan”), was sentenced today to 37 months in prison for embezzling from the Union and the Plan, concealing this embezzlement through false filings with the U.S. Department of Labor, and for participating in a kickback scheme. Through these embezzlement and kickback schemes, FAZZOLARI and a co-conspirator illegally obtained a total of more than $1.3 million from the Union and the Plan. FAZZOLARI previously pled guilty before United States District Judge Analisa Torres, who imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Rocco Fazzolari abused his position as the president of a labor union, taking more than $1 million through embezzlement and kickback schemes. Most of this money was taken from an employee benefit plan, which was established to provide medical care for union members. For his crimes, he is now headed to federal prison.”
According to the allegations in the Information to which FAZZOLARI pled guilty, public court filings, and statements made in court:
From at least in or about 2012 through in or about June 2016, FAZZOLARI repeatedly used Union funds to pay for his personal expenses, including payments for spa treatments, a gym membership, a second car, medical expenses, dues for an actors’ union, personal credit card charges, and ATM cash withdrawals. FAZZOLARI then “reimbursed” the Union with funds from the Plan. The Plan was established to provide, among other things, medical, surgical, and hospital care or benefits to Union members. In total, FAZZOLARI embezzled more than $128,000 from the Union over approximately four years, and improperly transferred more than $89,000 from the Plan to “reimburse” the Union.
In addition, from at least in or about 2000 through in or about June 2016, FAZZOLARI engaged in a kickback scheme with another individual (“CC-1”). Using Plan funds, FAZZOLARI paid CC-1’s company, Acclaim Administrators, Inc. (“Acclaim”), more than $1.1 million for purported services, even though Acclaim did not actually provide the Plan with these services. CC-1 then kicked back the vast majority of these payments to FAZZOLARI.
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In addition to his prison term, ROCCO FAZZOLARI, 58, of Manhasset Hills, New York, was also ordered to serve three years of supervised release, to forfeit $941,828, and to pay restitution of $1,288,810.75. Under the terms of his plea agreement, FAZZOLARI has agreed to a 13-year ban, pursuant to 29 U.S.C. §§ 504 and 1111, which generally prohibits him from, among other things, being employed by a labor union or employee benefit plan.
Mr. Berman praised the Department of Labor’s Office of Inspector General, Employee Benefits Security Administration, Office of Chief Accountant, and Office of Labor-Management Standards for their outstanding investigative work. Mr. Berman also thanked the Federal Bureau of Investigation and the Department of Justice’s Labor-Management Racketeering Unit of the Organized Crime and Gang Section for their assistance in this case.
This matter is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Michael D. Neff is in charge of the prosecution.
NYPD Detective Pleads Guilty to Bank FraudRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL BONANNO, a New York City Police Department (“NYPD”) detective, pled guilty today to his role in a bank fraud scheme that used stolen checks and bank account numbers from New York-based victims. BONANNO pled guilty to one count of bank fraud and one count of conspiracy to commit bank fraud before U.S. District Judge Paul G. Gardephe. Bonanno’s co-conspirator, Domenic Aiello, previously pled guilty before Magistrate Judge Debra Freeman on January 4, 2019.
U.S. Attorney Geoffrey S. Berman said: “Instead of upholding his duty to investigate and enforce the law, Michael Bonanno, who was at the time a detective in the NYPD’s Crime Stoppers unit, broke the law by brazenly attempting to swindle hundreds of thousands of dollars from residents of New York. I commend the FBI and the Internal Affairs Bureau of the NYPD for their outstanding work in this investigation.”
According to the Information and Complaint filed in this case, other public filings, and statements made during the plea proceeding:
BONANNO is an NYPD detective and was a member of the NYPD Crime Stoppers unit, which receives and investigates anonymous tips about criminal activity from members of the community.
From November 2016 to March 2017, BONANNO and Aiello stole and attempted to steal hundreds of thousands of dollars from the bank accounts of multiple New York residents in two ways. First, on over 20 occasions, BONANNO and Aiello made payments on BONANNO’s mortgage and credit card bills using stolen account information from various victims. Second, on at least 15 occasions, BONANNO and Aiello attempted to deposit fraudulent and stolen checks in BONANNO’s bank accounts.
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BONANNO, 44, who resides in Staten Island, New York, pled guilty to one count of bank fraud and one count of conspiracy to commit bank fraud. Each count carries a maximum term of 30 years in prison. BONANNO is scheduled to be sentenced by Judge Gardephe on April 26, 2019. The maximum potential penalties 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 Federal Bureau of Investigation and the Internal Affairs Bureau of the NYPD in this investigation.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Nicolas Roos and Danielle R. Sassoon are in charge of the prosecution.
Six Individuals Charged with Conspiring to Traffic More Than $30 Million of Contraband CigarettesRead 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 Office of the U.S. Postal Inspection Service (“USPIS”), 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”), Matthew Modafferi, Special Agent in Charge, U.S. Postal Service, Office of Inspector General, Northeast Area Field Office (“USPS-OIG”), and Joseph Fucito, New York City Sheriff, announced today the unsealing of an Indictment in Manhattan federal court charging SHAO JUN GUO, JIAN JIANG FENG, YUE JUAN CHEN, ZHURONG GAO, SHUI YING LIN, and WO KIT CHENG with conspiring to traffic contraband cigarettes and trafficking contraband cigarettes. The defendants were arrested yesterday and will be presented before U.S. Magistrate Judge Robert W. Lehrburger today. The case is assigned to U.S. District Judge Jesse M. Furman. The defendants will be arraigned before Judge Furman on January 31, 2019, at 11:00 a.m.
As alleged in the Indictment, SHAO JUN GUO, JIAN JIANG FENG, YUE JUAN CHEN, ZHURONG GAO, SHUI YING LIN, and WO KIT CHENG conspired to traffic more than $30 million of contraband cigarettes to avoid approximately $30 million in taxes. The case is assigned to United States District Judge Jesse M. Furman.
U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendants trafficked in massive quantities of contraband cigarettes, defrauding city, state, and federal governments of millions of dollars in tax revenue. That is lost tax revenue that would be used to fund research into cancer and other smoking-related illnesses, and to fund cessation and anti-smoking programs. These defendants’ alleged scheme to make millions, cheat taxing authorities, and deny funds for healthcare programs has gone up in smoke.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “These defendants thought they could get away with their scheme to distribute contraband cigarettes, avoiding regulations put in place to protect the public, businesses and the City from fraud. Their illegal profit went up in smoke.”
HSI Special Agent-in-Charge Angel M. Melendez said: “For the past six years these defendants smuggled untaxed cigarettes into the United States causing lost revenue to the U.S. economy to the tune of $30 million dollars in unpaid taxes. Whether it be drugs, counterfeit goods or untaxed cigarettes, smuggling items into the United States is a crime that we at HSI take very seriously as we work every day to secure our borders.”
USPS-OIG Special Agent-in-Charge Matthew Modafferi said: “In certain instances, the Special Agents of the U.S. Postal Service, Office of Inspector General will work with their law enforcement partners to stop those who use the U.S. Mail to facilitate their crimes. We would like to thank the U.S. Attorney’s Office, USPIS, HSI, and New York City Sheriff’s Department for their collaborative efforts in developing this investigation.”
Sheriff Joseph Fucito said: “The alleged criminal conduct of the defendants deprives all New Yorkers of significant tax revenues. These lost revenues impact public safety, education, health, housing, and social services. The New York City DOF Sheriff’s Department will continue to investigate and pursue criminal conduct to ensure these invaluable services are sustained.”
According to the allegations in the Indictment unsealed today in Manhattan federal court[1]: From June 2013 through January 2019, the defendants engaged in a scheme to smuggle and traffic $30 million of untaxed cigarettes in the United States to avoid at least $30 million in taxes.
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SHAO JUN GUO, 42, of Brooklyn, New York, JIAN JIANG FENG of New York, New York, YUE JUAN CHEN, 41, of Bayside, New York, ZHURONG GAO, 66, of New York, New York, SHUI YING LIN, 43, of Brooklyn, New York, and WO KIT CHENG, 44, of Brooklyn, New York, have each been charged with one count of conspiracy to traffic contraband cigarettes, which carries a maximum prison term of five years; and one count of trafficking contraband cigarettes, which carries a maximum prison term of five years. 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.
Mr. Berman praised the outstanding investigative work of the USPIS, HSI, and the New York City Sheriff’s Department.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Ryan B. Finkel, Elizabeth Espinosa, and Andrew Chan are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Second Former Honduran Mayor Charged with Conspiring to Import Cocaine into the United States and Related Firearms OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Christopher Tersigni, the Special Agent in Charge of the Special Operations Division of the U.S. Drug Enforcement Administration (“DEA”), announced today that charges have been filed in Manhattan federal court against former Honduran mayor Amilcar Alexander Ardon Soriano and, in a separate Superseding Indictment, Mario Jose Calix Hernandez. The charges in each indictment include conspiring to import cocaine into the United States and related weapons offenses involving the use and possession of machineguns and destructive devices. The United States is seeking the defendants’ extraditions from Honduras and Guatemala.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Amilcar Alexander Ardon Soriano and Mario Jose Calix Hernandez each conspired to import massive quantities of cocaine into the U.S. and used heavy weaponry to protect drug shipments. Ardon Soriano allegedly used his position as a Honduran mayor to facilitate his own drug trafficking, and to exact a ‘tax’ on other traffickers, making millions of dollars in the process. Thanks to the DEA, both men now face criminal charges in the U.S.”
As alleged in the Indictments filed in federal court:[1]
From at least in or about 2004, up to and including in or about 2016, multiple drug-trafficking organizations in Honduras and elsewhere worked together, and with support from certain prominent public and private individuals, including Honduran politicians and law enforcement officials, to receive multi-ton loads of cocaine sent to Honduras from, among other places, Colombia via air and maritime routes, and to transport the drugs westward in Honduras toward the border with Guatemala and eventually to the United States. For protection from official interference, and in order to facilitate the safe passage through Honduras of multi-hundred-kilogram loads of cocaine, drug traffickers paid bribes to public officials, including certain mayors and members of the National Congress of Honduras.
Ardon Soriano was previously the mayor of El Paraíso, Copán, in Honduras. Between approximately 2000 and approximately 2015, including at times while acting as mayor of El Paraíso, ARDON SORIANO engaged in large-scale drug trafficking activities with traffickers located in, among other places, Colombia, Honduras, Guatemala, and Mexico. Ardon Soriano is the second former Honduran mayor charged in the Southern District of New York with crimes related to drug trafficking. In July 2018, Arnaldo Urbina Soto, the former mayor of Yoro, Honduras, was charged in a separate Indictment with conspiring to import cocaine into the United States and related firearms offenses. See United States v. Urbina Soto, et al., 18 Cr. 497 (DLC).
As alleged in the Indictment, ARDON SORIANO participated in processing, receiving, transporting, and distributing large loads of cocaine that arrived in Honduras via planes and go-fast vessels. In Honduras, ARDON SORIANO had access to at least one cocaine laboratory as well as a clandestine airstrip that was used to receive cocaine-laden aircraft dispatched from South America. ARDON SORIANO and others participated in providing heavily armed security for cocaine shipments transported within Honduras, including by members of the Honduran National Police and drug traffickers armed with, among other weapons, machineguns. ARDON SORIANO also leveraged his power in El Paraíso by charging a per-kilogram tax on cocaine transported by other traffickers through the area that he controlled. As a result of these illegal activities, ARDON SORIANO earned millions of dollars from the distribution and sale of the cocaine that he worked with others to import into the United States. ARDON SORIANO used some of the drug proceeds to fund political campaigns in Honduras for himself and one or more of his associates.
As alleged in a separate Superseding Indictment, between in or about 2005 and in or about 2016, CALIX HERNANDEZ participated in large-scale drug trafficking with traffickers located in, among other places, Colombia, Honduras, Guatemala, and Mexico. Like ARDON SORIANO, CALIX HERNANDEZ and others participated in providing heavily armed security for cocaine shipments transported within Honduras, including by members of the Honduran National Police and drug traffickers armed with, among other weapons, machineguns. CALIX HERNANDEZ’s co-defendant and alleged co-conspirator is Juan Antonio Hernandez Alvarado, a/k/a “Tony Hernandez,” a former member of the National Congress of Honduras and the brother of the current president of Honduras. On November 23, 2018, Hernandez Alvarado was arrested in Miami. He was subsequently brought to the Southern District of New York and faces the same drug trafficking and firearms charges as CALIX HERNANDEZ as well as an additional charge of making false statements to U.S. federal agents.
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ARDON SORIANO, 43, a citizen of Honduras, is charged in three counts: (1) conspiring to import cocaine into the United States, (2) using and carrying machineguns and destructive devices during, and possessing machineguns and destructive devices in furtherance of, the cocaine importation conspiracy, and (3) conspiring to use and carry machineguns and destructive devices during, and to possess machineguns and destructive devices in furtherance of, the cocaine importation conspiracy.
CALIX HERNANDEZ, 36, a citizen of Honduras, is charged in three counts in a separate Superseding Indictment: (1) conspiring to import cocaine into the United States, (2) using and carrying machineguns and destructive devices during, and possessing machineguns and destructive devices in furtherance of, the cocaine importation conspiracy, and (3) conspiring to use and carry machineguns and destructive devices during, and to possess machineguns and destructive devices in furtherance of, the cocaine importation conspiracy.
If convicted, ARDON SORIANO and CALIX HERNANDEZ each face a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, a mandatory minimum sentence of 30 years in prison and a maximum term of life in prison on Count Two, and a maximum term of life on Count Three.
The maximum potential sentences in these cases are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Berman praised the outstanding efforts of the DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and Tegucigalpa Country Office. Mr. Berman also thanked the U.S. Department of Justice’s Office of International Affairs and the U.S. Attorney’s Offices for the Eastern District of Virginia and the Southern District of Florida.
These cases are being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Emil J. Bove III and Mathew J. Laroche are in charge of the prosecutions.
The charges contained in the Indictments are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment charging Ardon Soriano, and the separate Superseding Indictment charging Calix Hernandez, as well as the descriptions of the Indictments set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Former Harrison Police Chief Pleads Guilty to Tax EvasionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, 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 ANTHONY MARRACCINI pled guilty today to tax evasion before U.S. District Judge Kenneth M. Karas in White Plains federal court.
U.S. Attorney Geoffrey S. Berman said: “As he admitted in court today, former Harrison Police Chief Anthony Marraccini failed to report more than $2.5 million he earned through his ownership of a construction company and several rental properties. At a time when he was the top law enforcement officer in Harrison, Marraccini broke the law and evaded more than $780,000 in income taxes. Sworn officers of the law should be held to a higher standard. At a bare minimum, they should be expected to obey the law.”
IRS-CI Acting Special Agent in Charge Jonathan D. Larsen said: “As the Chief of Police for the Town of Harrison, Anthony Marraccini held a position of trust in the eyes of the public. That trust was broken when he decided to commit a serious tax felony. The laws of the land apply to everybody, regardless of position or power. IRS-CI special agents will continue their work to ensure that everybody pays their fair share.”
According to the allegations contained in the Information:
During the relevant time period of 2011 to 2016, MARRACCINI was the Chief of Police for the Town of Harrison, New York. MARRACCINI also owned and operated Coastal Construction Associates LLC (“Coastal Construction”), a construction business, and was also employed as a salesperson for two title companies. In addition, MARRACCINI owned several residential rental properties. MARRACCINI reported some of Coastal Construction’s revenue and expenses, and the rental income from some of his rental properties, on his personal federal income tax return.
MARRACCINI failed to report all of Coastal Construction’s revenue on his income tax returns from 2011 through 2016. Instead, he deposited some checks Coastal Construction received for construction work into his personal bank accounts. He also cashed some checks Coastal Construction received at a check cashing service and kept the cash for his personal use. In some instances, MARRACCINI deposited checks Coastal Construction received into Coastal Construction’s bank accounts but took portions of the deposits as cash, thus reducing the amounts of the deposits on Coastal Construction’s bank account statements. MARRACCINI then falsely represented to his tax return preparers that Coastal Construction’s bank account statements showed the vast majority of the company’s revenue for each year.
MARRACCINI failed to report more than $2.3 million in revenue for Coastal Construction for the tax years 2011 through 2016.
MARRACCINI also failed to report a total of more than $199,800 in rents received from two rental homes he owned in Purchase, New York, from 2011 through 2015. In addition, MARRACCINI failed to report $24,500 in rents he received from a rental home he owned in Rye, New York, in 2013 and 2014.
In total, MARRACCINI failed to report more than $2.5 million in revenue from Coastal Construction and the rental properties, thereby evading more than $782,000 in federal income tax from 2011 through 2016.
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MARRACCINI, 54, of West Harrison, New York, pled guilty to one count of tax evasion, which carries a maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentence will be determined by the court.
MARRACCINI is scheduled to be sentenced by Judge Karas on May 16, 2019.
Mr. Berman praised the outstanding investigative work of the IRS-CI and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorney James McMahon is in charge of the prosecution.
Sex Trafficker Lavelleous Purcell, a/k/a “King Casino,” a/k/a “Mike Hill,” Sentenced to 18 Years in Prison in Manhattan Federal CourtRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LAVELLEOUS PURCELL, a/k/a “King Casino,” a/k/a “Mike Hill,” was sentenced today by United States District Judge Denise L. Cote to 216 months in prison for sex trafficking by force, fraud, and coercion, and other related offenses.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Lavelleous Purcell, a violent and notoriously brutal predator, used physical violence and intimidation to force women into sexual servitude for his financial enrichment. Appropriately, Purcell has now been sentenced to surrender his own freedom for many years.”
According to the Indictment filed in Manhattan federal court, previous court filings, and statements made at public proceedings:
From at least in or about 2012 to in or about 2017, LAVELLEOUS PURCELL, a/k/a “King Casino,” a/k/a “Mike Hill,” the defendant engaged in the sex trafficking and commercial sexual exploitation of numerous women across the country, including in New York, Pennsylvania, and North Carolina. The defendant recruited, enticed, harbored, transported, provided, obtained, and maintained women for the purposes of commercial sex, and he used violent force, threats of force, coercion, intimidation, and fear to force at least one woman to engage in commercial sex for his own profit. For example, the defendant strangled and choked certain of his victims, he hit and threatened to hit certain of his victims, and he kidnapped certain of his victims.
The victims of the defendant’s prostitution business were required to follow a strict set of rules, which the defendant enforced through threats, fear, intimidation, and violence. The defendant’s rules required his victims to: make money for the defendant through prostitution, give the defendant all money earned from any commercial sex acts, call the defendant “Daddy,” not speak to men other than the defendant, not look at any men other than the defendant, not talk back to the defendant, not disrespect the defendant, not have boyfriends, not wear sneakers or loose-fitting clothing, and brand themselves with a tattoo bearing the defendant’s alias, “Casino,” on their necks.
The defendant recruited women to engage in commercial sex through social media websites, and he used Backpage.com, an online classifieds website, to post advertisements for commercial sex. The defendant also booked various rental cars and hotel rooms to transport women across state lines to engage in commercial sex. Meanwhile, the defendant boasted about the violence he used against women and his prostitution of women through social media posts, phone, text, and online communications, and in person.
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In addition to his prison sentence, PURCELL, 40, was sentenced to five years of supervised release.
Mr. Berman thanked the FBI and the NYPD for their outstanding investigative work in this matter. Mr. Berman also thanked the New York County District Attorney’s Office for its assistance with this investigation.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Sheb Swett, Jane Kim, and Margaret Graham are in charge of the prosecution.
Manhattan U.S. Attorney Announces $269.2 Million Recovery from Walgreens in Two Civil Healthcare Fraud SettlementsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Gregory E. Demske, Chief Counsel to the Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), Scott J. Lampert, Special Agent in Charge of HHS-OIG’s New York Regional Office, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), Leigh-Alistair Barzey, Special Agent-in-Charge of the Defense Criminal Investigative Service (“DCIS”) Northeast Field Office, Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor Office of Inspector General (“DOL-OIG”), Matthew Modafferi, Special Agent in Charge, U.S. Postal Service, Office of Inspector General, Northeast Area Field Office (“USPS-OIG”), and Thomas W. South, Deputy Assistant Inspector General for Investigations, U.S. Office of Personnel Management, Office of the Inspector General (“OPM-OIG”), announced today that the United States filed and settled two healthcare fraud lawsuits against national pharmacy chain WALGREENS BOOTS ALLIANCE, INC. (“WALGREENS”), pursuant to which WALGREENS must pay the United States and state governments a total of $269.2 million. The first settlement, approved on January 16, 2019, by U.S. District Judge Paul A. Crotty and unsealed today, requires WALGREENS to pay $209.2 million to resolve allegations that it improperly billed Medicare, Medicaid, and other federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to program beneficiaries who did not need them. The second settlement, approved on January 15, 2019, by U.S. District Judge J. Paul Oetken and unsealed today, requires WALGREENS to pay $60 million to resolve allegations that it overbilled Medicaid by failing to disclose to and charge Medicaid the lower drug prices that WALGREENS offered the public through a discount program. In both settlements, WALGREENS admitted and accepted responsibility for conduct the Government alleged in its complaints under the False Claims Act.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Medicare and Medicaid provide essential healthcare coverage to millions of people across this country. The financial integrity of these programs depends on truthful and accurate billing by pharmacies like Walgreens. Overbilling and improper billing of Medicare and Medicaid unduly burden taxpayers and put the solvency of these vital healthcare programs at risk. This Office will hold healthcare providers to account when they fail to deal honestly with federal programs.”
HHS-OIG Special Agent in Charge Scott J. Lampert said: “Walgreens engaged in practices that undermined the integrity of the Medicare and Medicaid programs, compromised patient care, and wasted taxpayer dollars. Along with our law enforcement partners, HHS-OIG will continue to protect the individuals that depend on federally funded health care programs, and ensure that companies that do business with those programs do so in an honest fashion.”
DCIS Special Agent-in-Charge Leigh-Alistair Barzey said: “Health care fraud impacting the U.S. Department of Defense (DoD) is a top investigative priority for the DCIS. The settlements announced today by the U.S. Attorney’s Office are the direct result of a joint investigative effort by the DCIS, the FBI, HHS OIG, DoL OIG, OPM OIG, Postal OIG, and the U.S. Department of Justice. The successful resolution of these cases demonstrates the DCIS’s ongoing commitment to work with its law enforcement partners to combat health care fraud, protect Defense Health Agency funds, and ensure the integrity of TRICARE, the DoD’s health care system.”
DOL-OIG Special Agent-in-Charge Michael C. Mikulka said: “Walgreens defrauded the U.S. Department of Labor’s (DOL) Federal Employees’ Compensation Act Program and other health care programs out of millions of dollars by over-dispensing insulin pens at the risk of potentially causing harm to beneficiaries. We will continue to work with our law enforcement partners to protect the integrity of DOL’s benefit programs.”
USPS-OIG Special Agent in Charge Matthew Modafferi said: “This settlement sends a clear message to pharmaceutical chains to follow the law. Pharmacies that attempt to take advantage of federal benefit systems will be pursued by the Special Agents of the U.S. Postal Service Office of Inspector General, their law enforcement partners, and the U.S. Attorney’s Office.”
OPM-OIG Deputy Assistant Inspector General for Investigations Thomas W. South said: “The OPM-OIG has zero tolerance for fraud against the Federal Employees Health Benefits Program. Today’s settlement reflects our commitment to pursuing and preventing improper and illegal billing practices that waste taxpayer dollars and increase the cost of medical care. I would like to thank the DOJ attorneys, OPM-OIG agents, and their law enforcement partners for all their hard work.”
Insulin Pens Settlement
The United States’ complaint alleges that WALGREENS routinely submitted false days-of-supply data to federal healthcare programs when it sought federal reimbursement for insulin pens it dispensed to federal beneficiaries who did not need them. Specifically, WALGREENS engaged in two practices that resulted in the fraudulent submissions. First, WALGREENS configured its electronic pharmacy management system to prevent its pharmacists from dispensing less than a full box of five insulin pens, even when patients did not need that much insulin. Second, when a full box of insulin pens exceeded the federal healthcare program’s limit on the total days of supply (i.e., the total number of daily doses) that could be dispensed and reimbursed at that time, WALGREENS evaded this restriction by falsely stating in its reimbursement claims that the total days of supply did not go over the limit. As a result, federal healthcare programs paid WALGREENS millions of dollars for insulin that many beneficiaries did not actually need, and substantial quantities of valuable medication were wasted. This conduct also opened the door to potential healthcare risks and abuse, such as the improper resale of insulin pens on the Internet.
The settlement requires WALGREENS to pay approximately $168 million to the United States, and WALGREENS has agreed separately to pay approximately $41.2 million to state governments.[1] Under the settlement, WALGREENS admitted, among other things, that:
- When a federal health program denied a claim from WALGREENS because the reported days of supply for a full carton of five insulin pens exceeded the federal program’s days-of-supply limit, it was WALGREENS’s practice to dispense and bill for the full carton and reduce the reported days of supply to conform to the program’s days-of-supply limit; and
- WALGREENS thus repeatedly reported days-of-supply data to federal health programs that were different from, and lower than, the days-of-supply calculated according to the standard pharmacy billing formula.
Discount Drug Pricing Settlement
The United States’ complaint in this case alleges that WALGREENS operated a program called the Prescription Savings Club (the “PSC”), under which customers received discounts when they ordered drugs from WALGREENS. Medicaid regulations directed WALGREENS to seek Medicaid reimbursement only at the lowest of certain drug price points, including the “usual and customary price” (“U&C price”). Medicaid rules of many states defined the U&C price as the price offered through discount programs like the PSC. Contrary to these requirements, WALGREENS did not disclose to Medicaid the discount drug prices it offered customers through the PSC when it sought reimbursement from Medicaid. As a result, Medicaid programs paid WALGREENS more in reimbursements than they would have paid had WALGREENS disclosed the lower PSC prices.
The settlement requires WALGREENS to pay a total of $60 million, of which approximately $32 million is to the United States and approximately $28 million will go to state governments. Under the settlement, WALGREENS admitted, among other things, that:- Customers who enrolled in the PSC were eligible to receive discounts for thousands of types of drugs, and WALGREENS offered a savings guarantee under which PSC enrollees could recoup through a store credit the difference between the amount they paid to enroll in a given year and the amount they received in discounted savings in that year; and
- In submitting claims for reimbursement to Medicaid, WALGREENS did not identify its PSC program prices as its U&C prices for the drugs on the PSC program formulary, which resulted in the States paying more in reimbursement than they would have paid if WALGREENS had identified its PSC program prices.
Both cases arose from lawsuits filed by whistleblowers under the False Claims Act.
In connection with these settlements, WALGREENS has entered into a Corporate Integrity Agreement with HHS-OIG. The Corporate Integrity Agreement reaches broadly across WALGREENS’s retail and specialty pharmacies that bill federal health care programs. Board oversight, multi-site claims reviews to be conducted by an Independent Review Organization, and other Corporate Integrity Agreement requirements seek to foster adherence to federal health care program requirements and thereby protect the programs.
Mr. Berman praised the outstanding investigative work of the HHS-OIG, FBI, DOD-OIG, DOL-OIG, USPS-OIG, and OPM-OIG. He also thanked the Medicaid Fraud Control Units for Indiana, Washington, New York, and Texas for their assistance in these cases.
These cases are being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorneys Li Yu and Jessica Jean Hu are in charge of the insulin pens case against Walgreens, and former Assistant U.S. Attorney Christopher Harwood was in charge of the discount drug pricing case against Walgreens.
[1] The Medicaid program is primarily administered by the states but financed jointly by federal and state funds.