Southern District of New York

Defendants Were Members of the APT 10 Hacking Group Who Acted in Association with the Tianjin State Security Bureau and Engaged in Global Computer Intrusions for More Than a Decade, Continuing into 2018, Including Thefts from Managed Service Providers and More Than 45 Technology Companies

The unsealing of an indictment charging Zhu Hua (朱华), aka Afwar, aka CVNX, aka Alayos, aka Godkiller; and Zhang Shilong (张士龙), aka Baobeilong, aka Zhang Jianguo, aka Atreexp, both nationals of the People’s Republic of China (China), with conspiracy to commit computer intrusions, conspiracy to commit wire fraud, and aggravated identity theft was announced today.

The announcement was made by Deputy Attorney General Rod J. Rosenstein, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Director Christopher A. Wray of the FBI, Director Dermot F. O’Reilly of the Defense Criminal Investigative Service (DCIS) of the U.S. Department of Defense, and Assistant Attorney General for National Security John C. Demers.

Zhu and Zhang were members of a hacking group operating in China known within the cyber security community as Advanced Persistent Threat 10 (the APT10 Group).  The defendants worked for a company in China called Huaying Haitai Science and Technology Development Company (Huaying Haitai) and acted in association with the Chinese Ministry of State Security’s Tianjin State Security Bureau. 

Through their involvement with the APT10 Group, from at least in or about 2006 up to and including in or about 2018, Zhu and Zhang conducted global campaigns of computer intrusions targeting, among other data, intellectual property and confidential business and technological information at managed service providers (MSPs), which are companies that remotely manage the information technology infrastructure of businesses and governments around the world, more than 45 technology companies in at least a dozen U.S. states, and U.S. government agencies.  The APT10 Group targeted a diverse array of commercial activity, industries and technologies, including aviation, satellite and maritime technology, industrial factory automation, automotive supplies, laboratory instruments, banking and finance, telecommunications and consumer electronics, computer processor technology, information technology services, packaging, consulting, medical equipment, healthcare, biotechnology, pharmaceutical manufacturing, mining, and oil and gas exploration and production.  Among other things, Zhu and Zhang registered IT infrastructure that the APT10 Group used for its intrusions and engaged in illegal hacking operations.

“The indictment alleges that the defendants were part of a group that hacked computers in at least a dozen countries and gave China’s intelligence service access to sensitive business information,” said Deputy Attorney General Rosenstein.  “This is outright cheating and theft, and it gives China an unfair advantage at the expense of law-abiding businesses and countries that follow the international rules in return for the privilege of participating in the global economic system.”

“It is galling that American companies and government agencies spent years of research and countless dollars to develop their intellectual property, while the defendants simply stole it and got it for free” said U.S. Attorney Berman.  “As a nation, we cannot, and will not, allow such brazen thievery to go unchecked.”

“Healthy competition is good for the global economy, but criminal conduct is not.  This is conduct that hurts American businesses, American jobs, and American consumers,” said FBI Director Wray.  “No country should be able to flout the rule of law – so we’re going to keep calling out this behavior for what it is: illegal, unethical, and unfair.  It's going to take all of us working together to protect our economic security and our way of life, because the American people deserve no less."

“The theft of sensitive defense technology and cyber intrusions are major national security concerns and top investigative priorities for the DCIS,” said DCIS Director O’Reilly.  “The indictments unsealed today are the direct result of a joint investigative effort between DCIS and its law enforcement partners to vigorously investigate individuals and groups who illegally access information technology systems of the U.S. Department of Defense and the Defense Industrial Base.  DCIS remains vigilant in our efforts to safeguard the integrity of the Department of Defense and its enterprise of information technology systems.”

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

Overview

Zhu Hua (朱华), aka Afwar, aka CVNX, aka Alayos, aka Godkiller, and Zhang Shilong (张士龙), aka Baobeilong, aka Zhang Jianguo, aka Atreexp, the defendants, both nationals of China, were members of a hacking group operating in China known within the cyber security community as the APT10 Group, or alternatively as “Red Apollo,” “CVNX,” “Stone Panda,” “MenuPass,” and “POTASSIUM.”  The defendants worked for Huaying Haitai in Tianjin, China, and acted in association with the Chinese Ministry of State Security’s Tianjin State Security Bureau.  From at least in or about 2006 up to and including in or about 2018, members of the APT10 Group, including Zhu and Zhang, conducted extensive campaigns of intrusions into computer systems around the world.  The APT10 Group used some of the same online facilities to initiate, facilitate and execute its campaigns during the conspiracy.

Most recently, beginning at least in or about 2014, members of the APT10 Group, including Zhu and Zhang, engaged in an intrusion campaign to obtain unauthorized access to the computers and computer networks of MSPs for businesses and governments around the world (the MSP Theft Campaign).  The APT10 Group targeted MSPs in order to leverage the MSPs’ networks to gain unauthorized access to the computers and computer networks of the MSPs’ clients and to steal, among other data, intellectual property and confidential business data on a global scale.  For example, through the MSP Theft Campaign, the APT10 Group obtained unauthorized access to the computers of an MSP that had offices in the Southern District of New York and compromised the data of that MSP and certain of its clients involved in banking and finance, telecommunications and consumer electronics, medical equipment, packaging, manufacturing, consulting, healthcare, biotechnology, automotive, oil and gas exploration, and mining.

Earlier, beginning in or about 2006, members of the APT10 Group, including Zhu and Zhang, engaged in an intrusion campaign to obtain unauthorized access to the computers and computer networks of more than 45 technology companies and U.S. government agencies, in order to steal information and data concerning a number of technologies (the Technology Theft Campaign).  Through the Technology Theft Campaign, the APT10 Group stole hundreds of gigabytes of sensitive data and targeted the computers of victim companies involved in aviation, space and satellite technology, manufacturing technology, pharmaceutical technology, oil and gas exploration and production technology, communications technology, computer processor technology, and maritime technology.

In furtherance of the APT10 Group’s intrusion campaigns, Zhu and Zhang, among other things, worked for Huaying Haitai and registered malicious domains and infrastructure.  In addition, Zhu, a penetration tester, engaged in hacking operations on behalf of the APT10 Group and recruited other individuals to the APT10 Group, and Zhang developed and tested malware for the APT10 Group.

The MSP Theft Campaign

In furtherance of the MSP Theft Campaign, Zhu, Zhang, and their co-conspirators in the APT10 Group engaged in the following criminal conduct:

• First, after the APT10 Group gained unauthorized access into the computers of an MSP, the APT10 Group installed multiple variants of malware on MSP computers around the world. To avoid antivirus detection, the malware was installed using malicious files that masqueraded as legitimate files associated with the victim computer’s operating system.  Such malware enabled members of the APT10 Group to monitor victims’ computers remotely and steal user credentials. 
• Second, after stealing administrative credentials from computers of an MSP, the APT10 Group used those stolen credentials to connect to other systems within an MSP and its clients’ networks. This enabled the APT10 Group to move laterally through an MSP’s network and its clients’ networks and to compromise victim computers that were not yet infected with malware. 
• Third, after identifying data of interest on a compromised computer and packaging it for exfiltration using encrypted archives, the APT10 Group used stolen credentials to move the data of an MSP client to one or more other compromised computers of the MSP or its other clients’ networks before exfiltrating the data to other computers controlled by the APT10 Group.

Over the course of the MSP Theft Campaign, Zhu, Zhang, and their co-conspirators in the APT10 Group successfully obtained unauthorized access to computers providing services to or belonging to victim companies located in at least 12 countries, including Brazil, Canada, Finland, France, Germany, India, Japan, Sweden, Switzerland, the United Arab Emirates, the United Kingdom, and the United States.  The victim companies included at least the following:  a global financial institution, three telecommunications and/or consumer electronics companies; three companies involved in commercial or industrial manufacturing; two consulting companies; a healthcare company; a biotechnology company; a mining company; an automotive supplier company; and a drilling company. 

The Technology Theft Campaign

Over the course of the Technology Theft Campaign, which began in or about 2006, Zhu, Zhang, and their coconspirators in the APT10 Group successfully obtained unauthorized access to the computers of more than 45 technology companies and U.S. Government agencies based in at least 12 states, including Arizona, California, Connecticut, Florida, Maryland, New York, Ohio, Pennsylvania, Texas, Utah, Virginia and Wisconsin.  The APT10 Group stole hundreds of gigabytes of sensitive data and information from the victims’ computer systems, including from at least the following victims: seven companies involved in aviation, space and/or satellite technology; three companies involved in communications technology; three companies involved in manufacturing advanced electronic systems and/or laboratory analytical instruments; a company involved in maritime technology; a company involved in oil and gas drilling, production, and processing; and the NASA Goddard Space Center and Jet Propulsion Laboratory.  In addition to those victims who had information stolen, Zhu, Zhang, and their co-conspirators successfully obtained unauthorized access to computers belonging to more than 25 other technology-related companies involved in, among other things, industrial factory automation, radar technology, oil exploration, information technology services, pharmaceutical manufacturing, and computer processor technology, as well as the U.S. Department of Energy’s Lawrence Berkeley National Laboratory. 

Finally, the APT10 Group compromised more than 40 computers in order to steal sensitive data belonging to the Navy, including the names, Social Security numbers, dates of birth, salary information, personal phone numbers, and email addresses of more than 100,000 Navy personnel.

*                *                *

Zhu and Zhang are each charged with one count of conspiracy to commit computer intrusions, which carries a maximum sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison. 

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the assigned judge.  The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.

The case was investigated by the FBI, including the New Orleans, New Haven, Houston, New York, Sacramento, and San Antonio Field Offices; DCIS; and the U.S. Naval Criminal Investigative Service (NCIS).  Mr. Rosenstein, Mr. Berman and Mr. Demers praised the outstanding investigative work of, and collaboration among, the FBI, DCIS, and NCIS.  They also thanked the U.S. Attorney’s Office for the District of Connecticut, and the Department of Defense’s Computer Forensic Laboratory for their assistance in the investigation.

Assistant U.S. Attorney Sagar K. Ravi of the Southern District of New York’s Complex Frauds and Cybercrime Unit is in charge of the prosecution, with assistance provided by Trial Attorney Matthew Chang of the National Security Division’s Counterintelligence and Export Control Section.

Rod J. Rosenstein, the Deputy Attorney General of the United States, Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Christopher A. Wray, the Director of the Federal Bureau of Investigation (“FBI”), Dermot F. O’Reilly, Director of the Defense Criminal Investigative Service (“DCIS”) of the U.S. Department of Defense, and John C. Demers, the Assistant Attorney General for National Security, announced today the unsealing of an indictment charging ZHU HUA (朱华), a/k/a “Afwar,” a/k/a “CVNX,” a/k/a “Alayos,” a/k/a “Godkiller,” and ZHANG SHILONG (张士龙), a/k/a “Baobeilong,” a/k/a “Zhang Jianguo,” a/k/a “Atreexp,” both nationals of the People’s Republic of China (“China”), with conspiracy to commit computer intrusions, conspiracy to commit wire fraud, and aggravated identity theft.

ZHU and ZHANG were members of a hacking group operating in China known within the cyber security community as Advanced Persistent Threat 10 (the “APT10 Group”).  The defendants worked for a company in China called Huaying Haitai Science and Technology Development Company (“Huaying Haitai”) and acted in association with the Chinese Ministry of State Security’s Tianjin State Security Bureau. 

Through their involvement with the APT10 Group, from at least in or about 2006 up to and including in or about 2018, ZHU and ZHANG conducted global campaigns of computer intrusions targeting, among other data, intellectual property and confidential business and technological information at managed service providers (“MSPs”), which are companies that remotely manage the information technology infrastructure of businesses and governments around the world, more than 45 technology companies in at least a dozen U.S. states, and U.S. government agencies.  The APT10 Group targeted a diverse array of commercial activity, industries, and technologies, including aviation, satellite, and maritime technology, industrial factory automation, automotive supplies, laboratory instruments, banking and finance, telecommunications and consumer electronics, computer processor technology, information technology services, packaging, consulting, medical equipment, healthcare, biotechnology, pharmaceutical manufacturing, mining, and oil and gas exploration and production.  Among other things, ZHU and ZHANG registered IT infrastructure that the APT10 Group used for its intrusions and engaged in illegal hacking operations.

Rod J. Rosenstein, the Deputy Attorney General of the United States said:  “The indictment alleges that the defendants were part of a group that hacked computers in at least a dozen countries and gave China’s intelligence service access to sensitive business information.  This is outright cheating and theft, and it gives China an unfair advantage at the expense of law-abiding businesses and countries that follow the international rules in return for the privilege of participating in the global economic system.”

Manhattan U.S. Attorney Geoffrey S. Berman said:  “It is galling that American companies and government agencies spent years of research and countless dollars to develop their intellectual property, while the defendants simply stole it and got it for free.  As a nation, we cannot, and will not, allow such brazen thievery to go unchecked.”

FBI Director Christopher A. Wray said:  “Healthy competition is good for the global economy, but criminal conduct is not.  This is conduct that hurts American businesses, American jobs, and American consumers.  No country should be able to flout the rule of law – so we’re going to keep calling out this behavior for what it is: illegal, unethical, and unfair.  It's going to take all of us working together to protect our economic security and our way of life, because the American people deserve no less.”

DCIS Director Dermot F. O’Reilly said:  “The theft of sensitive defense technology and cyber intrusions are major national security concerns and top investigative priorities for the DCIS.  The indictments unsealed today are the direct result of a joint investigative effort between DCIS and its law enforcement partners to vigorously investigate individuals and groups who illegally access information technology systems of the U.S. Department of Defense and the Defense Industrial Base.  DCIS remains vigilant in our efforts to safeguard the integrity of the Department of Defense and its enterprise of information technology systems.”

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

Overview

ZHU HUA (朱华), a/k/a “Afwar,” a/k/a “CVNX,” a/k/a “Alayos,” a/k/a “Godkiller,” and ZHANG SHILONG (张士龙), a/k/a “Baobeilong,” a/k/a “Zhang Jianguo,” a/k/a “Atreexp,” the defendants, both nationals of China, were members of a hacking group operating in China known within the cyber security community as the APT10 Group, or alternatively as “Red Apollo,” “CVNX,” “Stone Panda,” “MenuPass,” and “POTASSIUM.”  The defendants worked for Huaying Haitai in Tianjin, China, and acted in association with the Chinese Ministry of State Security’s Tianjin State Security Bureau.  From at least in or about 2006 up to and including in or about 2018, members of the APT10 Group, including ZHU and ZHANG, conducted extensive campaigns of intrusions into computer systems around the world.  The APT10 Group used some of the same online facilities to initiate, facilitate, and execute its campaigns during the conspiracy.

Most recently, beginning at least in or about 2014, members of the APT10 Group, including ZHU and ZHANG, engaged in an intrusion campaign to obtain unauthorized access to the computers and computer networks of MSPs for businesses and governments around the world (the “MSP Theft Campaign”).  The APT10 Group targeted MSPs in order to leverage the MSPs’ networks to gain unauthorized access to the computers and computer networks of the MSPs’ clients and to steal, among other data, intellectual property and confidential business data on a global scale.  For example, through the MSP Theft Campaign, the APT10 Group obtained unauthorized access to the computers of an MSP that had offices in the Southern District of New York and compromised the data of that MSP and certain of its clients involved in banking and finance, telecommunications and consumer electronics, medical equipment, packaging, manufacturing, consulting, healthcare, biotechnology, automotive, oil and gas exploration, and mining.

Earlier, beginning in or about 2006, members of the APT10 Group, including ZHU and ZHANG, engaged in an intrusion campaign to obtain unauthorized access to the computers and computer networks of more than 45 technology companies and U.S. government agencies, in order to steal information and data concerning a number of technologies (the “Technology Theft Campaign”).  Through the Technology Theft Campaign, the APT10 Group stole hundreds of gigabytes of sensitive data and targeted the computers of victim companies involved in aviation, space and satellite technology, manufacturing technology, pharmaceutical technology, oil and gas exploration and production technology, communications technology, computer processor technology, and maritime technology.

In furtherance of the APT10 Group’s intrusion campaigns, ZHU and ZHANG, among other things, worked for Huaying Haitai and registered malicious domains and infrastructure.  In addition, ZHU, a penetration tester, engaged in hacking operations on behalf of the APT10 Group and recruited other individuals to the APT10 Group, and ZHANG developed and tested malware for the APT10 Group.

The MSP Theft Campaign

In furtherance of the MSP Theft Campaign, ZHU, ZHANG, and their coconspirators in the APT10 Group engaged in the following criminal conduct:

• First, after the APT10 Group gained unauthorized access into the computers of an MSP, the APT10 Group installed multiple variants of malware on MSP computers around the world.  To avoid antivirus detection, the malware was installed using malicious files that masqueraded as legitimate files associated with the victim computer’s operating system.  Such malware enabled members of the APT10 Group to monitor victims’ computers remotely and steal user credentials. 

• Second, after stealing administrative credentials from computers of an MSP, the APT10 Group used those stolen credentials to connect to other systems within an MSP and its clients’ networks.  This enabled the APT10 Group to move laterally through an MSP’s network and its clients’ networks and to compromise victim computers that were not yet infected with malware. 

• Third, after identifying data of interest on a compromised computer and packaging it for exfiltration using encrypted archives, the APT10 Group used stolen credentials to move the data of an MSP client to one or more other compromised computers of the MSP or its other clients’ networks before exfiltrating the data to other computers controlled by the APT10 Group.

 

Over the course of the MSP Theft Campaign, ZHU, ZHANG, and their coconspirators in the APT10 Group successfully obtained unauthorized access to computers providing services to or belonging to victim companies located in at least 12 countries, including Brazil, Canada, Finland, France, Germany, India, Japan, Sweden, Switzerland, the United Arab Emirates, the United Kingdom, and the United States.  The victim companies included at least the following:  a global financial institution, three telecommunications and/or consumer electronics companies; three companies involved in commercial or industrial manufacturing; two consulting companies; a healthcare company; a biotechnology company; a mining company; an automotive supplier company; and a drilling company. 

The Technology Theft Campaign

Over the course of the Technology Theft Campaign, which began in or about 2006, ZHU, ZHANG, and their coconspirators in the APT10 Group successfully obtained unauthorized access to the computers of more than 45 technology companies and U.S. Government agencies based in at least 12 states, including Arizona, California, Connecticut, Florida, Maryland, New York, Ohio, Pennsylvania, Texas, Utah, Virginia, and Wisconsin.  The APT10 Group stole hundreds of gigabytes of sensitive data and information from the victims’ computer systems, including from at least the following victims:  seven companies involved in aviation, space and/or satellite technology; three companies involved in communications technology; three companies involved in manufacturing advanced electronic systems and/or laboratory analytical instruments; a company involved in maritime technology; a company involved in oil and gas drilling, production, and processing; and the NASA Goddard Space Center and Jet Propulsion Laboratory.  In addition to those victims who had information stolen, ZHU, ZHANG, and their coconspirators successfully obtained unauthorized access to computers belonging to more than 25 other technology-related companies involved in, among other things, industrial factory automation, radar technology, oil exploration, information technology services, pharmaceutical manufacturing, and computer processor technology, as well as the U.S. Department of Energy’s Lawrence Berkeley National Laboratory. 

Finally, the APT10 Group compromised more than 40 computers in order to steal sensitive data belonging to the Navy, including the names, Social Security numbers, dates of birth, salary information, personal phone numbers, and email addresses of more than 100,000 Navy personnel.

*                *                *

ZHU HUA (朱华), a/k/a “Afwar,” a/k/a “CVNX,” a/k/a “Alayos,” a/k/a “Godkiller,” and ZHANG SHILONG (张士龙), a/k/a “Baobeilong,” a/k/a “Zhang Jianguo,” a/k/a “Atreexp,” the defendants, are citizens and residents of China.  ZHU and ZHANG are each charged with one count of conspiracy to commit computer intrusions, which carries a maximum sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the assigned judge.

The case was investigated by the FBI, including the New Orleans, New Haven, Houston, New York, Sacramento, and San Antonio Field Offices; DCIS; and the U.S. Naval Criminal Investigative Service (“NCIS”).  Mr. Berman praised the outstanding investigative work of, and collaboration among, the FBI, DCIS, and NCIS.  He also thanked the United States Attorney’s Office for the District of Connecticut and the Department of Defense’s Computer Forensic Laboratory for their assistance in the investigation.

The 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, with assistance provided by Trial Attorney Matthew Chang of the National Security Division’s Counterintelligence and Export Control Section.

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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that IBRAHIM ISSA, a/k/a “Tony Issa,” was found guilty yesterday of bribery of public officials and tax fraud.  A unanimous jury convicted ISSA after a two-week trial before Chief United States District Judge Colleen McMahon.

U.S. Attorney Geoffrey S. Berman said:  “As proven at trial, Ibrahim Issa provided cash, lavish meals, and trips to managers of U.S. Postal Service Vehicle Maintenance Facilities (“VMFs”) in exchange for lucrative vehicle maintenance and repair jobs on Postal Service vehicles.  In addition, Issa evaded and conspired to evade both corporate and personal income taxes.”

According to court documents and the evidence at trial:

From at least in or about 2012 up to and including in or about August 2016, ISSA, who owned and operated numerous auto-repair and maintenance companies in the New York area and elsewhere, paid bribes to Postal Service VMF managers in order to obtain work repairing and maintaining vehicles belonging to the Postal Service.  ISSA provided cash, gifts, lavish meals, and trips to these VMF Managers in exchange for receiving work for his companies.  As a result of some of these bribes, ISSA received millions of dollars in fees from the Postal Service. 

In addition, from at least in or about 2012 up to and including in or about August 2016, ISSA conspired with others to evade paying federal income taxes for his auto-repair and maintenance companies by misreporting income and expenses to the IRS.  ISSA also signed and subscribed to false personal income tax returns.  As a result of ISSA’s tax fraud through both his companies and personally, ISSA failed to pay hundreds of thousands of dollars in taxes due and owing.

*              *             *

IBRAHIM ISSA, 56, of Manhattan, New York, was convicted of one count of bribery (which carries a maximum sentence 15 years in prison), one count of conspiracy to file a false corporate tax return (five years in prison), one count of corporate tax evasion (five years in prison), one count of aiding and abetting the filing of a false corporate tax return (three years in prison), and three counts of signing and subscribing a false personal tax return (each of which carries a maximum penalty of three 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.  ISSA is scheduled to be sentenced on April 30, 2019, at 4:00 p.m., before Chief Judge McMahon.

Mr. Berman praised the outstanding work of the United States Postal Service Office of the Inspector General and the Internal Revenue Service.

This matter is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Kyle Wirshba, Elizabeth Hanft, and Noah Solowiejczyk are in charge of the prosecution.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Shawn Harris, Commissioner of the Mount Vernon Police Department, announced the unsealing of a federal indictment charging BARRY JOHNSON, 26, with aiding and abetting the murder of David DeGrace, 36, on August 26, 2018, in furtherance of a marijuana distribution conspiracy.  JOHNSON was arrested this morning in Mount Vernon and will be presented this afternoon before United States Magistrate Judge Lisa M. Smith.

U.S. Attorney Geoffrey S. Berman said:  “Last summer, David DeGrace was shot dead, the victim of senseless drug-related violence.  As alleged, Barry Johnson aided and abetted that murder.  Thanks to the work of our remarkable law enforcement partners, Johnson now stands charged in federal court for his role in this terrible crime.”

FBI Assistant Director William F. Sweeney Jr. said:  “In addition to the scourge of addiction, the drug trade brings violence and fear to our communities.  As alleged, Barry Johnson aided and abetted the death of David DeGrace for no other reason than to further that drug trade. The FBI and our partners are committed to eradicating drugs and associated criminal activity from our streets.”

Commissioner Shawn Harris said:  “I anticipate the arrest and prosecution of Barry Johnson will bring some closure to the family of David DeGrace.  This case is another example of a successful inter-agency investigation that lead to the arrest of a violent offender.  I express thanks to U.S. Attorney Geoffrey S. Berman and FBI Assistant Director William F. Sweeney Jr. for their continued support to hold those accountable who engage in violent criminal activity.  The men and women of the FBI Westchester County Safe Streets Task Force and the Mount Vernon Police Department are endlessly working together to make Mount Vernon a safer city.”

*                      *                     *

According to the allegations in the Indictment[1]:

On or about August 26, 2018, JOHNSON aided and abetted the murder of David DeGrace in Mount Vernon, New York, in furtherance of a marijuana distribution conspiracy.

JOHNSON is charged with one count of aiding and abetting the murder of DeGrace through the use of a firearm during and in relation to a narcotics trafficking offense, in violation of 18 U.S.C. §§ 924(j) and 2.  This charge carries a maximum penalty of death or life in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI Westchester County Safe Streets Task Force, which comprises agents and task force officers from the FBI, Bureau of Alcohol, Tobacco, Firearms and Explosives, United States Probation Office, New York State Police, New York City Police Department, Mount Vernon Police Department, Yonkers Police Department, Greenburgh Police Department, Peekskill Police Department, Westchester County Police Department, and Westchester County District Attorney’s Office.  Mr. Berman also thanked the Mount Vernon Police Department for its assistance in this matter.

This case is being handled by the Office’s White Plains Division and Violent and Organized Crime Unit.  Assistant United States Attorneys Christopher Brumwell and Celia V. Cohen are in charge of the prosecution.

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

Geoffrey S. Berman, United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Joseph F. Schaller, Commissioner of the New Rochelle Police Department (“NRPD”), announced today a Complaint charging JEFFREY STOVER, 46, with possessing a firearm and ammunition after having been convicted of a felony.  The defendant was arrested today and presented in White Plains federal court before United States Magistrate Judge Lisa Margaret Smith. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the defendant unlawfully possessed and discharged a firearm, endangering the lives of many in our community.  Thanks to the FBI, the New Rochelle Police Department, and the New York State Department of Corrections and Community Supervision, the defendant is in custody and facing federal criminal charges.”

FBI Assistant Director William F. Sweeney Jr. said:  “For a convicted felon, even possessing a firearm or ammunition is a felony – and as alleged, Stover not only was in possession of a gun, he discharged it on a public street, showing reckless disregard for public safety. As today’s arrest shows, the FBI and our law enforcement partners are committed to ensuring the safety of our communities.”

NRPD Commissioner Joseph F. Schaller said:  “This is yet another example of local, State, and federal law enforcement agencies working together to achieve positive results in removing alleged dangerous felons from our streets and enhancing the safety and quality of life in our community.”

*                      *                     *

According to the allegations in the Complaint[1]:

On or about December 15, 2018 and December 20, 2018, STOVER, after having been convicted of a felony, possessed ammunition and a firearm, which STOVER discharged on or about December 15, 2018 in downtown New Rochelle.  STOVER is charged with two counts of being a felon in possession of ammunition and/or a firearm in violation of 18 U.S.C. § 922(g)(1).  These charges carry a maximum penalty of 10 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI Westchester County Safe Streets Task Force, which comprises agents and task force officers from the FBI, Bureau of Alcohol, Tobacco, Firearms and Explosives, United States Probation Office, New York State Police, New York City Police Department, Mount Vernon Police Department, Yonkers Police Department, Greenburgh Police Department, Peekskill Police Department, New Rochelle Police Department, Westchester County Police Department, and Westchester County District Attorney’s Office.  Mr. Berman also thanked the New York State Department of Corrections and Community Supervision for its assistance in this matter.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Jim Ligtenberg 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 phase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that FRANKIE BEQIRAJ was sentenced to 25 years in prison for leading a conspiracy to distribute heroin, cocaine, oxycodone, and alprazolam in the Bronx and Westchester.  BEQIRAJ personally distributed heroin that resulted in the death of Robert Vivolo, a 25-year-old man from City Island, New York.  BEQIRAJ was convicted after trial on June 11, 2018, before United States District Judge Richard M. Berman, who also imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Frankie Beqiraj ran a crew of employees that distributed heroin throughout the City Island community, often hiring addicts and paying them in cash and drugs.  His callousness and greed ultimately led to the overdose death of 25-year-old Robert Vivolo.  Now, Beqiraj has been sentenced for his crimes and will spend significant time in prison.”

According to court documents and the evidence at trial:

From July 2016 to January 2017, BEQIRAJ was the principal drug supplier of the small Bronx community of City Island.  BEQIRAJ employed workers, who were themselves heroin addicts and were supplied drugs by BEQIRAJ, to deliver narcotics to his customers using prepaid phones supplied by BEQIRAJ.  These workers were paid their salaries in money and heroin.  Through his organization, BEQIRAJ distributed large quantities of heroin, cocaine, oxycodone, and alprazolam.

On October 21, 2016, BEQIRAJ sold heroin to Robert Vivolo, a recovering heroin addict, on City Island, New York.  BEQIRAJ’s heroin caused Vivolo to die from an overdose that night.

The Court also found that, on or about January 9, 2017, one of Beqiraj’s workers distributed heroin to three additional individuals, all of whom overdosed.  One of those individuals died as a result of the overdose; the two others survived, having been revived with naloxone.

*              *             *

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

U.S. Attorney Berman praised the outstanding work of the New York City Police Department’s Bronx Narcotics Heroin Overdose Team, the New Rochelle Police Department, and the Special Agents of the U.S. Attorney’s Office for the Southern District of New York.

This matter is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys David W. Denton Jr. and Elizabeth A. Hanft are in charge of the prosecution.   

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today the filing of a complaint charging DARRELL JONES with possessing a firearm subsequent to having been convicted of a felony.  JONES was taken into federal custody today, presented before United States Magistrate Judge Lisa M. Smith, and ordered detained. 

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

Officers with the U.S. Drug Enforcement Administration (“DEA”) and Mount Vernon Police Department (“MVPD”), executed a search warrant of an apartment believed to be JONES’s on November 26, 2018, where they found, among other things, mail addressed to JONES, a 9 millimeter CANIK TP9SF handgun with the slide separated from the receiver, and approximately 300 grams of a white substance believed to be heroin.  An agent with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) has confirmed that the CANIK handgun was manufactured outside New York.  JONES has nine prior state felony convictions, including seven felony convictions for possession, attempted possession, or sale of controlled substances. 

*                *                *

Based on the charges in the current complaint, JONES faces a maximum of 10 years in prison, with the possibility of a mandatory minimum of 15 years in prison.

The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendant would be determined by the judge.

Mr. Berman praised the outstanding investigative work of the DEA Westchester Residential Office, the Mount Vernon Police Department, and the ATF.

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

The charge 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that RAZHDEN SHULAYA, a vor v zakone or “thief-in-law,” was sentenced today to 45 years in prison by United States District Judge Loretta A. Preska.  The sentence followed the June 2018 trial conviction of SHULAYA and Avtandil Khurtsidze, a boxing world champion and Shulaya’s violent enforcer, on racketeering and related charges in connection with a sprawling and violent criminal enterprise operating in New York, New Jersey, Pennsylvania, Nevada, and abroad.  Khurtsidze was sentenced on September 7, 2018, to 10 years in prison by U.S. District Judge Katherine B. Forrest.           

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Razhden Shulaya led a vast and violent criminal enterprise engaged in an array of criminal schemes that included extortion, theft, trafficking in stolen goods, and fraud.  Shulaya, a ‘thief-in-law,’ is a convicted thief under U.S. law, and has deservedly been sentenced to a lengthy prison term.”

As established by the evidence at trial:

The Shulaya Enterprise was an organized criminal group operating under the direction and protection of RAZHDEN SHULAYA a/k/a “Brother,” a/k/a “Roma,” a “vor v zakone” or “vor,” which are Russian phrases translated roughly as “Thief-in-Law” or “Thief,” and which refer to an order of elite criminals from the former Soviet Union who receive tribute from other criminals, offer protection, and use their recognized status as vor to adjudicate disputes among lower-level criminals.  As a vor, SHULAYA had substantial influence in the criminal underworld and offered assistance to and protection of the members and associates of the Shulaya Enterprise.  Those members and associates, and SHULAYA himself, engaged in widespread criminal activities, including acts of violence, extortion, the operation of illegal gambling businesses, fraud on various casinos, identity theft, credit card frauds, trafficking in large quantities of stolen goods, money laundering through a fraudulently established vodka import-export company, payment of bribes to local law enforcement officers, and the operation of a Brooklyn-based brothel.

The Shulaya Enterprise operated through groups of individuals, often with overlapping members and/or associates, dedicated to particular criminal tasks.  While many of these crews were based in New York City, the Shulaya Enterprise had operations in various locations throughout the United States (including in New Jersey, Pennsylvania, Florida, and Nevada) and abroad.  Most members and associates of the Shulaya Enterprise were born in the former Soviet Union and many maintained substantial ties to Georgia, Ukraine, and the Russian Federation, including regular travel to those countries, communication with associates in those countries, and the transfer of criminal proceeds to individuals in those countries.

SHULAYA oversaw and personally committed multiple acts of brutal violence in his role as a vor.  Evidence at trial included testimony regarding SHULAYA’s pistol-whipping of his own family member; testimony regarding SHULAYA’s public beating of a supposedly disrespectful underling; and photographs of the badly disfigured face of SHULAYA’s former lieutenant, co-defendant Mamuka Chaganava.  SHULAYA, protected by Khurtsidze, acted with impunity in the brutal assault of Chagaanva, a man whom he previously had held in high regard, and SHULAYA took pride in the brutality of that assault:  SHULAYA photographed Chaganava’s battered face in order to share his “handiwork” with another vor. In later explaining that he was unafraid of any retribution or reports to law enforcement by Chaganava, SHULAYA explained the perceived power of his position:  “For him, I am a god.”

   SHULAYA accomplished additional acts of violence and extortion through Khurtsidze, formerly a middleweight boxing champion, who acted as SHULAYA’s chief enforcer.  Khurtsidze was captured on video twice assaulting others in service of the Shulaya Enterprise, participated in recorded acts of extortion of gambling debts, and planned additional acts of violence with SHULAYA targeting associates of the Shulaya Enterprise whom Khurtsidze and SHULAYA perceived as having disrespected SHULAYA’s status as a vor.

SHULAYA also orchestrated a scheme to defraud casinos by targeting particular models of electronic slot machines using a complicated algorithm designed to predict the behavior of those machines.  SHULAYA obtained the technology used to commit that fraud through violence, including through the 2014 kidnapping of a software engineer in Las Vegas.  SHULAYA refined that technology by training lower-level members of the Shulaya Enterprise to execute this casino scam using smartphones and software developed by the Enterprise.

Following a two-week trial before Judge Forrest, SHULAYA was found guilty of one count of racketeering conspiracy, one count of conspiring to traffic in stolen goods such as luxury watches, one count of conspiracy to traffic in contraband tobacco, one count of identification document fraud, and one count of wire fraud conspiracy.  

*                *                *

In addition to the prison term, SHULAYA, 41, of Saint Petersburg, Russia, was sentenced to three years of supervised release, and ordered to pay $2,169,270 in forfeiture and restitution in the amount of $550,000.

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation and its Eurasian Organized Crime Squad, as well as U.S. Customs and Border Protection and the New York City Police Department for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Andrew C. Adams and Andrew Thomas are in charge of the case.

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”), and Raymond P. Donovan, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), announced today that KAREEM DAVIS, an alleged member of the “Killbrook” gang based in the Mill Brook Houses in the Bronx, was arrested and charged in connection with the April 18, 2011, murder of Bolivia Beck, the girlfriend of a rival gang member.  Beck was shot and killed as she was being introduced to her boyfriend’s grandparents on a sidewalk in the Mill Brook Houses.  DAVIS will be arraigned in Manhattan federal court later today before United States Magistrate Judge Debra Freeman. 

Fifteen individuals were previously charged in an initial Indictment unsealed on October 11, 2017.  That Indictment charged four individuals, including Gary Davis, the brother of KAREEM DAVIS, with racketeering conspiracy, in connection with their membership in the Killbrook gang, and charged other individuals with narcotics conspiracy and firearms offenses.  On January 8, 2018, Gary Davis was charged with the 2011 murder of Beck.  The Superseding Indictment adds KAREEM DAVIS as the second defendant charged with that murder.  The case is assigned to U.S. District Judge Lorna G. Schofield. 

U.S. Attorney Geoffrey S. Berman said:  “Bolivia Beck was murdered in 2011, in the most horrible and tragic of circumstances.  Over seven years have passed, but our remarkable partners at the NYPD and DEA have remained committed to holding her killers accountable.  As a result, Kareem Davis now stands charged with this terrible crime.”

DEA Special Agent in Charge Raymond P. Donovan said: “This investigation into the Killbrook Gang uncovered a racketeering conspiracy involving drug trafficking, firearms offenses and murder. Allegedly, Bolivia Beck was put in the crosshairs of gang rivalry and gang violence by Kareem and Gary Davis, both of whom are charged with murder.  There is no place for criminal gang activity in our communities and law enforcement is working to remove threats of violence by putting those responsible in jail.”  

*                      *                     *

According to the allegations in the Superseding Indictment[1] and information in the public record:

On April 18, 2011, Bolivia Beck was struck in the head by a bullet as she was being introduced to her boyfriend’s grandparents on a sidewalk in the Mill Brook Houses.  The shooting occurred in broad daylight.  Beck died two days later from the gunshot wound.  The shooting arose out of an ongoing gang dispute between Killbrook and the rival “MBG” street gang. 

KAREEM DAVIS, 29, of the Bronx, New York, is charged in the Superseding Indictment with one count of racketeering conspiracy, one count of murder in aid of racketeering and aiding and abetting the same, and one count of murder through the use of a firearm and aiding and abetting the same.  DAVIS faces a maximum penalty of death or life in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

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

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jordan Estes and Alexandra Rothman are in charge of the prosecution.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced criminal charges against Central States Capital Markets, LLC (“CSCM”), consisting of one felony violation of the Bank Secrecy Act (“BSA”), based on CSCM’s willful failure to file a suspicious activity report (“SAR”) regarding the illegal activities of its customer Scott Tucker.  Today’s charge represents the first criminal BSA charge ever brought against a United States broker-dealer.  The case is assigned to United States District Judge Paul J. Oetken.  

Mr. Berman also announced an agreement (the “Agreement”) under which CSCM agreed to accept responsibility for its conduct by stipulating to the accuracy of an extensive Statement of Facts, pay a $400,000 penalty, and continue to enhance its BSA/Anti-Money Laundering (“AML”) compliance program.  Assuming CSCM’s continued compliance with the Agreement, the Government has agreed to defer prosecution for a period of two years, after which time the Government will seek to dismiss the charges.  The penalty shall be collected through CSCM’s forfeiture to the United States of $400,000 in a civil forfeiture action also filed today.

U.S. Attorney Geoffrey S. Berman stated:  “CSCM’s anti-money laundering program was operated with serious gaps in oversight, responsiveness, and diligence.  As a result, CSCM failed to investigate and report suspicious transactions relating to a historically significant pay-day lending fraud.  With today’s resolution, CSCM has accepted responsibility for its criminal conduct and committed to completing the reform of its anti-money laundering program.  Today’s charge makes clear that all actors governed by the Bank Secrecy Act – not only banks – must uphold their obligations to protect our economy from exploitation by fraudsters and thieves.”

According to the documents filed today in Manhattan federal court:

The Tucker Payday Lending Scheme

On October 13, 2017, Scott Tucker and his attorney, Timothy Muir, were convicted after trial in the United States District Court for the Southern District of New York of racketeering, wire fraud and money laundering for their roles in perpetrating a massive payday lending scheme.  As the jury found, from in or about the late 1990s through in or about 2013, through various companies that he owned and controlled (the “Tucker Payday Lenders”), Tucker extended short-term, high-interest, unsecured loans, commonly referred to as “payday loans,” to individuals around the country at interest rates as high as 700% or more and in violation of the usury laws of numerous states, including New York.  Tucker sought to inoculate himself against applicable usury laws by entering into a series of sham relationships with certain Native American tribes (the “Tribes”) in order to conceal his ownership and control of the Tucker Payday Lenders and gain the protection of tribal sovereign immunity – a legal doctrine that generally prevents states from enforcing their laws against Native American tribes.  To effectuate his scheme, Tucker assigned nominal ownership of his payday lending companies to certain corporations created under the laws of the tribes (the “Tribal Companies”).

CSCM’s Willful Failure to File a SAR in Violation of the BSA

CSCM failed to follow its written customer identification procedures and did not act upon red flags prior to opening investment accounts for the Tribal Companies, which were in fact controlled by Tucker.  CSCM discussed opening these accounts exclusively with Scott Tucker and his brother Blaine (the “Tuckers”).  Although CSCM received account opening documents signed by tribal officials granting only Blaine Tucker authorization over the accounts, CSCM routinely dealt with and took direction from Scott Tucker concerning the management of funds in the Tribal Companies’ accounts based solely on Scott Tucker’s oral assertions that he was a “consultant” to the Tribes.  At no point did CSCM obtain written verification of Tucker’s authority over the accounts.

CSCM also disregarded red flags that were known prior to opening the accounts.  In March 2012, Tucker explained to the CEO that he was involved in the payday lending business and that he had approached certain Native American tribes to operate the payday lending business in order to take advantage of the tribes’ sovereign immunity.  Tucker further explained that the payday lending business had generated large cash reserves and that he was approaching CSCM because the business’s existing bank, a small bank based in Florida (the “Florida Bank”), had asked Tucker to move excess accumulations of cash because of certain regulatory requirements it was unable to meet.  Neither the CEO, nor anyone at CSCM, attempted to verify this explanation.

Shortly thereafter, CSCM also became aware of additional red flags concerning the Tuckers and the Tribal Companies.  Specifically, CSCM learned that Tucker had been convicted of fraud in 1991 and, separately, found news reports from as early as 2011 alleging that the Tuckers were engaging in a “rent-a-tribe” scheme in which the Tribal Companies were used by the Tuckers to claim ownership and control over the payday lending businesses in order to exploit the Tribal Companies’ ability to assert sovereign immunity as a defense to charges that the payday lending business violated state usury laws.  CSCM also became aware of an action brought by the Federal Trade Commission (“FTC”) against the Tuckers and the Tribal Companies, among others, for engaging in unfair business practices, which included allegations that the Tribal Companies were not protected by sovereign immunity.  CSCM, including its CEO, did not act upon these red flags because Tucker assured CSCM that the FTC action would soon be resolved and all challenges brought by state regulators had been unsuccessful due to sovereign immunity.

In addition to ignoring these various warning signals, CSCM failed to monitor any transactions using Actimize, the AML tool provided to CSCM for that purpose.  Between December 2011 and December 2015, Actimize generated 103 alerts, but CSCM never checked any of the alerts, made any attempt to customize Actimize’s default parameters, or undertook a review to ensure that this tool was sufficient for its specific monitoring needs or was being appropriately utilized.  Further, although the Clearing Firm furnished CSCM with the ability to generate a report reflecting, among other things, the identities of third parties transferring funds via wire transactions to CSCM account holders, CSCM never generated such reports.

Numerous suspicious transactions went undetected and unreported by CSCM.  For example, between December 21, 2012, and March 13, 2013, 18 wire transfers totaling $40,518,000 were sent from accounts at the Florida Bank in the names of Tribal Companies to Tucker’s personal CSCM account.  The transfers were in even dollar amounts, and on several occasions two different Tribal Companies, associated with different tribes, transferred the same dollar amounts, on the same day, to Tucker’s personal CSCM account.  CSCM never asked Tucker or the Tribal Companies about any of these transactions.

Despite producing documents in connection with this Office’s criminal investigation and its awareness of the indictment against Tucker, CSCM did not file a SAR until long after Tucker was convicted at trial. 

*         *        *

The Government intends to recommend that the amounts forfeited by CSCM be distributed to victims of Tucker’s scheme, consistent with the applicable Department of Justice regulations, through the ongoing remission process.

Mr. Berman praised the outstanding investigative work of the Special Agents at the United States Attorney’s Office and thanked the Securities and Exchange Commission for its assistance with the investigation.

The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorney Andrew C. Adams is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that WOOJAE JUNG, a/k/a “Steve Jung,” pled guilty today to one of count of securities fraud relating to his scheme to buy stock based on material nonpublic information. JUNG’s plea was taken by U.S. Magistrate Judge Debra Freeman and will be transmitted to U.S. District Judge Lewis A. Kaplan for consideration.  

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Woojae Jung pled guilty today to using favorable material nonpublic information taken from his investment bank employer in order to generate illicit profits, netting nearly $130,000 in illegal gains.  Our Office will continue to fight insider trading and ensure that those who cheat in our financial markets are held to account.”

According to the Information, the allegations in the Complaint, and statements made during the proceedings in Manhattan federal court:

JUNG worked at an investment bank (the “Investment Bank”) that provided, among other services, financing and consulting to clients in connection with mergers, acquisitions, and corporate restructurings.  The Investment Bank has offices around the world, including in New York, New York, and San Francisco, California.  JUNG was a vice president.  In his role as a vice president at the Investment Bank, JUNG had access to, among other materials, electronic files maintained on the Investment Fund’s computer server, including files containing material nonpublic information (“MNPI”) relating to various clients.

JUNG used his position at the Investment Bank to obtain MNPI about a number of the Investment Bank’s clients and then, in multiple instances, JUNG used that MNPI to cause profitable securities trades.  In an effort to conceal this illicit trading, JUNG caused these illegal trades to be conducted through a brokerage account held in the name of another person.  In contravention of his employer’s rules about outside investment accounts, JUNG accessed, used, and traded in that account repeatedly between in or about 2015 and in or about 2017, including on hundreds of occasions when the account was accessed through IP addresses subscribed in JUNG’s name.

Over the course of the scheme JUNG traded in securities of at least 10 companies based on MNPI and made more than approximately $130,000.

*                *                *

JUNG, 37, of San Francisco, California, pled guilty to one count of securities fraud, which carries a maximum penalty of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding work of the FBI.  He also thanked the Securities and Exchange Commission, which previously filed civil charges against JUNG in a separate action.

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

Abdulrahman El Bahnasawy, 20, of Missausagua, Canada, was sentenced to 40 years in prison, and a lifetime of supervised release, for plotting to carry out terrorist attacks in New York City during the summer of 2016 in support of the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization.  El Bahnasawy pleaded guilty on Oct. 13, 2016, to a seven-count Superseding Information charging El Bahnasawy with terrorism offenses. 

Assistant Attorney General for National Security John C. Demers, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York field office, Assistant Director in Charge Paul D. Delacourt of the FBI’s Los Angeles field office, and Commissioner James P. O’Neill of the NYPD made the announcement.  The sentence was issued by U.S. District Judge Richard M. Berman.

“El Bahnasawy conspired with others to conduct terrorist attacks in New York City in support of ISIS, and came into this country to carry them out. Today’s sentence reflects the severity of his conduct and holds him accountable for his terrorist activities,” said Assistant Attorney General Demers.  “I want to commend the prosecutors, agents, and analysts who are responsible for this successful result.  The National Security Division is committed to identifying and holding accountable those who seek to harm to our country and our citizens.”

“In the name of ISIS, Abdulrahman El Bahnasawy planned an elaborate attack to wreak havoc and destruction on New York City,” said U.S. Attorney Berman.  “He planned to detonate bombs in Times Square and the New York City subway system, and to shoot civilians at concert venues.  Demonstrating his commitment to carry out the attacks, El Bahnasawy pinpointed bomb locations on a map of the subway system, and acquired an array of bomb-making materials.  El Bahnasawy aspired, in his words, to ‘create the next 9/11.’  Thanks to our law enforcement partners in New York, nationally, and internationally, this potentially devastating plot was thwarted.”

Using encrypted electronic messaging applications, El Bahnasawy, a 20-year-old Canadian citizen and resident, plotted with Talha Haroon, a 20-year-old U.S. citizen residing in Pakistan, and Russell Salic, a 38-year-old Philippines citizen and resident, to conduct bombings and shootings in heavily populated areas of New York City during the Islamic holy month of Ramadhan in 2016, all in the name of ISIS (the NYC Attacks).  El Bahnasawy acquired bomb-making materials and helped secure a cabin within driving distance of New York City to use for building explosive devices and staging the NYC Attacks.  Haroon allegedly made plans to travel from Pakistan to New York City to join El Bahnasawy in carrying out the attacks.  And as El Bahnasawy and Haroon prepared to execute the NYC Attacks, Salic allegedly wired money from the Philippines to the United States to help fund the terrorist operation.

An undercover FBI agent (the UC) infiltrated the co-conspirators’ terrorist plot, posing as an ISIS supporter prepared to join in the attacks.  The FBI arrested El Bahnasawy in May 2016 after he traveled from Canada to the New York City area in preparation for the attacks, and he has been in custody since that time.  Haroon was arrested in Pakistan in September 2016, and Salic was arrested in the Philippines in April 2017, based on Complaints filed against them in Manhattan federal court, and they remain in foreign custody pending proceedings for their extradition to the United States.

The charges contained in the Complaints filed against Haroon and Salic are merely accusations, and Haroon and Salic are presumed innocent unless and until proven guilty.

Mr. Demers and Mr. Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD, and the FBI’s Los Angeles and Denver Field Offices.  Mr. Demers and Mr. Berman also thanked the Royal Canadian Mounted Police, the FBI’s Cleveland Field Office, the FBI’s Legal Attaché Offices in Canada, Pakistan, and the Philippines, the New York State Police, the Department of Justice’s Office of International Affairs, and the U.S. Attorney’s Office for the Central District of California for their assistance.

Assistant U.S. Attorneys Negar Tekeei and George D. Turner of the Southern District of New York are in charge of the prosecution, with assistance from Trial Attorneys Joshua Champagne and Larry Schneider of the National Security Division’s Counterterrorism Section.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, the Assistant Attorney General for National Security, announced today that ABDULRAHMAN EL BAHNASAWY was sentenced to 40 years in prison for plotting to carry out terrorist attacks in New York City during the summer of 2016 in support of the Islamic State of Iraq and al-Sham (“ISIS”), a designated foreign terrorist organization.  EL BAHNASAWY pled guilty on October 13, 2016, before U.S. District Judge Richard M. Berman to a seven-count Superseding Information charging EL BAHNASAWY with terrorism offenses.  Judge Berman also imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “In the name of ISIS, Abdulrahman El Bahnasawy planned an elaborate attack to wreak havoc and destruction on New York City.  He planned to detonate bombs in Times Square and the New York City subway system, and to shoot civilians at concert venues.  Demonstrating his commitment to carry out the attacks, El Bahnasawy pinpointed bomb locations on a map of the subway system, and acquired an array of bomb-making materials.  El Bahnasawy aspired, in his words, to ‘create the next 9/11.’  Thanks to our law enforcement partners in New York, nationally, and internationally, this potentially devastating plot was thwarted.”

Assistant Attorney General John C. Demers said:  “El Bahnasawy conspired with others to conduct terrorist attacks in New York City in support of ISIS, and came into this country to carry them out.  Today’s sentence reflects the severity of his conduct and holds him accountable for his terrorist activities.  I want to commend the prosecutors, agents, and analysts who are responsible for this successful result.  The National Security Division is committed to identifying and holding accountable those who seek to harm to our country and our citizens.”

According to the Indictment, Superseding Information, and other court filings:

Using encrypted electronic messaging applications, EL BAHNASAWY, a 20-year-old Canadian citizen and resident, plotted with Talha Haroon, a 20-year-old U.S. citizen residing in Pakistan, and Russell Salic, a 38-year-old Philippines citizen and resident, to conduct bombings and shootings in heavily populated areas of New York City during the Islamic holy month of Ramadhan in 2016, all in the name of ISIS (the “NYC Attacks”).  EL BAHNASAWY acquired bomb-making materials and helped secure a cabin within driving distance of New York City to use for building explosive devices and staging the NYC Attacks.  Haroon allegedly made plans to travel from Pakistan to New York City to join EL BAHNASAWY in carrying out the attacks.  And as EL BAHNASAWY and Haroon prepared to execute the NYC Attacks, Salic allegedly wired money from the Philippines to the United States to help fund the terrorist operation.

An undercover FBI agent infiltrated the co-conspirators’ terrorist plot, posing as an ISIS supporter prepared to join in the attacks.  The FBI arrested EL BAHNASAWY in May 2016 after he traveled from Canada to the New York City area in preparation for the attacks, and he has been in custody since that time.  Haroon was arrested in Pakistan in September 2016, and Salic was arrested in the Philippines in April 2017, based on Complaints filed against them in Manhattan federal court, and they remain in foreign custody pending proceedings for their extradition to the United States.

*                      *                      *

In addition to the prison term, EL BAHNASAWY, 20, of Mississauga, Canada, was sentenced to lifetime supervised release.

Mr. Berman and Mr. Demers praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD, and the FBI’s Los Angeles and Denver Field Offices.  Mr. Berman and Mr. Demers also thanked the Royal Canadian Mounted Police, the FBI’s Cleveland Field Office, the FBI’s Legal Attaché Offices in Canada, Pakistan, and the Philippines, the New York State Police, the Department of Justice’s Office of International Affairs, and the U.S. Attorney’s Office for the Central District of California for their assistance.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Negar Tekeei and George D. Turner are in charge of the prosecution, with assistance from Trial Attorneys Joshua Champagne and Larry Schneider of the Department of Justice’s National Security Division.

The charges contained in the Complaints filed against Haroon and Salic are merely accusations, and Haroon and Salic are presumed innocent unless and until proven guilty.        

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DOUGLAS E. CASTLE, the owner of Global Edge Technologies Group LLC, a financial consulting firm located in Somers, New York (“Global Edge”), was sentenced yesterday to 50 months in prison for defrauding certain investors (the “Victims”) out of over $800,000 dollars.  CASTLE pled guilty to one count of wire fraud on July 26, 2018.  The sentence was imposed by United States District Judge Kenneth M. Karas.

U.S. Attorney Geoffrey S. Berman said:  “Douglas E. Castle took money from investors under false pretenses, lied to the FBI, and then lied to victims by telling them he was working with the FBI.  Now he has been sentenced to more than four years in prison for his litany of lies.”

According to the Complaint, Information, and other documents filed in the case, as well as statements made during court proceedings:

On June 25, 2003, CASTLE was sentenced in federal court to 34 months in prison and three years of supervised release for his conviction on an investment fraud scheme that caused investor losses of over $1.2 million.  Approximately five years after completing supervised release on that offense, CASTLE perpetrated the investment fraud scheme for which he was sentenced yesterday.

From about 2014 through 2017, CASTLE defrauded at least three victims of over $800,000, including by encouraging an aging window (“Victim-1”) prematurely to withdraw funds from her tax-advantaged retirement savings account to invest with CASTLE.  CASTLE misrepresented that he would invest Victim-1’s funds with a United Kingdom-based investment firm (“Firm-1”) that purportedly guaranteed the safety of the invested principal.  CASTLE represented that he previously invested his own money with Firm-1, but that because Firm-1 had high minimum investment thresholds, Victim-1 could invest her funds only by adding her money on top of CASTLE’s investment.  For that reason, CASTLE said the investment would be structured as a loan between CASTLE’s own financial consulting firm, Global Edge, and Victim-1.  In truth, as CASTLE knew, Firm-1 did not exist, and CASTLE spent Victim-1’s money instead on his own personal expenses, cash withdrawals, and eventually, in overseas transfers to individuals in Ghana and elsewhere who perpetrated an advance fee scam on CASTLE himself.  CASTLE also defrauded at least two other victims into investing funds with him under false pretenses. 

On June 8, 2016, CASTLE participated in a voluntary interview with the FBI in which he lied about the source of a particular transfer of Victim-1’s money he made to a Ghana bank account.  After this meeting with the FBI, CASTLE continued to lie to victims to raise more money.  After CASTLE came to realize that he would not receive a multimillion-dollar windfall in exchange for transferring his and his victims’ money, CASTLE attempted to preclude his victims from reporting the fraud to law enforcement by falsely claiming that he was already working with the FBI and multiple other law enforcement agencies on their behalf to recover their funds. 

*                *                *

In addition to his prison term, CASTLE, 64, of Somers, New York, was sentenced to three years of supervised release, a forfeiture money judgment in the amount of $825,000, and restitution in the amount of $849,800.

Mr. Berman praised the outstanding investigative work of the Federal Bureau Investigation and thanked the Department of Homeland Security, Homeland Security Investigations for their assistance.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James D. Robnett, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of a criminal complaint charging TODD KOZEL with wire fraud conspiracy, wire fraud, and money laundering conspiracy in connection with a scheme to defraud his ex-wife by hiding tens of millions of dollars’ worth of assets in a foreign trust and using a portion of those assets secretly to purchase a $12.75 million condominium in Manhattan.  KOZEL was arrested this afternoon at John F. Kennedy airport and will be presented before U.S. Magistrate Judge Debra Freeman in Manhattan federal court later today.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Todd Kozel defrauded his ex-wife by hiding millions of dollars in assets in an offshore trust, and purchasing expensive Manhattan real estate and masking his ownership.  Kozel is now in custody facing these serious charges.”

IRS-CI Special Agent-in-Charge James D. Robnett said:  “Those who create elaborate schemes that have no purpose other than to mislead run a very high risk of prosecution.  IRS-CI, and our partners at the Large Business and International Division, have made it a priority to investigate abusive trusts that are setup offshore to hide the true beneficial owner of income and assets.”       

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

Between 2010 and 2014, KOZEL, a United States citizen, earned an average of approximately $10 million in income per year as the chief executive officer of a foreign oil company.  KOZEL did not, however, file U.S. tax returns for tax years 2011 through 2014.  In August 2010, KOZEL and his ex-wife filed for divorce in Florida state court.  From February 2012 through the present, KOZEL engaged in a fraudulent scheme with others to hide assets from his ex-wife during their divorce proceedings and in violation of orders entered by the Florida court, which required KOZEL fully to disclose and not dissipate his assets and to make certain payments to his ex-wife. 

In furtherance of the scheme to defraud his ex-wife, KOZEL, among other things, transferred valuable assets, including approximately 29 million shares of his foreign oil company, into a foreign trust organized under the laws of the Isle of Jersey, and repeatedly lied under oath about his control and ownership of the foreign trust.  KOZEL also used approximately $12.75 million of his assets from the foreign trust to purchase a condominium in Manhattan.  Further, KOZEL fraudulently concealed his ownership interest in the Manhattan condominium by creating a New York limited liability company that was secretly controlled by the foreign trust to pose as the paper “owner” of the condominium; entering into a sham lease transaction to make it appear as though KOZEL were leasing the condominium and did not own it; and entering into a backdated sham sale transaction to prevent his ex-wife from seizing the condominium after the Florida state court ordered KOZEL to pay his ex-wife an additional $34 million in September 2015.  As a result of this fraudulent scheme, KOZEL caused his ex-wife to suffer tens of millions of dollars in financial harm.

                         *                *                *

KOZEL, 51, of New York, New York, is charged with wire fraud conspiracy, wire fraud, and money laundering conspiracy, each of which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.   

Mr. Berman praised the IRS-CI for their outstanding investigative work on this case, and thanked the Large Business and International Division of the IRS for its assistance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Jennifer L. Beidel and Sarah E. Paul 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.

Ahmed Mohammed El Gammal, 46, a resident of Arizona, was sentenced today to 12 years in prison for providing and conspiring to provide material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization, aiding and abetting the receipt of military-type training from ISIS, and conspiring to receive such training. A jury convicted El Gammal of these charges on Jan. 30, 2017, following a three-week trial.

Assistant Attorney General for National Security John C. Demers and U.S Attorney Geoffrey S. Berman for the Southern District of New York made the announcement.  U.S. District Judge Edgardo Ramos presided over the trial and issued the sentence.

According to documents publicly filed in this case and evidence presented at trial:

Beginning in at least April 2014, El Gammal was an outspoken online supporter of ISIS and ISIS’s Caliphate, or Islamic government, in Syria. Among other things, El Gammal announced on social media that he was “with” “[t]he State of Iraq and the Levant,” referring to ISIS; celebrated ISIS’s achievements in battle and announcement of the establishment of a Caliphate; proclaimed that he “support[s] jihad everywhere”; and declared that “[b]eheadings have a magical effect.” El Gammal additionally announced that “[i]f Daesh [i.e., ISIS] gets to Egypt, I will go join them, so I can torture the Egyptians, and whip them.”

As of at least August 2014, a 24-year-old New York City resident named Samy El-Goarany began to express his support for ISIS on social media as well. On August 14, 2014, El-Goarany learned that El Gammal had made comments supportive of ISIS. Minutes later, El-Goarany contacted El Gammal and they communicated via an encrypted communications platform. Less than an hour after this online conversation, El Gammal sent El-Goarany a documentary on life in the Islamic State that outlined the type of training ISIS provides. Over the next several months, El Gammal and El-Goarany continued corresponding over the Internet, although El Gammal and El-Goarany ultimately deleted many of these exchanges.

In the midst of these communications, in October 2014, El Gammal traveled to New York City, where El-Goarany was enrolled in college, and met with El-Goarany. During this October 2014 trip, El Gammal provided El-Goarany with the phone number for El Gammal’s contact in Turkey, Ateia Aboualala, who would be responsible for helping El-Goarany travel from Turkey across the border to ISIS in Syria. While in New York City, El Gammal also contacted Aboualala in Turkey regarding El-Goarany’s plans to travel. El Gammal later provided El-Goarany with social media contact information for Aboualala. Thereafter, in a coded conversation, El Gammal assured Aboualala that he had vetted El-Goarany and El-Goarany could be trusted.

In late January 2015, El-Goarany left New York City for Istanbul, Turkey. Upon arriving in Turkey, El-Goarany immediately reached out to Aboualala. While El-Goarany was in Turkey, El Gammal continued to communicate with El-Goarany over the Internet, providing advice on traveling toward Syria and on meeting with Aboualala. After arriving in Syria, El-Goarany received religious training and advanced military-type training from ISIS throughout 2015. On May 7, 2015, in the midst of his training with ISIS, El-Goarany reported to El Gammal that “everything [was] going according to plan.” A few months later, on July 16, 2015, El-Goarany wrote to El Gammal: “Life has changed a lot for me at this new job but I love it and I don’t regret taking up the offer,” and “May God reward you with goodness,” to which El Gammal responded, “Great.”

In May 2015, El-Goarany’s father traveled to Turkey and met with Aboualala, in an attempt to locate his son. Upon learning of this, El Gammal instructed Aboualala, “Don’t ever ever mention me. Not even my name[,]” and urged Aboualala not to meet with El-Goarany’s father. On May 5, 2015, Aboualala reported back to El Gammal, assuring El Gammal that, when Aboualala met up with El-Goarany’s father, “I covered up for you.”

In coded messages in mid-2015, El Gammal reached out to El-Goarany to inquire about the possibility of El Gammal’s traveling to ISIS in Syria. On July 13, 2015, El-Goarany, again in a coded message, responded that he needed to ask his “supervisors at work first,” but commented that “it’s risky because the parking lot these days is going under a lot of renovation, especially in the north side,” alluding to military operations occurring in northern Syria at the time.

On November 23, 2015, El-Goarany’s brother received a message from a member of ISIS with an attached letter from El-Goarany. The letter read: “if you’re reading this then know that I’ve been killed in battle and am now with our Lord, inshaAllah. Remember what I told you . . . we will win this war one day, this war between Iman (Belief) and Kufr (Disbelief) between Good and Evil. . . .”

* * *

In addition to the prison term, El Gammal was sentenced to 3 years’ supervised release.

Mr. Demers and Mr. Berman praised the outstanding investigative work of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the NYPD. Mr. Demers and Mr. Berman also thanked the U.S. Attorney’s Office for the District of Arizona and the Phoenix Field Office of the FBI for their assistance.

Assistant U.S. Attorneys Negar Tekeei, Brendan F. Quigley, and Andrew J. DeFilippis of the Southern District of New York are in charge of the prosecution, with assistance from Trial Attorney Ranganath Manthripragada of the National Security Division’s Counterterrorism Section. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, Assistant Attorney General for National Security, announced that AHMED MOHAMMED EL GAMMAL, a resident of Arizona, was sentenced today by U.S. District Judge Edgardo Ramos to 12 years in prison for providing and conspiring to provide material support to the Islamic State of Iraq and Syria (“ISIS”), aiding and abetting the receipt of military-type training from ISIS, and conspiring to receive such training.  A jury convicted EL GAMMAL of these charges on January 30, 2017, following a three-week trial before Judge Ramos.

U.S. Attorney Geoffrey S. Berman said:  “Ahmed Mohammed El Gammal, a fervent ISIS supporter, was convicted of assisting a fellow supporter and aspiring ISIS fighter to receive military-type training.  Through the use of coded messaging, the two conspired to navigate foreign travel, and avoid law enforcement roadblocks to get the would-be fighter to his ultimate goal – a Syrian battlefield.  El Gammal – who extoled the virtues of violence, and chillingly even beheadings, in the name of ISIS – has now witnessed first-hand how a fair justice system works, and has been sentenced to a lengthy term in federal prison.”

According to documents publicly filed in this case and evidence presented at trial:

Beginning in at least April 2014, EL GAMMAL was an outspoken online supporter of ISIS and ISIS’s Caliphate, or Islamic government, in Syria.  Among other things, EL GAMMAL announced on social media that he was “with” “[t]he State of Iraq and the Levant,” referring to ISIS; celebrated ISIS’s achievements in battle and announcement of the establishment of a Caliphate; proclaimed that he “support[s] jihad everywhere”; and declared that “[b]eheadings have a magical effect.”  EL GAMMAL additionally announced that “[i]f Daesh [i.e., ISIS] gets to Egypt, I will go join them, so I can torture the Egyptians, and whip them.”

As of at least August 2014, a 24-year-old New York City resident named Samy El-Goarany began to express his support for ISIS on social media as well.  On August 14, 2014, El-Goarany learned that EL GAMMAL had made comments supportive of ISIS.  Minutes later, El-Goarany contacted EL GAMMAL and they communicated via an encrypted communications platform.  Less than an hour after this online conversation, EL GAMMAL sent El-Goarany a documentary on life in the Islamic State that outlined the type of training ISIS provides.  Over the next several months, EL GAMMAL and El-Goarany continued corresponding over the Internet, although EL GAMMAL and El-Goarany ultimately deleted many of these exchanges.

In the midst of these communications, in October 2014, EL GAMMAL traveled to New York City, where El-Goarany was enrolled in college, and met with El-Goarany.  During this October 2014 trip, EL GAMMAL provided El-Goarany with the phone number for EL GAMMAL’s contact in Turkey, Ateia Aboualala, who would be responsible for helping El-Goarany travel from Turkey across the border to ISIS in Syria.  While in New York City, EL GAMMAL also contacted Aboualala in Turkey regarding El-Goarany’s plans to travel.  EL GAMMAL later provided El-Goarany with social media contact information for Aboualala.  Thereafter, in a coded conversation, EL GAMMAL assured Aboualala that he had vetted El-Goarany and El-Goarany could be trusted.

In late January 2015, El-Goarany left New York City for Istanbul, Turkey.  Upon arriving in Turkey, El-Goarany immediately reached out to Aboualala.  While El-Goarany was in Turkey, EL GAMMAL continued to communicate with El-Goarany over the Internet, providing advice on traveling toward Syria and on meeting with Aboualala.  After arriving in Syria, El-Goarany received religious training and advanced military-type training from ISIS throughout 2015.  On May 7, 2015, in the midst of his training with ISIS, El-Goarany reported to EL GAMMAL that “everything [was] going according to plan.”  A few months later, on July 16, 2015, El-Goarany wrote to EL GAMMAL:  “Life has changed a lot for me at this new job but I love it and I don’t regret taking up the offer,” and “May God reward you with goodness,” to which EL GAMMAL responded, “Great.”

In May 2015, El-Goarany’s father traveled to Turkey and met with Aboualala, in an attempt to locate his son.  Upon learning of this, EL GAMMAL instructed Aboualala, “Don’t ever ever mention me.  Not even my name[,]” and urged Aboualala not to meet with El-Goarany’s father.  On May 5, 2015, Aboualala reported back to EL GAMMAL, assuring EL GAMMAL that, when Aboualala met up with El-Goarany’s father, “I covered up for you.”

In coded messages in mid-2015, EL GAMMAL reached out to El-Goarany to inquire about the possibility of EL GAMMAL’s traveling to ISIS in Syria.  On July 13, 2015, El-Goarany, again in a coded message, responded that he needed to ask his “supervisors at work first,” but commented that “it’s risky because the parking lot these days is going under a lot of renovation, especially in the north side,” alluding to military operations occurring in northern Syria at the time.

On November 23, 2015, El-Goarany’s brother received a message from a member of ISIS with an attached letter from El-Goarany.  The letter read: “if you’re reading this then know that I’ve been killed in battle and am now with our Lord, inshaAllah.  Remember what I told you . . . we will win this war one day, this war between Iman (Belief) and Kufr (Disbelief) between Good and Evil. . . .”

*                *                *

In addition to the prison term, EL GAMMAL was sentenced to three years of supervised release.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation’s (“FBI”) New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the New York City Police Department.  Mr. Berman also thanked the Counterterrorism Section of the Department of Justice’s National Security Division, the U.S. Attorney’s Office for the District of Arizona, and the Phoenix Field Office of the FBI for their assistance.

The prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Negar Tekeei, Brendan F. Quigley, and Andrew J. DeFilippis are in charge of the prosecution, with assistance from Trial Attorney Ranganath Manthripragada of the National Security Division’s Counterterrorism Section. 

U.S. Attorney Geoffrey S. Berman said:  “Therese Okoumou was convicted in federal court today for a dangerous stunt last July 4th that endangered herself and the NYPD and U.S. Park Police officers who rescued and apprehended her.  The act of climbing the base of the Statue of Liberty went well beyond peaceable protest, a right we certainly respect.  It was a crime that put people at grave risk.  We commend Judge Gorenstein’s decision to hold Therese Okoumou accountable for her dangerous and reckless conduct.”

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MOSHE BENENFELD, a/k/a “Michael Benenfeld,” pleaded guilty to bank fraud in connection with hundreds of unauthorized transactions that BENENFELD conducted in bank customer accounts while employed by two different New York-area banks. BENENFELD’s bank fraud scheme resulted in losses totaling more than $5 million.  BENENFELD pleaded guilty before U.S. District Judge Loretta A. Preska.  Sentencing is scheduled for April 17, 2019.

Manhattan U.S. Attorney Geoffrey Berman said:  “Moshe Benenfeld, a branch manager for two separate New York banks, admitted today to abusing his position of trust by stealing from the banks’ customers.  Benenfeld used his position of access to withdraw and transfer funds from victims’ accounts by falsely authorizing transactions and forging signatures. Today, he has admitted to his crime, which victimized more than 20 individuals and totaled more than five million dollars.”

According to the allegations in the Complaint and the Indictment, to which BENENFELD pleaded guilty:

From 2000 to 2016, BENENFELD was the branch manager at a branch of a New York-area bank (“Bank-1”).  Beginning in or about 2004 and continuing into 2016, while employed at Bank-1, BENENFELD conducted hundreds of unauthorized transactions involving the accounts of over 20 bank customers, including the accounts of BENENFELD’s relatives.  BENENFELD made unauthorized draws on, and payments to, the customers’ lines of credit; made unauthorized withdrawals from, and deposits to, the customers’ deposit accounts; and used the customers’ deposit accounts as collateral for other customers’ lines of credit without authorization.  To effect the unauthorized transactions, BENENFELD, among other things, forged the signatures of bank customers and used a document previously signed by a bank customer to create paperwork that falsely purported to authorize a different transaction.  In or about April 2016, after having discovered BENENFELD’s conduct, Bank-1 terminated BENENFELD’s employment.  In or about June 2016, BENENFELD was hired by another New York-area bank (“Bank-2”).  At Bank-2, BENENFELD continued to conduct unauthorized transactions involving customer accounts.  As a result of the unauthorized transactions conducted by BENENFELD, Bank-1 sustained losses of over $5 million.

*                *                *

BENENFELD, 49, of Brooklyn, New York, pleaded guilty to one count of bank fraud, which carries a maximum sentence of 30 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.

Mr. Berman praised the investigative work of the U.S. Postal Inspection Service’s New York Division.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Dina McLeod is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that DARIN WEBB was sentenced in Manhattan federal court to two years in prison for defrauding Donadio & Olson, a Manhattan-based literary agency (the “Agency”), and its clients of over $3.3 million.  WEBB provided bookkeeping services for the Agency and carried out his scheme by making unauthorized transfers from the Agency’s bank accounts, and then making changes to the Agency’s accounting system to evade detection.  WEBB pled guilty on July 25, 2018, to one count of wire fraud before U.S. District Judge Edgardo Ramos, who also imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Darin Webb, a bookkeeper for a literary agency, admitted to embezzling more than $3.3 million from the agency, and then changing their accounting system to evade detection.  Webb’s theft was eventually uncovered, and he is now sentenced to two years in federal prison.”

According to allegations contained in the Information filed against Webb and statements made in related court filings and proceedings:  

From 2001 through March 2018, WEBB was engaged as a bookkeeper for the Agency.  From January 2011 through March 2018, WEBB used his position as the Agency’s bookkeeper to transfer more than $3.3 million of funds, belonging to the Agency and its clients, from the Agency’s bank accounts to bank accounts that WEBB controlled.  In order to evade detection of his criminal conduct and carry out his scheme, WEBB made changes to the Agency’s accounting records to disguise the nature of the transfers.

*                    *                    *

In addition to his prison term, WEBB, 48, of Manhattan, New York, was sentenced to three years of supervised release, a forfeiture money judgment in the amount of $3,300,000, and restitution in an amount to be determined.

Mr. Berman praised the work of the FBI.

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

Geoffrey S. Berman, United States Attorney for the Southern District of New York, and Raymond Donovan, Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), announced that former New York City Police Department (“NYPD”) Detective SAED RABAH pled guilty to knowingly providing misinformation to a federal law enforcement officer in order to obstruct a narcotics investigation.  RABAH pled guilty before the U.S. Magistrate Judge Judith C. McCarthy.  RABAH’s case has been assigned to U.S. District Judge Vincent L. Briccetti.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As an NYPD detective, Saed Rabah swore to uphold the law – not to break it and help a known criminal continue trafficking drugs.  Now this corrupt former officer faces serious prison time for his crimes.”

According to the Information filed today, to which RABAH pled guilty, and a previously filed criminal complaint: 

The target of a narcotics investigation was a cooperator in another court proceeding, and RABAH was his handler.  Despite his obligation as a cooperator to engage in no further criminal conduct, the target continued to operate a sophisticated narcotics distribution business.  In May 2016, RABAH was contacted by law enforcement and informed that the target was under investigation for narcotics related offenses.  In September 2016, RABAH was again contacted by law enforcement, this time about whether RABAH had a phone number for the target.  RABAH waited to respond and, when he did, intentionally provided a phone number for the target that RABAH knew the target was no longer using, rather than providing the target’s active phone number through which RABAH and the target were regularly communicating at that time. 

As alleged in the complaint, RABAH’s obstruction of the investigation was only one component of his corrupt relationship with the target.  For example, RABAH shared in the target’s proceeds from operating an illegal sports betting business by bringing in betters.  In addition, RABAH and the target traveled to Las Vegas together in July 2016.  Moreover, RABAH warned the target when RABAH observed one of the target’s employees make a drug delivery in a manner that RABAH believed could have drawn the attention of law enforcement.

*                *                *

RABAH, 46, of Brooklyn, New York, is charged with one count of obstruction of justice, 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.

RABAH is scheduled to be sentenced March 18, 2019.

Mr. Berman praised the outstanding investigative work of the DEA’s Westchester Tactical Diversion Squad comprising agents and officers of the DEA, Yonkers Police Department, Orangetown Police Department, New York City Police Department, Westchester Police Department, Putnam Sheriff’s Office, Rockland County Sheriff’s Office, New Windsor Police Department, and the Woodbury Police Department.  He also thanked the Special Agents of the United States Attorney’s Office for the Southern District of New York for their assistance

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the United States has settled its federal Fair Housing Act (“FHA”) lawsuit against WEBSTER AV MANAGEMENT LLC (“WEBSTER”).  Under the settlement, WEBSTER has agreed to make retrofits to the Riverdale Parc rental complex in the Bronx and the Bluestone Commons rental complex in Maybrook, New York, which together contain more than 120 apartments, in order to make those apartments more accessible to individuals with disabilities.  WEBSTER also has agreed to establish procedures to ensure that its future residential development projects will comply with the accessibility requirements of the FHA.  Additionally, the settlement requires WEBSTER to provide up to $105,000 to compensate aggrieved persons and to pay a civil penalty of $37,500.  The resolution of this lawsuit was approved yesterday by U.S. District Judge Paul G. Gardephe.  Previously, on January 26, 2017, the United States obtained a court-ordered preliminary injunction on consent in this lawsuit that requires WEBSTER to ensure accessibility at two other rental complexes currently under development in the Bronx. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “The Fair Housing Act’s accessibility provisions protect people with disabilities wherever they live.  Today’s settlement is part of the Office’s long-standing effort to fulfill the FHA’s promise of accessibility throughout the counties in the Southern District of New York.”

The FHA’s accessible design and construction provisions require new multifamily housing complexes constructed after 1991 to have basic features accessible to persons with disabilities.  According to the allegations in the complaint and the factual admissions in the settlement stipulation, the Riverdale Parc and Bluestone Commons rental complexes, which WEBSTER designed and constructed, have a number of inaccessible features, including bedroom, bathroom, and balcony doors that are not wide enough to accommodate people in wheelchairs, excessively high thresholds within individual units, thermostats and light switches located too high above the floor, and common area bathrooms that lack grab bars.    

Pursuant to the settlement, WEBSTER agreed to make retrofits to both the public and common use areas and the individual units to ensure that Riverdale Parc and Bluestone Commons are accessible.  The settlement also requires WEBSTER to establish procedures to ensure FHA compliance at its future development projects, including to retain an FHA compliance consultant to assess the design documents and conduct site visits to identify non-compliant conditions.  In addition, WEBSTER agreed to institute policies and training to ensure that its employees and agents will comply with the FHA’s accessibility requirements.

The settlement requires WEBSTER to provide up to $105,000 to compensate aggrieved persons.  Aggrieved persons may be entitled to monetary compensation from the fund created through today’s settlement.  Aggrieved individuals may include those who:

• Were discouraged from living at Riverdale Parc or Bluestone Commons because of the lack of accessible features;
• Have been hurt in any way by the lack of accessible features at Riverdale Parc or Bluestone Commons;
• Paid to have an apartment at Riverdale Parc or Bluestone Commons made more accessible to persons with disabilities; or
• Otherwise were discriminated against on the basis of disability at Riverdale Parc or Bluestone Commons as a result of inaccessible design and construction.

            Any individual who may be entitled to compensation can file a claim by using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/civilrights.html, or by sending a written claim to:

U.S. Attorney’s Office, Southern District of New York

86 Chambers Street, 3rd Floor

New York, New York 10007

Attention: Chief, Civil Rights Unit

Finally, WEBSTER also agreed to pay a civil penalty of $37,500.

The case is being handled by the Office’s Civil Rights Unit.  Assistant U.S. Attorneys Natasha W. Teleanu, Li Yu, and Jacob Lillywhite are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of five indictments and three superseding indictments charging a total of 19 with participating in the sex trafficking of minor girls and young women.  As alleged, the defendants trafficked or recruited to engage in prostitution at least 15 minor girls in the child welfare system, including at least nine minors who resided at a particular non-incarceratory residential treatment facility located in Westchester County (“Facility-1”).  Facility-1 provided housing for at-risk and troubled children and adolescents on behalf of departments of social welfare for certain counties in New York State.  

Eight of the 19 charged defendants were arrested yesterday, two are in state custody on unrelated charges, and eight other defendants were previously charged.  One remains at large.  These defendants were identified as part of an ongoing criminal investigation into the sex trafficking of minor victims, some of whom were as young as 13 years old, in the social welfare system.  As detailed below, the charges are set forth in a total of eight separate indictments. 

In each of these eight indicted cases, victims of the charged conduct included one or more minors who resided at Facility-1 and were in the New York State’s social welfare system.  The conduct charged in the eight cases occurred, as detailed below, between the years of 2010 and 2018. 

U.S. Attorney Geoffrey S. Berman stated:  “Children in the child welfare system are among the most vulnerable in our society.  As alleged in today’s charges, the defendants and their conspirators callously recruited girls as young as 13 from a residential treatment facility for at-risk youth, then sexually trafficked and prostituted them for financial profit.  Together with our partners in the FBI, we will work tirelessly to ensure that anyone who sexually traffics a minor is subject to the full force of the law.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Sex traffickers routinely prey on young people and those in our communities who are the most defenseless. As alleged, the defendants targeted vulnerable women and girls, including residents of a facility for at-risk children and adolescents, knowing that the victims would be more susceptible to their claims.  The FBI Human Trafficking and Child Exploitation Task Force and our law enforcement partners will aggressively pursue and hold accountable anyone who exploits others for their own profit.”

The 11 newly charged defendants are CARLTON VANIER, RUBEN MORCIGLIO, SAEED NORRIS, LLOYD KIDD, LUIDI BENJAMIN, LAWRENCE WALSH, CIMMIE WRIGHT, ADRIENNE ROBERTS, CHRISTOPHER BULLOCK, DARIEL BRAHAM, and STEVEN LESANE.  These defendants and the defendants already in federal custody were presented yesterday in the Southern District of New York.

In addition to the charges against the new defendants, Superseding Indictments were unsealed against HUBERT DUPIGNY, HENSLEY DUPIGNY, NAZEER VICKERS, SEAN MERCHANT, REUBEN SANDS, MARTIQUE MCGRIFF, JERMAINE MYRIE, and JABARI KENNEDY, who were first charged in the summer of 2018 for their participation in the trafficking of minor victims and young women. 

*                *                *

If you believe you are a victim of a similar crime, or if you have information concerning the exploitation of children, contact the Federal Bureau of Investigation at (212) 384-1000 or https://tips.fbi.gov/.

A chart outlining the charges and maximum prison sentences for each of the defendants is below.  The maximum potential sentences and the mandatory minimum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the respective judges.

Mr. Berman praised the outstanding investigative work of the FBI, the NYPD, and, in particular, the New York Child Exploitation and Human Trafficking Task Force.  Mr. Berman also thanked the New York City Department of Corrections and the Human Resources Administration for their assistance.  The prosecutions of these cases are being handled by the Office’s General Crimes and Public Corruption Units.  Assistant United States Attorneys Mollie Bracewell, Elinor Tarlow, Jacob Gutwillig, and Alex Rossmiller are in charge of the prosecutions.

U.S. v. Merchant, et al., 18 Cr. 527 (KMW)

COUNT

CHARGE

DEFENDANTS/AGES

MAX SENTENCE

1

Conspiracy to commit sex trafficking between January 2016 and June 2018

(18 U.S.C. § 1594(c))

Sean Merchant (31)

Martique Mcgriff (30)

Jermaine Myrie (34)

Reuben Sands (59)

Steven Lesane (31)

Life in prison

2

Sex trafficking of a minor under the age of 14 (18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2)

Sean Merchant (31)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

3

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2) and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1) and 2)

Sean Merchant (31)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

4

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Sean Merchant (31)

Life in prison; mandatory minimum sentence of 15 years in prison

5

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Jermaine Myrie (34)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

6

Sex trafficking by force, threats of  force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Martique Mcgriff (30)

Life in prison; mandatory minimum sentence of 15 years in prison

7

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Steven Lesane (31)

Life in prison; mandatory minimum sentence of 15 years in prison

U.S. v. Hubert Dupigny, et al., 18 Cr. 528 (JMF)

COUNT

CHARGE

DEFENDANTS/AGES

MAX. PENALTIES

1

Conspiracy to commit sex trafficking between August 2016 to May 2017 (18 U.S.C. § 1594(c))

Hubert Dupigny (34)

Hensley Dupigny (29)

Dariel Braham (45)

Christopher Bullock (36)

Adrienne Roberts (59)

Life in prison

2

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Hubert Dupigny (34)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

3

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Hubert Dupigny (34)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

4

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Hubert Dupigny (34)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

5

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Hensley Dupigny (34)

Life in prison; mandatory minimum of 10 years in prison

U.S. v. Luidji Benjamin et al., 18 Cr. 874

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Conspiracy to commit sex trafficking in the Fall of 2015 (18 U.S.C. § 1594(c))

Luidji Benjamin (22)

Lawrence Walsh (25

Life in prison

2

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Luidji Benjamin (22)

Life in prison; mandatory minimum sentence of 10 years in prison

U.S. v. Jabari Kennedy et al, 18 Cr. 529 (JFK)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Conspiracy to commit sex trafficking between January 2017 to May 2018 (18 U.S.C. § 1594(c))

Jabari Kennedy (26)

Cimmie Wright (24)

Life in prison

2

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Jabari Kennedy (26)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

3

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Jabari Kennedy (26)

Life in prison; mandatory minimum sentence of 15 years in prison

4

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Cimmie Wright (24)

Life; mandatory minimum sentence of ten years

U.S. v. Nazeer Vickers, 18 Cr. 530 (LGS)

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Conspiracy to commit sex trafficking between June 2017 and August 2017 (18 U.S.C. § 1594(c))

Nazeer Vickers (36)

Life in prison

2

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Nazeer Vickers (36)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

3

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Nazeer Vickers (36)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

U.S. v. Saeed Malik Thomas Norris, 18 Cr. 871

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Conspiracy to commit sex trafficking between July 2016 and August 2016 (18 U.S.C. § 1594(c))

Saeed Malik Thomas Norris (24)

Life in prison

2

Sex trafficking of a minor (18 U.S.C. §§1591(a), (b)(2), and 2)

Saeed Malik Thomas Norris (24)

Life in prison; mandatory minimum sentence of 10 years  in prison

U.S. v. Ruben Morciglio and Carlton Vanier, 18 Cr. 873

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Conspiracy to commit sex trafficking between 2011 and October 2018 (18 U.S.C. §1 594(c))

Ruben Morciglio (31)

Carlton Vanier (26)

Life in prison

2

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Ruben Morciglio (31)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

3.

Sex trafficking of a minor (18 U.S.C. §§1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Carlton Vanier (26)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

4.

Sex trafficking of a minor (18 U.S.C. §§1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Ruben Morciglio (31)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

5.

Sex trafficking of a minor (18 U.S.C. §§1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Carlton Vanier (26)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

U.S. v. Lloyd Kidd, 18 Cr. 872

COUNT

CHARGE

DEFENDANTS

MAX. PENALTIES

1

Sex trafficking of a minor (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Sex trafficking by force, threats of force, fraud, and coercion (18 U.S.C. §§ 1591(a), (b)(1), and 2)

Lloyd Kidd (28)

Life in prison; mandatory minimum sentence of 10 years in prison (under 18 U.S.C. § 1591(b)(2)); and mandatory minimum sentence of 15 years in prison (under 18 U.S.C. § 1591(b)(1))

2

Sex trafficking of a minor  (18 U.S.C. §§ 1591(a), (b)(2), and 2)

Lloyd Kidd (28)

Life in prison; mandatory minimum sentence of 10 years in prisons

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”), and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that HECTOR MAY, the president of Executive Compensation Planners, Inc. (“ECP”), a registered investment adviser and financial planning firm located in New City, New York, pled guilty today to participating in a conspiracy to defraud certain investment advisory clients (the “Victims”) out of more than $11 million.  MAY pled guilty before U.S. Magistrate Judge Judith C. McCarthy.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As Hector May admitted today, for decades he and his co-conspirator violated his clients’ trust by siphoning money from their accounts to line their pockets and continue to perpetrate their illegal scheme.  In total, May and his co-conspirator stole more than $11 million.  Now, he has confessed to his crimes and faces significant time in prison.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “This case has all the markings of a classic Ponzi Scheme with payments made to investors with other investor money, bogus account statements, etc. Mr. May also used investor money to pay personal and business expenses. His day of reckoning has arrived.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Hector May spent decades defrauding investors and gaming the system to make himself wealthier, all at the expense of those who trusted him to serve as a responsible steward of their funds.  This kind of criminal behavior undermines the strength and security of our financial systems.  Today’s conviction should serve as a warning to those who think they can get away with similar schemes -- the FBI and our law enforcement partners will discover the truth and hold you accountable for your actions.”

According to the Information filed today, to which MAY pled guilty:        

Since 1982, MAY has been the president of ECP and has provided financial advisory services to numerous clients.  Since 1994, MAY has been a registered representative of a broker dealer (“Broker Dealer-1”).  In its role as a broker dealer, Broker Dealer-1 facilitated the buying and selling of securities for clients of Broker Dealer-1’s registered representatives, including clients of MAY.  To that end, Broker Dealer-1 and associated clearing firms maintained securities accounts for ECP’s clients and, through those accounts, held ECP’s clients’ money, executed their securities trades, produced account statements reflecting activity in the clients’ accounts, and forwarded these account statements to ECP’s clients.

In order to obtain money from the Victims’ securities accounts with Broker Dealer-1, MAY advised the Victims, among other things, that they should use money from those accounts to have ECP, rather than Broker Dealer-1, purchase bonds on their behalf.  He further represented that by purchasing bonds through ECP directly, the Victims could avoid transaction fees.  Because MAY lacked the authority to withdraw money directly from the Victims’ accounts with Broker Dealer-1, he persuaded the Victims to withdraw the money themselves and to forward that money to an ECP “custodial” account (the “ECP Custodial Account”), so that he could use the money to purchase bonds on their behalf. 

With the assistance of his co-conspirator (“CC-1”), MAY guided the Victims, first, to withdraw their money from their Broker Dealer-1 accounts, and second, to send that money to the ECP Custodial Account by wire transfer or check.  At times, MAY falsely represented that the funds being withdrawn from Victims’ Broker Dealer-1 accounts were the proceeds of prior bond purchases MAY had made.  After the Victims sent their money to the ECP Custodial Account, MAY did not use the money to purchase bonds.  Instead, MAY and CC-1 spent the money on business expenses, personal expenses, and to make payments to certain Victims in order to perpetuate the scheme and conceal the fraud. 

Specifically, in some cases, MAY used Victims’ funds to make purported bond interest payments to other Victims.  In other cases, MAY used Victims’ funds to make payments to other Victims who wished to withdraw funds from their accounts.  MAY and CC-1 also created phony “consolidated” account statements that they issued through ECP and sent to the Victims.  These “consolidated” account statements purported to reflect the Victims’ total portfolio balances and included the names of bonds MAY falsely represented that he purchased for the Victims and the amounts of interest the Victims were supposedly earning on the bonds.  In order to create the phony consolidated account statements, MAY provided CC-1 with bond names and false interest earnings, and CC-1 created ECP computerized account statements and had them distributed to the Victims.

To keep track of the money that the co-conspirators were taking from the Victims, CC-1 processed the Victims’ payments for the purported bonds, entered them in a computerized accounting program, and, through that program, kept track of how MAY and CC-1 received and spent the Victims’ stolen money.  In this way, from the late 1990’s through March 9, 2018, MAY and CC-1 induced Victims to forward them more than $11,400,000.

*                *                *

MAY, 77, of Orangeburg, New York, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense.  Sentencing before Judge Vincent L. Briccetti has been scheduled for March 15, 2019.

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

Mr. Berman praised the outstanding investigative work of the U.S. Postal Inspection Service, Special Agents of the United States Attorney’s Office, and the Federal Bureau of Investigation.

In a related case, the Securities & Exchange Commission brought a civil action today against May and another in the White Plains federal court. 

The criminal case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys Margery B. Feinzig and Vlad Vainberg are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that SEAN PETER, a/k/a “Huggie,” JASON CAMPBELL, a/k/a “Holiday,” a/k/a “Fish,” and STEVEN SYDER, were found guilty yesterday of the murder of 20-year-old Brian Gray in the Bronx on October 2, 2012.  PETER, CAMPBELL, and SYDER were also found guilty of conspiring to distribute marijuana and related firearms offenses.  The defendants were convicted following a six-day trial before United States District Judge Naomi Reice Buchwald.

U.S. Attorney Geoffrey S. Berman said:  “For years, the defendants thought they had gotten away with murder.  Yesterday, a unanimous jury said otherwise.  We thank our partners at the FBI and the NYPD for their extraordinary work on this case, and for making sure that, no matter the passage of time, justice was done.”

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

In retaliation for an attempted drug robbery, the defendants followed Gray and three friends in the early morning hours of October 2, 2012, from a local bodega to a nearby porch on Barker Avenue in the Bronx.  The defendants then left the area to arm themselves, returned to where Gray and his friends were located, and opened fire, fatally wounding Gray and injuring two other individuals. 

*                *                *

PETER, 35, CAMPBELL, 32, and SYDER, 35, all of the Bronx, New York, were found guilty of conspiring to distribute or possess with intent to distribute marijuana, murder in relation to a drug trafficking crime, and discharging a firearm in relation to a drug trafficking crime.  The defendants each face a mandatory minimum sentence of five years in prison and a maximum sentence of life in prison.  Sentencing of the defendants before Judge Buchwald will be scheduled at a later date.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department.  Mr. Berman also thanked the Teaneck, New Jersey, Police Department for their assistance with the investigation. 

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

Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that MICHAEL COHEN was sentenced today to three years in prison for tax evasion, making false statements to a federally insured bank, and campaign finance violations.  COHEN pled guilty on August 21, 2018, to an eight-count information before U.S. District Judge William H. Pauley III, who imposed today’s sentence.  In a separate prosecution brought by the Special Counsel’s Office (“SCO”), COHEN pled guilty on November 29, 2018 to one count of making false statements to the U.S. Congress and was also sentenced on that case today, receiving a two-month concurrent sentence.

According to the allegations in Information 18 Cr. 602 (WHP), filed by the United States States Attorney’s Office for the Southern District of New York (the “Office”), as well as previous court filings and statements in public court proceedings:

Between 2012 and 2016, COHEN concealed more than $4 million in personal income from the Internal Revenue Service, avoiding more than $1.3 million in income tax.  COHEN also made false statements to a federally insured financial institution to obtain a $500,000 home equity loan.  Finally, in 2016, COHEN made or caused two separate payments to women to ensure that they did not publicly disclose their alleged affairs with a presidential candidate in advance of the election.  In one instance, COHEN caused American Media, Inc. (“AMI”), which was identified in previous court filings as “Corporation-1,” to make a $150,000 payment to one woman; in the other, COHEN made a $130,000 payment to another woman through an LLC he incorporated for the purpose of making the payment.  COHEN was reimbursed for the latter payment in monthly installments disguised as payments for legal services performed pursuant to a retainer, when in fact no such retainer existed.  COHEN made or caused both of these payments in order to influence the 2016 election and did so in coordination with one or more members of the campaign.

In addition to the sentence of imprisonment, Judge Pauley also ordered COHEN, 52, of New York, New York, to pay a fine of $50,000, to forfeit $500,000, to pay $1,393,858 in restitution to the IRS, and to pay a mandatory $800 special assessment.  Separately, COHEN was ordered to pay a $50,000 fine and to pay a $100 special assessment in the case brought by the SCO.  COHEN was also sentenced to concurrent three-year terms of supervised release in both cases, to follow his term of imprisonment. 

*                      *                      *

The Office also announced today that it has previously reached a non-prosecution agreement with AMI, in connection with AMI’s role in making the above-described $150,000 payment before the 2016 presidential election.  As a part of the agreement, AMI admitted that it made the $150,000 payment in concert with a candidate’s presidential campaign, and in order to ensure that the woman did not publicize damaging allegations about the candidate before the 2016 presidential election.  AMI further admitted that its principal purpose in making the payment was to suppress the woman’s story so as to prevent it from influencing the election.

Assuming AMI’s continued compliance with the agreement, the Office has agreed not to prosecute AMI for its role in that payment.  The agreement also acknowledges, among other things, AMI’s acceptance of responsibility, its substantial and important assistance in this investigation, and its agreement to provide cooperation in the future and implement specific improvements to its internal compliance to prevent future violations of the federal campaign finance laws.  These improvements include distributing written standards regarding federal election laws to its employees and conducting annual training concerning these standards.

*                      *                      *

Mr. Khuzami praised the work of the Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigation; and the Special Agents of the U.S. Attorney’s Office. 

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Andrea M. Griswold, Rachel Maimin, Thomas McKay, and Nicolas Roos are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that FREDY RENAN NAJERA MONTOYA pled guilty yesterday in Manhattan federal court to charges that he conspired to import cocaine into the United States and possessed machineguns and destructive devices during the course of that conspiracy.  NAJERA, who arrived in the United States on March 14, 2018, pled guilty before U.S. District Judge Paul G. Gardephe.  NAJERA served in the National Congress of Honduras from 2006 until he arrived in the United States for prosecution.  NAJERA pled guilty to charges carrying a mandatory minimum sentence of 40 years in prison.  Sentencing is scheduled for April 19, 2019. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he has now admitted in a United States courthouse, Fredy Renan Najera Montoya used his power and influence as a Honduran congressman to facilitate the transporting of massive amounts of cocaine from Colombia through Honduras, and ultimately to the streets of the U.S.  He further admitted that he and his hired security teams used military-grade weapons, including machineguns, to protect the drug smuggling enterprise.  Now, Najera awaits sentencing for the serious crimes to which he has pled.”

According to the Superseding Indictment, other court filings, and statements made during court proceedings: 

From at least in or about 2008, up to and including in or about 2015, NAJERA abused his position as a Honduran congressman to lead large-scale and violent drug-trafficking activities in the same part of Honduras that he represented in his government position.  NAJERA helped distribute more than 30 metric tons of cocaine, which NAJERA and his co-conspirators received in Honduras through a variety of means and ultimately imported into the United States.  As part of these activities, NAJERA used, and employed security teams who used, military-grade weapons, including machineguns and rocket-propelled grenade launchers. 

Between approximately 2008 and 2015, NAJERA constructed, maintained, and staffed clandestine airstrips in Olancho that were used to receive multi-hundred-kilogram shipments of cocaine sent from Venezuela to Honduras.  NAJERA facilitated the receipt of cocaine-laden planes and helicopters at his airstrips, and coordinated the transportation of the cocaine westward in Honduras so that it could be imported into the United States.  NAJERA employed heavily armed security personnel who participated in all aspects of the receipt and transportation of these shipments.  NAJERA also cultivated criminal relationships with members of the Honduran National Police and the Honduran military in order to support his drug-trafficking activities by obtaining sensitive law enforcement information used by traffickers to avoid arrests and to plan transportation routes for U.S.-bound cocaine.

In 2009, NAJERA worked with narcotics trafficker Sergio Neftalí Mejía Duarte and Leonel Rivera Maradiaga, one the leaders of the violent Cachiros drug-trafficking organization, to hire members of the Honduran National Police to assassinate General Julian Arístides González.  Around that time, General Arístides González began investigating NAJERA and other drug traffickers in Honduras following a cocaine plane shipment to Olancho that drew law enforcement attention.  In retaliation, Mejía Duarte, on behalf of NAJERA, contacted other drug traffickers, including Leonel Rivera Maradiaga, and requested that they assist in killing General Arístides González in order to stop the investigation and other similar investigations.  Leonel Rivera Maradiaga, in turn, recruited members of the Honduran National Police to carry out the murder. 

Shortly after the murder, NAJERA and Mejía Duarte met with Leonel Rivera Maradiaga.  During that meeting, NAJERA told Leonel Rivera Maradiaga, in substance, that Leonel Rivera Maradiaga had done a good job killing General Arístides González.  Mejía Duarte also congratulated Leonel Rivera Maradiaga for arranging the murder.  NAJERA and Mejía Duarte then presented Leonel Rivera Maradiaga with the money to pay the assassins, in the form of approximately $300,000 in cash that they had laid out on a table nearby.  

In 2012, NAJERA also introduced members of the Sinaloa Cartel to Honduran officials who provided nearly unfettered access to a major commercial shipping hub in Puerto Cortés, Honduras.  In connection with these efforts, NAJERA accepted at least one cash payment and helped broker additional bribes paid to Fabio Lobo, the son of the former Honduran President, and others.  The Sinaloa Cartel relied on NAJERA’s connections to transport approximately 10 tons of cocaine through Puerto Cortés.

In 2013 and 2014, NAJERA was part of a group of current and former Honduran congressmen who worked with other drug traffickers in an effort to obtain political support and protection from other high-ranking Honduran officials.  One of the group’s objectives was to install a Cachiros associate as the leader of the Honduran Congress to promote trafficker-friendly policies, including with respect to extradition. 

Some of NAJERA’s co-conspirators have already been sentenced.  In May 2018, Mejía Duarte was sentenced in the Southern District of Florida to life in prison for conspiring to import cocaine into the United States.  In September 2017, Lobo was sentenced by U.S. District Judge Lorna G. Schofield to 24 years in prison for conspiring to import cocaine into the United States. 

*                *                *

NAJERA, 41, pled guilty to one count of conspiring to import cocaine into the United States, and to one count of possessing machineguns and destructive devices during the course of that conspiracy.  Count One carries a maximum term of life in prison and a mandatory minimum term of ten years in prison.  Count Two carries a maximum term of life in prison and a mandatory minimum of 30 years in prison, which must be served consecutive to any other term of imprisonment.  The minimum and maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of NAJERA will be determined by Judge Gardephe.

Mr. Berman praised the outstanding efforts of the Bilateral Investigations Unit of the Special Operations Division of the DEA, New York Strike Force, and Tegucigalpa Country Office.  

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Emil J. Bove III and Matthew J. Laroche are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ALAIN KALOYEROS, the former President of the State University of New York Polytechnic Institute; STEVEN AIELLO, a founder and partner of COR Development (“COR”), a real estate development company based in the Syracuse, New York, area; JOSEPH GERARDI, also a founder and partner of COR; and LOUIS CIMINELLI, the former Chairman and CEO of LPCiminelli, a construction company based in Buffalo, New York, were sentenced to prison for fraud in connection with the rigging of bids for hundreds of millions of dollars of State-funded contracts under New York State’s “Buffalo Billion” economic development program.  KALOYEROS was sentenced today by U.S. District Judge Valerie E. Caproni, and AIELLO, GERARDI, and CIMINELLI were all sentenced last week by Judge Caproni.  The defendants received the following sentences:

ALAIN KALOYEROS

42 months in prison

STEVEN AIELLO

36 months in prison

JOSEPH GERARDI

30 months in prison

LOUIS CIMINELLI

28 months in prison

On July 12, 2018, KALOYEROS, AIELLO, GERARDI, and CIMINELLI were each convicted of wire fraud and wire fraud conspiracy, following a three-week trial before Judge Caproni, who imposed sentence on each of the defendants.  GERARDI was also convicted of making false statements to federal officers.  In addition to the bid-rigging offense, AIELLO’s sentence also reflected his conviction for paying bribes to Joseph Percoco, a former executive aide and campaign manager to the Governor of New York. 

U.S. Attorney Geoffrey Berman said:  “The Buffalo Billion program is an economic initiative intended to stimulate economic growth, and ultimately benefit the people of New York.  But a well-connected group of Albany insiders exploited the project to benefit themselves instead.  By manipulating the application process for awarding bids, these men effectively corrupted the bidding process to ensure that companies with which they had financial interests would be awarded the lucrative work.  Public corruption – especially at such a disconcertingly high level in Albany – contributes to the frustration and eroding faith of the people of New York in the integrity of their government.  We will continue to do everything within our power to ensure that funds intended for the greater good of New Yorkers will be used for just that – and not to line the pockets of influence-peddlers with high-level access.”

Judge Caproni said during AIELLO’s sentencing:  “I want this sentence to be heard around the state. . . .  This prosecution . . . should serve as a warning to others who interact with the government everywhere . . . when competing for projects from an entity like Fort Schuyler, you are playing with state money.  That means you have to be purer than Caesar’s wife, because the money you were trying to get comes from the hardworking men and women of New York State.  If you can’t live with that standard, then stick with private sector work, because if you remain at the public trough and you engage in corrupt means to get to public money, even if you did a good job for the public, the Court will show you no mercy. . . .”

According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:

KALOYEROS, AIELLO, GERARDI, and CIMINELLI conspired to deceive Fort Schuyler Management Corporation (“Fort Schuyler”), a State-funded entity charged with awarding State contracts worth hundreds of millions of dollars, by secretly rigging the bidding process so that the contracts offered in connection with the Buffalo Billion program would be awarded to COR and LPCiminelli.  KALOYEROS, who oversaw the application process for many of the State grants awarded under the Buffalo Billion and similar programs, retained Todd Howe to lobby the New York Governor’s office in order to maintain and expand KALOYEROS’s position.  KALOYEROS and Howe, who also worked for both COR and LPCiminelli, then conspired with AIELLO, GERARDI, and CIMINELLI to defraud Fort Schuyler by secretly tailoring the required qualifications for development deals in Syracuse and Buffalo so that COR and LPCiminelli would be awarded significant projects without any meaningful competition.  All the while, the defendants falsely represented to Fort Schuyler that the bidding process was fair, open, and competitive. 

More specifically, in or about October 2013, Fort Schuyler issued requests for proposals (“RFPs”) to solicit bids from interested and qualified developers for the Syracuse and Buffalo projects.  KALOYEROS oversaw the drafting of the RFPs and, unbeknownst to Fort Schuyler, KALOYEROS and Howe secretly solicited from AIELLO, GERARDI, CIMINELLI, and others at LPCiminelli:  (1) qualifications of COR and LPCiminelli to put in the RFPs, so that the RFPs would request qualifications specifically held by those companies, and (2) feedback on the RFPs, before they were released publicly.  For example, the Syracuse RFP requested the use of specific project management software used by COR.  After Howe emailed GERARDI and AIELLO a draft of the Syracuse RFP approximately two weeks before its public issuance, GERARDI sent back to Howe and AIELLO a handwritten mark-up of the draft RFP, on which GERARDI had, among other things, underlined the software names and wrote “too telegraphed??  I would leave out these specific programs.”  For its part, the Buffalo RFP, as initially issued, required 50 years of experience by a local developer – a qualification touted by LPCiminelli in promotional materials provided to KALOYEROS.

Additionally, after the Government’s investigation became public, both KALOYEROS and CIMINELLI deleted incriminating evidence from their personal email accounts.  GERARDI voluntarily met with government agents and lied about his criminal conduct.

In addition to his convictions for fraud in connection with the Buffalo Billion program, AIELLO was convicted in connection with a bribery conspiracy involving Percoco, who was also convicted and sentenced by Judge Caproni to 72 months in prison.  Beginning in early 2014, Percoco was paid bribes totaling approximately $35,000 from COR.  These bribe payments were orchestrated by AIELLO, who arranged them in exchange for Percoco’s official assistance for COR on an as-needed basis. 

Specifically, Percoco agreed with AIELLO to, and did, take official action for the benefit of COR to (a) reverse an adverse decision by the Empire State Development Corporation, which is the State’s main economic development agency, that would have required COR to enter into a costly labor peace agreement in connection with a development project in Syracuse, (b) free up a backlog of more than $14 million in State funds that had already been awarded to COR but were delayed in payment, and (c) secure a substantial pay raise for AIELLO’s son, who worked in the Governor’s office.  To disguise the nature and source of the bribe payments, COR’s bribes to Percoco were funneled through bank accounts and a shell company set up by Howe.

*                      *                     *

In addition to the prison term, KALOYEROS, 62, of Slingerlands, New York, was sentenced to 2 years of supervised release.  Judge Caproni also ordered KALOYEROS to pay a fine of $100,000. 

In addition to the prison terms, AIELLO, 60, of Fayetteville, New York, GERARDI, 59, of Fayetteville, New York, and CIMINELLI, 63, of Buffalo, New York, were each sentenced to two years of supervised release.  Judge Caproni also ordered AIELLO, GERARDI, and CIMINELLI each to pay a fine of $500,000 and to forfeit ill-gotten gains.

Mr. Berman praised the outstanding work of the Buffalo Field Office of the Federal Bureau of Investigation and the New York Office of the Internal Revenue Service-Criminal Investigation, which jointly conducted this investigation with Special Agents from the U.S. Attorney’s Office.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Janis Echenberg, Robert Boone, David Zhou, and Matthew Podolsky are in charge of the prosecution.

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”), Ari C. Shapira, Special Agent in Charge of the Miami Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”), and Robert A. Bourbon, Special Agent in Charge of the Miami Field Office of the United States Department of Justice, Office of the Inspector General (“DOJ OIG”), announced the unsealing today of an Indictment charging DEA agent FERNANDO GOMEZ for his participation in a conspiracy to distribute cocaine and his possession of firearms, and aiding and abetting the possession of firearms, in furtherance of that drug conspiracy.  GOMEZ was arrested this morning in Chicago and will be presented Magistrate Judge Susan E. Cox in the Northern District of Illinois this afternoon.

As alleged in the Superseding Indictment[1], GOMEZ, while working as a detective with the City of Evanston Police Department in Illinois, obtained firearms from drug dealers, transported those firearms to Puerto Rico, and provided those firearms to Jose Martinez-Diaz, a/k/a “Tony Zinc,” who is also charged in the Superseding Indictment.  GOMEZ then joined the DEA so that he could help members of the narcotics conspiracy, including Martinez-Diaz, evade prosecution by law enforcement.    

Martinez-Diaz was previously charged for his participation in La Organizacion de Narcotraficantes Unidos (“La ONU”), a racketeering enterprise involved in drug dealing and murders.  Eight other members of La ONU were also charged with various racketeering, drug trafficking, murder, and firearms offenses.  In addition to the charges against GOMEZ, the Superseding Indictment contains charges that had previously been brought against Martinez-Diaz and the eight other defendants.  The case is assigned to U.S. District Judge Jesse M. Furman. 

U.S. Attorney Geoffrey S. Berman said:  “Fernando Gomez is a special agent of the DEA, an organization committed to upholding the nation’s drug laws and relentless in its pursuit of narcotics traffickers.  But as alleged, Gomez joined the DEA to betray those laws, and to help narcotics traffickers evade detection by law enforcement.  He will now be prosecuted to the full extent of the law.”

*                      *                     *

FERNANDO GOMEZ, 41, of Chicago, Illinois, is charged in the Superseding Indictment with one count of participating in a narcotics conspiracy involving the distribution of five kilograms or more of cocaine, and one count of using and carrying firearms during and in relation to the narcotics conspiracy, possessing firearms in furtherance of the narcotics conspiracy, and aiding and abetting and the possession of firearms, some of which were brandished and discharged.  GOMEZ faces a maximum penalty of life in prison and a mandatory minimum penalty 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 investigative work of USPIS, DEA, ATF, DOJ OIG, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jordan Estes, Andrew Thomas, and Lara Pomerantz are in charge of the prosecution.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LUIS OMAR VARGAS, an unlicensed dentist, was convicted last Friday, after a two-week jury trial, for defrauding health insurance companies by billing for false claims, billing for claims performed by him as an unlicensed provider, and for conspiring to pay kickbacks to his patients.  The trial was presided over by United States District Judge Ronnie Abrams.

U.S. Attorney Geoffrey S. Berman said:  “Luis Omar Vargas defrauded taxpayer-funded health insurance plans and his patients by posing as a dentist licensed to practice, when he was not.  Vargas billed for services he never performed and induced his patients to visit his dental clinic by providing them kickback payments.  Now, for his fraud and abuse of the system, Vargas stands convicted of three crimes and faces a substantial term in prison.” 

According to allegations in the Indictment and evidence introduced at trial:

From in or around 2012 through at least November 2017, in the Southern District of New York and elsewhere, VARGAS and others conspired and participated in a scheme to defraud insurance providers of more than $2 million.  Vargas and others induced patients to be seen at a dental clinic on the Upper West Side of Manhattan by offering patients a $25 cash kickback.  Once the patients were in the door, VARGAS and his coconspirators charged insurance companies for services that were never performed and for services performed by VARGAS that he was not licensed to perform.

*                *                *

VARGAS, 46, of Roselle, New Jersey, was convicted of one count of health care fraud and one count of conspiracy to commit health care fraud, each of which carries a maximum sentence of 10 years in prison, and one count of conspiracy to violate the Anti-Kickback Statute, which carries a maximum sentence of five years in prison.  VARGAS will be sentenced on April 5, 2019, by Judge Abrams.

Other members of the conspiracy, including Dr. Mehmet Dikengil, 70, and Anna Jones, 60, previously pled guilty to related offenses.

 Mr. Berman praised the outstanding investigative work of the U.S. Department of Health and Human Services-Office of Inspector General in this investigation.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Alexandra N. Rothman, Ryan B. Finkel, and Kristy J. Greenberg are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that RICHARD BREGA was sentenced today to 50 months in prison for bribery, fraud, and theft from a program receiving government funds.  BREGA was found guilty of these crimes on May 2, 2018, by a jury at the conclusion of a three-week trial.  The sentence was imposed by United States District Judge Kenneth M. Karas.

U.S. Attorney Geoffrey S. Berman said:  “The successful prosecution of Richard Brega demonstrates the commitment of the federal government to rooting out corruption and fraud in Rockland County and throughout the Hudson Valley.  The taxpayers and the schoolchildren and their families there deserve far better than the criminal scheming Brega gave them.  The sentence imposed today serves a stern reminder that the criminal path Brega chose leads to one place: prison.”

The evidence at trial showed, among other things, the following:

BREGA defrauded a school district – Rockland BOCES – by falsely claiming to maintain the district’s buses, which BREGA knew were used to transport special-needs students, and bribing a Rockland BOCES employee to approve the false invoices for payment.  As a result, Rockland BOCES transported special-needs students on deteriorating, unmaintained buses as BREGA got paid.

In particular, BREGA owned and controlled vehicle repair and transportation companies in Rockland County, including Brega D.O.T. Maintenance Corp. (“Brega DOT”), a fleet-maintenance repair shop.  Rockland BOCES serves eight school districts in Rockland County.  Among the services that Rockland BOCES offers to its students – particularly children with special physical, intellectual, and emotional needs – is transportation, for which it has a fleet of buses and other vehicles (hereinafter collectively referred to as “Rockland BOCES buses” and “bus fleet”), some of which are specially equipped for students with physical disabilities.  Rockland BOCES receives federal funding each year, often in excess of $1 million.

From in or about 2008 or 2009, through in or about 2015, Brega DOT provided vehicle repair service and maintenance for Rockland BOCES bus fleet, including regular preventive maintenance (“Preventive Maintenance”), which is supposed to involve a thorough and detailed inspection and testing of the buses at Brega DOT’s facility, designed to ensure that the buses are defect-free and safe to operate with children aboard.  Brega DOT would fix any problems with the buses that it found during Preventive Maintenance inspections before releasing the buses back to Rockland BOCES.  Brega DOT also created invoices documenting the work done and provided those invoices to Rockland BOCES for payment.  Rockland BOCES’ director of transportation, William Popkave, would then approve the invoice as accurately stating work that was performed on Rockland BOCES buses, and Rockland BOCES would mail payment to Brega DOT.

From in or about 2012 through in or about 2014, BREGA stole money from Rockland BOCES by, among other things, billing Rockland BOCES for Preventive Maintenance inspections that were never performed.  To do so, BREGA directed his employees to prepare fraudulent invoices, as well as fraudulent supporting documentation, giving the false appearance that his company had performed regular Preventive Maintenance inspections on certain buses, when in fact those buses were not even brought to Brega DOT and Preventive Maintenance inspections were not performed.

To create the fraudulent invoices, and to obtain payment from Rockland BOCES for work that was never performed, BREGA bribed Popkave – who oversaw upkeep and maintenance of its buses – with tens of thousands of dollars’ worth of free personal vehicle repairs.  Popkave sent BREGA lists of buses and their mileages so that BREGA could create fraudulent invoices and supporting documentation, and thereafter approved payment of the fraudulent invoices at Rockland BOCES, even though Popkave and BREGA knew that the buses had not even been to Brega DOT on the days for which Brega DOT billed Rockland BOCES, and had not received Preventive Maintenance inspections.

*                      *                     *

BREGA, 51, of Rockland County, was convicted of three counts: (1) mail fraud, (2) bribery concerning a program receiving federal funds, and (3) theft from a program receiving federal funds. 

Popkave, 62, of Rockland County, New York, pled guilty before U.S. Magistrate Judge Judith C. McCarthy on January 24, 2017, to five counts: (1) conspiracy to commit mail fraud, which carries a maximum potential penalty of 20 years in prison; (2) mail fraud, which carries a maximum potential penalty of 20 years in prison; (3) theft concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison; (4) bribery concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison; and (5) obstruction of justice, which carries a maximum potential penalty of 20 years in prison.

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as the sentencing of Popkave will be determined by the judge at a future date.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, the Rockland County District Attorney’s Office, and the United States Department of Transportation Office of Inspector General.  Mr. Berman also thanked the United States Department of Education, Office of Inspector General, for its assistance.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Michael D. Maimin and Benjamin Allee are in charge of the prosecution.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced the unsealing of a Complaint on Tuesday in White Plains federal court[1] charging SAMIR SULLIVAN, a/k/a “S,” with committing four armed carjackings of cabs in Mt. Vernon and the Bronx in the early morning hours of November 25 and November 29.  SULLIVAN was arrested on Tuesday, December 4 and presented in White Plains federal court before United States Magistrate Judge Paul E. Davison.

U.S. Attorney Geoffrey S. Berman stated:  “As alleged, four cab drivers in Mt. Vernon and the Bronx were doing their jobs transporting passengers when Samir Sullivan used a gun to take their cabs and, in three cases, their hard-earned money.  No driver should fear a gun being pointed at him when he simply picks up a passenger on the job.”

*                *                *

SULLIVAN, 32, of Mt. Vernon, New York, is charged with four counts of carjacking, which carry a maximum sentence of 15 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI and the MVPD.

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

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

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

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 Division of the Federal Bureau of Investigation (“FBI”), Thomas P. DiNapoli, New York State Comptroller,  and George P. Beach II, Superintendent of the New York State Police, announced today the arrest and guilty plea of ROBERT GERARDI, the former treasurer of the Putnam Engine & Hose Co. No. 2 (“Putnam Engine and Hose”), a unit of the Port Chester Volunteer Fire Department, for embezzlement of more than $38,000 from Putnam Engine and Hose.  GERARDI was arraigned on Monday in White Plains federal court and pled guilty today before U.S. Magistrate Judge Paul E. Davison.  This case has been assigned to U.S. District Judge Nelson S. Román.

U.S. Attorney Geoffrey S. Berman said:  Robert Gerardi was entrusted to oversee the finances of a unit of a volunteer fire company.  Gerardi betrayed that trust and lined his own pockets with money meant to be used in furtherance of protecting life and property.”

FBI Assistant Director William F. Sweeney Jr. said:  “Those who serve the public should be held to a higher standard of integrity and accountability.  Gerardi violated his most basic duty when he decided to use the funds entrusted to his care to cover his own financial losses.  The FBI and our state and local partners will continue to investigate and bring to justice public servants who abuse public trust.”

Comptroller Thomas DiNapoli said:  “Former treasurer Robert Gerardi allegedly fell for an online scam and stole nearly $40,000 to pay for it, violating his duty to the public and to his fellow firefighters.  This case illustrates the need for vigilant oversight of anyone in charge of public funds.  I thank U.S. Attorney Berman, the FBI, and the New York State Police for their partnership in this case.”

NYSP Superintendent George P. Beach II said:  “I want to commend our Troopers along with our state and federal partners for their outstanding work in this case. This investigation revealed that Robert Gerardi violated the public trust when he used his authority to steal funds that were meant to benefit the community.  We have zero tolerance for those who abuse their position for their own personal gain.”

According to the Information filed against GERARDI and statements made in related court filings and proceedings, including during the plea proceeding:

GERARDI was elected to the position of treasurer of Putnam Engine & Hose in or about October 2016.  GERARDI was given signatory authority over bank accounts held by Putnam Engine & Hose at that time.

From in or about November 2016 to in or about May 2017, GERARDI embezzled money from Putnam Engine & Hose by making withdrawals from its bank accounts and by charging personal expenses to its debit card.  GERARDI embezzled $38,236.99 from Putnam Engine & Hose through approximately 28 fraudulent transactions.  GERARDI told the president of Putnam Engine & Hose that the missing funds had been stolen from the bank accounts.

GERARDI, 62, of Port Chester, New York, pled guilty to one count of theft concerning a program receiving federal funds, which carries a maximum sentence of 10 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.  GERARDI is scheduled to be sentenced before Judge Román on March 8, 2019.

*                *                *

Mr. Berman praised the outstanding investigative work of the FBI, New York State Comptroller, and New York State Police.

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

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 today the unsealing of two Complaints charging four defendants with firearms trafficking and narcotics distribution offenses in and around Port Chester, New York.  The defendants, WALTER JONES, FRANK MAXWELL, MARKEL CALHOUN, and JAMAR CALHOUN, were presented in White Plains federal court this afternoon before United States Magistrate Judge Paul E. Davison.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants were responsible for selling guns and drugs, two potentially lethal commodities that plague too many communities.  Thanks to the FBI and the Port Chester Police, the defendants are in custody and facing federal criminal charges.”

FBI Assistant Director William F. Sweeney Jr. said:  “Public safety is at risk when criminals think they can operate outside the law, selling guns and drugs in our communities.  The FBI's Westchester County Safe Streets Task Force is committed to working with our law enforcement partners to break the cycle of addiction and violence by removing those responsible for putting weapons and narcotics on the streets.”

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

In or about February and March 2017, JONES and MARKEL CALHOUN conspired to traffic in firearms, and sold four firearms in Port Chester, New York, and Riverside, Connecticut.  During about the same period, JONES and MARKEL CALHOUN also possessed firearms unlawfully despite their prior felon status.  From at least in or about February 2018 up to November 2018, JONES and MAXWELL conspired to distribute 28 grams or more of crack cocaine.  Between March and May 2018, JAMAR CALHOUN distributed crack cocaine on at least six occasions in and around Port Chester, New York.   

*                *                *

JONES, 30, and MARKEL CALHOUN, 26, are charged with one count of firearms trafficking conspiracy, which carries a maximum sentence of five years in prison.  MARKEL CALHOUN is charged with one count of being a felon in possession of a firearm and JONES is charged with two counts of being a felon in possession of a firearm, each of which carries a maximum sentence of 10 years in prison.  JONES and MAXWELL, 36, are charged with one count of conspiracy to distribute 28 grams or more of crack cocaine, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 40 years in prison.   JAMAR CALHOUN, 28, is charged with six counts of distribution of crack cocaine, which carries a maximum sentence of 20 years in prison.

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

Mr. Berman praised the outstanding investigative work of the FBI Westchester County Safe Streets Task Force and the Port Chester Police Department. 

These cases are being handled by the Office’s White Plains Division.  Assistant United States Attorneys Christopher Brumwell and Vladislav Vainberg are in charge of the prosecution.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that RANDY WANG was sentenced in Manhattan federal court to 18 months in prison for defrauding his former employer, a company based in Manhattan that manages a global airline alliance whose members consist of approximately 13 international airlines and their affiliates (the “Company”), by incurring more than $2.2 million in unauthorized charges on the Company’s credit card account.  WANG pled guilty on April 17, 2018, to one count of wire fraud before U.S. District Judge John F. Keenan, who also imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said: “Randy Wang took advantage of his positions of trust with his employer – and his access to the company’s purse strings.  He charged millions of dollars’ worth of electronics on his employer’s credit card for non-businesses purposes, and attempted to cover up his criminal conduct.  Today Wang has been sentenced to prison for his crime.”

According to the Information filed against Wang and statements made in related court filings and proceedings: 

During the relevant time period, WANG was employed as a business manager for the Company, and for approximately the last two months of the scheme, WANG also served as the Company’s interim chief financial officer.  From at least in or about January 2016 through in or about October 2017, WANG incurred more than $2.2 million of unauthorized charges on the Company’s credit card account by making hundreds of purchases at both online and brick-and-mortar retailers.  WANG’s purchases, which were entirely unrelated to his official duties and were not for the benefit of the Company, included approximately 443 laptop computers, 241 mobile electronic devices, 24 tablet computers, and numerous other electronics.  In order to evade detection of his criminal conduct, WANG made changes to the Company’s accounting records to disguise the nature of the credit card charges.

*                    *                    *

In addition to his prison term, WANG, 34, of Oakland Gardens, New York, was sentenced to 3 years of supervised release, a forfeiture money judgment in the amount of $2,294,982.00, and a restitution order in the amount of $2,294,982.00.

Mr. Berman praised the work of the Department of Homeland Security, Homeland Security Investigations, and the El Dorado Task Force. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID TAYLOR, a state-licensed doctor, was convicted by a jury for writing medically unnecessary prescriptions for oxycodone over a five-year period. The verdict followed a one-week jury trial before United States District Court Judge Andrew L. Carter, Jr.

U.S. Attorney Geoffrey S. Berman said:  “Dr. David Taylor violated his solemn Hippocratic oath to do no harm.  For cash and gifts, Taylor prescribed more than 100,000 oxycodone pills that quickly made its way to the streets of New York City, fueling the opioid epidemic.  Now, Taylor stands convicted and faces 20 years in prison for his crime.” 

According to allegations in the Indictment and evidence introduced at trial:

From January 2012 through at least June 2017, in the Southern District of New York and elsewhere, TAYLOR and others conspired to distribute and possess with the intent to distribute oxycodone.  During this time, TAYLOR operated out of three offices in Staten Island, New York, and prescribed more than 2.6 million 30-milligram oxycodone pills.  In exchange for cash and gifts, TAYLOR wrote prescriptions for over 100,000 oxycodone pills with a street value of more than $2 million for members of the conspiracy whom TAYLOR knew had no legitimate medical need for the drug.  The co-conspirators then illegally sold the oxycodone they obtained from TAYLOR on the streets.

*          *          *

TAYLOR, 75, was convicted of one count of conspiring to distribute and possess with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison.  TAYLOR will be sentenced by Judge Carter on April 5, 2019.

Other members of the conspiracy, including VITO GALLICCHIO, 51, NICHOLAS AVICOLLI, 54, DANIEL GARCIA, 57, LAWRENCE MONTALBANO, 52, and DON MICHAEL CARIM, 34, previously pleaded guilty to the same offense.

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the DEA’s Tactical Diversion Squad (Group TDS-NY), which comprises agents and officers from the DEA, the New York Police Department, the New York State Police, New York State Department of Financial Services, the New York National Guard, and New York City Department of Investigation.  He also acknowledged the assistance of Health and Human Services-OIG and the National Insurance Crime Bureau.

The case is being prosecuted by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Kiersten A. Fletcher, Justin V. Rodriguez, and Nicolas Roos are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of a criminal complaint charging FABIO BRETAS DE FREITAS with commodities fraud, wire fraud, bank fraud, and identity theft in connection with BRETAS’s operation of two related investment companies, Phynance Capital Management LLC (“Phy Capital”) and Absolute Experience LLC (“Absolute”).  BRETAS is alleged to have misrepresented to investors the trading activity and use of funds invested in Phy Capital and Absolute, and, after acquiring investor funds, misappropriated a large portion of those funds for his personal benefit.  Additionally, after the initiation of an audit of BRETAS’s companies by the Commodity Futures Trading Commission (“CFTC”) and the National Futures Association (“NFA”), BRETAS allegedly attempted to deceive those regulators by impersonating a victim-investor using a fraudulent email account appearing to belong to that victim, but in fact controlled by BRETAS.  BRETAS was arrested this morning in Miami and will be presented before a U.S. Magistrate Judge in the Southern District of Florida later today.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Fabio Bretas de Freitas used sham investment companies to steal both the money and the identities of his would-be investors. Thanks to the dedication of the FBI, and with the support and assistance of the CFTC and NFA, Bretas’s alleged scheme has collapsed around him and he will now be held to account.”  

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “The defendant obtained more than $5.5 million from people who invested their money in good faith.  But as alleged, instead of investing those funds as he had promised, the defendant used it to cover his own personal expenses, even going so far as to impersonate one of his own victims to deceive investigators.  Bretas’s arrest should serve as a stark reminder that those who seek to manipulate our financial systems for their personal gain will be identified and disrupted.”

According to the Complaint filed today in Manhattan federal court[1]:

BRETAS started Phy Capital and Absolute in 2016, and ultimately obtained more than $5.5 million from various investors (the “Victims”).  While BRETAS conducted a minimal level of trading, his predominant use of his companies was the theft of investor money, using it to cover his personal expenses, and transferring investor funds abroad.  When his regulators, the CFTC and NFA, initiated an audit of BRETAS in 2017, BRETAS lied about his affiliation with Absolute, falsely claimed that his victims’ funds reflected mere loans to his company, lied about the use of those funds and the solicitation of investments, and ultimately created a fraudulent email account for the purpose of impersonating one victim in communications with the NFA. 

BRETAS, 53, of Miami, Florida, was arrested this morning in Miami.  BRETAS is charged with wire fraud, which carries a maximum sentence of 20 years in prison; bank fraud, which carries a maximum sentence of 30 years in prison; commodities fraud, which carries a maximum sentence of 25 years in prison; and aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

*                *                *

This case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorneys Andrew C. Adams and Benet Kearney 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.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, and Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division announced that CHI PING PATRICK HO, a/k/a “Patrick C.P. Ho,” a/k/a “He Zhiping,” was found guilty today after a jury trial before U.S. District Judge Loretta A. Preska of participating in a multi-year, multimillion-dollar scheme to bribe top officials of Chad and Uganda in exchange for business advantages for CEFC China Energy Company Limited (“CEFC China”).  HO was convicted of violations of the Foreign Corrupt Practices Act (“FCPA”), international money laundering, and conspiracy to commit both.  HO is scheduled to be sentenced before Judge Preska on March 14, 2019, at 10:00 a.m.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Patrick Ho now stands convicted of scheming to pay millions in bribes to foreign leaders in Chad and Uganda, all as part of his efforts to corruptly secure unfair business advantages for a multibillion-dollar Chinese energy company.  As the jury’s verdict makes clear, Ho’s repeated attempts to corrupt foreign leaders were not business as usual, but criminal efforts to undermine the fairness of international markets and erode the public’s faith in its leaders.”

Assistant Attorney General Brian A. Benczkowski:  “Patrick Ho paid millions of dollars in bribes to the leaders of two African countries to secure contracts for a Chinese conglomerate.  Today’s trial conviction demonstrates the Criminal Division’s commitment to prosecuting those who seek to utilize our financial system to secure unfair competition advantages through corruption and bribery.”

According to the Indictment, evidence presented at trial, and other public proceedings in the case:           

Overview 

HO was involved in two bribery schemes to pay top officials of Chad and Uganda in exchange for business advantages for CEFC China, a Shanghai-based multibillion-dollar conglomerate that operates internationally in multiple sectors, including oil, gas, and banking.  At the center of both schemes was HO, the head of a non-governmental organization based in Hong Kong and Arlington, Virginia, the China Energy Fund Committee (the “CEFC NGO”), which held “Special Consultative Status” with the United Nations (“UN”) Economic and Social Council.  CEFC NGO was funded by CEFC China.

In the first scheme (the “Chad Scheme”), HO, on behalf of CEFC China, offered a $2 million cash bribe, hidden within gift boxes, to Idriss Déby, the President of Chad, in an effort to obtain valuable oil rights from the Chadian government.  In the second scheme (the “Uganda Scheme”), HO caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by Sam Kutesa, the Minister of Foreign Affairs of Uganda, who had recently completed his term as the President of the UN General Assembly.  HO also schemed to pay a $500,000 cash bribe to Yoweri Museveni, the President of Uganda, and offered to provide both Kutesa and Museveni with additional corrupt benefits by “partnering” with them in future joint ventures in Uganda.

The Chad Scheme

The Chad Scheme began in or about September 2014 when HO flew into New York, New York to attend the annual UN General Assembly.  At that time, CEFC China was working to expand its operations to Chad and wanted to meet with President Déby as quickly as possible.  Through a connection, HO was introduced to Cheikh Gadio, the former Minister of Foreign Affairs of Senegal, who had a personal relationship with President Déby.  HO and Gadio met at CEFC China’s suite at Trump World Tower in midtown Manhattan, where HO enlisted Gadio to assist CEFC China in obtaining access to President Déby.

Gadio connected HO and CEFC China to President Déby.  In an initial meeting in Chad in November 2014, President Déby described to HO and CEFC China executives certain lucrative oil rights that were available for CEFC China to acquire.  Following that meeting, Gadio advised HO and CEFC China to send a technical team to Chad to investigate the oil rights and make an offer to President Déby.  Instead, HO insisted on a prompt second meeting with the President.  The second meeting took place a few weeks later, in December 2014.  HO led a CEFC China delegation, which flew into Chad on a corporate jet with $2 million cash concealed within several gift boxes.  At the conclusion of a business meeting with President Déby, HO and the CEFC China executives presented President Déby with the gift boxes.

To the surprise of HO and the CEFC China executives, President Déby rejected the $2 million bribe offer.  HO subsequently drafted a letter to President Déby claiming that the cash had been intended as a donation to Chad.  Ultimately, HO and CEFC China did not obtain the unfair advantage that they had sought through the bribe offer, and by mid-2015, HO had turned his attention to a different “gateway to Africa”: Uganda.

The Uganda Scheme

The Uganda Scheme began around the same time as the Chad Scheme, when HO was in New York, New York for the annual UN General Assembly.  HO met with Sam Kutesa, who had recently begun his term as the 69th President of the UN General Assembly (“PGA”).  HO, purporting to act on behalf of CEFC NGO, met with Kutesa and began to cultivate a relationship with him.  During the year that Kutesa served as PGA, HO and Kutesa discussed a “strategic partnership” between Uganda and CEFC China for various business ventures, to be formed once Kutesa completed his term as PGA and returned to Uganda.

In or about February 2016 – after Kutesa had returned to Uganda and resumed his role as Foreign Minister, and Yoweri Museveni (Kutesa’s relative) had been reelected as the President of Uganda – Kutesa solicited a payment from HO, purportedly for a charitable foundation that Kutesa wished to launch.  HO agreed to provide the requested payment, but simultaneously requested, on behalf of CEFC China, an invitation to Museveni’s inauguration, business meetings with President Museveni and other high-level Ugandan officials, and a list of specific business projects in Uganda that CEFC China could participate in.

In May 2016, HO and CEFC China executives traveled to Uganda.  Prior to departing, HO caused the CEFC NGO to wire $500,000 to the account provided by Kutesa in the name of the so-called “foundation,” which wire was transmitted through banks in New York, New York.  HO also advised his boss, the Chairman of CEFC China, to provide $500,000 in cash to President Museveni, ostensibly as a campaign donation, even though Museveni had already been reelected.  HO intended these payments as bribes to influence Kutesa and Museveni to use their official power to steer business advantages to CEFC China.

HO and CEFC China executives attended President Museveni’s inauguration and obtained business meetings in Uganda with President Museveni and top Ugandan officials, including at the Department of Energy and Mineral Resources.  After the trip, HO requested that Kutesa and Museveni assist CEFC China in acquiring a Ugandan bank, as an initial step before pursuing additional ventures in Uganda.  HO also explicitly offered to “partner” with Kutesa and Museveni and/or their “family businesses,” making clear that both officials would share in CEFC China’s future profits.  In exchange for the bribes offered and paid by HO, Kutesa thereafter steered a bank acquisition opportunity to CEFC China.

*                      *                      *

HO, 69, of Hong Kong, China, was convicted of one count of conspiring to violate the FCPA, four counts of violating the FCPA, one count of conspiring to commit international money laundering, and one count of committing international money laundering.  The maximum penalties for these charges are as follows: five years in prison for conspiring to violate the FCPA; five years in prison for each violation of the FCPA; 20 years in prison for conspiring to commit international money laundering; and 20 years in prison for committing international money laundering.  HO was acquitted of one count of international money laundering.

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

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation.  He also thanked the Department of Homeland Security, Homeland Security Investigations, and the Department of Justice, Criminal Division’s Office of International Affairs.

This case is being prosecuted by the Office’s Public Corruption Unit and the Criminal Division’s Fraud Section, FCPA Unit.  Assistant U.S. Attorneys Douglas S. Zolkind, Daniel C. Richenthal, and Catherine E. Ghosh, and Trial Attorney Paul A. Hayden of the Fraud Section, are in charge of the prosecution.

A federal jury in New York City today convicted the head of a nongovernmental organization (NGO) based in Hong Kong and Virginia on seven counts for his participation in a multi-year, multimillion-dollar scheme to bribe top officials of Chad and Uganda in exchange for business advantages for a Chinese oil and gas company, announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Geoffrey S. Berman of the Southern District of New York.

Chi Ping Patrick Ho, aka “Patrick C.P. Ho,” aka “He Zhiping,” 69, of Hong Kong, China, was found guilty today after a one-week jury trial before U.S. District Judge Loretta A. Preska in the Southern District of New York of one count of conspiring to violate the Foreign Corrupt Practices Act (FCPA), four counts of violating the FCPA, one count of conspiring to commit international money laundering and one count of committing international money laundering.  Ho is scheduled to be sentenced before Judge Preska on March 14, 2019, at 10:00 a.m. EDT.

“Patrick Ho paid millions of dollars in bribes to the leaders of two African countries to secure contracts for a Chinese conglomerate,” said Assistant Attorney General Benczkowski.  “Today’s trial conviction demonstrates the Criminal Division’s commitment to prosecuting those who seek to utilize our financial system to secure unfair competition advantages through corruption and bribery.”

“Patrick Ho now stands convicted of scheming to pay millions in bribes to foreign leaders in Chad and Uganda, all as part of his efforts to corruptly secure unfair business advantages for a multibillion-dollar Chinese energy company,” said U.S. Attorney Berman.  “As the jury’s verdict makes clear, Ho’s repeated attempts to corrupt foreign leaders were not business as usual, but criminal efforts to undermine the fairness of international markets and erode the public’s faith in its leaders.”

According to evidence presented at trial, Ho was involved in two bribery schemes to pay top officials of Chad and Uganda in exchange for business advantages for CEFC China, a Shanghai-based multibillion-dollar conglomerate that operates internationally in multiple sectors, including oil, gas, and banking.  At the center of both schemes was Ho, the head of a nongovernmental organization based in Hong Kong and Arlington, Virginia, the China Energy Fund Committee (the “CEFC NGO”), which held “Special Consultative Status” with the United Nations (UN) Economic and Social Council.  CEFC NGO was funded by CEFC China.

According to the evidence presented at trial, in the first scheme (the “Chad Scheme”), Ho, on behalf of CEFC China, offered a $2 million cash bribe, hidden within gift boxes, to Idriss Déby, the President of Chad, in an effort to obtain valuable oil rights from the Chadian government.  In the second scheme (the “Uganda Scheme”), Ho caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by Sam Kutesa, the Minister of Foreign Affairs of Uganda, who had recently completed his term as the President of the UN General Assembly.  Ho also schemed to pay a $500,000 cash bribe to Yoweri Museveni, the President of Uganda, and offered to provide both Kutesa and Museveni with additional corrupt benefits by “partnering” with them in future joint ventures in Uganda.

The Chad Scheme

According to the evidence presented at trial, the Chad Scheme began in or about September 2014 when Ho flew into New York, New York to attend the annual UN General Assembly.  At that time, CEFC China was working to expand its operations to Chad and wanted to meet with President Déby as quickly as possible.  Through a connection, Ho was introduced to Cheikh Gadio, the former Minister of Foreign Affairs of Senegal, who had a personal relationship with President Déby.  Ho and Gadio met in midtown Manhattan, New York where Ho enlisted Gadio to assist CEFC China in obtaining access to President Déby.

Gadio connected Ho and CEFC China to President Déby.  In an initial meeting in Chad in November 2014, President Déby described to Ho and CEFC China executives certain lucrative oil rights that were available for CEFC China to acquire.  Following that meeting, Gadio advised Ho and CEFC China to send a technical team to Chad to investigate the oil rights and make an offer to President Déby.  Instead, Ho insisted on a prompt second meeting with the President.  The second meeting took place a few weeks later, in December 2014.  Ho led a CEFC China delegation, which flew into Chad on a corporate jet with $2 million cash concealed within several gift boxes.  At the conclusion of a business meeting with President Déby, Ho and the CEFC China executives presented President Déby with the gift boxes.

To the surprise of Ho and the CEFC China executives, President Déby rejected the $2 million bribe offer.  Ho subsequently drafted a letter to President Déby claiming that the cash had been intended as a donation to Chad.  Ultimately, Ho and CEFC China did not obtain the unfair advantage that they had sought through the bribe offer, and by mid-2015, Ho had turned his attention to a different “gateway to Africa”: Uganda.

The Uganda Scheme

According to the evidence presented at trial, the Uganda Scheme began around the same time as the Chad Scheme, when Ho was in New York, New York for the annual UN General Assembly.  Ho met with Sam Kutesa, who had recently begun his term as the 69th President of the UN General Assembly (“PGA”).  Ho, purporting to act on behalf of CEFC NGO, met with Kutesa and began to cultivate a relationship with him.  During the year that Kutesa served as PGA, Ho and Kutesa discussed a “strategic partnership” between Uganda and CEFC China for various business ventures, to be formed once Kutesa completed his term as PGA and returned to Uganda.

In or about February 2016 – after Kutesa had returned to Uganda and resumed his role as Foreign Minister, and Yoweri Museveni (Kutesa’s relative) had been reelected as the President of Uganda – Kutesa solicited a payment from Ho, purportedly for a charitable foundation that Kutesa wished to launch.  Ho agreed to provide the requested payment, but simultaneously requested, on behalf of CEFC China, an invitation to Museveni’s inauguration, business meetings with President Museveni and other high-level Ugandan officials, and a list of specific business projects in Uganda that CEFC China could participate in.

In May 2016, Ho and CEFC China executives traveled to Uganda.  Prior to departing, Ho caused the CEFC NGO to wire $500,000 to the account provided by Kutesa in the name of the so-called “foundation,” which wire was transmitted through banks in New York, New York.  Ho also advised his boss, the Chairman of CEFC China, to provide $500,000 in cash to President Museveni, ostensibly as a campaign donation, even though Museveni had already been reelected.  Ho intended these payments as bribes to influence Kutesa and Museveni to use their official power to steer business advantages to CEFC China.

Ho and CEFC China executives attended President Museveni’s inauguration and obtained business meetings in Uganda with President Museveni and top Ugandan officials, including at the Department of Energy and Mineral Resources.  After the trip, Ho requested that Kutesa and Museveni assist CEFC China in acquiring a Ugandan bank, as an initial step before pursuing additional ventures in Uganda.  Ho also explicitly offered to “partner” with Kutesa and Museveni and/or their “family businesses,” making clear that both officials would share in CEFC China’s future profits.  In exchange for the bribes offered and paid by Ho, Kutesa thereafter steered a bank acquisition opportunity to CEFC China.

This case was investigated by the FBI and IRS-CI.  U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the Department of Justice, Criminal Division’s Office of International Affairs provided assistance.

Trial Attorney Paul A. Hayden of the Criminal Division’s Fraud Section, FCPA Unit and Assistant U.S. Attorneys Douglas S. Zolkind, Daniel C. Richenthal and Catherine E. Ghosh of the U.S. Attorney’s Office for Southern District of New York’s Public Corruption Unit and the Criminal Division’s Fraud Section are prosecuting the case.

The Fraud Section is responsible for investigating and prosecuting all FCPA matters.  Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Laura Wertheimer, Inspector General for the Federal Housing Finance Agency Office of Inspector General (“FHFA-OIG”), and Michael J. Missal, Inspector General for the U.S. Department of Veterans Affairs (“VA”) Office of Inspector General (“VA-OIG”), announced today the settlement of a civil fraud lawsuit against New York law firm Rosicki, Rosicki & Associates, P.C. (“ROSICKI”) and its wholly owned affiliates, Enterprise Process Service, Inc. (“ENTERPRISE”) and Paramount Land, Inc. (“PARAMOUNT”).  The settlement resolves the United States’ claims, asserted under the False Claims Act, alleging that ROSICKI used its affiliates, ENTERPRISE and PARAMOUNT, to systematically generate false and inflated bills for foreclosure-related and eviction-related expenses, and caused those expenses to be submitted to and paid for by the Federal National Mortgage Association, known colloquially as Fannie Mae.  The settlement also resolves claims arising from identical misconduct in connection with eviction-related expenses that were submitted to and paid for by the VA.  As part of the settlement approved by U.S. District Judge Jed S. Rakoff, ROSICKI, ENTERPRISE, and PARAMOUNT admitted and accepted responsibility for their conduct and must pay $4.6 million to the United States.  The settlement also requires ROSICKI to implement a compliance program with regular reporting over the next five years, and to publicly disclose the nature of its affiliation with ENTERPRISE and PARAMOUNT on its website.  

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Lawyers are not above the law.  For years, the Rosicki firm submitted bills to Fannie Mae and the VA that contained inflated and unnecessary charges.  This Office will continue to hold accountable those who seek to achieve profits by fraudulent conduct.”

FHFA-OIG Inspector General Wertheimer said:  “FHFA is committed to holding accountable those who waste, steal, or abuse the resources of FHFA or any of the entities it regulates.  We work with U.S. Attorneys’ Offices across the country to protect the interests of the American taxpayers in the housing government-sponsored enterprises and are proud to have partnered with the U.S. Attorney’s Office for the Southern District of New York on this matter.”

VA-OIG Inspector General Michael J. Missal said:  “This civil settlement should send a clear message to individuals and businesses that VA-OIG and its law enforcement partners will vigorously investigate and expose false claims that fraudulently impact programs designed to benefit our veterans and their families.”     

ROSICKI is a New York law firm whose main practice area is mortgage foreclosures.  The two founding ROSICKI partners also own a number of affiliated entities, including ENTERPRISE, a service-of-process company, and PARAMOUNT, a title search company.  Fannie Mae approved ROSICKI to perform legal work in connection with foreclosures on residential properties for which Fannie Mae owned the mortgage loans.  Fannie Mae’s Servicing Guide required, among other things, that all foreclosure costs and expenses be “actual, reasonable, and necessary,” and that foreclosure law firms “must make every effort to reduce foreclosure-related costs and expenses in a manner that is consistent with all applicable laws.”  ROSICKI understood those requirements and represented at various times that the firm was complying with them.  

In fact, as ROSICKI, ENTERPRISE, and PARAMOUNT have admitted, from 2009 through 2018, on certain invoices for service of process (i.e., delivery or attempted delivery of legal papers) in connection with foreclosures or evictions, ENTERPRISE added additional charges to the costs charged by independent contractors and otherwise took actions that increased costs and expenses.  Similarly, on certain invoices for foreclosure searches and title continuations, PARAMOUNT added additional charges to the costs charged by independent contractors and otherwise took actions that increased costs and expenses.  ROSICKI submitted those costs and expenses for payment, with the understanding that Fannie Mae would reimburse for them. 

The settlement also resolves identical conduct by ROSICKI, ENTERPRISE, and PARAMOUNT pertaining to expenses attendant to evictions that ultimately were paid by the VA.

This case arose from a lawsuit filed by a whistleblower under the False Claims Act.  In March of this year, the United States intervened in the case and took over prosecution of some of the claims that the whistleblower asserted.  In a separate settlement agreement, ROSICKI, ENTERPRISE, and PARAMOUNT agreed to pay the United States an additional $1,518,000 to resolve separate False Claims Act claims pursued by the whistleblower, resulting in a total recovery to the United States of $6,118,000. 

*                *                *

Mr. Berman thanked the FHFA-OIG and VA-OIG for their efforts and ongoing support and assistance with the case.

The case is being handled by the Office’s Civil Division.  Assistant U.S. Attorneys Cristy Irvin Phillips, Andrew E. Krause, and Joseph N. Cordaro are in charge of the case.

Four individuals have been charged in an indictment unsealed today in the Southern District of New York with wire fraud, tax fraud, money laundering and other offenses in connection with their alleged roles in a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (“Mossack Fonseca”), a Panamanian-based global law firm, and related entities.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Chief Don Fort of IRS Criminal Investigation (IRS-CI), and Special Agent in Charge Angel M. Melendez of U.S. Immigrations and Customs Enforcement’s Homeland Security Investigations (HSI) New York made the announcement today.

Ramses Owens, 50, a Panamanian citizen; Dirk Brauer, 54, a German citizen; Richard Gaffey, 74, a U.S. citizen, of Medfield, Massachusetts; and Harald Joachim Von Der Goltz, 81, a German citizen, have been charged in an 11-count indictment.  Owens, Gaffey and Von Der Goltz are charged with one count of conspiracy to commit tax evasion, one count of wire fraud, and one count of money laundering conspiracy.  Owens and Brauer have been charged with one count of conspiracy to defraud the United States and one count of conspiracy to commit wire fraud.  Gaffey and Von Der Goltz are additionally charged with four counts of willful failure to file an FBAR.  Von Der Goltz has been additionally charged with two counts of making false statements.

Three of the four defendants named in the indictment have been arrested.  Brauer, who worked as an investment manager for Mossfon Asset Management, S.A. (“Mossfon Asset Management”), an asset management company closely affiliated with Mossack Fonseca, was arrested in Paris, France, on Nov. 15.  Von Der Goltz, a former U.S. resident and taxpayer, was arrested in London, United Kingdom, on Dec. 3.  Gaffey, a U.S.-based accountant, was arrested in Boston, Massachusetts earlier today.  Owens, a Panamanian attorney who worked for Mossack Fonseca, remains at large.   

“Law firms, asset managers, and accountants play key roles enabling entry into the global financial system,” said Assistant Attorney General Benczkowski.  “The charges announced today demonstrate our commitment to prosecute professionals who facilitate financial crime across international borders and the tax cheats who utilize their services.” 

"As alleged, these defendants went to extraordinary lengths to circumvent U.S. tax laws in order to maintain their wealth and the wealth of their clients,” said Manhattan U.S. Attorney Berman.  “For decades, the defendants, employees and a client of global law firm Mossack Fonseca allegedly shuffled millions of dollars through offshore accounts and created shell companies to hide fortunes.  In fact, as alleged, they had a playbook to repatriate un-taxed money into the U.S. banking system.  Now, their international tax scheme is over, and these defendants face years in prison for their crimes.”

“The unsealing of this indictment sends a clear message that IRS-CI is actively engaged in international tax enforcement, and more investigations are on the way,” said IRS-CI Chief Don Fort.  “IRS-CI specializes in unraveling these intricate offshore tax schemes and following the money around the globe wherever it may lead.  Cases like this help maintain the public’s confidence in our tax system by letting them know that we investigate and prosecute those who evade their tax obligation.”

“Today we announce the indictment of four individuals who allegedly defrauded the U.S. government through a large scale, intercontinental money laundering and wire fraud scheme, associated with Mossack Fonseca and its affiliates,” said HSI Special Agent-in-Charge Angel M. Melendez.  “HSI’s El Dorado Task Force, together with the IRS, built a case that uncovered an alleged complex trail of offshore shell corporations and bogus foundations used to disguise the beneficial ownership of huge amounts of money.  These efforts reflect the commitment of U.S. law enforcement to follow that trail and apprehend these criminals regardless of where they are in the world.”

According to the indictment, from at least in or about 2000 through in or about 2017, Owens and Brauer conspired with others to help U.S. taxpayer clients of Mossack Fonseca conceal assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means.  To conceal their clients’ assets and income from the IRS, Owens and Brauer allegedly worked to establish and manage opaque offshore trusts and undeclared bank accounts on behalf of U.S. taxpayers who were clients of Mossack Fonseca.  Owens and Brauer allegedly marketed, created, and serviced sham foundations and shell companies formed under the laws of countries such as Panama, Hong Kong, and the British Virgin Islands, to conceal from the IRS and others the ownership by U.S. taxpayers of accounts established at overseas banks, as well as the income generated in those accounts.  As structured by Mossack Fonseca, the sham foundations typically “owned” the shell companies that nominally held the undeclared assets on behalf of the U.S. taxpayer clients of Mossack Fonseca.  The names of Mossack Fonseca’s clients generally did not appear anywhere on the incorporation paperwork for the sham foundations or related shell companies, although the clients in fact beneficially owned, and had complete access to, the assets of those sham entities and accounts.

In furtherance of the scheme, and in exchange for additional fees, Owens and Brauer allegedly provided support to clients who had purchased the sham foundations and related shell companies by providing corporate meeting minutes, resolutions, mail forwarding, and signature services.  Moreover, Owens and Brauer are alleged to have purposefully established the bank accounts in locations with strict bank secrecy laws, which impeded the ability of the United States to obtain bank records for the accounts.  Owens and Brauer also allegedly instructed U.S. taxpayer clients of Mossack Fonseca about how to repatriate funds to the United States from their offshore bank accounts in a manner designed to keep the undeclared bank accounts concealed.  Among other things, Owens and Brauer instructed clients to use debit cards and fictitious sales to repatriate their funds covertly, the indictment alleges.

Von Der Goltz was allegedly one of Mossack Fonseca’s U.S. taxpayer clients.  At all relevant times, Von Der Goltz was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts.  U.S. citizens, resident aliens, and permanent legal residents with a foreign financial interest in or signatory authority over a foreign financial account worth more than $10,000 are required to file a Report of Foreign Bank and Financial Accounts, commonly known as an FBAR, disclosing the account.  Von Der Goltz is alleged to have evaded his tax reporting obligations by setting up a series of shell companies and bank accounts, and hiding his beneficial ownership of the shell companies and bank accounts from the IRS.  These shell companies and bank accounts allegedly made investments totaling tens of millions of dollars.  According to the indictment, Von Der Goltz was assisted in this scheme by Owens and by Gaffey, a partner at a U.S.-based accounting firm.  In furtherance of Von Der Goltz’s fraudulent scheme, Von Der Goltz, Gaffey, and Owens are alleged to have falsely claimed that Von Der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and — unlike Von Der Goltz — was not a U.S. taxpayer. 

As alleged in the indictment, Gaffey, in addition to assisting Von Der Goltz evade U.S. income taxes and reporting requirements, also worked closely with Owens to help another U.S. taxpayer client (“Client-1”) of Mossack Fonseca defraud the IRS.  Client-1 allegedly maintained a series of offshore bank accounts, which Mossack Fonseca helped Client-1 conceal from the IRS for years.    The indictment further alleges that, upon the advice of Owens and Gaffey, Client-1 covertly repatriated approximately $3 million of Client-1’s offshore money to the United States by falsely stating on Client-1’s federal tax return that the money represented proceeds from the sale of a company.  After Client-1 repatriated approximately $3 million in this manner, approximately $1 million still remained in Client-1’s offshore account, the existence of which remained hidden from the IRS.  

The charges in the indictment are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

The investigation was conducted by IRS-CI and HSI with significant assistance by the Justice Department’s Tax Division and the FBI.  The Justice Department’s Office of International Affairs and law enforcement partners in France and the United Kingdom secured the arrests of the defendants located overseas.                                                                                                                                                                                                                                                                                                                                                                                                                                                    

This case is being prosecuted by Trial Attorneys Michael Parker and Parker Tobin of the Criminal Division’s Money Laundering and Asset Recovery Section of the Justice Department and Assistant U.S. Attorneys Sarah E. Paul, Nathan Rehn, Kristy Greenberg and Andrew Adams of the Manhattan U.S. Attorney’s Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit, with substantial support from previous co-counsel, Assistant U.S. Attorney Ann Marie Blaylock of the Western District of Kentucky.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Brian A. Benczkowski, Assistant Attorney General of the Criminal Division of the U.S. Department of Justice, Don Fort, Chief, Internal Revenue Service-Criminal Investigation (“IRS-CI”), and Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today the unsealing of an indictment charging RAMSES OWENS, DIRK BRAUER, RICHARD GAFFEY, and HARALD JOACHIM VON DER GOLTZ, with wire fraud, tax fraud, money laundering, and other offenses in connection with their roles in a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (“Mossack Fonseca”), a Panamanian-based global law firm, and related entities.

Three of the four defendants named in the indictment have been arrested.  BRAUER, who worked as an investment manager for Mossfon Asset Management, S.A., an asset management company closely affiliated with Mossack Fonseca, was arrested in Paris, France, on November 15, 2018.  VON DER GOLTZ, a former U.S. resident and taxpayer, was arrested in London, United Kingdom, on December 3, 2018.  GAFFEY, a U.S.-based accountant, was arrested in Medfield, Massachusetts, this morning.  OWENS, a Panamanian attorney who worked for Mossack Fonseca, remains at large.    

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants went to extraordinary lengths to circumvent U.S. tax laws in order to maintain their wealth and the wealth of their clients.  For decades, the defendants, employees and a client of global law firm Mossack Fonseca, allegedly shuffled millions of dollars through off-shore accounts and created shell companies to hide fortunes.  In fact, as alleged, they had a playbook to repatriate un-taxed money into the U.S. banking system.  Now, their international tax scheme is over, and these defendants face years in prison for their crimes.”

AAG Brian A. Benczkowski said:  “Law firms, asset managers, and accountants play key roles enabling entry into the global financial system.  The charges announced today demonstrate our commitment to prosecute professionals who facilitate financial crimes across international borders and the tax cheats who utilize their services.”

IRS-CI Chief Don Fort said:  “The unsealing of this indictment sends a clear message that IRS-CI is actively engaged in international tax enforcement, and more investigations are on the way.  IRS-CI specializes in unraveling these intricate offshore tax schemes and following the money around the globe wherever it may lead.  Cases like this help maintain the public’s confidence in our tax system by letting them know that we investigate and prosecute those who evade their tax obligation.”

HSI Special Agent-in-Charge Angel M. Melendez said: “Today we announce the indictment of four individuals who allegedly defrauded the U.S. government through a large scale, intercontinental money laundering and wire fraud scheme, associated with Mossack Fonseca and its affiliates.  HSI’s El Dorado Task Force, together with the IRS, built a case that uncovered an alleged complex trail of offshore shell corporations and bogus foundations used to disguise the beneficial ownership of huge amounts of money.  These efforts reflect the commitment of U.S. law enforcement to follow that trail and apprehend these criminal regardless where they are in the world.”

According to the Indictment, which was unsealed today in Manhattan federal court[1]:

From 2000 through 2017, OWENS and BRAUER conspired with others to help U.S. taxpayer clients of Mossack Fonseca conceal assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means.  To conceal their clients’ assets and income from the IRS, OWENS and BRAUER worked to establish and manage opaque offshore trusts and undeclared bank accounts on behalf of U.S. taxpayers who were clients of Mossack Fonseca.  OWENS and BRAUER marketed, created, and serviced sham foundations and shell companies formed under the laws of countries such as Panama, Hong Kong, and the British Virgin Islands, to conceal from the IRS and others the ownership by U.S. taxpayers of accounts established at overseas banks, as well as the income generated in those accounts.  As structured by Mossack Fonseca, the sham foundations typically “owned” the shell companies that nominally held the undeclared assets on behalf of the U.S. taxpayer clients of Mossack Fonseca.  The names of Mossack Fonseca’s clients generally did not appear anywhere on the incorporation paperwork for the sham foundations or related shell companies, although the clients in fact beneficially owned, and had complete access to, the assets of those sham entities and accounts.

In furtherance of the scheme, and in exchange for additional fees, OWENS and BRAUER provided support to clients who had purchased the sham foundations and related shell companies by providing corporate meeting minutes, resolutions, mail forwarding, and signature services.  Moreover, OWENS and BRAUER purposefully established the bank accounts in locations with strict bank secrecy laws, which impeded the ability of the United States to obtain bank records for the accounts.  OWENS and BRAUER also instructed U.S. taxpayer clients of Mossack Fonseca about how to repatriate funds to the United States from their offshore bank accounts in a manner designed to keep the undeclared bank accounts concealed.  Among other things, OWENS and BRAUER instructed clients to use debit cards and fictitious sales to repatriate their funds covertly.

VON DER GOLTZ was one of Mossack Fonseca’s U.S. taxpayer clients.  At all relevant times, VON DER GOLTZ was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts.  VON DER GOLTZ evaded his tax reporting obligations by setting up a series of shell companies and bank accounts, and hiding his beneficial ownership of the shell companies and bank accounts from the IRS.  These shell companies and bank accounts made investments totaling tens of millions of dollars.  VON DER GOLTZ was assisted in this scheme by OWENS and by GAFFEY, a partner at a U.S.-based accounting firm.  In furtherance of VON DER GOLTZ’s fraudulent scheme, VON DER GOLTZ, GAFFEY, and OWENS falsely claimed that VON DER GOLTZ’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and – unlike VON DER GOLTZ – was not a U.S. taxpayer. 

GAFFEY, in addition to assisting VON DER GOLTZ evade U.S. income taxes and reporting requirements, also worked closely with OWENS to help another U.S. taxpayer client (“Client-1”) of Mossack Fonseca defraud the IRS.  Client-1 maintained a series of offshore bank accounts, which Mossack Fonseca helped Client-1 conceal from the IRS for years.  The indictment further alleges that upon the advice of OWENS and GAFFEY, Client-1 covertly repatriated approximately $3 million of Client-1’s offshore money to the United States by falsely stating on Client-1’s federal tax return that the money represented proceeds from the sale of a company.  After Client-1 repatriated approximately $3 million in this manner, approximately $1 million still remained in Client-1’s offshore account, the existence of which remained hidden from the IRS.   

*                *                *

A chart outlining the charges against each defendant is below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.  The charges in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

COUNT

DEFENDANT

AGE & CITIZENSHIP

MAXIMUM SENTENCE

Count One: Conspiracy to Defraud the United States

18 U.S.C. § 371

RAMSES OWENS

DIRK BRAUER

50, Panamanian Citizen

54, German Citizen

Five years in prison

Count Two: Conspiracy to Commit Wire Fraud

18 U.S.C. § 1349

RAMSES OWENS

DIRK BRAUER

50, Panamanian Citizen

54, German Citizen

20 years in prison

Count Three: Conspiracy to Commit Tax Evasion

18 U.S.C. § 371

RAMSES OWENS

RICHARD GAFFEY

HARALD JOACHIM VON DER GOLTZ

50, Panamanian Citizen

74, U.S. Citizen

81, German Citizen

Five years in prison

Count Four: Wire Fraud

18 U.S.C. § 1343

RAMSES OWENS

RICHARD GAFFEY

HARALD JOACHIM VON DER GOLTZ

50, Panamanian Citizen

74, U.S. Citizen

81, German Citizen

20 years in prison

Count Five: Money Laundering Conspiracy

18 U.S.C. § 1956

RAMSES OWENS

RICHARD GAFFEY

HARALD JOACHIM VON DER GOLTZ

50, Panamanian Citizen

74, U.S. Citizen

81, German Citizen

20 years in prison

Counts Six-Nine: Willful Failure to File an FBAR

31 U.S.C. §§ 5314 & 5322(a)

RICHARD GAFFEY

HARALD JOACHIM VON DER GOLTZ

74, U.S. Citizen

81, German Citizen

10 years in prison for each count

Counts Ten-Eleven: False Statements

18 U.S.C. § 1001

HARALD JOACHIM VON DER GOLTZ

81, German Citizen

Five years in prison for each count

Mr. Berman praised the outstanding investigative work of IRS-CI and HSI, and thanked the Justice Department’s Tax Division and the Federal Bureau of Investigation for their significant assistance in the investigation.  Mr. Berman also thanked the U.S. Justice Department’s Office of International Affairs and law enforcement partners in France and the United Kingdom for their assistance in securing the arrests of the defendants located overseas.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Transnational Criminal Enterprises Unit, working in partnership with the Money Laundering and Asset Recovery Section of the Criminal Division.  Assistant United States Attorneys Sarah E. Paul, Thane Rehn, Kristy Greenberg, and Andrew Adams, along with Trial Attorneys Michael Parker and Parker Tobin of the Money Laundering and Asset Recovery Section, 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CLINT EDWARDS was sentenced on November 30, 2018, to 20 years in prison for enticing a child to engage in illegal sexual activity.  EDWARDS pled guilty on July 2, 2018, before United States District Judge Cathy Seibel, who also imposed the sentence.

According to the Superseding Information, Complaint, and other documents filed in the case to which EDWARDS pled, as well as statements made during the plea proceeding:

In May and June of 2017, EDWARDS used social media and texting applications on his iPhone to entice a 14-year-old minor (the “Victim”) to engage in sexual activity with him.  During their text message conversations, EDWARDS solicited sexually explicit photos and videos from the Victim, and sent the Victim a video of himself engaged in sexual activity.  Despite knowing that the Victim was 14 years old, EDWARDS arranged to meet the Victim in order to have sex.

On June 6, 2017, EDWARDS met the Victim at her apartment building and engaged in sexual activity with her in the building’s basement.  EDWARDS used his iPhone to film a portion of his sexual activity with the Victim.  The basement’s surveillance cameras captured EDWARDS’s sexual conduct with the Victim, as well as his use of a smartphone to film a portion of that conduct.  EDWARDS later traveled with the Victim to his residence in New Windsor, New York, where EDWARDS continued to engage in sexual conduct with the Victim over the course of several days.

On June 13, 2017, law enforcement recovered the Victim from EDWARDS’s residence.  EDWARDS had entered a backyard area of his home shortly before law enforcement arrived, and he fled upon observing law enforcement’s presence.  EDWARDS was arrested on June 16, 2017.

*                *                *

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation.  He thanked the Portchester Police Department and the New Windsor Police Department for their assistance throughout the investigation.

Any individuals who believe they have information concerning the exploitation of children may contact the Federal Bureau of Investigation at 1-212-384-1000 or https://tips.fbi.gov/.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Scott Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General’s (“HHS-OIG”) New York Region, announced today that  FENG QIN, M.D. (“QIN”), a vascular surgeon with practices in Lower Manhattan and Far Rockaway, Queens, has been indicted for healthcare fraud and that the United States has filed a civil fraud complaint against him and his medical practice, QIN MEDICAL P.C., under the False Claims Act.  Specifically, the Indictment and Civil Complaint charge QIN with fraudulently billing Medicare for performing vascular surgery procedures on patients that were not medically reasonable and necessary or covered under Medicare rules.  QIN will be presented before U.S. Magistrate Judge Ona T. Wang this afternoon.  QIN’s case is assigned to U.S. District Judge Ronnie Abrams. 

In 2015, this Office filed and simultaneously settled a civil fraud lawsuit against QIN and his previous employer for engaging in fraudulent billing practices during the time period 2010 through 2012.  As part of that settlement, QIN paid $150,000 and admitted that he was familiar with the applicable Medicare rules and that he had regularly performed vascular surgeries on patients who had not exhibited symptoms justifying the procedures.  As charged in the Indictment and Civil Complaint, QIN later opened his own surgical practice and continued to engage in the same fraudulent conduct.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Feng Qin clearly did not learn his lesson from the previous civil suit this Office filed against him for healthcare fraud – that he must follow Medicare rules and stop billing for surgical procedures that are not clinically justified.  He is now being charged criminally for his alleged failure to do so.”

HHS-OIG Special Agent in Charge Scott Lampert said:  “Performing medically unnecessary services for the purposes of financial gain will not be tolerated.  HHS-OIG is committed to holding providers accountable and protecting the integrity of our nation’s federal healthcare programs.”

According to the Indictment[1] and the Civil Complaint:

Patients with end-stage renal disease (“ESRD”) who are receiving dialysis may require vascular access surgical procedures, such as fistulagrams, where dye is injected into the patient’s vein or artery to visualize blood flow, and percutaneous transluminal angioplasties, in which wires and balloons are inserted into blood vessels that have narrowed in order to restore blood flow.  However, as Medicare billing guidelines made clear, it is not reasonable and necessary for physicians to bill the program for fistulagrams and angioplasties unless the patient has specific and documented clinical problems, such as significant difficulty receiving dialysis properly. 

The patients at QIN’s medical practice primarily consisted of ESRD patients undergoing dialysis treatment.  During the relevant period, from 2015 to 2016, QIN routinely scheduled patients for fistulagrams and angioplasties three months in advance, and performed fistulagrams and angioplasties on these patients as a matter of routine, regardless of whether there was a justifiable clinical reason to do so.  Furthermore, he sometimes misrepresented the medical conditions of patients in their medical records to make it seem as if they suffered from symptoms that would warrant the procedures when they did not.  QIN’s practice unlawfully billed and received payment from Medicare for these procedures, which were excluded from Medicare coverage, as he knew.

*                      *                      *

FENG QIN, 54, of New York, New York, is charged with one count of healthcare fraud, and faces a maximum sentence of 10 years.  The charge contained in the Indictment against QIN is merely an accusation, and the defendant is presumed innocent unless and until proven guilty.

The allegations of fraud stated in the Civil Complaint were first brought to the attention of federal law enforcement by a whistle-blower who filed a lawsuit under the False Claims Act.

The criminal case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Jean-David Barnea and Michael K. Krouse are in charge of the case.  The civil case is being handled by the Office’s Civil Frauds Unit.  Assistant United States Attorney Barnea is in charge of the case.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that TOM SHIN pled guilty to charges of aiding the preparation of a false tax return and wire fraud.  SHIN pled guilty before U.S. District Judge Valerie E. Caproni.

U.S. Attorney Geoffrey S. Berman said:  “Tom Shin admitted today that he violated his clients’ trust by filing false tax returns on their behalf in a scheme to defraud his clients of more than $1.3 million that was intended to pay taxes owed to the federal and state governments.  Shin will now have to answer for his actions.”

According to the allegations in the Complaint and Indictment to which SHIN pled guilty:

SHIN was hired to prepare joint federal and state tax returns for two individuals (the “Clients”) for tax year 2017.  SHIN showed the Clients completed tax return forms indicating that the Clients owed approximately $1.3 million in taxes.  However, SHIN actually filed false returns on behalf of the Clients without their knowledge, which concealed the Clients’ tax liability.  SHIN then, in connection with applications for extensions of time to file his personal tax returns, directed tax authorities to withdraw approximately $1.3 million from the Clients’ bank account, and then filed personal tax returns seeking an approximately $1.3 million refund.  The net result of the alleged scheme would have been a transfer of approximately $1.3 million from the Clients’ bank account to SHIN.

*                *                *

SHIN, 36, of Staten Island, New York, pled guilty to one count of aiding the preparation of a false tax return, which carries a maximum penalty of three years in prison, and one count of wire fraud, which carries a maximum penalty of 20 years in prison.  As a condition of his plea, SHIN also agreed to forfeit $335,894. 

SHIN is scheduled to be sentenced by Judge Caproni on March 4, 2019, at 12:00 p.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 thanked the Internal Revenue Service and the New York State Department of Taxation and Finance for their outstanding work.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today that the Madoff Victim Fund established by the Department of Justice began the distribution of $695.4 million in funds forfeited to the United States Government in connection with the Bernard L. Madoff Investment Securities LLC (“BLMIS”) fraud scheme. These funds will be sent to more than 27,000 victims worldwide, the third in a series of payments from the Madoff Victim Fund to victims of the BLMIS fraud that will ultimately total more than $4 billion.  Another $5 billion in assets recovered by the U.S. Attorney’s Office are being separately paid to Madoff victims through the BLMIS Customer Fund administered by the Securities Investor Protection Act Trustee.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Bernie Madoff committed history’s largest Ponzi scheme.  This Office prosecuted Madoff and others who helped perpetrate his fraud, and we assisted in recovering billions of dollars in proceeds from the fraud.  Today’s payment of more than $690 million is this Office’s third installment in a series of distributions that represent our ongoing commitment to find relief for victims of Madoff’s heinous crimes.”

Assistant Attorney General Brian A. Benczkowski said:  “Bernie Madoff’s scheme devastated retirement and pension funds, charitable organizations, and thousands of individual investors spread across 49 States, the District of Columbia, and 121 other countries.  The payments announced today could not have happened without the prosecutors’ relentless pursuit of proceeds of Madoff’s fraud through civil forfeiture – and, as a result of their efforts and those of the Criminal Division’s Money Laundering and Asset Recovery Section, victims who would not have seen a dime in other compensation programs will now recover more than half of their losses.”

FBI Assistant Director William F. Sweeney Jr. said:  “While today’s distribution of funds is indeed significant in scope, we understand no amount of money could ever restore the damage done by Madoff as a result of his selfish behavior and unforgivable financial crimes.  To all of his many victims and their families, we realize this gesture may not provide the consolation necessary to remove the pain and suffering you have been brought to bear, but we are hopeful it provides some sense of relief, and we remain committed to achieve justice for all victims of inexcusable financial crimes.”

Since the early 1970s, BERNARD L. MADOFF (“MADOFF”) used his position as Chairman of BLMIS, the investment advisory business he founded, to steal billions from his clients.  On March 12, 2009, MADOFF pled guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family, and select members of his inner circle.  On June 29, 2009, United States District Judge Denny Chin sentenced MADOFF to 150 years in prison for running the largest fraudulent scheme in history.  Judge Chin ordered MADOFF to forfeit $170,799,000,000 as part of MADOFF’s sentence.

The Madoff Victim Fund is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.  The two prior distributions from the Madoff Victim Fund have already returned nearly $1.3 billion to Madoff victims, and this third distribution will increase that total to almost $2 billion.

Of the approximately $4.05 billion that will ultimately be made available to victims through the Madoff Victim Fund, approximately $2.2 billion was collected as part of the civil forfeiture recovery from the estate of deceased MADOFF investor Jeffry Picower.  An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. for MADOFF-related Bank Secrecy Act violations.  Additional funds were collected through criminal and civil forfeiture actions against MADOFF and his co-conspirators, and certain MADOFF investors.

Mr. Berman praised the work of the FBI and the Madoff Victim Fund, and thanked the Money Laundering and Asset Recovery Section of the Department of Justice’s Criminal Division for their assistance.

For more information about the Madoff Victim Fund, compensation to victims of BLMIS, eligibility criteria, and payment information, please visit www.madoffvictimfund.com.

The case is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant United States Attorney Louis A. Pellegrino is in charge of the case.          

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Lesley Brovner, Acting Commissioner of the New York City Department of Investigation (“DOI”), and James D. Robnett, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that ELIANA BAUTA, GERALDINE PEREZ, and ERIC GONZALES were charged in Manhattan federal court with six counts related to their theft of over $300,000 in funds from the New York City Human Resources Administration (“HRA”).  BAUTA perpetrated the offenses in her capacity as an HRA employee.  PEREZ is also charged with a separate fraudulent scheme involving over $90,000 of stolen or fraudulently issued Treasury checks.  BAUTA was arrested by the U.S. Marshals in Florida, and was presented in the United States District Court for the Middle District of Florida this afternoon.  PEREZ and GONZALEZ will appear tomorrow for presentment in the Southern District of New York before Magistrate Judge Gabriel W. Gorenstein. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As an HRA employee, Eliana Bauta was supposed to help New Yorkers in need.  Instead, she and her co-defendants allegedly helped themselves, stealing hundreds of thousands in emergency benefits funds.  As today’s arrests make clear, we will not tolerate alleged abuses of trust in City agencies, and we remain committed to ensuring that federal and local funds go to the intended recipients, not the pockets of unscrupulous employees and their families and friends.”

IRS-CI Special Agent-in-Charge Robnett said:  “When stolen identities are used to file fraudulent tax returns, it robs all of us.  IRS-CI will investigate these alleged crimes and protect this country’s tax administration.”

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

HRA is an agency of the City of New York responsible for administering the majority of the City’s public assistance programs.  Among other things, HRA provides temporary, emergency cash assistance to individuals and families with social service and economic needs to assist them in reaching self-sufficiency.  The emergency assistance is funded by the federal government as well as by New York State and City. 

Since in or about 2015, DOI has been investigating two related schemes in which an HRA employee – ELIANA BAUTA – defrauded HRA and the City of New York by using her position to commit public assistance fraud.  BAUTA worked as a Job Opportunity Specialist for HRA from approximately January 2008 to on or about May 23, 2018.  As a Job Opportunity Specialist, BAUTA was at various points responsible for interviewing benefits applicants, compiling and submitting applicants’ paperwork, and disbursing applicants’ benefits. 

In the first of the two schemes, BAUTA is alleged to have caused the fraudulent issuance of emergency benefits funds to relatives and acquaintances, including GERALDINE PEREZ and ERIC GONZALES, among others, who in truth and in fact did not qualify for those funds.  For example, BAUTA altered a police report submitted by an actual HRA client by changing the name of the victim to a family member’s name, and then entered the doctored report into HRA systems in support of a request for benefits to be issued to that family member.  On another occasion, BAUTA submitted a request for emergency benefits to be issued to an individual after an alleged disaster, but no such disaster had occurred, and the payments were intended to repay that individual for putting a supernatural curse on BAUTA’s ex-boyfriend.  Both PEREZ and GONZALEZ were knowing recipients of such fraudulently issued funds and shared the proceeds with BAUTA.

In the second scheme, BAUTA is alleged to have obtained access to and misappropriated emergency benefits checks issued to actual HRA clients.  Instead of providing the checks to the legitimate clients in need of emergency funding, BAUTA gave them to PEREZ and GONZALES, among other of BAUTA’s relatives and associates, who deposited the checks in their own bank accounts and withdrew the funds, and then shared the proceeds with BAUTA.  In total, the two schemes resulted in losses to HRA of at least $309,000 in public funds.

In addition to obtaining stolen HRA checks into her bank account and the bank accounts of family members, PEREZ is also alleged to have deposited or caused to be deposited into these same accounts improperly obtained United States Treasury checks that were issued to other individuals as tax refunds.  In total, 23 such checks worth over $91,000 were deposited into bank accounts of PEREZ and her family members and associates.  PEREZ then split the proceeds with a tax preparer who assisted in the scheme.

*                *                *

ELIANA BAUTA, 35, GERALDINE PEREZ, 60, and ERIC GONZALES, 26, all of the Bronx, New York, are each charged with one count of conspiracy to commit federal program theft, which carries a maximum sentence of five years in prison; two counts of federal program theft, each of which carries a maximum sentence of 10 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison.  BAUTA is also charged with one count of aggravated identity theft, which carries a mandatory consecutive sentence of two years in prison.  PEREZ is also charged with one count of receiving stolen government money or property, which carries a maximum sentence of 10 years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Berman praised the investigative work of DOI and the IRS, and noted that the investigation is continuing.  

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Paul Monteleoni and Catherine Ghosh are in charge of the prosecution.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSE SANTIAGO-ORTIZ was sentenced today to three consecutive life sentences for murder, participating in a narcotics conspiracy, and firearms offenses.  SANTIAGO-ORTIZ was convicted on May 15, 2018, following a one-week jury trial before U.S. District Judge Lewis A. Kaplan, who also imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Over eight years ago, in service of a violent drug crew, Jose Santiago-Ortiz brutally and senselessly murdered Jerry Tide.  Now, thanks to the extraordinary work of the FBI, Santiago-Ortiz stands convicted of that murder and other crimes, and will spend the rest of his life in prison.”

According to the Complaint, the Indictment, other filings in Manhattan federal court, evidence at trial, and statements made in court proceedings:

On September 11, 2010, SANTIAGO-ORTIZ shot and killed Jerry Tide in the vicinity of Jerome Avenue and 182nd Street in the Bronx.  Between 2010 and November 2015, SANTIAGO-ORTIZ was the leader of a violent heroin trafficking enterprise (the “Flow Heroin Enterprise”) that trafficked kilogram quantities of heroin, stamped “Flow,” in the Bronx and to Rutland, Vermont.  SANTIAGO-ORTIZ killed Jerry Tide in part to increase his position within the Flow Heroin Enterprise.  Following his arrest on state charges in March 2014, SANTIAGO-ORTIZ continued to direct narcotics trafficking and acts of violence from prison.  In addition, in 2015, members of the Flow Heroin Enterprise engaged in several shootings with rival drug dealers in the Bronx.

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In addition to the prison term, SANTIAGO-ORTIZ, 27, was sentenced to five years of supervised release.

Mr. Berman thanked the Federal Bureau of Investigation’s New York Field Division for their work on the investigation.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant U.S. Attorneys Shawn G. Crowley, Lauren B. Schorr, and George D. Turner are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ashan M. Benedict, 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 of a Superseding Indictment, charging three additional individuals, JOWAYNE TOMLISON, SEAN KNOTT, and ELIZABETH MCCASKILL, with trafficking in firearms, including the trafficking of firearms from South Carolina to the New York City area.  A fourth defendant, Dayvon Chestnut, was previously arrested and indicted on the same charges.  TOMLISON and KNOTT were arrested today and will be presented today at the United States Courthouse in Manhattan.  MCCASKILL was arrested this afternoon in the District of South Carolina. 

U.S. Attorney Geoffrey S. Berman said:  “The defendants conspired to put illegal firearms on the streets of New York, increasing the risk of gun violence.  Today, thanks to our partners at the ATF and the NYPD, they face federal charges for their crimes.”

ATF Special Agent-in-Charge Ashan M. Benedict said:  “Protecting Americans from gun violence is central to the ATF mission.  The defendants are alleged to have been part of a ring responsible for numerous illegal firearms out on our city streets.  The ATF/ NYPD Joint Firearms Task Force is committed to disrupting and dismantling trafficking rings and bringing those responsible to justice.  I would like to thank the United States Attorney’s Office for prosecuting this case.”                         

According to the allegations and information in the public record, including the allegations in the Superseding Indictment[1]:

From 2016 to 2018, Chestnut was unlawfully purchasing firearms in South Carolina for resale, and directing others, such as MCCASKILL, to do the same.  In April and May 2018, Chestnut traveled to the New York City area on at least four occasions to distribute those firearms.  TOMLISON and KNOTT obtained firearms from Chestnut for further resale to other individuals.    

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All four defendants – Chestnut, 25, of Bishopville, South Carolina, TOMLISON, 28, of Brooklyn, New York, KNOTT, 52, of Queens, New York, and MCCASKILL, 29, of Bishopville, South Carolina, are charged with conspiracy to traffic in firearms and firearms trafficking, each of which carries a maximum statutory penalty of five years in prison.            

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

Mr. Berman praised the efforts of the ATF and NYPD in this case.

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorney Sarah Krissoff 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 forth herein constitute only allegations, and every fact described should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that KEVIN PINNOCK, a/k/a “Kev Savage,” a/k/a “Sav,” was sentenced yesterday to 12 years and three months in prison for using the internet to facilitate sex trafficking, possessing crack cocaine with intent to distribute, possessing a firearm in furtherance of drug trafficking, and possessing stolen identification documents.  PINNOCK previously pled guilty before United States District Judge Deborah A. Batts, who also imposed yesterday’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Kevin Pinnock used violence and coercion to force women to engage in commercial sex for his own profit.  He will now serve a substantial prison sentence for his crimes.  The prosecution of Kevin Pinnock is part of our determined effort to deliver justice to victims of sex trafficking and other forms of commercial exploitation, and to deter others from engaging in this predatory criminal conduct.”

In sentencing PINNOCK, Judge Batts said:  “The nature of the crimes in which the defendant was convicted” were “unspeakable, violent, gratuitous crimes he arrogantly committed on young women for his financial gain,” and that his theft of others’ identities “show[s] a shocking disregard on the part of the defendant for the havoc his crimes create for innocent victims in terms of their ruined credit and long-term ramifications on their financial lives.”

According to the Complaint, Indictment, Superseding Indictment, and other documents filed in the case, as well as statements made during court proceedings:

In 2015 and 2016, PINNOCK posted online advertisements to solicit customers to engage in commercial sex with women PINNOCK forced into prostitution by violence, abuse, and coercion.  PINNOCK retained virtually all of the profits from his sex trafficking business. 

Since at least November 2016, PINNOCK sold crack cocaine and possessed a loaded firearm, which had been stolen, in order to protect his drug dealing business.  He also possessed dozens of stolen identification cards – including driver’s licenses and Social Security cards – which he sold to other individuals who were engaged in identity theft and fraud.  Many of the identification cards had been obtained through the commission of robberies.

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In addition to his prison term, PINNOCK, 22, of the Bronx, New York, was sentenced to three years of supervised release, a forfeiture money judgment in the amount of $15,000, and restitution in the amount of $100,000.

Mr. Berman praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms, and Explosives and United States Immigration and Customs Enforcement’s Homeland Security Investigations, and thanked the United States Secret Service, the Social Security Administration’s Office of the Inspector General, the New York City Police Department, and the Bronx County District Attorney’s Office for their assistance.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Robert B. Sobelman is in charge of the prosecution.