Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that SHOLOM MURATOV and MENACHEM ABRAMOV were convicted yesterday, following a seven-day trial in Manhattan federal court, of conspiring to defraud diamond sellers in Mumbai, India out of more than $12 million in loose diamonds. MURATOV will be sentenced on March 26, 2019 and ABRAMOV will be sentenced on March 28, 2019, by Judge Lorna G. Schofield, who presided over the trial.

Ten other defendants have previously pled guilty in connection with their participation in this and related schemes.

Manhattan U.S. Attorney Geoffrey S. Berman said: “These defendants engaged in a brazen, multi-million dollar fraud scheme extending from New York to Mumbai.  Thanks to the outstanding work of our law enforcement partners, these fraudsters have been convicted at trial and will be sentenced for their crime.

According to the evidence presented at trial:

From in or about December 2015, up to and including at least in or about December 2016, MURATOV and ABRAMOV participated in a coordinated and wide-ranging conspiracy to defraud a group of diamond wholesalers in Mumbai (the “Victim Merchants”) out of millions of dollars in loose diamonds known as “melee” diamonds. The scheme involved numerous misrepresentations to the Victim Merchants, including but not limited to: (i) the defendants’ corporate affiliations; (ii) the longevity and track records of those corporations; (iii) that the defendants were not affiliated with one another, and, most significantly; (iv) purporting to agree to payment terms proposed by the Victim Merchants in order to induce the Victim Merchants to release diamonds without having received full payment.  Together, through these fraudulent misrepresentations, the defendants succeeded in convincing the Victim Merchants to provide them over $12 million worth of loose diamonds, for which MURATOV, ABRAMOV, and their co-conspirators provided no payment.  Members of the conspiracy then sold the diamonds in Manhattan’s Diamond District.

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MENCHAM ABRAMOV, 32, and SHOLOM MURATOV, 36, have been convicted of conspiring to commit mail fraud, 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 work of the FBI, the CBP, and the NYPD.

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

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 unsealing of a superseding indictment against TAN WEE BENG, a/k/a “WB,” for conspiring to use the U.S. financial system to conduct millions of dollars’ worth of transactions to finance shipments of goods to the Democratic People’s Republic of Korea (“DPRK” or “North Korea”) by a Singapore-based commodities company (“Company-1”), of which TAN WEE BENG is a director and part-owner.  The Indictment charges TAN WEE BENG with conspiring to violate United States sanctions on the DPRK by conducting those illicit transactions on behalf of North Korean entities; laundering funds in connection with those illegal transactions; defrauding several financial institutions by concealing the true nature of these transactions; and obstructing the enforcement of the sanctions regime by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”).  In addition to these criminal charges, today OFAC designated TAN WEE BENG, Company-1, and another affiliated entity for sanctions, based on the illicit support for North Korea and clandestine financial conduct charged in the Indictment.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “North Korea’s illicit attempts to hide its activities around the world undermine the integrity of the global financial system.  But the DPRK has not acted alone – unscrupulous profiteers in other nations facilitate this malign conduct through their willingness to lie and cheat to conceal their dealings with a pariah state, including by lying to major U.S. banks and laundering money on North Korea’s behalf.  But Tan Wee Beng can no longer hide behind those alleged falsehoods.  He is now a fugitive from American justice, and we look forward to working with our foreign partners to bring Beng to the U.S. to answer for his alleged crimes.”         

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Beng conducted illicit transactions totaling millions of dollars in support of North Korean entities in blatant violation of a host of economic sanctions the United States has established against North Korea and North Korean entities.  The charges unsealed today should serve as a reminder that the FBI will continue to aggressively investigate violations of economic sanctions lawfully imposed by our government.  While Beng remains at large, the FBI is committed to working with its international partners to bring Beng to justice.”

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

Beginning in 2008, the President has repeatedly found that the DPRK constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and declared a national emergency to deal with the threat.  Pursuant to these Presidential declarations, the United States has instituted a host of economic sanctions against North Korea and North Korean entities pursuant to the International Emergency Economic Powers Act (the “IEEPA”).  This sanctions regime prohibits, among other things, financial transactions involving the United States (including U.S. banks) that were intended for the benefit of North Korea or North Korean entities.

Separately, both the United States and the United Nations (the “UN”) have designated for sanctions particular North Korean entities responsible for supporting the regime’s illicit activities.  One such entity, Daedong Credit Bank (“DCB”), was designated by OFAC in June 2013 and by the UN in March 2016.  According to OFAC, DCB is “responsible for managing millions of dollars of transactions in support of the North Korean regime’s destabilizing activities,” and the UN reported that DCB “has knowingly facilitated transactions by using deceptive financial practices.”

Beginning in 2011, TAN WEE BENG conspired to use commodities businesses, including Company-1, of which TAN WEE BENG was both an owner and director, and front companies in Singapore, Thailand, Hong Kong, and elsewhere to violate and evade both prohibitions against North Korea’s access to the U.S. financial system and prohibitions on dealings with certain North Korean entities identified by the U.S. Department of the Treasury, including DCB.  In particular, TAN WEE BENG conspired to deceive U.S. financial institutions into conducting financial transactions on behalf of and for the benefit of DCB and other North Korean entities and persons.  Those illicit transactions were used to launder money from DCB and other North Korean entities and persons to make payments to Company-1 for shipments to North Korea.

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TAN WEE BENG, 41, is a resident and citizen of Singapore.  He is charged with conspiracies to violate the IEEPA, to commit bank fraud, to commit money laundering, and to obstruct the lawful functions of OFAC, as well as with substantive counts of bank fraud and money laundering.  The bank fraud counts carry a maximum sentence of 30 years in prison.  The conspiracy to violate the IEEPA and money laundering counts each carry a maximum sentence of 20 years in prison.  The conspiracy to defraud the United States count carries a maximum sentence of five years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

TAN WEE BENG remains at large.  The United States looks forward to working with our foreign partners to bring BENG to justice.

Mr. Berman praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division, and thanked the Department of Justice’s National Security Division, Counterintelligence and Export Control Section and Office of International Affairs for their assistance.

The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys David W. Denton, Jr., Amanda L. Houle, and Jane Kim are in charge of the prosecution. 

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York announced that BAKTASH AKASHA ABDALLA, a/k/a “Baktash Akasha,” and IBRAHIM AKASHA ABDALLA, a/k/a “Ibrahim Akasha,” pled guilty yesterday in Manhattan federal court to conspiring to import and importing heroin and methamphetamine, conspiring to use and carry machineguns and destructive devices in connection with their drug-trafficking crimes, and obstructing justice by paying bribes to Kenyan officials in an effort to avoid being extradited to the United States.  The defendants were provisionally arrested in Kenya on November 9, 2014, after providing 99 kilograms of heroin and two kilograms of methamphetamine during the course of the investigation to confidential sources acting at the direction of the Drug Enforcement Administration (“DEA”).  Their bribery scheme was thwarted on January 29, 2017, when the defendants were expelled from Kenya and DEA agents brought them to the United States for prosecution.  The defendants pled guilty today before U.S. Magistrate Judge Katharine H. Parker, and they will be sentenced by U.S. District Judge Victor Marrero.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Baktash Akasha Abdalla and his brother, Ibrahim Akasha Abdalla, were the leader and deputy of a sophisticated international drug trafficking network, responsible for tons of narcotics shipments throughout the world. Not only did they manufacture and distribute narcotics for over two decades, they kidnapped, beat, and murdered others who posed a threat to their enterprise. When the brothers encountered legal interference, they bribed Kenyan officials — including judges, prosecutors, and law enforcement officers—in an effort to avoid facing the charges against them in the United States. Today’s pleas put two of the most prolific drug traffickers in the world out of business, and ensure that tons of dangerous narcotics will never reach our shores.”

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

The defendants operated a sprawling and lucrative international drug business, which involved the distribution of multi-ton quantities of narcotics including hashish, ephedrine, methamphetamine, and methaqulone—a Schedule I controlled substance commonly referred to in Europe, South Africa, and elsewhere as “Mandrax” or “mandies,” and in the United States as “Quaaludes.”  For almost two decades, BAKTASH AKASHA ABDALLA acted as the leader of the Akasha Organization, and IBRAHIM AKASHA ABDALLA functioned as his brother’s deputy.  The defendants engaged in acts of violence to protect the reputation of the Akasha Organization and their drug-trafficking business.  For example, in 2014, the defendants kidnapped and assaulted a rival drug trafficker in Kenya named David Armstrong.  The defendants helped orchestrate the murder in South Africa of an associate of Armstrong, who was known as “Pinky” and was shot approximately 32 times in the street.  The defendants subsequently participated in an altercation at a public shopping mall in Kenya with an Armstrong associate named Stanley Livondo, during which IBRAHIM AKASHA ABDALLA threatened Livondo with a pistol in the mall. 

By early 2014, the defendants and other members of the Akasha Organization were working to import ton quantities of methaqualone precursor chemicals into Africa in order to fuel the production of the illicit pills in South Africa.  The defendants used the proceeds of their methaqualone-related business to pursue other illegal ventures, including efforts to import ephedrine that was produced illegally by Avon Lifesciences in India, so that the Akasha Organization and others could manufacture methamphetamine in Africa.  In connection with these methamphetamine-production efforts, the defendants aligned the Akasha Organization and other associates with co-defendant MUHAMMAD ASIF HAFEEZ, a/k/a “Sultan,” and worked together to establish a methamphetamine-production facility in Mozambique.  But the defendants, HAFEEZ, and other co-conspirators were forced to abandon their plan after law enforcement authorities seized approximately 18 tons of ephedrine from an Avon Lifesciences factory in Solapur, India, including several tons of ephedrine that the defendants and HAFEEZ planned to use to manufacture methamphetamine in Mozambique.

Over the course of several months beginning in March 2014, during telephone calls and meetings in Nairobi and Mombasa, Kenya, the defendants agreed to supply, and in fact did supply, multi-kilogram quantities of heroin and methamphetamine to individuals they believed to be representatives of a South American drug-trafficking organization, but who were in fact confidential sources (the “CSes”) working at the direction and under the supervision of the DEA.  The defendants negotiated on behalf of the Akasha Organization to procure and distribute hundreds of kilograms of heroin from suppliers in the Afghanistan/Pakistan region and to produce and distribute hundreds of kilograms of methamphetamine, which they understood would ultimately be imported into the United States. 

During a meeting in Mombasa, Kenya, in April 2014, BAKTASH AKASHA ABDALLA introduced a CS via Skype to one of his heroin suppliers in Pakistan, who said he could provide 420 kilograms of 100 percent pure heroin—which he called “diamond” quality—for distribution in the United States.  Thereafter, in June 2014, a co-defendant began discussing with the CSes his ability to procure methamphetamine precursor chemicals and to establish labs to produce methamphetamine for importation to the United States.  In a meeting in Mombasa in September 2014, BAKTASH AKASHA ABDALLA introduced another co-defendant as a narcotics transporter from Afghanistan who moved ton quantities of narcotics using ships.  BAKTASH AKASHA ABDALLA and a co-defendant also described HAFEEZ to the CSes as one of the top drug traffickers in the world. 

In September and October 2014, IBRAHIM AKASHA ABDALLA personally delivered one-kilogram samples of methamphetamine and heroin to the CSes in Nairobi on behalf of the Akasha Organization.  In early November, IBRAHIM AKASHA ABDALLA personally delivered an additional 98 kilograms of heroin to the CSes in Nairobi on behalf of the Akasha Organization.  A few days later, IBRAHIM AKASHA ABDALLA also delivered another kilogram of methamphetamine. In the course of these negotiations, the Akasha Organization provided a total of 99 kilograms of heroin and two kilograms of methamphetamine to the CSes, and agreed to provide hundreds of kilograms more of each. 

The defendants, along with Gulam Hussein and Vijaygiri Anandgiri Goswami, were provisionally arrested by Kenyan Anti-Narcotics Unit officers on November 9, 2014, in Mombasa, Kenya, prior to another planned meeting with the CSes.  At the time of the provisional arrests in Kenya, 500 kilograms of heroin brokered by HAFEEZ were being transported through international waters to the defendants in Africa.  The defendants directed the ship to return to the Afghanistan/Pakistan region rather than risk interdiction upon arrival.  Following the arrests and during pending extradition proceedings, the defendants continued to distribute ton quantities of narcotics.  They used some of the drug proceeds to bribe Kenyan officials— including judges, prosecutors, and law enforcement officers—in an effort to avoid facing the charges against them in the United States.    

On January 29, 2017, the Kenyan government expelled the defendants, and the DEA brought them to the Southern District of New York for prosecution.  HAFEEZ was provisionally arrested in London in August 2017, and the United States has requested his extradition from the United Kingdom.

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BAKTASH AKASHA ABDALLA, 41, and IBRAHIM AKASHA ABDALLA, 29, each pleaded guilty to conspiring to import heroin into the United States, conspiring to import methamphetamine into the United States, distributing heroin while knowing and intending that the drugs would be imported into the United States, and distributing methamphetamine while knowing and intending that the drugs would be imported into the United States.  Each of these four crimes carries a maximum sentence of life imprisonment and a mandatory minimum sentence of 10 years in prison.  The defendants also pleaded guilty to participating in a conspiracy to carry and use machineguns and destructive devices during and in relation to, and to possess machineguns and destructive devices in furtherance of, drug-trafficking offenses, which carries a maximum sentence of life imprisonment.  Finally, the defendants pleaded guilty to obstruction of justice, which carries a maximum sentence of 20 years in prison.  The maximum and minimum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.  The defendants are scheduled to be sentenced before Judge Marrero on February 1, 2019.

Mr. Berman praised the outstanding efforts of the Special Operations Division of the DEA, Bilateral Investigations Unit.  Mr. Berman also thanked the DEA Dubai Country Office, the DEA Nairobi Country Office, the DEA Pretoria Country Office, the DEA New Delhi Country Office, the U.S. Department of Justice’s Office of International Affairs, Kenya’s Anti-Narcotics Unit, Kenya’s Director of Public Prosecutions, Kenya’s Director of Criminal Investigations, local Nairobi law enforcement officers, and the Government of Kenya.

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

The charges contained in the Indictment against MUHAMMAD ASIF HAFEEZ, a/k/a “Sultan,” are merely accusations, and HAFEEZ is presumed innocent unless and until proven guilty.

 

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[1] The descriptions set forth below of conduct by co-defendant MUHAMMAD ASIF HAFEEZ, a/k/a “Sultan,” constitute only allegations, and every fact described should be treated as an allegation with respect to HAFEEZ.

Robert Khuzami, Attorney for the United States, acting under authority conferred by 28 U.S.C. § 515, announced today that former New York State Senate Majority Leader DEAN SKELOS was sentenced today to 51 months in prison after having been found guilty by a federal jury of using his official position to obtain more than $300,000 in bribes and extortion payments that were paid to his son, ADAM SKELOS, in exchange for DEAN SKELOS’s official acts.  ADAM SKELOS, who was convicted by the same jury, was also sentenced to four years in prison.  The defendants had previously been found guilty of the same offenses by a jury in December 2015, but their convictions were overturned by the U.S. Court of Appeals for the Second Circuit as a result of the Supreme Court’s decision in McDonnell v. United States. DEAN SKELOS and ADAM SKELOS were sentenced in Manhattan federal court by U.S. District Judge Kimba M. Wood, who also presided over both jury trials.   

Deputy U.S. Attorney Robert Khuzami said:  “Former State Senate Majority Leader Dean Skelos was entrusted with enormous power and responsibility, power a unanimous jury of his peers has now concluded for a second time that Skelos repeatedly abused in pursuit of illegal payments to his son, Adam Skelos.  The sentences imposed today are but a small down-payment to correct the damage they did to our citizens’ faith in state government.  At the same time, these same citizens can have faith that those who abuse the public trust for their personal benefit will be caught and sentenced to substantial prison terms.”

In imposing today’s sentence of DEAN SKELOS, Judge Wood found that he had lied during his testimony at trial, and cited several examples of DEAN SKELOS’s dishonesties.  Judge Wood increased his sentence to account for his false testimony.

According to the evidence introduced at trial, court filings, and statements made in Manhattan federal court:

From 2011 to 2015, DEAN SKELOS served as Majority Leader and Co-Majority Leader of the New York State Senate, a position that gave him significant power over the operation of New York State government.  DEAN SKELOS repeatedly used this power to pressure companies with business before New York State to make payments to his son, ADAM SKELOS, who substantially depended on these companies for his income.  DEAN SKELOS and ADAM SKELOS were able to secure these illegal payments through implicit and explicit representations that DEAN SKELOS would use his official position to benefit those who made the payments, and punish those who did not.  In total, DEAN SKELOS obtained over $300,000 in payments to ADAM SKELOS through persistent and repeated pressure applied to senior executives of three different companies that needed legislation passed in the New York State Senate and other official actions from DEAN SKELOS. 

The Glenwood Scheme

Beginning in late 2010, and continuing for approximately two years, DEAN SKELOS repeatedly solicited payments for ADAM SKELOS from representatives of Glenwood Management Corp. (“Glenwood”), a major New York City real estate company.  DEAN SKELOS’s solicitations for payments to ADAM SKELOS took place during the same meetings when Glenwood’s representatives were asking for DEAN SKELOS’s assistance with New York State legislation that was crucial to Glenwood’s profitability.  As a result of the sustained pressure from DEAN SKELOS, representatives of Glenwood arranged for a $20,000 direct payment to ADAM SKELOS and further arranged for Abtech Industries (“Abtech”), an Arizona-based storm water technology company in which Glenwood’s founding family owned a stake, to make $4,000 monthly payments to ADAM SKELOS.  Glenwood arranged for these payments to ADAM SKELOS due to the company’s substantial dependence on DEAN SKELOS for real estate tax abatements and other real estate legislation favorable to Glenwood, and based in part on statements from DEAN SKELOS that he would punish those in the real estate industry who defied him. 

The Abtech Scheme

After successfully obtaining ADAM SKELOS’s Abtech consulting contract for $4,000 per month, DEAN SKELOS assisted Abtech in causing Nassau County to issue a request for proposal (“RFP”) for a public works project that was tailored to Abtech’s storm water technology.  DEAN SKELOS and ADAM SKELOS then threatened to use DEAN SKELOS’s official powers to block Abtech’s bid for the RFP unless the company sharply increased ADAM SKELOS’s payments.  Abtech ultimately agreed to increase ADAM SKELOS’s payments to $10,000 per month because the company feared that, if it did not meet the defendants’ demands, it would lose the Nassau County contract that was critical to its business.  In return for the payments to ADAM SKELOS, and to ensure that they would continue, DEAN SKELOS facilitated the approval of Abtech’s $12 million contract with Nassau County and thereafter took numerous additional official actions to benefit Abtech. 

For example, when Abtech and ADAM SKELOS believed Nassau County was insufficiently funding the company’s project, DEAN SKELOS pressured Nassau County officials to make additional funds available.  In January 2015, DEAN SKELOS was intercepted in a call with the Nassau County Executive in which he asked for an explanation for the lack of funding, complaining on behalf of ADAM SKELOS that “somebody feels like they’re getting jerked around the last two years.”  The next day, DEAN SKELOS traveled with the County Executive and his Deputy to the funeral of a New York City Police Department officer, where DEAN SKELOS reiterated in person his demand that the County expedite payments to Abtech. 

DEAN SKELOS also used his official position in an attempt to direct a portion of a $5.4 billion sum that the State had recovered in litigation with financial services companies (the “Settlement Funds”) in a way that would benefit water projects and contracts that were being pursued by Abtech.  For example, at the same time ADAM SKELOS was attempting to obtain additional Abtech storm water projects with local municipalities by claiming that the projects could be funded through State funds, DEAN SKELOS was advocating for a portion of the Settlement Funds to be allocated for storm water projects. 

DEAN SKELOS also used his official position in an attempt to enact State “design-build” legislation that was being sought by Abetch and that Nassau County officials had explained was necessary to implement fully the $12 million contract with Abtech.  Nassau County officials provided DEAN SKELOS with proposed legislation that DEAN SKELOS stated he would support if backed by the Governor.  In a recorded call on ADAM SKELOS’s “burner” phone, ADAM SKELOS told a representative of Abtech that DEAN SKELOS had privately assured ADAM SKELOS that DEAN SKELOS was “going to be sure that [the design-build legislation] gets done.”  Later, ADAM SKELOS told Abtech’s representatives that while design-build legislation would not be enacted as part of the April 2015 budget process, DEAN SKELOS would continue to pursue it in the legislative session continuing through June 2015.  The defendants were arrested in May 2015 before their plan to enact the legislation could be completed.

The PRI Scheme

During the same time period as the Glenwood and Abtech schemes, DEAN SKELOS pressured yet a third company, called Physician Reciprocal Insurers (“PRI”), to pay ADAM SKELOS.  PRI is a major medical malpractice insurance firm, whose existence depends on New York State legislation that exempts the firm from being liquidated even though its liabilities exceed its assets.  Similar to the Glenwood scheme, DEAN SKELOS solicited payments to ADAM SKELOS from PRI during the same conversations when PRI was seeking DEAN SKELOS’s support for the extension of this legislation that was critical to PRI’s business. 

In response to the pressure from DEAN SKELOS to find sources of payment to ADAM SKELOS, PRI agreed to, among other things, give ADAM SKELOS a full-time job with benefits.  Even though ADAM SKELOS was expected to work 40 hours per week, he treated his PRI position as a “no show” job from the outset of his employment.  When ADAM SKELOS’s supervisor told ADAM SKELOS that he was expected to show up to work, ADAM SKELOS berated him and told him “[g]uys like you . . . couldn’t shine my shoes. . . . And if you talk to me like that again, I will smash your fucking head in.”  When the CEO of PRI told DEAN SKELOS that ADAM SKELOS was not showing up to work and was mistreating the other employees, DEAN SKELOS expressed no concern about ADAM SKELOS’s conduct and simply told the CEO to “[w]ork [it] out.”  Based on this conversation, among others, the CEO understood that if he did not continue to pay ADAM SKELOS, despite his non-performance and misconduct at work, he was risking DEAN SKELOS taking legislative action against PRI.  Later, when former Senator Alphonse D’Amato, one of PRI’s lobbyists, reiterated to DEAN SKELOS that ADAM SKELOS was not showing up to work and was being disruptive when he actually did show up, DEAN SKELOS also dismissed Senator D’Amato’s concerns and told him that ADAM SKELOS needed the income and benefits from PRI.

DEAN SKELOS did not inform any of the companies he pressured to pay ADAM SKELOS that, between 2011 and 2014, ADAM SKELOS was making between $230,000 and $441,000 per year.  

During the time period that PRI was paying ADAM SKELOS, DEAN SKELOS repeatedly voted to extend PRI’s legislative protection from liquidation as well as other legislation that was being sought by PRI.

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In addition to the prison sentence, Judge Wood ordered DEAN SKELOS, 70, of Rockville Centre, New York, to pay a $500,000 fine.  DEAN SKELOS also was sentenced to one year of supervised release.  In imposing a fine on DEAN SKELOS, Judge Wood took into account the tax-payer funded pension that DEAN SKELOS would be receiving.  In addition to the prison term, Judge Wood sentenced ADAM SKELOS, 36, also of Rockville Centre, to three years of supervised release. 

DEAN SKELOS and ADAM SKELOS were found guilty by a unanimous jury on July 17, 2018, of conspiracy to commit extortion under color of official right, conspiracy to commit honest services wire fraud, three counts of extortion under color of official right, and three counts of soliciting and receiving bribes.  

Mr. Khuzami praised the work of the Criminal Investigators of the United States Attorney’s Office and the Federal Bureau of Investigation, who jointly conducted this investigation.  

This case was prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Edward B. Diskant, Douglas S. Zolkind, and Thomas A. McKay are in charge of the prosecution.

Robert S. Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced the convictions of JAMES GATTO, a/k/a “Jim,” MERL CODE, and CHRISTIAN DAWKINS for conspiring to defraud universities by funneling illicit payments to the families of high-school and college basketball players and concealing those payments – which were prohibited by university policies and NCAA rules – from the schools.  GATTO, the Director of Global Basketball Sports Marketing at Adidas, CODE, an Adidas consultant, and DAWKINS, an aspiring manager of professional athletes, will be sentenced on March 5, 2019, at 10:00 a.m. by Judge Kaplan, who presided over the four-week trial.

Two other scheme participants, MUNISH SOOD, a financial advisor, and THOMAS “T.J.” GASSNOLA, a former Adidas consultant, previously pled guilty in connection with their participation in the fraudulent scheme. 

Mr. Khuzami said:  “Today’s convictions expose an underground culture of illicit payments, deception and corruption in world of college basketball.  These defendants now stand convicted of not simply flouting the rules but breaking the law for their own personal gain.  As a jury has now found, the defendants not only deceived universities into issuing scholarships under false pretenses, they deprived the universities of their economic rights and tarnished an ideal which makes college sports a beloved tradition by so many fans all over the world.”

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

Overview of the Scheme

As found by the jury, GATTO, CODE, and DAWKINS brokered and facilitated the payments funded by Adidas to the families of high school and college aged basketball players in connection with decisions by those players to commit to Adidas-sponsored schools and a promise that the players also would retain the services of DAWKINS and sign lucrative endorsement deals with Adidas upon turning professional.  The payments, which the defendants took great lengths to conceal from the victim-universities, served to defraud the relevant universities in several ways.  First, because the illicit payments to the families of student-athletes rendered those student-athletes ineligible to participate in collegiate athletics, scheme participants conspired to conceal these payments from the universities, thereby causing them to provide or agree to provide athletic-based scholarships and financial aid under false and fraudulent pretenses. Indeed, the defendants and their co-conspirators, who included the families of the student-athletes and, in certain instances, one or more corrupt coaches at the universities, knew that, for the scheme to succeed and the athletic scholarships to be awarded, the illicit payments had to be concealed from the universities, and that certifications, falsely representing that the student-athletes were eligible to compete in Division I athletics, would be submitted to the universities.

Second, the scheme participants further defrauded the universities by depriving the universities of significant and necessary information regarding the non-compliance with NCAA rules by the relevant student-athletes and their families, and, in some cases, by certain corrupt coaches involved in the scheme.  In doing so, the scheme participants interfered with the universities’ ability to control their assets and created a risk of tangible economic harm to the universities, including, among other things, decision-making about the distribution of their limited athletic scholarships; the possible disgorgement of certain profit-sharing by the NCAA; monetary fines; restrictions on athlete recruitment and the distribution of athletic scholarships; and the potential ineligibility of the universities’ basketball teams to compete in NCAA programs generally, and the ineligibility of certain student-athletes in particular.

Allegations Involving the University of Louisville

Beginning in approximately May 2017, GATTO, CODE, DAWKINS, and others worked together to illicitly funnel approximately $100,000 from Adidas to the father of Brian Bowen, then a top-rated high school basketball player, in connection with Bowen’s commitment to play at the University of Louisville, a school whose athletic programs are sponsored by Adidas.  Because the payments to the family of Bowen were both in violation of NCAA rules and illegal, the defendants took steps to conceal them from the University, including funneling the money indirectly through an amateur team affiliated with CODE and a corporation controlled by DAWKINS.  The payments were all funded by Adidas pursuant to phony invoices approved by GATTO, and the first installment was delivered to Bowen’s father in cash in July 2017 in a parking lot in New Jersey.

Allegations Involving the University of Kansas

Between 2016 and 2017, GATTO and GASSNOLA worked together to funnel approximately $90,000 from Adidas to the family of Billy Preston, then a high school basketball player, in connection with Preston’s commitment to play at the University of Kansas, a university whose athletic programs are sponsored by Adidas.  To conceal the payments from the University, GATTO routed the money to Billy Preston’s family indirectly, through an Adidas-sponsored amateur team affiliated with GASSNOLA, and pursuant to sham invoices which GATTO approved.

In addition, in the summer of 2017, GATTO and GASSNOLA agreed to funnel money to the legal guardian of Silvio De Sousa, then a high school basketball player, in connection with De Sousa’s commitment to play at the University of Kansas.  In one instance, GATTO and GASSNOLA were intercepted over a wiretap discussing a $20,000 payment to the legal guardian.

Allegations Involving the North Carolina State University

In approximately November 2015, GATTO and GASSNOLA agreed to funnel approximately $40,000 from Adidas to the family of Dennis Smith Jr., then a high school basketball player, in order to stop Smith Jr. from de-committing from North Carolina State University, a university whose athletic programs are sponsored by Adidas.  GASSNOLA flew to North Carolina to personally deliver the money in cash to a basketball coach at North Carolina State University, who then routed the money to Smith Jr.’s family.  After GASSNOLA made the payment, GATTO reimbursed GASSNOLA via his Adidas-sponsored amateur team. 

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GATTO, 48, of Wilsonville, Oregon, CODE, 44, of Greer, South Carolina, and DAWKINS, 25, of Atlanta, Georgia, were each convicted of one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carry a maximum sentence of 20 years in prison.  GATTO was also convicted of an additional count of wire fraud.

Mr. Khuzami thanked the FBI and the Special Agents of the U.S. Attorney’s Office of the Southern District of New York for their tireless efforts during the investigation and prosecution of this case.

The case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Edward B. Diskant, Noah Solowiejczyk, Eli J. Mark, and Aline R. Flodr are in charge of the prosecution.

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 Division of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment charging four defendants with participating in a criminal organization that committed a series of burglaries and engaged in the interstate transportation of stolen goods between 2006 and 2017.  DAMIR PEJCINOVIC, a/k/a “Damian,” a/k/a “CoCo,” GZIMI BOJKOVIC, a/k/a Jimmy,” ADRIAN FISEKU, and ELVIS CIRIKOVIC, a/k/a “Gorilla,” were arrested this morning and will be presented today before Magistrate Judge Katharine H. Parker.  The case is assigned to U.S. District Judge Victor Marrero.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the indictment, the defendants were part of a sophisticated criminal enterprise that carried out burglaries on both sides of the Atlantic, to the tune of more than $10 million.  Thanks to the outstanding efforts of our partners at the FBI and the NYPD, the defendants now face significant federal charges.”

FBI Special Assistant Director-in-Charge William F. Sweeney Jr. said:  “Today’s charges bring to an end an alleged criminal enterprise whose activity spanned more than a decade and included more than a dozen individual incidents that occurred across the United States and around the world.  This investigation demonstrates the FBI/NYPD Joint Violent Crimes Task Force’s unwavering commitment to bringing justice to these groups, in spite of the challenges created by time or distance.  I would like to thank all of our national and international partners for their contributions to this investigation.  Our success in bringing this case to prosecution would not have been possible without them.”

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

Between 2006 and April 2017, PEJCINOVIC, BOJKOVIC, FISEKU, and CIRIKOVIC participated in a criminal organization whose members and associates engaged in, among other things, the commission of burglaries and interstate transportation and sale of stolen goods.  The criminal organization operated principally in New York City, California, New Jersey, Pennsylvania, Florida, Massachusetts, Maine, and Europe.  Members and associates of the organization committed, conspired to commit, and attempted to commit numerous burglaries of jewelry stores and banks, as well as the interstate transportation and sale of stolen property from the burglaries.  PEJCINOVIC, BOJKOVIC, FISEKU, CIRIKOVIC, and other members and associates of the criminal organization committed the following burglaries and attempted burglaries, among others:

• Between February 2006 and March 2006, PEJCINOVIC and two others participated in a burglary of a restaurant and an attempted burglary of a jewelry store in Portland, Oregon.
• On March 29, 2008, PEJCINOVIC, BOJKOVIC, CIRIKOVIC, and one other participated in a burglary of a jewelry store in Manhattan, which resulted in the theft of jewelry valued at more than $2.5 million.
• On October 11, 2008, PEJCINOVIC and CIRIKOVIC participated in an attempted burglary of a jewelry store in Germany, attempting to steal gold valued at more than €10 million.
• On July 26, 2009, PEJCINOVIC, BOJKOVIC, and two others participated in a burglary of a jewelry store in Manhattan, which resulted in the theft of jewelry valued at more than $850,000.
• On August 25, 2010, PEJCINOVIC and one other participated in an attempted burglary of a jewelry store in Manhattan.
• On August 28, 2010, PEJCINOVIC, BOJKOVIC, and two others participated in a burglary of a jewelry store in Beverly Hills, which resulted in the theft of jewelry valued at more than $70,000.
• On September 5, 2010, PEJCINOVIC and two others participated in a burglary of a jewelry store in Kansas City, Kansas, which resulted in the theft, interstate transportation, and sale of jewelry valued at more than $1 million.
• On February 19, 2011, PEJCINOVIC, CIRIKOVIC, FISEKU, and two others participated in a jewelry store in Los Angeles, which resulted in the theft, interstate transportation, and sale of jewelry valued at more than $3 million.
• In the summer of 2011, PEJCINOVIC and one other participated in an attempted burglary of a jewelry store in Brooklyn, New York.
• On September 16, 2011, PEJCINOVIC, CIRIKOVIC, and three others participated in a burglary of a jewelry store in Los Angeles, which resulted in the theft of jewelry valued at more than $150,000.
• In the fall of 2012, PEJCINOVIC, BOJKOVIC, and two others participated in an attempted burglary of a bank in Philadelphia.
• On June 30, 2012, PEJCINOVIC, CIRIKOVIC, and two others participated in an attempted burglary of a bank in Scarsdale, New York.
• On July 22, 2012, PEJCINOVIC and two others participated in an attempted burglary of a jewelry store in Manhattan.
• In the fall of 2013, PEJCINOVIC, BOJKOVIC, CIRIKOVIC, and one other participated in the burglary of a jewelry store in New Jersey.
• On December 31, 2016, PEJCINOVIC, BOJKOVIC, FISEKU, and one other participated in the burglary of a jewelry store in Manhattan, which resulted in the theft, interstate transportation, and sale of jewelry valued at more than $3 million.
• On March 20, 2017, PEJCINOVIC, BOJKOVIC, FISEKU, and one other participated in the burglary of a jewelry store in Los Angeles, which resulted in the theft of jewelry valued at more than $2 million.              

*                *                *

PEJCINOVIC, 44, of New York, New York, BOJKOVIC, 36, of Staten Island, New York, FISEKU, 35, of Staten Island, New York, and CIRIKOVIC, 35 of Woodhaven, New York, are each charged with one count of racketeering conspiracy, which carries a maximum sentence of 20 years in prison; and one count of conspiracy to commit interstate transportation of stolen property and bank burglary, which carries a maximum sentence of five years in prison.  In addition, PEJCINOVIC, BOJKOVIC, and FISEKU are charged with one count of interstate transportation of stolen property, which carries a maximum sentence of 10 years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Berman praised the investigative work of the FBI and the NYPD.  Mr. Berman also thanked the Los Angeles Police Department, Beverly Hills Police Department, Kansas City Police Department, Portland Police Department, German authorities, Interpol, Europol, the U.S. Department of Justice’s Office of International Affairs, and the Manhattan District Attorney’s Office for their assistance in this investigation.  He added that the investigation is continuing.

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

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

 

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

Geoffrey S. Berman, 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 Thomas P. DiNapoli, New York State Comptroller, announced that GREGORY BAYARD pled guilty to wire fraud today in White Plains federal court.  The charge arose out of BAYARD’s embezzlement of approximately $1.4 million from a decedent's estate for which he served as a court-appointed administrator.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As a fiduciary of an estate, Gregory Bayard’s duty was to protect the assets of the decedent and ensure that the rightful beneficiaries receive their inheritance.  Instead, Bayard violated his obligation and used the estate for his own use, spending nearly more than $1 million of the estate’s money on home renovations, college tuition, and other personal expenses.  Bayard now faces significant prison time for his crimes.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “Instead of being satisfied with the fees the law prescribed as an estate administrator, Gregory Bayard decided to steal from the fund he was hired to manage to bankroll his lavish lifestyle.  This case highlights the need for proper checks and balances to mitigate the risk of theft.  Inspectors caught this entrusted administrator with his hand in the cookie jar.”

New York State Comptroller Thomas P. DiNapoli said:  “Administrators should protect an estate and serve its heirs, not steal from them.  This is the second individual charged in trying to allegedly exploit this estate identified as part of our joint investigation.  I thank both U.S. Attorney Geoffrey Berman and the U.S. Postal Inspection Service for their collaboration on this case.”

According to the allegations contained in the Information:

BAYARD was appointed administrator of the estate of a former resident of Mt. Vernon by the Surrogate’s Court in 2008.  His duties as administrator included collecting the assets of the estate.  As an administrator, BAYARD had a fiduciary duty to the estate and to the decedent’s son, the sole beneficiary of his father’s will.  New York law provides, for a fee, estate administrators like BAYARD based on a percentage of the value of the estate’s assets.

In 2009, the decedent’s son retained an attorney and filed a motion in the Surrogate’s Court to remove BAYARD as the administrator of his father’s estate.  While the motion was pending, BAYARD embezzled more than $1.4 million from the estate’s bank account.  From June 2011 to June 2012, BAYARD wrote approximately 14 checks totaling more than $435,000 from the estate’s account to himself.  From December 2012 to May 2016, BAYARD caused more than 70 electronic wire transfers of a total of more than $1 million from the estate’s account to his personal account.  BAYARD spent the money on home renovations, college tuition, and other personal expenses and transferred some of the money to family members.

*          *          *

BAYARD, 58, of Scotch Plains, New Jersey, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as the sentence will be determined by the court.

Mr. Berman praised the outstanding investigative work of the Postal Inspection Service and the New York State Comptroller. 

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

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 the United States has settled civil healthcare fraud claims against VASCULAR ACCESS CENTERS, L.P., and related entities (collectively, “VAC”), for their submission of fraudulent claims for reimbursement by Medicare for vascular surgical procedures not covered under Medicare.  In connection with the settlement, which was approved on October 19, 2018, by U.S. District Judge Lorna G. Schofield, VAC agreed to pay at least $3.825 million and up to $18.3 million to resolve its False Claims Act liabilities.  In the settlement, VAC also admitted to and accepted responsibility for its conduct.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “For years, Vascular Access Centers cheated taxpayers out of millions of dollars by billing Medicare for treatments that were clearly nonreimbursable, and in some cases by falsifying medical records to make it seem as if its billings were justified.  Through this settlement, VAC is being made to account for its misconduct.”

HHS-OIG Special Agent in Charge Scott Lampert said:  “Performing and billing for surgical procedures not allowed under Medicare rules will not be tolerated.  We will continue to work with our law enforcement partners to investigate these deceptive practices.”

According to the complaint filed in Manhattan federal court:

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, according to applicable Medicare billing rules, fistulagrams and angioplasties are not to be performed, and are not reimbursable, unless the patient has specific and documented clinical problems, such as significant difficulty receiving dialysis properly. 

During the relevant period, from July 2012 through December 2016, VAC operated at least 22 office-based surgical sites in 12 states and Washington, D.C.  VAC’s patients primarily consisted of ESRD patients undergoing dialysis treatment.  As a regular practice, VAC scheduled patients for fistulagrams and angioplasties three months in advance, and VAC 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, VAC sometimes misrepresented the medical conditions of patients in its medical records to make it seem as if they suffered from symptoms that would warrant the procedures.  VAC unlawfully billed Medicare for these procedures, which were excluded from Medicare coverage by the applicable rules.

*                      *                      *

As part of today’s settlement, VAC admitted that its centers regularly performed, and billed Medicare for, vascular surgery procedures as a prophylactic or screening measure, even though the patients presented without any documented evidence that they exhibited a need for therapies.  VAC also agreed to make payments totaling at least $3.825 million and up to $18.3 million over five years, based on its ability to pay and depending on certain financial contingencies.  In addition, VAC entered into an integrity agreement with HHS-OIG, through which it agreed to implement compliance measures and submit to monitoring by HHS-OIG.  Simultaneous with the settlement of this action, the United States is also settling a different lawsuit against VAC filed in the United States District Court for the Eastern District of Louisiana with overlapping claims.

The allegations of fraud stated in the 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 case is being handled by the Office’s Civil Frauds Unit.  Assistant United States Attorney Jean-David Barnea is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Ann Calvaresi Barr, the Inspector General of the United States Agency for International Development (“USAID”), announced the unsealing today of an indictment charging RENE DJESSA and DANIEL OHOYO, both nationals of the Democratic Republic of Congo (“DRC”), with conspiracy and theft of government property in connection with a scheme to divert tens of thousands of doses of anti-malarial medication funded by the President’s Malaria Initiative (“PMI”) for resale on the black market in East Africa.  DJESSA and OHOYO remain at large.

Manhattan U.S. Attorney Geoffrey S. Berman said:  As alleged, while hundreds of thousands of people died of malaria—many of whom could’ve been saved with the very medicines these defendants stole-- Rene Djessa and Daniel Ohoyo put their greed ahead of their humanity.  They stole life-saving anti-malarial medicines and sold them on the black market.  This crime is outrageous, and we will do everything in our power to ensure that these defendants are held to account for their actions.”

Inspector General Ann Calvaresi Barr said:  “Promoting integrity in the global health supply chain, including for anti-malarial medications, has been a long-standing priority for USAID Office of Inspector General.  This indictment shows not only how programs to provide these life-saving medications can be abused, but also my Office’s commitment to identifying and investigating the theft of U.S.-funded health commodities and holding offenders accountable.  I thank our Special Agents for their tremendous effort and the U.S. Attorney’s Office for the Southern District of New York for its steadfast prosecution in this case.”

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

The PMI and Anti-Malarial Medication

USAID is an independent federal agency that provides loans, grants, and technical assistance to assist countries with, among other things, global health issues, including malaria.  The PMI is a U.S. government-funded interagency initiative led by USAID.  The U.S. government launched the PMI in 2005 to support malaria prevention and treatment programs in certain high-burden countries in sub-Saharan Africa.  The PMI coordinates with foreign governments in 19 focus countries, including the DRC, to implement strategies to strengthen health systems and improve malaria prevention and treatment, including the procurement and distribution of antimalarial medication. 

Malaria is a serious and sometimes fatal mosquito-borne infectious disease caused by parasites.  In 2013—at the time of the criminal conduct alleged in the Indictment—an estimated 198 million cases of malaria occurred worldwide and approximately 500,000 people died, mostly children in the sub-Saharan African region.  Malaria must be diagnosed and treated promptly with an antimalarial drug to keep the illness from progressing and to prevent further spread of infection in the community. 

One of the malaria prevention and treatment measures funded by the PMI is the procurement and distribution of artemisinin-based combination therapies (“ACTs”) to treat individuals with uncomplicated malaria.  ACTs contain an artemisinin-based drug combined with another effective anti-malarial medication.  One type of ACT that the PMI procures and distributes to the 19 focus countries in sub-Saharan Africa is Coartem.  Coartem contains two active substances, artemether and lumefantrine, that work together to kill the parasites that cause malaria.  Coartem is taken orally and is effective in treating acute, uncomplicated malaria infections.  At the time of the criminal conduct alleged in the Indictment, Coartem was manufactured by a pharmaceutical company at a manufacturing facility in the Southern District of New York. 

In 2011, USAID personnel in the DRC discovered significant quantities of PMI-funded ACTs, including Coartem, being sold in various markets in Kinshasa, DRC.  Upon further inquiry, USAID determined that some of the Coartem being sold in the DRC had been procured through PMI funding for distribution in other sub-Saharan African countries, including Malawi, Angola, Mozambique, Zambia, Benin, Zimbabwe, and Ghana. 

The Coartem Diversion Scheme

From 2013 through 2015, DJESSA, OHOYO, and others engaged in a scheme to divert PMI-funded Coartem anti-malarial medication for resale on the wholesale black market in Kinshasa, DRC, and Brazzaville, Congo.  As detailed in the Indictment, between January 2013 and September 2015, USAID Office of Inspector General (“USAID-OIG”) Special Agents, operating in an undercover (“UC”) capacity, conducted numerous undercover purchases of PMI-funded Coartem from Djessa and Ohoyo in Kinshasa, DRC, and from a co-conspirator (“CC-1”) in Brazzaville, Congo.  The UCs posed as businessmen who wanted to purchase large quantities of Coartem on the black market for resale to their purported clients. 

A UC initially purchased Coartem from CC-1 in Brazzaville, who, in February 2013, introduced the UC to Ohoyo as CC-1’s supplier in Kinshasa.  Approximately one year later, after the UC had made several additional purchases of PMI-funded Coartem from OHOYO, Ohoyo introduced the UC to DJESSA as Ohoyo’s supplier.  Djessa claimed that he was the main supplier of Coartem in the DRC, Congo, and Angola, and that he had a supplier in Tanzania.  Djessa further stated that he could supply the UC with as much Coartem as he wanted.  The UCs subsequently made several undercover purchases of Coartem from Djessa, most recently in September 2015.  At the September 2015 meeting, Djessa told the UCs that he was aware that the Coartem was funded by the United States government. 

Altogether, the UCs purchased almost 2,100 dispenser boxes of Coartem from Djessa, Ohoyo, and CC-1 for approximately $63,000.  USAID-OIG confirmed that a majority of the Coartem purchased in the undercover operations was funded through the PMI (a portion of the purchased Coartem was determined to be counterfeit).  Each dispenser box of Coartem contained approximately 30 blister packs, each of which contained 6, 12, 18, or 24 individual Coartem tablets, depending on the weight of the patient for which the dispenser box was intended.  One blister pack represented a course of treatment for a single patient.  Thus, the approximately 2,100 boxes of Coartem that the UCs purchased from Djessa, Ohoyo, and CC-1 alone could have been used to treat nearly 63,000 persons suffering from malaria. 

            *                *                *

DJESSA, 41, and OHOYO, 32 of Kinshasa, DRC, are each charged with one count of conspiracy to steal U.S. government property, which carries a maximum sentence of five years in prison, and one count of theft of U.S. government property, which carries a maximum sentence of 10 years in prison. 

The statutory maximum sentences are prescribed by Congress and are provided here for information purposes only, as any sentence imposed on the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of USAID-OIG in this case.  Mr. Berman also thanked the U.S. Department of Justice’s Office of International Affairs for their assistance.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Daniel S. Noble is in charge of the prosecution.

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeny Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the filing of a civil forfeiture action seeking the return to its rightful owner of a painting looted by the Nazis during World War II.  The piece, A Scholar Sharpening His Quill, painted in 1639 by Salomon Koninck (the “Painting”), was allegedly stolen from the children and heirs of renowned Jewish art collector Adolphe Schloss.  Schloss was a prominent Jewish art collector in Paris whose large collection of Old Master paintings (the “Schloss Collection”) was regarded as among the most significant private collections of Dutch and Flemish paintings assembled in prewar France.

Manhattan U.S. Attorney Geoffrey Berman said:  “As alleged, this 1639 Old Master painting was owned by the Schloss family before it was stolen by the Nazis in France and transported to Munich to Hitler’s personal headquarters.  We can never reverse history and undo the horrors committed at the hands of the Nazis.  But we are steadfast in our determination to remember those who suffered and do what we can to return what was taken.”

According to the Complaint filed today in Manhattan federal court:

During World War II, the Nazis created a division known as the Einsatzstab Reichleiter Rosenberg (the “ERR”) in order to “study” Jewish life and culture as part of the Nazis’ propagandist mission against the Jews.  Principally, the ERR confiscated artworks and other cultural holdings of “the enemies of the Reich” on a massive scale, and registered and identified those artworks – even photographing them – thereby leaving behind a detailed record of the works that they stole.  ERR records and photographs of art and cultural artifacts looted by the Nazis are digitized and available in an online database created by the Conference on Jewish Material Claims Against Germany, and this database includes a photograph of the Painting taken by the ERR during World War II.

Upon the outbreak of World War II in 1939, the Schloss heirs moved the Schloss Collection from Paris to Chateau de Chambon, a township in Southern France, in an attempt to protect the collection from looting by the Nazis.  Due to its value and significance, the ERR made substantial efforts to locate and loot the Schloss Collection.  In 1943, the Schloss Collection was ultimately looted by the ERR from its holding place in Chateau de Chambon.  The Nazis took 262 paintings from the Schloss Collection, including the Painting, and transported them to a depot located at the Jeu de Paume, a prewar museum in Paris that was operated by the ERR during the war.  Ultimately, the Painting was selected by the Nazis to be transported to the the “Führerbau,” Hitler’s headquarters in Munich, from where it and many other paintings disappeared in the aftermath of the war.

The Painting resurfaced in November 2017, when a Chilean art dealer (the “Consignor”) attempted to sell the painting through a New York-based auction house.  When the Painting arrived in New York from Chile, it was determined that it was the Painting came from the Schloss collection and had been looted by the Nazis.  When the Consignor was informed of this, the Consignor stated that her father had purchased the Painting from Walter Andreas Hofer in Munich in 1952.  Hofer was Hermann Göring’s chief purchasing agent and as such was a key player in the confiscation and looting of Jewish art collections during the Nazi era.  In 1950, after being tried in absentia by a French military tribunal for his role in art plundering during World War II, Hofer was found guilty and sentenced to 10 years in prison.

The U.S. Attorney’s Office and the FBI are seeking forfeiture of the painting so it can be returned to its rightful owners, the Schloss family.

Mr. Berman thanked the FBI’s Art Crime Team for their assistance.

The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorney Thane Rehn is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL ARNSTEIN was sentenced today to nine months in prison for conspiring to forge a federal judge’s signature on counterfeit court orders that ARNSTEIN submitted to Google to get negative reviews about his business removed from Google search results.  ARNSTEIN pled guilty on September 15, 2017, before U.S. District Court Judge Andrew L. Carter Jr., who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Michael Arnstein’s blatant criminal scheme to exploit the authority of the federal judiciary for his company’s benefit was outrageous.  As Arnstein has learned, his attempts to remove negative reviews about his business from Google search results by forging a U.S. District Court judge’s signature may have worked in the short term, but it also earned him nine months in a federal prison.”

According to the allegations contained in the Complaint, the felony Information to which ARNSTEIN pled guilty, and statements made during court proceedings:

Between February 2014 and February 2017, ARNSTEIN engaged in a scheme to submit counterfeit federal court orders to Google, Inc. (“Google”) in an effort to get websites containing unfavorable postings about ARNSTEIN’s business de-indexed from Google’s internet search results.  In furtherance of this scheme, ARNSTEIN and others forged the signature of a United States District Judge for the Southern District of New York on more than 10 counterfeit court orders.  These counterfeit orders listed the websites containing purportedly defamatory information about ARNSTEIN’s business and ordered the removal of such information from the websites.  ARNSTEIN then submitted the counterfeit orders, which appeared to be valid on their face, to Google and requested that Google de-index the websites containing the purportedly defamatory information.  

*                *                *

In addition to the prison term, ARNSTEIN, 41, of Yonkers, New York, was sentenced to three years of supervised release, the first five months of which ARNSTEIN must serve in home detention.  ARNSTEIN was also ordered to pay a fine of $20,000 and to perform 200 hours of community service during his term of supervised release.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the United States Marshals Service.  He also thanked Google for its helpful assistance in this investigation. 

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Sheb Swett and Daniel S. Noble are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that a federal jury today found LAVELLOUS PURCELL, a/k/a “King Casino,” a/k/a “Mike Hill,” guilty of sex trafficking by force, fraud, or coercion, and related offenses.  PURCELL was convicted following a one-week jury trial before U.S. District Judge Denise L. Cote.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Lavellous Purcell, a/k/a ‘King Casino,’ was a pimp with a notoriously brutal set of rules he used to keep his victims under his control. Besides physical violence and intimidation, Purcell forced the women to dress and act in certain ways, and forced them to brand themselves with a tattoo of his alias, ‘Casino,’ on their necks. Purcell even boasted about his reprehensible abuse of women on social media. Now, Purcell has himself been branded as a felon by a unanimous jury, and faces life in federal prison. We hope today’s verdict brings at least some small measure of comfort to the victims of Purcell’s unconscionable crimes.”

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

From at least in or about 2012 to in or about 2017, LAVELLOUS PURCELL, a/k/a “King Casino,” a/k/a “Mike Hill,” the defendant engaged in the sex trafficking and commercial sexual exploitation of numerous women across the country, including in New York, Pennsylvania, and North Carolina.  The defendant recruited, enticed, harbored, transported, provided, obtained, and maintained women for the purposes of commercial sex, and he used violent force, threats of force, coercion, intimidation, and fear to force at least one woman to engage in commercial sex for his own profit.  For example, the defendant strangled and choked certain of his victims, he hit and threatened to hit certain of his victims, and he kidnapped certain of his victims. 

The victims of the defendant’s prostitution business were required to follow a strict set of rules, which the defendant enforced through threats, fear, intimidation, and violence.  The defendant’s rules required his victims to:  make the defendant money through prostitution, give the defendant all money earned from any commercial sex acts, call the defendant “Daddy,” not speak to men other than the defendant, not look at any men other than the defendant, not talk back to the defendant, not disrespect the defendant, not have boyfriends, not wear sneakers or loose-fitting clothing, and brand themselves with a tattoo bearing the defendant’s alias, “Casino,” on their necks. 

The defendant recruited women to engage in commercial sex through social media websites, and he used Backpage.com, an online classifieds website, to post advertisements for commercial sex.  The defendant also booked various rental cars and hotel rooms to transport women across state lines to engage in commercial sex.  Meanwhile, the defendant boasted about the violence he used against women and his prostitution of women through social media posts, phone, text, and online communications, and in person. 

To date, law enforcement agents have identified numerous women who have engaged in commercial sex at the defendant’s direction.

*                *                *

LAVELLOUS PURCELL, a/k/a “King Casino,” a/k/a “Mike Hill,” 40, of Hempstead, New York, was convicted of one count of sex trafficking by force, fraud, or coercion, one count of enticement to engage in prostitution, one count of transporting individuals in interstate commerce to engage in prostitution, one count of using interstate commerce to promote prostitution, and one count of conspiring to use interstate facilities to promote prostitution.  The defendant faces a mandatory minimum sentence of 15 years’ imprisonment, as well as maximum potential sentences that are prescribed by Congress and provided below for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

Mr. Berman thanked the FBI and NYPD for their outstanding investigative work in this matter.  Mr. Berman also thanked the New York County District Attorney’s Office for its assistance with this investigation. 

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Sheb Swett, Jane Kim, and Margaret Graham are in charge of the prosecution.

           

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that NICHOLAS JOSEPH GENOVESE pled guilty today in Manhattan federal court to securities fraud for inducing investments in a hedge fund that he founded, Willow Creek Investments LP (“Willow Creek”), by misrepresenting his qualifications and professional background and concealing that he had prior felony convictions for fraud-related crimes.  In February 2018, GENOVESE was charged and arrested for perpetrating this fraud.  Today, GENOVESE pled guilty to one count of securities fraud before United States District Judge William H. Pauley III.  As part of his guilty plea, GENOVESE agreed to forfeit more than $13 million of proceeds of the securities fraud, including his interest in two watercraft that GENOVESE purchased with funds that he obtained from his victims.  

Manhattan U.S. Attorney Berman said:  “Nicholas Genovese admitted today that he duped victims into investing millions of dollars into his hedge fund, Willow Creek, based on false claims about his background and credentials.  Genovese brazenly lied to his victims, falsely claiming that he was an heir to a multimillion dollar fortune, that he had an Ivy League MBA, and that he had served in senior roles at major Wall Street firms.  In reality, Genovese was a confidence man with an extensive criminal record.  Now, Genovese has pled guilty to his audacious crimes and faces prison time for his misdeeds.” 

According to the allegations set forth in the Complaint and Indictment filed against GENOVESE in Manhattan federal court, and statements made in public court filings and proceedings including GENOVESE’s guilty plea hearing:

In 2015, GENOVESE began soliciting individuals to invest in the hedge fund that became Willow Creek, which was based in New York, New York.  In doing so, GENOVESE represented, among other things, that he was part of the Genovese family that had owned the Genovese Drug Store chain in the New York area and was an heir to this family’s fortune from the sale of that business for hundreds of millions of dollars in the late 1990s; that he had graduated from Dartmouth College’s Tuck School of Business; and that he had extensive Wall Street experience.  In particular, GENOVESE claimed that he had been a Goldman Sachs partner and a Bear Sterns portfolio manager before forming Willow Creek.  Based in part on these claims, victims invested more than $13 million with GENOVESE.

These representations were false.  GENOVESE is not related to the Genovese family that owned and sold the Genovese Drug Store Chain, did not attend the Tuck School of Business, and had never worked for Goldman Sachs or Bear Stearns.  GENOVESE also did not tell his investors that he had multiple prior felony convictions for fraud-related offenses including forgery, identity theft, and grand larceny.

When investors began to ask for their money back, GENOVESE put them off.  He told one investor that he would only return that investor’s funds after “the stars have aligned,” or else there would be a risk that almost all the money would be lost as a result of the purported impracticalities of unwinding unspecified trading positions.  Records indicate that GENOVESE lost approximately $8 million trading in TD Ameritrade accounts between January 2015 and December 2017.  GENOVESE also used proceeds of his fraud to purchase various luxury items, including two high-end mahogany boats.

*          *          *

GENOVESE, 53, of New York, New York, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison, and agreed to forfeit more than $13 million of proceeds of the securities fraud to the U.S. government (including his two mahogany boats).  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence of the defendant will be determined by Judge Pauley at GENOVESE’s sentencing, which has been scheduled for February 15, 2019 at 2 p.m.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and thanked the New York Regional Office of the United States Securities and Exchange Commission.

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

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that MICHAEL SIVA pled guilty today before U.S. District Judge Alison J. Nathan to conspiracy to commit securities fraud and fraud in connection with his role in an insider trading scheme based on material, nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank.  In August 2017, SIVA, Roberto Rodriguez, Rodolfo Sablon, and Jeffrey Rogiers were arrested and charged in a 54-count Indictment for their involvement in three insider trading schemes, all stemming from information misappropriated by Rivas.  Rivas and an additional participant, James Moodhe, had previously pled guilty and are cooperating with the government in this investigation.  Prior to SIVA’s guilty plea, the four other defendants each pled guilty.  All of the defendants will be sentenced by Judge Nathan.

U.S. Attorney Geoffrey S. Berman said:  “As Michael Siva admitted today, he knowingly used misappropriated confidential corporate information to place trades in the accounts of his brokerage clients in order to make it look like he was a talented stock selector.  In reality, Siva was a criminal.  Together with the trading of James Moodhe, Siva’s client from whom Siva obtained the illicit information, Siva’s trading resulted in millions in illicit profits on which Siva was paid tainted commissions.  Corrupt brokers like Siva will be held to account for their crimes.  This Office is committed to identifying and prosecuting inside information-sharing networks that undermine our nation’s securities markets.”

According to the allegations contained in the Indictment filed against SIVA and his co-conspirators, and statements made in related court filings and proceedings:

The Investment Bank and Rivas

From August 2013 through May 2017, Rivas was employed as a technology consultant in the Research and Capital Markets Technology Group of an investment bank (the “Investment Bank”).  In this role, Rivas had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing material, nonpublic information (“Inside Information”) about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank.  The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included Inside Information.  Rivas had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information. 

Overview of Insider Trading Schemes

From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material, nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades.  On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition (“M&A”) transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities.  In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities.  The Inside Information was passed through three tipping chains.    

The Rivas-Moodhe-Siva Tipping Chain

SIVA was a member of the first of three tipping chains outlined in the Indictment.  In this tipping chain, Rivas passed inside information to Moodhe, whose daughter Rivas was living with and dating.  Moodhe then passed the inside information to SIVA, a broker and financial advisor at a global investment bank headquartered in Manhattan, New York.  Moodhe and SIVA had known each other for more than a decade and SIVA also became Moodhe’s broker. 

Between 2015 and 2017, Moodhe shared the inside information he received from Rivas with SIVA so that SIVA could execute profitable trades on behalf of his financial advisory clients and himself.  By at least early 2016, SIVA understood that the source of the stock tips provided by Moodhe was a corporate insider at an investment bank with whom Moodhe was friends. 

In order to keep their scheme from being exposed, including by SIVA’s employer, Moodhe and SIVA developed code phrases to use on the telephone so that Moodhe could surreptitiously provide SIVA with updated inside information.  To further hide their scheme, SIVA and Moodhe began going to various diners outside of New York City so that Moodhe could provide stock tips to SIVA in person.  During these meetings, Moodhe read from pieces of paper provided to him by Rivas, which contained detailed information about confidential impending deals, including ticker symbols, deal values and expected announcement dates.  In order to hide the fact that SIVA was placing trades in his client accounts based on illicit stock tips from Moodhe, SIVA also instructed Moodhe to mark his dirty trades “solicited” in his firm’s online trading platform, so that it would appear that SIVA had directed the trades as opposed to the suggestion coming from Moodhe.  On occasion, SIVA also instructed Moodhe to wait to trade on a tip from Rivas until SIVA could first trade in the security on behalf of his financial advisory clients, thereby making it look like SIVA had originated the idea. 

In total, between 2015 and 2017, SIVA and Moodhe used Inside Information Rivas provided to trade ahead of the public announcements of more than two dozen transactions, including numerous tender offers, allowing SIVA and Moodhe to generate illicit profits in excess of $3 million.  SIVA also earned thousands of dollars in commissions on the illegal trades entered on behalf of his clients.

*                *                *

SIVA, 56, of Morristown, New Jersey, pled guilty to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer, which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  SIVA will be sentenced on February 11, 2018, before U.S. District Judge Alison J. Nathan. 

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for their assistance.  He added that the investigation is continuing.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Andrea M. Griswold and Samson Enzer are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), and Eric M. Thorson, Inspector General for the Department of Treasury, announced today the filing of a criminal complaint charging NATALIE MAYFLOWER SOURS EDWARDS, a/k/a “Natalie Sours,” a/k/a “Natalie May Edwards,” a/k/a “May Edwards,” who is a Senior Advisor at the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), with unlawfully disclosing Suspicious Activity Reports (“SARs”) and conspiracy to do the same.  EDWARDS was arrested yesterday and will be presented this afternoon in the United States District Court for the Eastern District of Virginia.

U.S. Attorney Geoffrey S. Berman said:  “Natalie Mayflower Sours Edwards, a senior-level FinCEN employee, allegedly betrayed her position of trust by repeatedly disclosing highly sensitive information contained in Suspicious Activity Reports (SARs) to an individual not authorized to receive them.  SARs, which are filed confidentially by banks and other financial institutions to alert law enforcement to potentially illegal transactions, are not public documents, and it is an independent federal crime to disclose them outside of one’s official duties.  We hope today’s charges remind those in positions of trust within government agencies that the unlawful sharing of sensitive documents will not be tolerated and will be met with swift justice by this Office.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “In her position, Edwards was entrusted with sensitive government information.  As we allege here today, Edwards violated that trust when she made several unauthorized disclosures to the media.  Today's action demonstrates that those who fail to protect the integrity of government information will be rightfully held accountable for their behavior.”

Treasury Department Inspector General Eric Thorson said:  “Our criminal investigators have been at the center of this investigation as a core part of our responsibility to detect and prevent threats to the integrity and efficiency of Treasury programs and operations.  We are committed to working with our law enforcement partners and with FinCEN and other Treasury officials, and appreciate their cooperation and support.”

Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker said:  “Protecting sensitive information is one of our most critical responsibilities, and it is a role that we take very seriously.  We have fully and proactively supported Treasury’s Office of Inspector General’s investigation of leaks of protected information, and thank them for their hard work with the U.S. Attorney’s Office to hold accountable those responsible.”

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

The mission of FinCEN is to “safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”[2]  Among other things, FinCEN manages the collection and maintenance of SARs regarding potentially suspicious financial transactions, which, under the Bank Secrecy Act, U.S. financial institutions and other parties are required by law to generate and deliver to FinCEN.  Under the BSA and its implementing regulations, willful disclosure of a SAR or its contents by government employees or agents except as necessary to fulfill official duties is a felony.

Beginning in approximately October 2017, and lasting until the present, EDWARDS unlawfully disclosed numerous SARs to a reporter (“Reporter-1”), the substance of which were published over the course of approximately 12 articles by a news organization for which Reporter-1 wrote (“News Organization-1”).  The illegally disclosed SARs pertained to, among other things, Paul Manafort, Richard Gates, the Russian Embassy, Mariia Butina, and Prevezon Alexander.  EDWARDS had access to each of the pertinent SARs and saved them – along with thousands of other files containing sensitive government information – to a flash drive provided to her by FinCEN.  She transmitted the SARs to Reporter-1 by means that included taking photographs of them and texting the photographs to Reporter-1 over an encrypted application.  In addition to disseminating SARs to Reporter-1, EDWARDS sent Reporter-1 internal FinCEN emails appearing to relate to SARs or other information protected by the BSA, and FinCEN non-public memoranda, including Investigative Memos and Intelligence Assessments published by the FinCEN Intelligence Division, which contained confidential personal, business, and/or security threat assessments. 

At the time of EDWARDS’s arrest, she was in possession of a flash drive appearing to be the flash drive on which she saved the unlawfully disclosed SARs, and a cellphone containing numerous communications over an encrypted application in which she transmitted SARs and other sensitive government information to Reporter-1.

*                      *                      *

EDWARDS, 40, of Quinton, Virginia, is charged with one count of unauthorized disclosures of suspicious activity reports and one count of conspiracy to make unauthorized disclosures of suspicious activity reports, both of which carry a maximum sentence of five years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, the Treasury Department, and the Treasury Department’s Office of Inspector General.  He also thanked the United States Attorney’s Office for the Eastern District of Virginia for its assistance with the investigation.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Kimberly J. Ravener and Daniel C. Richenthal are in charge of the prosecution.

 

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[1] The charges contained in the Complaint are merely accusations, and EDWARDS is presumed innocent unless and until proven guilty.

[2] www.fincen.gov/about/mission

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL WHITE, a leader of two violent street gangs, “MBG,” and the “Young Gunnaz,” was convicted of racketeering conspiracy, attempted murder and assault with a deadly weapon in aid of racketeering, and a firearms offense.  WHITE was convicted following a two-week trial before U.S. District Judge Robert W. Sweet. 

U.S. Attorney Geoffrey S. Berman said:  “Michael White, a leader of two gangs, committed a spree of shootings in and around New York City Housing Authority’s Mill Brook Houses.  He shot rival gang members in front of a public school, in a community center, and in a subway station.  Now he stands convicted for his crimes.  We thank the New York City Police Department and the Drug Enforcement Administration for their tireless efforts to secure this important conviction.”

According to the evidence presented in court during the trial:

From 2007 through October 2017, WHITE was a member of MBG, also known as “Money Bitches Guns,” a local gang based in the Mill Brook Houses.  From 2010 through October 2017, WHITE was a member of the Young Gunnaz set of the YGz gang also based in the Mill Brook Houses.  As part of his membership in both gangs, WHITE shot seven people.  Specifically, on January 25, 2010, WHITE shot and injured a 16-year-old rival on a street corner in the Mill Brook Houses.  On January 31, 2010, WHITE shot and injured an 18-year-old rival at a baby shower.  Later on January 31, 2010, WHITE shot a rival gang member near a building in the Mill Brook Houses, causing the individual to suffer life threatening injuries.  On February 12, 2010, WHITE shot and injured an 18-year-old rival outside a public school.  On October 28, 2012, WHITE shot and injured three individuals in the Cypress Avenue Subway Station.

*          *          *

WHITE, 30, of the Bronx, New York, was convicted of two counts of racketeering conspiracy, each of which carries a maximum sentence of 20 years in prison; one count of violent crime in aid of racketeering, which carries a maximum sentence of 20 years in prison; and one count of use of a firearm during a violent crime, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison. 

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

Mr. Berman praised the outstanding investigative work of the New York City Police Department and the Drug Enforcement Administration.  

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jordan Estes, Gina Castellano, and Alexandra Rothman are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CYNTHIA HOLDER, a former Public Company Accounting Oversight Board (“PCAOB”) Inspections Leader and KPMG Executive Director, pled guilty today to participating in a scheme to defraud the Securities and Exchange Commission (the “SEC”) and the PCAOB by obtaining, disseminating, and using confidential lists of which KPMG audits the PCAOB would be reviewing so that KPMG could improve its performance in PCAOB inspections, the results of which were shared with, and utilized by, the SEC in carrying out its governmental functions.  HOLDER pled guilty before the U.S. District Court Judge J. Paul Oetken.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “In the wake of the accounting fraud scandals of the early 2000s, Congress passed important laws to ensure the quality and accuracy of auditing work performed on publicly traded companies so that investors could have confidence in the reported financial results of those companies.  The SEC was vested with the responsibility and authority of executing these laws and the PCAOB was created to play a key role:  To audit the auditors.  HOLDER undermined the work of the SEC and the PCAOB by stealing confidential inspection information from her former employer, the PCAOB, and helping insiders at her new employer, KPMG, to cheat the regulatory system put in place to protect the investing public.  This was a revolving door tainted by fraud and today we hold the defendant accountable for her conduct.”

According to the allegations contained in the Indictment filed against HOLDER, along with her co-conspirators, David Middendorf, David Britt, Thomas Whittle, and Jeffrey Wada, and statements made in related court filings and proceedings:[1]     

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

KPMG is one of the largest accounting firms in the world.  In recent years, KPMG fared poorly in PCAOB inspections and in 2014 received approximately twice as many comments as its competitor firms.  By 2015, KPMG was engaged in efforts to improve its performance in PCAOB inspections, including but not limited to recruiting and hiring former PCAOB personnel such as HOLDER and HOLDER’s co-conspirator, Brian Sweet. 

KPMG’s efforts to improve inspection results, however, were not limited to legitimate means.  Instead, between 2015 and 2017, HOLDER, Middendorf, Whittle, Britt, Wada, and Sweet worked to illicitly acquire valuable confidential PCAOB information concerning which KPMG audits would be inspected, in an effort to game the system and improve inspection results.  For example, after Sweet began employment at KPMG, but while HOLDER was still employed by the PCAOB, HOLDER fed Sweet confidential PCAOB information about certain pending inspections.  HOLDER did so while simultaneously seeking employment at KPMG.  During the pendency of her efforts to obtain employment at KPMG, HOLDER – in violation of PCAOB rules – continued to work on KPMG inspections at the PCAOB.  Once she secured a job at KPMG, HOLDER stole valuable confidential information on her way out of the PCAOB and then passed it on to Sweet, her new boss at KPMG.     

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

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

In February 2017, Wada texted HOLDER saying, “I have the grocery list. . . . All the things you’ll need for this year.”  Wada then spoke to HOLDER and provided her with the full confidential 2017 final inspection selections.  HOLDER again shared the stolen information with Sweet, who shared it with Middendorf, Whittle, and Britt.  Middendorf, Whittle, Britt and Sweet agreed to inform engagement partners on the list so that extra attention could be paid to these audits in light of the forthcoming PCAOB inspections. 

In 2017, a KPMG partner who received early notice that his/her engagement was on the confidential 2017 inspection list reported the matter, as a result of which KPMG’s Office of General Counsel launched an internal investigation.  Thereafter, HOLDER and Sweet took a number of steps to destroy or fabricate evidence relevant to the investigation.  For example, HOLDER deleted a number of relevant text messages, emails, and documents, and said she was going to purchase a “burner phone” so her conversations could not be monitored.  Similarly, Sweet burned evidence of the 2017 inspection list and provided a falsified version of the list to KPMG counsel.

*                      *                      *

HOLDER, 52, pled guilty to one count of conspiracy to defraud the United States, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; 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 two counts of wire fraud, which each carry a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  Sentencing is scheduled for April 5, 2019 at 10:30 a.m. 

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

Trial against the remaining defendants is scheduled to begin on February 11, 2019, before the Honorable J. Paul Oetken.

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

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein, Amanda Kramer, and Jessica Greenwood are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that PETER GALBRAITH KELLY JR., a former executive at Competitive Power Ventures (“CPV”), was sentenced to 14 months in prison for defrauding CPV by misrepresenting that the former Executive Deputy Secretary to the Governor, Joseph Percoco, had obtained state ethics approval for his wife to work at CPV.  Co-defendants Percoco and Steven Aiello were convicted of charges relating to bribery on March 13, 2018, after an eight-week jury trial.  The jury was deadlocked on the charges against KELLY.  Joseph Gerardi, who was acquitted of all charges at the trial with Percoco, was convicted of all charges in a related trial earlier this year.  KELLY pled guilty on May 11, 2018, to one count of conspiracy to commit wire fraud before U.S. District Judge Valerie E. Caproni, who imposed today’s sentence.

U.S. Attorney Geoffrey Berman said:  “Braith Kelly admitted to giving the spouse of one of the most powerful men in Albany, Joseph Percoco, a low-show job at his company in order to ingratiate himself and his company with Percoco.  Many consider this type of behavior to be ‘the way things are done’ in government.  But our Office does not, and neither does the court.” 

In imposing today’s sentence, Judge Caproni stated:  “I hope the sentence will be heard in government affairs offices everywhere…you have to play by the rules.”

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

KELLY hired Percoco’s wife to a low-show job at CPV, and ran monthly payments to Percoco and his wife through a consultant who worked for CPV in order to disguise the source of the payments.  KELLY also made sure that Percoco’s wife’s photograph and full name were not included in promotional materials for CPV, and he falsely told his superiors at CPV – on two separate occasions – that Percoco had obtained an ethics opinion from the Governor’s Office approving of Percoco’s wife’s employment with CPV, when in fact no such opinion existed.  

*                      *                      *

In addition to the prison term, KELLY, 55, of Canterbury, Connecticut, was sentenced to three years of supervised release.  He was also ordered to pay $247,000 in restitution to CPV.

On September 20, 2018, Judge Caproni sentenced Percoco to six years in prison.  Aiello is scheduled to be sentenced on November 29, 2018.  Gerardi is scheduled to be sentenced on December 6, 2018.

U.S. Attorney Berman praised the work of the Buffalo Field Office of the Federal Bureau of Investigation and 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 prosecuted 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, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of a complaint charging HARBIR PARMAR with kidnapping and wire fraud.  PARMAR will be presented in White Plains federal court this afternoon before United States Magistrate Judge Judith C. McCarthy.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Harbir Parmar was hired to transport a woman from Manhattan to her home in White Plains.  Instead, Parmar kidnapped, terrorized, and assaulted the woman before dumping her on the side of an interstate.  No one – man or woman – should fear such an attack when they simply hire a car service.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “The victim in this case utilized a ride sharing service trusting that her driver would provide a safe ride home.  Instead, as we allege today, Harbir Parmar made an outrageous choice, deciding to unlawfully take advantage of his passenger at a moment of vulnerability for his own selfish motives.  This kind of behavior should never be tolerated, and the FBI will continue to work tirelessly with our partners to bring justice to those who would shamelessly and illegally take advantage of others.”

Commissioner James P. O’Neill said:  “The criminal acts outlined in this complaint are reprehensible.  This individual’s behavior goes far beyond ridesharing companies’ efforts to revise their ethics codes and put stronger emphasis on background checks for their drivers.  The people we serve deserve much better.  These charges are appalling, and such behavior will never be tolerated by the NYPD or any of our local, state, or federal law enforcement partners.”

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

On February 21, 2018, an individual (“Victim-1”) ordered a vehicle through a ridesharing company (“Company-1”) to pick her up in Manhattan, New York, and take her to White Plains, New York, where she resided at the time.  At approximately 11:30 p.m., Victim-1 entered a vehicle driven by PARMAR, who was licensed to use Company-1’s software as a driver.  Victim-1 fell asleep in the vehicle.  PARMAR changed Victim-1’s destination in Company-1’s mobile application to an address in Boston, Massachusetts and proceeded to drive toward Massachusetts.  When Victim-1 awoke, the vehicle was on the side of the road and PARMAR was in the backseat of the vehicle with her, with his hand under her shirt touching the top of her breast.  Upon Victim-1 waking up, PARMAR got back into the driver’s seat and continued driving.  Victim-1 requested that she be taken to White Plains or to the police station but PARMAR refused.  PARMAR instead dropped Victim-1 off on the side of I-95 in Branford, Connecticut.  Victim-1 went to a nearby convenience store where she sought assistance.    

In addition, from December 2016 through February 2018, PARMAR, sent allegedly false information about the destinations of Company-1’s customers through Company-1’s mobile application on at least 11 occasions.   He also sent false information about the application of a cleaning fee to be applied to the accounts of Company-1’s customers on at least three occasions.  In these instances, customers of Company-1 filed complaints with Company-1 about being overcharged for their rides.  These instances have resulted in over $3,600 in improper charges to the accounts of Company-1’s customers. 

*              *             *

PARMAR, 24, of Howard Beach, New York, is charged with one count of kidnapping, which carries a maximum sentence of life in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

There may be more victims of this alleged conduct.  If you have information to report, contact the FBI’s Westchester Resident Agency at (914) 925-3888.

Mr. Berman praised the outstanding investigative work of FBI’s Westchester County Safe Streets Task Force, which is comprised of investigators from the FBI, U.S. Probation Office, New York State police, Westchester County Department of Public Safety, Westchester County District Attorney’s Office, the New York City Police Department, Yonkers Police Department, Greenburgh Police Department, Mount Vernon Police Department and the Peekskill Police Department.    

The case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Jamie Bagliebter is in charge of the prosecution. 

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney, Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that JASON RHODES was arrested this morning on conspiracy, securities fraud, wire fraud, and investment adviser fraud charges stemming from his participation in a scheme to defraud investors by lying to investors in his hedge fund (the “Hedge Fund”) and using investor funds for his own personal use and to make repayments to earlier investors in a Ponzi-like manner.   

RHODES is expected to be presented today in Magistrate Court before the Honorable Gabriel W. Gorenstein. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Rhodes participated in a scheme to solicit investors’ money by promising to use it for a stated purpose — to invest in securities — instead, he used it to line his own pockets. In typical Ponzi-like fashion, Rhodes allegedly kept his scheme operating by using investor funds to make payments to other investors who were demanding their money.  Jason Rhodes now faces serious time in federal prison for his deceitful conduct.”

FBI Assistant Director-in-Charge William F. Sweeney, Jr. said:  “Time and time again, we see Ponzi-like investment schemes fail and their perpetrators brought to justice.  As we allege today, Jason Rhodes is just the latest example of someone who allowed greed to guide his actions as he defrauded investors of more than $19 million.  The FBI will continue to aggressively investigate these cases as long as misguided individuals continue to foolishly pursue these fraudulent schemes.”

According to the Complaint[1]:

Beginning in at least November 2013 and through in or about December 2016, RHODES, together with his co-conspirators, solicited investments in the Hedge Fund by falsely representing to investors that their funds would be used for legitimate, specified, investment purposes, namely purchasing securities.  In fact, RHODES failed to invest the investor monies as promised, but rather diverted investor funds to his own personal use and the personal use of his co-conspirators and to make repayments to other investors who were demanding their money.  Through this scheme, RHODES and his co-conspirators defrauded approximately 25 investors out of a total of approximately $19.6 million.

Among other fraudulent acts, RHODES and a co-conspirator falsified an investor account statement using a computer software program to conceal the fact that most of the $4.2 million the investor had sent to the Hedge Fund had been misappropriated, including through transfers of the funds to, among other places, the personal bank accounts of RHODES and a co-conspirator, and to previous investors.  After this investor discovered the fraudulent nature of the account statement, RHODES, working with others, obtained funds from yet another investor in order to make payments to this previous investor. 

*                      *                      *

RHODES, 46, of Rowayton, Connecticut, was arrested this morning.  RHODES is charged with one count of conspiracy to commit securities fraud and wire fraud, one count of securities fraud, one count of wire fraud, and one count of investment adviser fraud.  The conspiracy count carries a maximum sentence of 5 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million or twice the gross gain or loss from the offense.  The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The investment adviser fraud count carries a maximum sentence of 5 years in prison and a maximum fine of $10,000.  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 work of the FBI.  He also thanked the Securities and Exchange Commission.  

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Elisha J. Kobre and Jared Lenow are in charge of the prosecution.  

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Philip R. Bartlett, Inspector-In-Charge for the New York Division of the U.S. Postal Inspection Service (“USPIS”), and Timothy W. Dumas, the Special Agent in Charge of the New York Field Office of the U.S. Department of State’s Diplomatic Security Service (“DSS”) of the U.S. Department of State, announced today that KWANG KYU KIM, a/k/a “Kevin,” HYUN KYUNG HAN, a/k/a “Jay Hee,” HONG NAE YI, a/k/a “Diane Yi,” BEIRNE LOWRY, a/k/a “Michael,” TIEN CHIH WANG, and ZHENGYI LU, a/k/a “Allen,” were charged with money laundering and conspiring to commit money laundering in connection with a scheme to provide financing and other support services to brothels in the New York metropolitan area.  The defendants were arrested this morning and were presented before a U.S. Magistrate judge in federal court in Manhattan this afternoon.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “These individuals allegedly offered support to independent owners of illegal brothels in the form of financing, website maintenance, and other administrative assistance to help the brothels function.  By allegedly offering their support, they contributed to the commercial sex industry, an industry notorious for heinous victimization of young women.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “As alleged in the complaint, the suspects thought they could hide their crimes by laundering their illicit proceeds using money orders and other financial instruments; but their tricks were uncovered when they underestimated the resolve of law enforcement to follow the trail of money no matter where it leads.  Postal Inspectors and their law enforcement partners are doing their part to, ‘turn off the red light,’ on the sex trafficking trade.”

DSS Special Agent in Charge Timothy W. Dumas said:  “DSS continues to disrupt and dismantle transnational criminal organizations seeking to profit from the entry and illicit activities of vulnerable foreign nationals.  This investigation demonstrates the global reach of the Diplomatic Security Service.”

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

Since 2012, the Diplomatic Security Service, United States Postal Inspection Service, United States Customs and Border Protection, and the United States Attorney’s Office for the Southern District of New York have been investigating money laundering in connection with a network of Korean brothels that are located in the New York metropolitan area.

These brothels, which are independently owned and operated, receive financing and advertising from common sources.  KWANG KYU KIM, a/k/a “Kevin,” HYUN KYUNG HAN, a/k/a “Jay Hee,” and HONG NAE YI, a/k/a “Diane Yi,” provide financing for several brothels in Manhattan, including by issuing loans with high interest rates to Korean brothel owners and employees.  KIM and YI also operate rotating credit associations in which individuals, who are often involved in the commercial sex industry, contribute a fixed amount each month and then receive the lump sum on a rotating basis.  KIM, HAN, and YI have collectively provided or assisted in providing hundreds of thousands of dollars to finance new and existing brothels in Manhattan.

BEIRNE LOWRY, a/k/a “Michael,” TIEN CHIH WANG, and ZHENGYI LU, a/k/a “Allen,” provide advertising services to Korean brothels in Manhattan.  LOWRY, WANG, and LU create and maintain individual websites for brothels, which include sexually suggestive photographs and coded language for specific commercial sex activities.  LOWRY also registered and promoted a website that aggregated information and advertising for brothels in the New York metropolitan area.  WANG and LU further coordinated online reviews for the brothels’ commercial sex services and facilitated the brothels’ purchase of commercial sex advertisements on third-party websites. 

 *          *          *

The defendants, KWANG KYU KIM, a/k/a “Kevin,” 62, of Queens, New York, HYUN KYUNG HAN, a/k/a “Jay Hee,” 49, of Queens, New York, HONG NAE YI, a/k/a “Diane Yi,” 59, of Queens, New York, BEIRNE LOWRY, a/k/a “Michael,” 59, of Manhattan, New York, TIEN CHIH WANG, 44, of Queens, New York, and ZHENGYI LU, a/k/a “Allen,” 35, of Queens, New York, are each charged with one count of conspiring to commit money laundering and one count of committing money laundering.  Each count carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Nathan Rehn, Danielle Sassoon, and Elinor Tarlow 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.

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that CARL DAVID STILLWELL was sentenced to life in prison in connection with his participation in the murder of a woman in the Philippines.  STILLWELL and his co-defendants, Adam Samia and Joseph Hunter, were convicted following a 12-day jury trial before U.S. District Judge Ronnie Abrams of the Southern District of New York on April 18, 2018. 

U.S. Attorney Geoffrey S. Berman said:  “Like the plot of some blockbuster novel or movie, this case is nearly unbelievable:  a former Army sniper recruits two others to commit a murder-for-hire in a foreign land.  But every aspect of this troubling case is true, including a murder victim in the Philippines.  Carl Stillwell played a role in that murder, and will now spend the rest of his life behind bars.”

According to the Superseding Indictment against Hunter, Samia, and STILLWELL, other filings in Manhattan federal court, and the evidence admitted at trial:

Hunter served in the U.S. Army from 1983 to 2004, where he attained the rank of sergeant first class.  While in the Army, Hunter led air-assault and airborne infantry squads; served as a sniper instructor; and trained soldiers in marksmanship and tactics as a senior drill sergeant.  Since leaving the Army in 2004, Hunter has arranged for the murders of multiple victims in exchange for money, among other completed acts of violence undertaken for pay. 

Samia is a self-described “personal protection/security industry” professional.  According to Samia’s résumé, he has worked as an “independent contractor” for clients in the Philippines, China, Papua New Guinea, the Democratic Republic of the Congo, and the Republic of the Congo; and has training in tactics and weapons, including handguns, shotguns, rifles, sniper rifles, and machineguns.  STILLWELL also purported to have training and experience in the field of information technology and to have worked at a firm in North Carolina that provides firearms training.

In 2011 and 2012, Hunter, Samia, and STILLWELL agreed to commit murders-for-hire in overseas locations in exchange for salaries and bonus payments for each victim.  In early 2012, Samia and STILLWELL traveled from North Carolina to the Philippines, where Hunter provided them with, among other things, information about their intended victims and firearms to use to commit the murders. 

In January and February 2012, Samia and STILLWELL surveilled their intended victims in the Philippines as they formulated their murder plans.  On February 12, 2012, Samia and STILLWELL killed one of their intended victims (“Victim-1”) – a Filipino woman – in the Philippines by shooting her multiple times in the face.  After killing Victim-1, Samia and STILLWELL disposed of her body on a pile of garbage, where local authorities later found it.  Hunter paid Samia and STILLWELL $35,000 each for completing the murder, and Samia and STILLWELL sent thousands of dollars from the payments they received to the United States using, among other methods, structured wire transfers in amounts under $10,000. 

In late February and early March 2012, Samia and STILLWELL returned from the Philippines to North Carolina, where they continued to reside until their July 2015 arrests on these charges.

*          *          *

Hunter, 52, of Owensboro, Kentucky, Samia, 43, of Roxboro, North Carolina, and STILLWELL, 50, of Roxboro, North Carolina, were each convicted of one count of conspiring to commit murder-for-hire and one count of committing murder-for-hire, each of which carries a maximum sentence of life in prison and mandatory minimum sentence of life in prison; and one count of conspiring to murder and kidnap in a foreign country and one count of using and carrying a firearm during and in relation to a crime of violence, each of which carries a maximum sentence of life in prison.  Samia and STILLWELL were also each convicted of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of HUNTER and SAMIA will be determined by the judge. 

Sentencing has been scheduled for Hunter on February 15, 2019, and for Samia on October 31, 2018, before Judge Abrams. 

The charges against the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division, Bilateral Investigations Unit; DEA’s Manila Country Office; DEA’s Atlanta Field Division, Raleigh Resident Office; DEA’s Louisville Field Division; the Durham Police Department; the Raleigh Police Department; the Harnett County Sherriff’s Office; the Wake County Sherriff’s Office; the Person County Sherriff’s Office; the Cary Police Department; the North Carolina State Bureau of Investigations; the Bureau of Alcohol, Tobacco, Firearms and Explosives, Greensboro Field Office; the Customs and Border Protection’s National Targeting Center; the Royal Thai Police; the Philippines National Bureau of Investigation; and the Philippines National Police; and the Department of Justice’s Office of International Affairs.  Mr. Berman also thanked the United States Attorney’s Office for the Middle District of North Carolina and the Department of Justice’s Computer Crime and Intellectual Property Section for their support and assistance.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Emil J. Bove III, Rebekah Donaleski, and Patrick Egan, are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that WILLIAM McFARLAND was sentenced today in Manhattan federal court to 6 years in prison for the following criminal conduct to which he had pled guilty: one count of wire fraud in connection with a scheme to defraud investors in a company controlled by McFARLAND, Fyre Media Inc. (“Fyre Media”), as well as its subsidiary (“Fyre Festival LLC”), which was formed to organize a music festival over two weekends in the Bahamas; one count of wire fraud in connection with a scheme to defraud a ticket vendor for the Fyre Festival; one count of wire fraud, in connection with his operation of a sham ticket scheme in which he purported to sell tickets to exclusive fashion, music, and sporting events though NYC VIP Access, a company controlled by McFARLAND; one count of bank fraud for writing a check with the name and account number of one of his employees without authorization; and one count of making false statements to a federal law enforcement agent in which McFARLAND, among other things, falsely denied the wire fraud and bank fraud conduct to which he pled guilty.  McFARLAND pled guilty on March 6, 2018 and July 26, 2018 before U.S. District Judge Naomi Reice Buchwald, who imposed today’s sentence.

Manhattan U.S. Attorney Geoffrey Berman said:  “Billy McFarland has shown a disturbing pattern of deception, which resulted in investors and customers losing over $26 million in two separate fraud schemes.  As he had previously admitted, Billy McFarland did not deliver on his promises to his investors and customers.  Today, McFarland found out the hard way that empty promises don’t lead to jet-setting, champagne, and extravagant parties – they lead to federal prison.”

According to the allegations in the Complaints and the First and Second Superseding Informations to which McFARLAND pled guilty, as well as statements made in court proceedings:

McFARLAND was the founder and chief executive officer of Fyre Media.  In 2016, McFARLAND started Fyre Media to build a digital application that would allow individuals organizing commercial events, such as concerts, to bid for artist and celebrity bookings at such events.  From at least in or about 2016, up to and including in or about May 2017, McFARLAND conducted a scheme to defraud individuals by inducing them to invest millions of dollars in Fyre Media.  Through this scheme, McFARLAND caused losses to at least 80 victim-investors, totaling more than $24 million dollars. 

In furtherance of the scheme, McFARLAND repeatedly made materially false statements to investors about Fyre Media’s revenue and income, and manipulated Fyre Media’s financial statements and supporting documentation to hide Fyre Media’s true financial condition.  For example, McFARLAND represented to investors that Fyre Media had earned millions of dollars of revenue solely from talent bookings; a review of Fyre Media’s records showed that those numbers were significantly overstated.  McFARLAND also provided falsified income statements to investors that purported to show that from approximately April 2016 to February 2017, Fyre Media had earned millions of dollars in income from talent bookings.  In reality, Fyre Media’s income from talent bookings from approximately May 2016 to April 2017 was only $57,443.  In addition, McFARLAND provided falsified documents to investors showing over 2,500 confirmed talent bookings in a single month when, in fact, there were only 60 confirmed talent bookings in the entire year.   

McFARLAND repeatedly made misrepresentations to investors designed to overstate Fyre Media’s financial condition and stability.  For example, McFARLAND told investors that a reputable venture capital firm (the “VC Firm”) had completed its due diligence process and had decided to invest in Fyre Media.  To the contrary, a VC Firm employee communicated to McFARLAND that the VC Firm would not invest in Fyre Media without first completing its due diligence, which the VC Firm had not done due to McFARLAND’s failure to provide many of the requested Fyre Media documents. 

In late 2016, McFARLAND established a subsidiary, Fyre Festival LLC, to hold a music festival called the “Fyre Festival” over two weekends in the Bahamas.  McFARLAND made repeated misrepresentations to investors with respect to their investments in Fyre Festival LLC. McFARLAND overstated the Festival’s receivables that he used as collateral for numerous investments to cover Festival expenses.  McFARLAND also secured numerous investments in Fyre Festival LLC by claiming that investors would have the rights to payouts from Festival event cancellation insurance policies when, in reality, no event cancellation insurance policies had been executed for the Festival.  Ultimately, the Festival was canceled and widely deemed to have been a failure.

McFARLAND also repeatedly made materially false statements to investors about his own financial condition.  For example, in order to induce several investors to make an investment in Fyre Media, McFARLAND provided an altered stock ownership statement to inflate the number of shares he purportedly owned in a publicly traded company to make it appear that McFARLAND could personally guarantee the investment.  In addition, despite the fact that McFARLAND’s applications to two banks (“Bank-1” and “Bank-2”) for millions in personal loans had not been approved, McFARLAND misrepresented to investors that the monies from those bank loans could serve as collateral for their investments.  On one occasion, McFARLAND sent an investor a snapshot of an email purporting to be from a Bank-1 banker (“Banker-1”) to McFARLAND approving a $3 million dollar loan.  Not only had Banker-1 not sent that email, Bank-1 had not approved McFARLAND’s loan application.

McFarland also made materially false statements to certain of Fyre Media’s investors about Magnises, a credit card and private club for millennials that was founded and run by McFARLAND.  McFARLAND told certain of Fyre Media’s investors that he had sold Magnises for approximately $40 million and made a profit of several million dollars personally from the sale, when in reality, McFARLAND had not sold Magnises.  McFARLAND also falsely stated to certain of Fyre Media’s investors that specific individuals were the acquirers of Magnises, when in fact, they were not.  McFarland also falsely stated to certain of Fyre Media’s investors that a group of acquiring partners were forming a new company to purchase Magnises, when in fact, no such group existed.

In or about April 2017, McFARLAND defrauded a ticket vendor (“Vendor-1”) by inducing Vendor-1 to pay $2 million for a block of advance tickets for future Festivals over the next three years.  McFARLAND also provided Vendor-1 with a fraudulent income statement for Fyre Media that grossly inflated the Company’s revenue and income.

On March 6, 2018, McFARLAND pled guilty before Judge Buchwald to one count of wire fraud in connection with a scheme to defraud over 80 investors in Fyre Media and Fyre Festival LLC of over $24 million, and one count of wire fraud in connection with a scheme to defraud a ticket vendor for the Fyre Festival of $2 million, in the case captioned United States v. William McFarland, 17 Cr. 600 (NRB).  In connection with that case, McFARLAND was on pretrial release from July 1, 2017, to June 12, 2018.

Subsequently, from late 2017 through March 2018, McFARLAND owned and operated NYC VIP Access, a company based in New York, New York.  NYC VIP Access purported to be in the business of obtaining and selling for profit tickets to various exclusive events such as fashion galas, music festivals, and sporting events, including the following events, among others: the 2018 Met Gala, Burning Man 2018, Coachella 2018, the 2018 Grammy Awards, Super Bowl LII, and a Cleveland Cavaliers game and team dinner with Lebron James.  McFARLAND, while on pretrial release, perpetrated a scheme to defraud attendees of the Fyre Festival, former customers of Magnises (another company operated by McFARLAND), and other customers by soliciting them to purchase tickets from NYC VIP Access to these exclusive events when, in fact, no such tickets existed. 

In furtherance of the fraudulent ticket scheme and to conceal his involvement in NYC VIP Access, McFARLAND took steps to make NYC VIP Access appear as it if were controlled and operated by other individuals.  For example, in soliciting ticket sales, McFARLAND used an email account in the name of a then-employee (“Employee-1”) and a fake employee (the “Fake Employee”) to communicate with customers.  In addition, McFARLAND did not personally meet or speak with customers.  Instead, at the direction of McFARLAND, Employee-1 met and spoke with customers to solicit ticket sales.  McFARLAND also directed Employee-1 to sign the contracts between NYC VIP Access and the customers for the sham ticket sales.  

McFARLAND also took steps to conceal his receipt of the proceeds from the scheme.  For example, McFARLAND arranged for customer payments to be made by wire transfer, or through a payment processor, to bank accounts to which McFARLAND or his associates had access, including bank accounts belonging to Employee-1 and McFARLAND’s driver (the “Driver”).  Alternatively, McFARLAND used mobile payment service accounts belonging to other NYC VIP Access employees to receive customers’ payments for tickets. Employee-1, the Driver, and other NYC VIP Access employees then provided the ticket sale proceeds to McFARLAND in cash.  After McFARLAND induced customers to pay for the tickets, McFARLAND either did not provide tickets at all, or did not provide tickets as advertised.  Altogether, McFARLAND obtained approximately $150,000 in fraudulent ticket sales from at least 30 customer-victims of NYC VIP Access.

In or about March 2018, McFARLAND provided a forged check in the name of Employee-1 to the Driver, which the Driver attempted to deposit into the Driver’s bank account and would have resulted in the unauthorized withdrawal of funds from Employee-1’s bank account.

On or about June 20, 2018, in an in-person interview with a federal law enforcement agent about his involvement in NYC VIP Access, McFARLAND falsely stated, among other things, that (i) McFARLAND did not think that he would defraud customers from his prior businesses, Magnises and Fyre Festival, when he solicited them to buy tickets for NYC VIP Access; and (ii) Employee-1 authorized McFARLAND to write a check from Employee-1’s bank account for $25,000 in the name of Employee-1 to the Driver for the Driver to deposit into the Driver’s bank account.           

*                *                *

McFARLAND, 26, of New York, New York, was sentenced to 6 years in prison, to be followed by 3 years of supervised release, and a $500 special assessment.  Judge Buchwald also ordered McFARLAND to forfeit $26,191,306.28. 

Mr. Berman praised the outstanding investigative work of the FBI’s New York Field Office, and thanked the U.S. Securities and Exchange Commission for its assistance. 

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United State Attorney Kristy J. Greenberg is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent-in-Charge of the New York Field Office of the Drug Enforcement Administration (“DEA”), James D. Robnett, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), Scott Lampert, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), James P. O'Neill, Commissioner of the New York City Police Department (“NYPD”), and Mark G. Peters, Commissioner of the New York City Department of Investigations (“DOI”), announced today the unsealing five Indictments and a criminal Complaint in Manhattan federal court charging a total of 10 defendants with illegally distributing oxycodone.

U.S. Attorney Geoffrey S. Berman said:  “These doctors and other health professionals should have been the first line of defense against opioid abuse, but as alleged in today’s charges, instead of caring for their patients, they were drug dealers in white coats.  They hid behind their medical licenses to sell addictive, dangerous narcotics.  This Office will do everything in its power to bring to justice anyone responsible for fueling the opioid epidemic that has taken so many lives.”    

DEA Special Agent-in-Charge James J. Hunt said:  “From drug cartels to street distributors, law enforcement is targeting all levels of drug traffickers amidst the worst drug crisis in American history.   The worst villains in the fight against drug abuse are doctors whose criminal actions fuel addiction and overdoses.  As a result of separate investigations from three DEA offices, five doctors, a pharmacist, a nurse practitioner and three associates have been arrested for their role in distributing millions of unnecessary oxycodone pills, allegedly. SAC Hunt commends the men and women from DEA’s Tactical Diversion Squads, our law enforcement partners and Southern District of New York for their commitment and hard work.” 

IRS-CI Special Agent-in-Charge James D. Robnett said:  “Medical professionals and others callously placed individuals in harm’s way simply because of greed. It takes a special kind of person to prey on the sick and vulnerable. The special agents of IRS Criminal Investigation will continue their mission to disrupt the flow of ill-gotten gains from these criminals.” 

HHS-OIG Special Agent-in-Charge Scott Lampert said:  “These individuals allegedly engaged in a greed-fueled scheme that put lives at risk and callously contributed to the opioid epidemic that continues to plague our society.  These charges should serve as a warning to medical professionals that act like drug dealers and profit off of the vulnerable individuals they should be helping.  Along with our law enforcement partners we are committed to ending the illegal distribution of opioids in this country and protecting the public’s health and welfare.”

NYPD Commissioner James P. O’Neill said:  “Our entire country is suffering through an opioid abuse crisis, and we need to do everything we can to save as many lives as possible.  We need to help people from falling into a black hole of addiction and fatal overdoses.  We have to push New York City and our nation to thrive, and to turn this epidemic around.  A good step in that direction is to investigate and put away the criminals who have so clearly betrayed their professional oaths – who have put illegal profits above their own integrity, and above the well-being of their fellow man.  I commend each of our law enforcement partners on the Drug Enforcement Task Force, and all the New Yorkers who alert the police when they suspect criminality.  This is how each of us – cops, prosecutors, and all the people we serve – are sharing the responsibility for public safety.  And this is how we are making our way forward.”    

DOI Commissioner Mark G. Peters said: “These joint investigations demonstrate the scourge that opioid abuse has on our community and the emphatic response from law enforcement: Any individual who seeks to promote prescription fraud and drug abuse will be exposed, arrested and prosecuted. DOI stands firmly with its federal partners on this serious issue and we will continue to work together to stop this crime and save lives.”

According to the allegations in the five Indictments and one Complaint unsealed today: [[1]]

DANTE A. CUBANGBANG, JOHN F. GARGAN, MICHAEL KELLERMAN, and LOREN PIQUANT, who together operated a medical clinic in Queens, were arrested yesterday evening and will be presented in Manhattan federal court today.   According to the allegations in the Indictment unsealed today, CUBANGBANG, a physician, and GARGAN, a nurse practitioner, prescribed over 6 million oxycodone pills to individuals they knew did not need the medication for any legitimate medical reason.  CUBANGBANG and GARGAN prescribed more than twice as many oxycodone pills that were paid for by Medicare and Medicaid than the next highest prescriber in New York.  CUBANGBANG and GARGAN doled out these prescriptions during office visits that lasted no more than a few minutes and involved little to no physical examination.  Together with KELLERMAN and PIQUANT, who worked in the clinic and recruited patients, the defendants collected more than $5 million in all-cash office visit fees, which they laundered and divided amongst themselves. 

CARL ANDERSON, a Staten Island physician, and ARTHUR GRANDE were arrested yesterday evening and will be presented in Manhattan federal court today.  According to the allegations in the Indictment unsealed today, ANDERSON prescribed nearly a million oxycodone pills to patients he knew had no legitimate medical need for the medication, including GRANDE, who sold the pills on the streets of New York.  ANDERSON often saw his patients, some of whom displayed visible signs of drug addiction, without appointments and with little notice, in the middle of the night, and required that they pay hundreds of dollars in cash for each prescription.  Noisy crowds of pill-seeking patients often gathered outside of ANDERSON’s office and in his waiting room, prompting occasional 911 calls from neighbors.  Even after some of ANDERSON’s patients died of drug overdoses, he did not alter his prescribing practices. 

ANTHONY PIETROPINTO, a psychiatrist residing in Manhattan, was arrested this morning and will be presented today before Magistrate Judge James L. Cott.  According to the allegations in the Complaint unsealed today in Manhattan federal court, PIETROPINTO wrote thousands of medically unnecessary oxycodone prescriptions in exchange for $50 to $100 in cash per visit.  PIETROPINTO wrote these prescriptions to drug-addicted individuals, including one patient who overdosed on drugs, and who had previously been prescribed by PIETROPINTO both oxycodone and naloxone, a medication used to block the effects of opioid overdoses, because PIETROPINTO was aware of, but disregarded, that patient’s addiction issues.  PIETROPINTO saw these patients in a rented office space after hours, and instructed his patients to not fill prescriptions at large chain pharmacies because pharmacists at those pharmacies would call and question PIETROPINTO about why he wrote prescriptions for large amounts of oxycodone. 

NKANGA NKANGA, a Staten Island physician, was arrested this morning and will be presented in Manhattan federal court today.  According to the allegations in the Indictment unsealed today, in exchange for cash payments, NKANGA wrote thousands of oxycodone prescriptions for patients, some of whom displayed visible signs of drug addiction, without conducting any physical examination, or even seeing them in an examination room.  NKANGA also wrote prescriptions in the names of patients who did not even visit his medical office.  On one occasion, for instance, NKANGA asked a patient, “how many people are you representing today,” and then wrote prescriptions in the names of people, even though three were not present.  NKANGA regularly prescribed over 100 oxycodone pills per patient per month until July 2018 when he reduced all patients’ monthly allotment, telling one patient he was “very worried” about scrutiny from law enforcement.    

NADEM J. SAYEGH, a physician with offices in the Bronx and Westchester, was arrested this morning and will be presented in Manhattan federal court today.  According to the allegations in the Indictment unsealed today, SAYEGH maintained a corrupt relationship with a co-conspirator, issuing oxycodone prescriptions in his name, variations of his name, his family members’ names, and the names of other individuals in exchange for thousands of dollars in cash, expensive dinners, high-end whisky, cruises, and all-expense-paid trips.  SAYEGH wrote some of these prescriptions, for which there was no legitimate medical purpose, for individuals who did not visit his medical office, including a patient who was overseas and another patient who was incarcerated.        

MARC KLEIN, a pharmacist in White Plains, was arrested this morning and will be presented in Manhattan federal court.  According to the allegations in the Indictment unsealed today, KLEIN filled oxycodone prescriptions that he knew were illegitimate, including prescriptions filled by a customer in multiple variations of his name and date of birth, and prescriptions filled in the names of individuals who never were present in the pharmacy.  KLEIN filled thousands of these oxycodone prescriptions, “fronted” controlled substances, and made false reports to New York State authorities, in exchange for cash payments and a vacation.   KLEIN admitted, in substance, that he and his employees could be called “licensed drug dealers” because “oxy pays the bills” at KLEIN’s pharmacy. 

*                      *                     *

CUBANGBANG, 50, of Franklin Square, New York, GARGAN, 62, of Manhattan, New York, KELLERMAN, 54, of Queens, New York, and PIQUANT, 37, of Bronx, New York, have been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison.  CUBANGBANG, GARGAN, and KELLERMAN are also charged with one count of conspiracy to commit health care fraud, which carries a maximum sentence of 10 years in prison, and conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison.

ANDERSON, 57, of Staten Island, New York, and GRANDE, 53, of Staten Island, New York, have been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison. 

PIETROPINTO, 80, of Manhattan, New York, has been charged in a Complaint with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison, and two counts of distribution of controlled substances, each of which carries a maximum sentence of 20 years in prison.

NKANGA, 65, of Staten Island, New York, has been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison, and four counts of distribution of controlled substances, each of which carries a maximum sentence of 20 years in prison.

SAYEGH, 64, of Yonkers, New York, has been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison; one count of distribution of controlled substances, which carries a maximum sentence of 20 years in prison; one count of health care fraud, which carries a maximum sentence of 10 years in prison; making false statements, which carries a maximum sentence of five years in prison; and aggravated identity theft, which carries a two year mandatory minimum prison sentence to be served consecutive to any other term of imprisonment. 

KLEIN, 47, of White Plains, New York, has been charged in an Indictment with one count of conspiracy to distribute controlled substances, which carries a maximum sentence of 20 years in prison, and 14 counts of distribution of controlled substances, each of which carries a maximum sentence of 20 years in prison.

The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by their respective judges. 

Mr. Berman praised the investigative work of the DEA Tactical Diversion Squads in New York, Long Island and Newark as well as HHS, DOI and IRS.  DEA’s Tactical Diversion Squad, New York (Group TDS-NY) comprises agents and officers from the DEA, the NYPD, the New York State Police, New York State Department of Financial Services and New York City Department of Investigation.  DEA’s Long Island Tactical Diversion Squad (LIDO –TDS) comprises agents and officers of the DEA, Nassau County Police Department, Rockville Centre Police Department, Suffolk County Police Department, Port Washington Police Department and Internal Revenue Service.  Newark Tactical Diversion Squad (Newark-TDS) comprises agents and officers from the DEA, Elizabeth Police Department, Essex County Sheriff’s Office, Toms River Police Department, Clinton Police Department, West Orange Police Department, Pohatcong Police Department, Long Branch Police Department, and Marlboro Police Department.  Assistance was also provided by the Yonkers Police Department and Greenburgh Police Department.

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

These cases are being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Michael Krouse and Louis Pellegrino are in charge of the prosecution in United States v. Cubangbang et al., Assistant U.S. Attorneys Stephanie Lake and Nicolas Roos are in charge of the prosecution in United States v. Pietropinto, and Assistant U.S. Attorney Nicolas Roos is in charge of the prosecutions in United States v. Anderson et al., United States v. Nkanga, United States v. Sayegh, and United States v. Klein.      

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

 

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[1]     As the introductory phrase signifies, the entirety of the texts of the Indictments and Complaint, and the description of the Indictments and 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, John H. Durham, United States Attorney for the District of Connecticut, William F. Sweeney, Assistant Director in Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), James J. Hunt, Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), Brian D. Boyle, Special Agent in Charge of the New England Division of the DEA, Brian C. Turner, Special Agent in Charge of the FBI, New Haven, and Joseph F. Schaller, the Commissioner of the New Rochelle Police Department, announced the results of a coordinated operation earlier today, in which federal, state, and local law enforcement officers arrested six defendants in Westchester County, New York, and three defendants in Fairfield County, Connecticut. 

Ten defendants are charged in two federal indictments, unsealed today.  Seven of the defendants were charged in the Southern District of New York with conspiracy to distribute five kilograms and more of cocaine and 50 grams and more of methamphetamine in and around New Rochelle, New York, since at least April 2018.  The U.S. Attorney’s Office for the District of Connecticut has charged an additional three defendants with narcotics offenses, including conspiracy to distribute 500 grams and more of cocaine.  Those defendants arrested today who are charged in the federal indictment in the Southern District of New York were presented in White Plains federal court today before Magistrate Judge Paul E. Davison. 

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Our Office is committed to ridding New York neighborhoods of highly addictive and extremely dangerous drugs.  And we will continue to help coordinate our efforts with other U.S. Attorney’s Offices and local and federal law enforcement agencies.”

Connecticut U.S. Attorney John H. Durham stated:  “We allege that these individuals were responsible for bringing significant amounts of cocaine and methamphetamine into our state.  I thank our federal, state and local law enforcement partners for their diligent efforts in these cases, and our counterparts in the Southern District on New York for coordinating with us in these investigations and today’s take down of the most significant members of this organization.”

FBI Assistant Director-in-Charge of the New York Field Office William F. Sweeney stated:  “The distribution of illegal narcotics continues to be a scourge on our communities.  As alleged, these defendants profited from trafficking cocaine and methamphetamines at the expense of those subjected to all the negatives wrought by these substances.  Today’s charges should serve as a reminder that the FBI, through our Westchester County Safe Streets task force, will continue to target these offenders and the impact they are having on our communities.”

FBI Special Agent-in-Charge of the New Haven Office Brian C. Turner stated:  “Despite the ongoing battle against the opioid crisis in our communities, this indictment should make it abundantly clear that we at the FBI, along with all of our law enforcement partners, have not lost sight of the other illicit drugs and those that traffic them.  Together we will continue to pursue those that seek to pollute our communities.”         

DEA New York Special Agent-in-Charge James J. Hunt stated:  “Earlier this year, DEA joined forces with FBI and the New Rochelle Police Department to dismantle a drug trafficking organization operating in Westchester and Fairfield Counties.  By shutting down this family-run methamphetamine operation, lives will be saved.  I applaud the efforts of our law enforcement partners and the US Attorney’s Offices Southern District of New York and District of Connecticut.”

DEA New England Special Agent-in-Charge Brian D. Boyle stated:  “DEA is committed to investigating and dismantling large-scale poly drug trafficking organizations like this one operating in the Bridgeport, Connecticut, area.  As we all know, drug trafficking, along with the gun and physical violence that often accompanies it, ravages the very foundations of our families and communities.  This investigation demonstrates the strength of collaborative local, state, and federal law enforcement efforts to seek and bring to justice anyone who engages in these crimes.”

New Rochelle Police Commissioner Joseph F. Schaller stated:  “This is another example of the excellent work being performed by the joint federal, state and local drug enforcement task forces operating in Westchester and Fairfield Counties.  The City of New Rochelle and the New Rochelle Police Department thank our law enforcement partners in this operation for their exceptional efforts and invaluable assistance in removing a significant number of dangerous drug traffickers from the streets of our city.”

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

From April 2018 up to October 2018, ULYSSES LOPEZ, VALENTINO LOPEZ, and CHRISTIAN LOPEZ conspired to distribute five kilograms and more of powder cocaine and 50 grams and more of methamphetamine, and FELIPE BARAJAS, a/k/a “Felipe Barajas Gallegos,” JOSE OCEGUERA, a/k/a “Cande,” FELIPE CORTES, and SATURNINO OLIVER FARIAS, a/k/a “Genaro Robles,” conspired to distribute five kilograms and more of powder cocaine.

As alleged in the Indictment unsealed today in New Haven federal court:

From March 2018 through June 26, 2018, RAFAEL LOPEZ-MACIAS, a/k/a “Rafa,” a/k/a “Martin Sanchez,” JAIME LOPEZ, a/k/a “Compa,” and JUAN CARLOS FIGUEROA, a/k/a “Chaito,” conspired to distribute 500 grams or more of powder cocaine.  In addition, on June 26, 2018, RAFAEL LOPEZ-MACIAS possessed with intent to distribute 500 grams and more of methamphetamine, and on June 7, 2018, JAIME LOPEZ possessed with intent to distribute a quantity of cocaine. 

The defendants charged in White Plains federal court each face a maximum sentence of life imprisonment, and a mandatory minimum term of 10 years in prison.  The defendants charged in New Haven federal court each face a maximum sentence of 40 years in prison, and a mandatory minimum term of five years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the respective judges.

Mr. Berman and Mr. Durham praised the outstanding investigative work of the FBI, DEA, the Connecticut State Police, and the New Rochelle, Norwalk and Stamford Police Departments.  Mr. Berman also thanked the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations for their assistance and the U.S. Attorney’s Office for the District of Connecticut for its ongoing coordination in the case.

This case is also the result of the ongoing efforts by the Organized Crime Drug Enforcement Task Force (OCDETF) a partnership that brings together the combined expertise and unique abilities of federal, state and local law enforcement agencies.  The principal mission of the OCDETF program is to identify, disrupt, dismantle and prosecute high level members of drug trafficking, weapons trafficking and money laundering organizations and enterprises.

These cases are being prosecuted by Assistant United States Attorneys Emily Deininger and Celia Cohen of Southern District of New York’s White Plains Division, and by Assistant United States Attorneys Anthony Kaplan and Lauren Clark of the District of Connecticut.

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

 

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[1] As the introductory phrase signifies, the entirety of the text of the Indictments and the descriptions of the Indictments 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 JAMES BECKISH and JOSEPH ANTHONY DEMARIA pled guilty to one count of conspiracy to commit wire fraud in connection with a scheme to make unauthorized charges on credit cards through sham companies that purportedly offered nutraceutical products for sale over the internet.  BECKISH and DEMARIA pled guilty before United States District Judge Edgardo Ramos.

According to the Complaint, the Information to which BECKISH and DEMARIA pled guilty, and statements made during the proceedings today:

Between 2013 and 2017, BECKISH, DEMARIA and others, created and operated dozens of companies that purported to sell dietary supplements and similar products called “nutraceuticals” over the internet.  The websites of the defendants’ companies purported to sell products like dietary supplements but, in reality, were primarily used to repeatedly bill consumers who never ordered their products, or even if they did, almost never received them.  The defendants used these websites as a cover for unauthorized and recurring charges that were placed on thousands of credit card numbers that the defendants had purchased or obtained, or had acquired from consumers who had attempted to order the products in question.  For example, in one email, DEMARIA asked BECKISH: “Are we shipping these guys actual nutra products? Lol.”  To which BECKISH responded:  “Nope.” 

BECKISH, DEMARIA, and others created these different companies and websites, because they knew that credit card processors would stop doing business with them over time as consumers noticed the unauthorized charges and sought refunds.  These refunds, called “chargebacks” by credit card processors, are generally low for legitimate businesses but reached extremely high percentages for many of the companies associated with the defendants’ scheme.  In certain instances, the chargeback rates quickly approached or even exceeded 20 percent – that is, consumers were seeking refunds of more than 20 percent of the charges placed by certain of the defendants’ companies.  Credit card processors, in turn, paid millions of dollars in refunds for fraudulent charges associated with the defendants’ companies between 2013 and 2017 in attempts to refund affected consumers.

In total, BECKISH and DEMARIA both pled guilty to causing more than $7 million in loss during the duration of the scheme.  

 

*                *                *

BECKISH, 32, of Miami, Florida, and DEMARIA, 33, of Miami, Florida, each plead guilty to one count of conspiracy, which carries a maximum sentence of five years in prison.  BECKISH and DEMARIA also agreed to pay restitution and to forfeit $7,231,878.  Sentencing for BECKISH is scheduled for January 16, 2019 at 12:30 p.m. before Judge Ramos. Sentencing for DEMARIA is scheduled for January 18, 2019 at 12:30 p.m. before Judge Ramos.

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

Mr. Berman praised the investigative work of the Secret Service. 

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Danielle Sassoon, Olga Zverovich, and Michael McGinnis 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 Office of the Federal Bureau of Investigation (“FBI”), announced that PAUL M. ROSENFELD has been charged in U.S. District Court for the Southern District of New York in connection with manufacturing an explosive device in his Rockland County residence.  The defendant was presented before U.S. Magistrate Judge Paul E. Davison in White Plains federal court this afternoon.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Paul M. Rosenfeld concocted a twisted plan to draw attention to his political ideology by killing himself on the National Mall in Washington, D.C.—risking harm to many others in the process.  Rosenfeld’s alleged plan for an Election Day detonation cut against our democratic principles.  Thanks to outstanding coordination between local and federal law enforcement, Rosenfeld’s alleged plot was thwarted and he is now in federal custody.” 

Assistant Director-in-Charge William F. Sweeney Jr. said:  “As alleged in the complaint, Paul M. Rosenfeld planned to detonate a large explosive to kill himself and draw attention to his radical political beliefs.  Had he been successful, Rosenfeld’s alleged plot could have claimed the lives of innocent bystanders and caused untold destruction.  Fortunately, his plans were thwarted by the quick action of a concerned citizen and the diligent work of a host of our law enforcement partners and the FBI’s Joint Terrorism Task Force.  I’d like to extend particular thanks to our partners with the Orangetown Police Department, the Rockland County Sheriff’s Office, the Rockland County District Attorney, the New York State Police, the New York City Police Department, and the Stony Point Police Department for their respective roles in bring this investigation to a safe conclusion.”

As alleged in the Complaint:[[1]]

In August and September 2018, ROSENFELD sent letters and text messages to an individual in Pennsylvania (“Individual-1”).  These letters and text messages stated that ROSENFELD planned to build an explosive device and detonate it on November 6, 2018, on the National Mall in Washington, D.C.  ROSENFELD’s stated reason for these acts was to draw attention to his political belief in “sortition,” a political theory that advocates the random selection of government officials. 

On October 9, 2018, law enforcement agent stopped a car driven by ROSENFELD.  ROSENFELD agreed to answer questions and, in an interview with law enforcement, stated that he ordered large quantities of black powder—an explosive substance—over the Internet, which he transported from a location in New Jersey to his home in Tappan, New York (the “Residence”).  ROSENFELD stated, among other things, that he used approximately eight pounds of black powder to construct a large explosive device in the basement of the Residence, and that he installed certain components in the explosive device to ensure that he was killed in the blast.  ROSENFELD reported that he had previously constructed smaller explosive devices and had conducted test detonations.  He also indicated that he planned to detonate the larger explosive device on November 6, 2018, on the National Mall in Washington, D.C. in order to draw attention to sortition. 

On October 9, 2018, law enforcement agents conducted a search of the Residence pursuant to a judicially authorized search warrant.  In the basement, law enforcement agents found what appeared to be a functional explosive device weighing approximately 200 pounds (the “Explosive Device”).  FBI bomb technicians removed the Explosive Device from the basement of the Residence and transported it to a safe location.  Within the Residence, law enforcement agents also found, among other things, a fusing system for triggering explosive devices and what appeared to be empty canisters of black powder.

*                      *                     *

PAUL M. ROSENFELD, 56, of Tappan, New York, has been charged with one count of unlawfully manufacturing a destructive device, which carries a maximum sentence of 10 years in prison, and one count of interstate transportation and receipt of an explosive, which carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI’s New York Joint Terrorism Task Force, which consists principally of agents of the FBI and detectives of the New York City Police Department.  Mr. Berman also thanked the Rockland County Sheriff’s Office, the Stony Point Police Department, the Rockland County District Attorney’s Office, New York State Police, and the Orangetown Police Department for their valuable assistance.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorney Michael K. Krouse is in charge of the prosecution.

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

 

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

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 the Indictment of CARLOS BATISTA JR., charging him with strangling and suffocating the woman he was dating. 

U.S. Attorney Geoffrey S. Berman said:  As alleged, Carlos Batista Jr. assaulted his girlfriend while on a cruise, grabbing and choking her until she passed out.  Thankfully others on the ship came to her aid.  Now Batista is back on New York soil and must answer for his alleged criminal actions.”

According to the allegations in the Indictment and the Complaint[1]:

As alleged in the criminal Complaint and the Indictment, following a dispute on September 8, 2018, with his girlfriend, BATISTA grabbed, dragged, pushed, and pulled the victim through the hallways of the cruise ship.  When the victim screamed for help, BATISTA covered her mouth and restricted her breathing, at one point causing the victim’s body to go limp.  Ultimately, BATISTA dragged the victim into his cabin and continued to assault her until others on the ship, who responded to the screaming, were able to open BATISTA’s cabin door where they found BATISTA with his arm around the victim’s neck.

*          *          *

BATISTA, 22, of Elmhurst, New York, has been charged with one count of assault of a spouse, intimate partner, or dating partner by strangling or suffocating, which carries a maximum sentence of 10 years.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the work of the FBI.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Ryan B. Finkel and Mathew Hellman are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip Bartlett, Inspector-In-Charge for the New York Division of the U.S. Postal Inspection Service (“USPIS”), announced today that STEVEN L. HENNING, a certified public accountant who was a Managing Partner at a Manhattan accounting firm, was charged with wire fraud in connection with a scheme in which he falsely claimed to have entered into multimillion-dollar intellectual property deals and defrauded investors out of $2 million.  HENNING was arrested in St. Johns, Florida, yesterday afternoon and presented before a U.S. Magistrate judge in federal court in Jacksonville, Florida, this afternoon.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Steven Henning, a CPA at a Manhattan accounting firm, established his own firm called OpportunIP, which he allegedly told victims was a company specializing in assisting other entities in taking intellectual property to the market.  Henning allegedly induced victims to invest in OpportunIP by providing them with false documents showing OpportunIP’s involvement in multi-million dollar transactions that would reap millions of dollars in future profits.   Ultimately, the victims learned that the deals did not exist and they were victims of an alleged scheme to defraud them out of millions of dollars.”

USPIS Inspector-in-Charge Philip R. Bartlett said:  “Mr. Henning’s claims were nothing more than a bag of lies.  Law enforcement reminds investors to research all investment opportunities thoroughly to avoid being scammed.”

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

HENNING, a certified public accountant, was a managing partner at an accounting firm in Manhattan (the “Accounting Firm”).  He was the Partner-in-Charge of Advisory Services and served on the firm’s Executive Committee.  Previously, HENNING was employed as a Professor of accounting at a Texas university (the “University”) and he served as an Academic Fellow in the Office of the Chief Accountant at the U.S. Securities and Exchange Commission.

In June 2008, while employed at the Accounting Firm, HENNING formed what would later become known as OpportunIP, LLC (“OpportunIP”), a business that, at different times, had offices in Purchase and Tarrytown, New York.  HENNING was the Chief Executive Officer and owned an interest in OpportunIP through an entity known as the Henning Family Partnership (“HFP”).  Members of the Accounting Firm also owned interests in OpportunIP.

In May 2012, HENNING told one of his prior students from the University (“Victim-1”) about an endeavor he was involved in, OpportunIP.  HENNING described OpportunIP as a business venture through which HENNING established partnerships with owners or developers of intellectual property (“IP”) and assisted them in taking the IP to market in exchange for a substantial percentage share of future profits.  Over the next few years, HENNING provided Victim-1 with information about OpportunIP, including a series of IP opportunities that were in various stages of implementation.  For example, he claimed that OpportunIP had signed an escrow agreement with two multi-national corporations (“MNC-1” and “MNC-2”) relating to the “license-out” of certain IP that was being represented by OpportunIP (the “Escrow Agreement”).

In fall 2014, HENNING presented Victim-1 with an opportunity to invest in OpportunIP and asked Victim-1 to help secure bridge financing for an IP owner (“IP Owner-1”) who was in financial distress and needed temporary financing while he brought his IP to market.  HENNING represented that the IP owner needed a $500,000 loan to get him past certain financial hurdles and would repay the loan in six months. 

Thereafter, there were ongoing communications relating to Victim-1’s purchase of an interest in OpportunIP and, at around the same time, HENNING disclosed another multi-million dollar OpportunIP License-Out deal involving an agreement between an IP owner represented by OpportunIP and a global automobile manufacturer (“AM-1”).  HENNING provided Victim-1 with a copy of the License-Out Agreement (“AM-1 License Agreement) and an AM-1 corporate guarantee (the “AM-1 Guarantee”).  In addition, he provided an agreement in which a second global automobile manufacturer (“AM-2”) agreed to license the same technology (“AM-2 License Agreement”).

On October 31, 2014, HENNING listed IP deals for which he had “signed deals and minimum guarantees” and proposed that Victim-1 acquire 5 percent of OpportunIP for $2 million.  On November 2, 2014, Victim-1 indicated his willingness to proceed and on November 7, 2014, HENNING sent Victim-1 the purported License-in Agreement between OpportunIP and MNC-1 (“MNC-1 License Agreement”) and the “License-out Agreement” between OpportunIP and MNC-2 (“MNC-2 License Agreement”).  Three days later, on November 10, 2014, HENNING emailed Victim-1 the Escrow Agreement, in which MNC-1, MNC-2, and OpportunIP purportedly agreed that, pursuant to the license agreements, $35 million would be held in escrow and OpportunIP would receive $2 million no later than December 31, 2014.

The AM-1 Guarantee, AM-1 Licensing Agreement, and the Escrow Agreement were all fraudulent documents and the deals never existed.  However, based on the information and documentation provided by HENNING, on November 21, 2014, Victim-1 sent HENNING $500,000, which was the beginning of the funding for HENNING’s proposal for Victim-1 to purchase an interest in OpportunIP and was a loan to HENNING.  On November 26, 2014, Victim-1 had another $500,000 wired to a bank account controlled by IP Owner-1, in order to fund the purported loan to IP Owner-1.

HENNING and Victim-1 continued to communicate about HENNING’s proposal to have Victim-1 purchase an interest in OpportunIP.  HENNING proposed forming a new company with the same goals and business model as OpportunIP.  Victim-1 brought in his relative (“Victim-2”) and Victim-2’s family.  In spring 2015, Victim-1, Victim-2, another investor (“Victim-3”), and a corporate attorney working on the transaction on their behalf (“Attorney-1”), were communicating with HENNING about the creation of a new corporate entity through which HENNING would transfer control of the company from his Accounting Firm partners to HENNING and Victim-1. 

Thereafter, the Victims’ families agreed that they, through their joint and separate investment entities, would fund an additional loan to the new HENNING venture, based largely upon confidence in the purported MNC-1 and AM-1 agreements and HENNING’s additional representations of future business opportunities. 

After discussions relating to the structure of the company and requests for information from the Victims’ corporate attorney, on June 3, 2015, HENNING sent purported electronic bank records for the months of April and May for a bank account in the name of OpportunIP (the “OpportunIP Account”).  He represented that “the April statement shows the amount coming in from [MNC-1] ($2 million plus remaining interest from the escrow account).”  The bank statements were also fraudulent and there was no deposit of over $2 million during those months.

On October 9, 2015, Victim-1 and Victim-2 had $1 million transferred to an account in the name of an entity that was set up to be the holding branch of the new OpportunIP.  Thereafter, nearly all of the $1 million was transferred to accounts controlled by HENNING. 

Meanwhile, HENNING continued to make false representations about the supposed progress he was making in securing deals for OpportunIP and he indicated that he was ready to have Victim-1 become more involved in OpportunIP’s operations.  Consequently, in Summer/Fall 2016, Victim-1 left his job at an investment bank to become Chief Operating Officer of OpportunIP.  But, despite HENNING’s representations that business was going well, he insulated his alleged business contacts from direct interaction with Victim-1 or Victim-2 and provided them with excuses for why deals were delayed.  In addition, in at least one instance in November 2016, HENNING made it appear that he had scheduled a meeting between HENNING, Victim-1 and an MNC-1 Executive (the “MNC-1 Executive”) when he actually had not.  Victim-1 traveled to New York and came to the Purchase office of OpportunIP to subsequently meet with HENNING and the MNC-1 Executive.  But, that meeting was never actually scheduled.  To make it appear that it had been, on November 18, 2016, HENNING forwarded a fabricated email to Victim-1, which was purportedly sent from the MNC-1 Executive to HENNING, and canceled the meeting.

In August 2017, during a search of HENNING’s office at the Accounting Firm, the Escrow Agreement, the AM-1 Guarantee, and the AM-1 License-out agreement were all recovered and contained taped-on signatures of executives on their signature pages.

*                *                *

HENNING, 57, is charged with wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the USPIS and the SEC Office of Inspector General. 

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

The charge contained in the Complaint is merely an accusation, and the defendant is presumed innocent unless and until proven guilty.

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that GARY DAVIS, a/k/a “Libertas,” pled guilty today to conspiring to distribute massive quantities of narcotics, a charge arising out of his role as a member of the small administrative staff of “Silk Road.”  During its operation from 2011 until 2013, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute illegal drugs and other illicit goods and services to more than 100,000 buyers, and to launder hundreds of millions of dollars derived from those unlawful transactions.  DAVIS pled guilty before United States District Judge Jesse M. Furman.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Silk Road was a secret online marketplace for illegal drugs, hacking services, and a whole host of other criminal activity.  As he admitted today, Gary Davis served as an administrator who helped run the Silk Road marketplace.  Davis’s arrest, extradition from Ireland, and conviction should send a clear message: the purported anonymity of the dark web is not a protective shield from prosecution.”

According to the allegations in the Superseding Indictment, court filings, statements made in court, and evidence presented during the 2015 trial of Ross Ulbricht, Silk Road’s founder:

From January 2011, up to October 2, 2013, the “Silk Road” website hosted a sprawling black-market bazaar on the Internet, where illegal drugs and other illicit goods and services were regularly bought and sold by the site’s users.  During its more than two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over 100,000 buyers, and to launder hundreds of millions of dollars derived from these unlawful transactions.

The owner and operator of Silk Road, Ross William Ulbricht, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” a/k/a “Silk Road,” ran the website with the assistance of a small support staff, including both site administrators and forum moderators.  The site administrators were responsible for, among other things, monitoring user activity on Silk Road for problems, responding to customer service inquiries, and resolving disputes between buyers and vendors.  The forum moderators were responsible for, among other things, monitoring user activity on discussion forums associated with the site, providing guidance to forum users concerning how to conduct business on Silk Road, and reporting any significant problems discussed on the forums to the site administrators and to Ulbricht. 

From May 2013 up to June 2013, DAVIS served as a forum moderator for Silk Road.  From June 2013 up to October 2, 2013, DAVIS worked as a site administrator on Silk Road.  In his role as a site administrator, DAVIS’s responsibilities included (1) responding to customer support requests from Silk Road users who needed assistance with their buyer or seller accounts on the marketplace; (2) serving as an arbitrator by resolving disputes that arose between drug dealers and buyers on the site; and (3) enforcing the rules for doing business on Silk Road, which had been set by Ulbricht.  For instance, there was a rule against “out of escrow” sales—i.e., sellers and buyers arranging payments off the site to avoid paying Silk Road commissions.  When violations of this rule were discovered, DAVIS could terminate the vendor’s account, demote the vendor, or otherwise restrict the vendor’s privileges, and he typically reported such incidents to Ulbricht.  DAVIS was paid a weekly salary for his work as a site administrator.

*                *                *

DAVIS, 30, of Wicklow, Ireland, pled guilty to one count of conspiracy to distribute narcotics, 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.  DAVIS is scheduled to be sentenced by Judge Furman on January 17, 2019 at 3:30 p.m.

*                *                *

Mr. Berman praised the outstanding joint efforts of the Federal Bureau of Investigation and its New York Special Operations and Cyber Division, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations—Chicago-O’Hare, the Drug Enforcement Administration’s New York Field Division, and the Internal Revenue Service—Criminal Investigation’s New York Field Office.  Mr. Berman also thanked the Irish Republic’s Computer Crime Investigation Unit of the An Garda Siochana for its valuable assistance and support.  Mr. Berman also thanked the U.S. Department of Justice’s Office of International Affairs for their support and assistance.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Michael D. Neff, Eun Young Choi, and Timothy T. Howard are in charge of the prosecution.

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID SHALAM was sentenced to 20 years in prison today for the sexual exploitation of minors. SHALAM pled guilty on March 15, 2018.  The sentence was imposed by United States District Judge Alvin K. Hellerstein.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “David Shalam previously admitted to the unconscionable crime of instructing others to engage in sexual acts with young children. Today’s sentence of twenty years in prison fittingly underscores the craven nature of Shalam’s acts. This Office will continue to aggressively bring perpetrators of crimes against children to swift and resolute justice.”

As set forth in the Superseding Information, the Complaint, and statements made during the plea proceeding:

Between April and December 2015, SHALAM paid a woman in Romania (referred to in the Complaint as “Jane Doe”) to participate in a series of live video chats over Skype, during which SHALAM directed Jane Doe to engage in specific sexually explicit conduct with her minor children, who at the time were approximately six and eight years old.  SHALAM referred to Jane Doe’s real time sexual abuse of her children as “shows,” at least one of which SHALAM recorded.

In conjunction with Romanian authorities, the FBI recovered logs of instant messages between SHALAM and Jane Doe over Skype, during which SHALAM and Jane Doe discussed the kinds of sex acts SHALAM wanted to see performed, when the children would be home from school so that the “shows” could take place, and the cost of each “show.” SHALAM wired payments to Jane Doe through a Western Union branch in midtown, Manhattan, a few blocks from the office where SHALAM worked for a retail clothing company.

In addition to his conduct with Jane Doe, SHALAM also engaged in similar conduct with an individual located in Colombia, who engaged in sexually explicit conduct with minor children during live video sessions with SHALAM in exchange for payments.

*                      *                      *

In addition to the prison term, SHALAM, 51, of Brooklyn, New York, was also sentenced to five years of supervised release.

Mr. Berman praised the investigative work of the FBI. 

This case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Alison Moe is in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ABELL OUJADDOU pled guilty to participating in a scheme to trade in the stock of the Valspar Corporation (“Valspar”) based on material nonpublic information relating to another’s company’s efforts to acquire Valspar.  OUJADDOU pled guilty to one count of conspiracy to commit securities fraud before U.S. District Judge Jed S. Rakoff.

U.S. Attorney Geoffrey Berman said: “Abell Oujaddou, a salon owner and hairstylist, pled guilty today to receiving favorable material nonpublic information about Valspar’s stock, and then trading on that information before it became public, netting nearly $200,000 in illegal gains.  As he admitted today, Oujaddou – who had never previously traded Valspar stock – was given the tip by his co-defendant, who worked at a rating agency and had access to inside information about the acquisition of Valspar.  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 allegations contained in the Complaint and Indictment filed against OUJADDOU and his co-conspirators, and statements made in related court filings and proceedings:[1]

Rating Evaluation Services and the Insider

When a company announces an acquisition, the acquiring company’s credit rating agency often evaluates, and ultimately issues a press release relating to, the impact that the acquisition could have on the acquiring company’s credit rating.  Therefore, companies often contact rating agencies before an acquisition is publicly announced in order to secure the rating agency’s views on how a possible acquisition could impact a company’s credit rating.  All the major rating agencies offer a service – sometimes known as a Rating Evaluation Service (“RES”) – that provides the company with a rating committee decision with respect to a proposed acquisition.

In March 2016, a credit rating agency in Manhattan (the “Firm”) assigned Sebastian Pinto-Thomaz, a credit ratings analyst, to work on an RES for the Sherwin-Williams Company (“Sherwin-Williams”) in advance of its contemplated but unannounced acquisition of the Valspar Corporation (“Valspar”).  In connection with this assignment, Pinto-Thomaz had access to confidential information about Sherwin-Williams’ acquisition of Valspar prior to the public announcement of the acquisition.  The Firm’s written policies prohibited the unauthorized disclosure of confidential information, which included the information about the possible acquisition of Valspar (the “Inside Information”).  During his tenure at the Firm, Pinto-Thomaz reviewed and certified his duties of loyalty and confidentiality to the Firm and its clients.

The Insider Trading Scheme

In March 2016, Pinto-Thomaz misappropriated the Inside Information about Sherwin-Williams’ acquisition of Valspar and passed it to OUJADDOU and Jeremy Millul so that they could use it to make profitable trades.  On March 21, 2016, the first trading day after the public announcement of the acquisition, the price of Valspar stock increased approximately 23 percent over the prior day’s close.

OUJADDOU is a Manhattan hairstylist and salon owner who has a close relationship with Pinto-Thomaz, as well as with a member of Pinto-Thomaz’s immediate family (the “Relative”).  Pinto-Thomaz repeatedly provided OUJADDOU with Inside Information about the Valspar acquisition, oftentimes shortly after Pinto-Thomaz became aware of the Inside Information through his work at the Firm.  From March 10, 2016, through March 18, 2016, OUJADDOU, who had never previously purchased Valspar or Sherwin-Williams’ securities, used the Inside Information he had received from Pinto-Thomaz to purchase 8,630 shares of Valspar stock.  After the acquisition was publicly announced, OUJADDOU sold his Valspar shares for approximately $192,080 in profits.  OUJADDOU admitted that he agreed to give Pinto-Thomaz a portion of OUJADDOU’s trading profits in exchange for the Inside Information.

Millul is a Manhattan jeweler who has a close personal friendship with Pinto-Thomaz and the Relative.  Pinto-Thomaz also provided Millul with Inside Information about the Valspar acquisition.  Although Millul had never owned a brokerage account in the United States and had never traded in U.S. securities prior to March 2016, he opened a brokerage account on March 13, 2012, and shortly thereafter purchased 480 shares of Valspar common stock.  On March 18, 2016, the last trading day before the acquisition was publicly announced, Millul also purchased 75 Valspar out-of-the-money call options. After the acquisition was publicly announced, Millul sold his Valspar stock and options for approximately $106,806 in profits. In December 2016, Millul gave Pinto-Thomaz $3,500 in cash.

Pinto-Thomaz Makes False Statements About OUJADDOU and Millul in Connection with a FINRA Inquiry

In June 2016, the Financial Industry Regulatory Authority (“FINRA”) sent the Firm a list of individuals and entities that had traded in Valspar in advance of the public announcement of the acquisition (the “List”).  The Firm forwarded the List to its employees who had worked on the Sherwin-Williams RES, including Pinto-Thomaz, asking the employees to respond by stating whether they had a past or present relationship with any individual or entity on the List. Although both OUJADDOU and Millul were on the List, Pinto-Thomaz denied having a relationship with anyone on the List. 

*                    *                    *

ABELL OUJADDOU, 55, of New York, New York, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.

OUJADDOU is scheduled to be sentenced on February 5, 2019 at 4 p.m.

Mr. Berman praised the work of the FBI, and thanked the SEC for its assistance.

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

 

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[1] As for the defendants who have pled not guilty, Sebastian Pinto-Thomaz and Jeremy Millul, the description of the charges set forth herein constitute only allegations.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that LEONARD MATHEWS was convicted by a jury of assault with a dangerous weapon in aid of racketeering, as well as firearms, ammunition, and crack cocaine distribution offenses.  The verdict followed a seven-day trial before the Honorable J. Paul Oetken.     

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

MATHEWS is a leader, or “big homie,” in the Gangsta Milla Bloods, or “GMB,” a subset of the United Bloods Nation gang that operates in the Bronx and engages in racketeering activity, including narcotics distribution.  On October 20, 2017, MATHEWS ordered a subordinate gang member to shoot someone with whom MATHEWS previously had a physical altercation.  The shooting resulted in the injury of three innocent bystanders on Morris Avenue between East Kingsbridge Road and East 196th Street in the Bronx.  On the night of the shooting, following a closed-door meeting with MATHEWS and other members of the gang, the same Bloods foot soldier that MATHEWS ordered to do the shooting stabbed and left for dead one of the principal witnesses to the shooting. 

*              *             *

MATHEWS, 27, of the Bronx, New York, was convicted of aiding and abetting or willfully causing assault with a dangerous weapon in aid of racketeering, which carries a maximum sentence of  20 years in prison; aiding and abetting or willfully causing the discharge of a firearm during and in relation to a crime of violence, which has a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; aiding and abetting or willfully causing the possession of ammunition by a felon, which carries a maximum sentence of 10 years in prison; and distribution and possession with intent to distribute crack cocaine, which carries a maximum sentence of 20 years in prison.  MATHEWS will be sentenced by Judge Oetken on January 17, 2019.       

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

Mr. Berman praised the investigative efforts of the Bronx Violent Crimes Squad of the New York City Police Department.

The case is being prosecuted by the Office’s General Crimes Unit.  Assistant United States Attorneys Justin V. Rodriguez, Dominic A. Gentile, and Emil Bove are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, Special Agent in Charge for U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), 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 Police Department for the City of New York (“NYPD”), announced that five defendants—SIRA ABASSI, KENLEE GALVEZ, DAVID BRADFORD, JEREMIAS MUNOZ, and LUIS MONSANTO-GERMOSEN—pleaded guilty to participating in a conspiracy to commit Hobbs Act robbery during August and September of 2017.  Each defendant pleaded guilty before United States District Judge Deborah A. Batts.

U.S. Attorney Geoffrey S. Berman stated:  “During August and September of 2017, a rotating crew of armed robbers committed nearly a dozen armed robberies in New York City, victimizing businesses and homes alike.  During one home invasion robbery in the middle of the night, a victim was stabbed in the torso.  Thanks to our law enforcement partners, this robbery crew has been dismantled and all five defendants in this case have admitted to taking part in this brazen scheme.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “This crew conducted nearly a dozen armed robberies.  They preyed on local businesses for their own greedy gain and used physical force whenever they deemed necessary.  HSI’s El Dorado Task Force, which includes task force officers from the Westchester County DA’s office, worked closely with the NYPD and ATF to apprehend these criminals, ensuring that they face justice for their criminal actions.”

ATF Special Agent-in-Charge Ashan M. Benedict said:  “The defendants were members of an organized ring of armed robbers that committed numerous brazen acts of violence all across the city.  Thanks to the investigative work of the ATF/NYPD Joint Robbery Task Force and the collaborative efforts of our state and federal partners, they will no longer prey on the innocent in their community.  ATF remains steadfast in its commitment to protecting citizens from violence and the lasting effects it has on communities.  I would also like to thank the United States Attorney’s Office for prosecuting this case.”

NYPD Commissioner James P. O'Neill said:  “Today’s guilty pleas reflect the highly-effective work of our NYPD investigators and our law enforcement partners at the Southern District, whose precise focus on the real drivers of crime in New York City is relentless. It is imperative that we continue to strongly collaborate in this way — that is how we will keep New Yorkers safe in every neighborhood.”

According to the allegations in the Complaint, the Superseding Indictment to which each defendant pled guilty, public court filings, and statements made in court:

For approximately two months—August and September of 2017—a rotating crew of robbers committed at least 11 successful armed robberies in New York City and attempted several more.  They targeted primarily Asian-owned businesses in Brooklyn and Queens, such as billiards halls and internet cafes.  They also committed home invasion robberies of at least two residences in Queens believed to be locations of gambling operations.  The robbers typically conducted these robberies at night.  For each robbery, they were armed with at least one knife and BB-gun, which they brandished and pointed at victims.  At times, they forced victims to open cash registers at knifepoint, while clutching a victim’s neck.

During these robberies, the robbers physically injured at least two victims.  During a home invasion robbery, one victim—who was asleep when the robbers entered—woke up, resisted, and was stabbed in the torso during the ensuing scuffle; his bloodied shirt, and his doubling over in pain, are visible on video surveillance.  Second, during a robbery of a commercial establishment, a perpetrator hit a resisting victim in the head with a BB gun.  Over the course of the conspiracy, the robbers used force, and the threat of force, to take the following items from victims: a total of more than approximately $20,000, approximately 20 cellphones, credit cards, a wallet, driver’s licenses, a social security card, and other electronic devices.  They took cellphones so that victims could not call 911.

The scheme continued until the night of September 29, 2017, when four defendants—ABASSI, GALVEZ, BRADFORD, and MUNOZ—were caught red-handed en route to another robbery.  They were found in possession of, among other things, a BB-gun, two screwdrivers, three masks, two pairs of gloves, backpacks to fill with robbery proceeds, attire that matched that of the robbers on video from a robbery earlier that week, and a spiral notebook containing handwritten notes (e.g., “gold,” “straight cash,” “doctor,” and “drugs!”) including names, addresses, and physical descriptions of apparent robbery targets.

*              *             *

SIRA ABASSI, 21, of Bayside, New York, pled guilty to conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison. 

KENLEE GALVEZ, 23, of Flushing, New York, pled guilty to conspiracy to commit Hobbs Act robbery and to Hobbs Act robbery, each of which carries a maximum sentence of 20 years in prison.

DAVID BRADFORD, 31, of New York, New York, pled guilty to conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison.

JEREMIAS MUNOZ, 19, of Brooklyn, New York, pled guilty to conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison.

LUIS MONSANTO-GERMOSEN, 23, of Corona, New York, pled guilty to conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison.

The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by Judge Batts.  Sentencings are scheduled for different dates in 2019.

Mr. Berman praised the outstanding investigative work of the ATF, the Strategic Pattern Armed Robbery Technical Apprehension (“SPARTA”) Task Force, the NYPD, and HSI.

If you believe you were a victim of this offense, please contact the U.S. Attorney’s Office’s Victim/Witness Coordinators at (212) 637-2200.

This matter is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Jessica Greenwood and Michael D. Neff are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today the arrest of MICHAEL JONES and the unsealing of an Indictment charging him with distributing the heroin and fentanyl that resulted in the death of Diana Haikova in Manhattan on December 7, 2017.  The Indictment also alleges that JONES distributed heroin in Manhattan on February 14, 2018.  JONES was arrested this morning in Miami, Florida, by the DEA and NYPD, and will be presented tomorrow in federal court in Miami. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the heroin and fentanyl Michael Jones distributed resulted in the tragic overdose of 29-year-old Diana Haikova.  Even more abhorrent, Jones allegedly continued to sell the same drugs that contributed to Haikova’s death.  Working with the NYPD and DEA, we will continue to target and charge drug dealers that profit from the lethal opioid epidemic that is killing so many people.”

DEA Special Agent-in-Charge James J. Hunt said: “This investigation led us into the underbelly of emo rap and its glorification of opioid use.  Today, a team of DEA agents and NYPD Detectives arrested Michael Jones, known as the ‘realnewjerzeydevil’ for allegedly distributing a fatal dose of fentanyl mixed with heroin.  Behind every lethal overdose is a victim whose death becomes a catalyst for raising awareness of the dangers of opioid misuse.  The DEA extends condolences to the victim’s family and reemphasizes our commitment to bringing drug dealers to justice to face the consequences of their crimes.” 

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

On December 7, 2017, Diana Haikova was found dead in her apartment in Manhattan, New York.  Following an investigation by the NYPD and DEA, law enforcement agents identified JONES as the person who distributed heroin and fentanyl to Haikova on December 5, 2017, that resulted in her death.

As further alleged in the Indictment, JONES continued to distribute narcotics in Manhattan after Haikova’s death, and distributed heroin on February 14, 2018.

*                *                *

JONES, 24, of Camden, New Jersey, was charged with distribution and possession with intent to distribute heroin and fentanyl, and with distribution and possession with intent to distribute heroin.  JONES faces a maximum sentence of life in prison and a mandatory minimum sentence of 20 years in prison based upon his alleged distribution of the heroin and fentanyl that resulted in Ms. Haikova’s death.

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

Mr. Berman praised the outstanding investigative work of the NYPD and DEA in this case.  Assistance was provided by the DEA’s Miami Field Division and the DEA Tactical Diversion Squad-NY, comprising agents from the DEA, the NYPD, the New York State Police, New York State Department of Financial Services, and New York City Department of Investigation. 

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Thane Rehn is in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that WILLIAM BURBANK was arrested on wire fraud charges stemming from a scheme in which he solicited funds from investors based on false and fraudulent pretenses to purportedly invest in dinar, the currency of Iraq.  Upon obtaining the funds, BURBANK either lost or misappropriated them, and then lied to investors about the state of their investments.  BURBANK was arrested this morning, and will appear later this afternoon in federal court in the Eastern District of Virginia.  This case has been assigned to U.S. District Court Judge Richard M. Berman.

U.S. Attorney Geoffrey Berman said:  “William Burbank allegedly misrepresented to his investors – many of whom were veterans and their families – that their funds would be used to invest in Iraqi dinar, a foreign currency.  Instead, Burbank allegedly engaged in a classic Ponzi-like scheme to pay out early investors and use the rest for unauthorized trading or for his own personal expenses.  As with most alleged Ponzi schemes, the result was Burbank’s clients suffering a loss of their investments.  Now William Burbank stands charged of the crime of wire fraud and faces time in federal prison.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “As alleged, Burbank engaged in a multimillion-dollar fraud scheme that ultimately unraveled and led to the charges he faces today.  What makes this case particularly egregious is that many of Burbank’s alleged victims were U.S. military veterans and their families whose trust Burbank cultivated by shamelessly touting his own military service.  Fraud cases remain a priority for the FBI as we continue to identify and investigate those who commit financial crimes against unwitting victims.”

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

From February 2010 through June 2018, BURBANK engaged in a Ponzi-like scheme to defraud more than 150 individual investors, including many U.S. military veterans and their families, of more than $2 million by soliciting funds through false and fraudulent pretenses.  Specifically, BURBANK falsely claimed to potential investors that their funds would be used to trade in off-exchange foreign currency, namely, to purchase quantities of the Iraqi dinar, through an Iraqi bank headquartered in Bagdad.  In truth and in fact, upon receiving investor funds, BURBANK used those funds to trade in his own brokerage accounts, to make payments to earlier investors, and for his personal expenses, among other things.  Additionally, during the course of his scheme, BURBANK hid from investors the fact that he had misappropriated and lost their funds.  In order to conceal the truth from investors, BURBANK provided them false information regarding the status of their investment, and engaged in a Ponzi-like scheme in which he used money obtained from new investors to make redemption payments to previous investors.

BURBANK, 62, of Virginia Beach, Virginia, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the work of the Federal Bureau of Investigation.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that TERRY JOHNSON, a former auditor and owner of a registered public accounting firm, was sentenced to five months’ imprisonment for falsifying records in an investigation within the jurisdiction of a federal agency.  Specifically, JOHNSON submitted falsely backdated documents to the United States Securities and Exchange Commission (“SEC”) during an SEC investigation into his auditing practices.  In response to SEC document requests, JOHNSON sent unsigned versions of the documents at issue to two of the companies he had audited and obtained backdated signatures on them.  JOHNSON then submitted the backdated documents to the SEC as though they were authentic, and later lied about his submission of these false documents during sworn SEC testimony.  JOHNSON pled guilty on May 31, 2018.

According to the Information, SEC public filings, and statements made during the plea proceeding:

At all relevant times, JOHNSON owned and ran an accounting firm that ostensibly audited the financial statements of publicly traded companies’ financial statements in order to ascertain whether the statements were accurate, truthful, and complete in accordance with Generally Accepted Accounting Principles (“GAAP”).  JOHNSON did so under the oversight of the SEC and the Public Company Accounting Oversight Board (“PCAOB”), a non-profit corporation created by the Sarbanes-Oxley Act of 2002.  JOHNSON was registered with the PCAOB.

Through his firm, JOHNSON audited several companies concerning their 2013 year-end financial statements, releasing audit reports for them in April 2014.  In August 2014, the SEC’s Division of Enforcement sent a voluntary document request to JOHNSON, announcing that it was conducting a non-public fact finding inquiry and requesting that JOHNSON provide certain categories of backup documentation and work papers concerning his audits as part of that inquiry.  In October 2014, the SEC issued a subpoena to JOHNSON, seeking substantially the same categories of documents, each of which was a critical part of the audit process.

JOHNSON provided documents responsive to the voluntary document request in September 2014 and additional documents responsive to both the voluntary request and the subpoena in November 2014.  The documents were supposed to have been those generated or obtained in the course of producing the April 2014 audit reports.  In truth, certain of the requested documentation did not exist.  Rather than admit this to the SEC, upon receiving the SEC’s requests for documents, JOHNSON created certain of the requested documents, sent unsigned copies of the documents to officials at the relevant client companies, and requested that the documents be signed and backdated to a date consistent with JOHNSON having obtained the signed documents during the course of his relevant audit work.  When JOHNSON received the signed and backdated documents, he submitted them to the SEC as though they were authentic.

In March 2015, JOHNSON, during sworn testimony before the SEC, lied repeatedly under oath concerning his submission of the backdated documents.  Ultimately, the SEC inquiry resulted in an SEC order sanctioning JOHNSON for committing securities fraud and improper professional conduct.  JOHNSON was assessed financial penalties and barred from appearing or practicing before the SEC as an accountant.          

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In addition to the prison term, JOHNSON, 60, of Casselberry, Florida, was also sentenced to two years of supervised release.  

Mr. Berman thanked the SEC and praised the investigative work of the SEC’s Office of the Inspector General and the Criminal Investigators of the United States Attorney’s Office.

This case is being handled by the Office’s Securities and Commodities Task Force.  Assistant United States Attorney Martin S. Bell is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that BILLY RIBEIRO ANDERSON, a/k/a “Anderson Albuquerque,” a/k/a “AlfabetoVirtual,” pled guilty today to two felony counts of computer fraud for obtaining unauthorized access to and committing defacements of the websites for the Combating Terrorism Center at the United States Military Academy in West Point, New York (“West Point”), and the Office of the New York City Comptroller (the “NYC Comptroller”).  ANDERSON pled guilty before U.S. District Judge Laura Taylor Swain.

U.S. Attorney Geoffrey S. Berman said:  “Billy Anderson hacked the websites of the New York City Comptroller and West Point, one of the most prestigious military academies in the world.  He has now pled guilty to those crimes and faces time in federal prison.  This case demonstrates that those who seek to commit cyber intrusions of government websites will be prosecuted to the fullest extent of the law.”  

According to the allegations contained in the Information to which ANDERSON pled guilty and statements made at the plea proceeding:

Website defacements are acts of computer intrusion in which a hacker obtains unauthorized access to computers hosting Internet websites and then replaces the publicly available contents of the website with content generated by the hacker, thereby “defacing” the website.  Hackers frequently claim responsibility for defacements by listing their online pseudonyms as part of the defaced content.

From 2015 through at least March 13, 2018, ANDERSON took responsibility for obtaining unauthorized access to, and committing more than 11,000 defacements of, various U.S. military, government, and business websites around the world under the online pseudonym “AlfabetoVirtual,” including websites for the Combating Terrorism Center at West Point and the NYC Comptroller.

On July 10, 2015, a website owned by the NYC Comptroller was defaced, and ANDERSON, using the online pseudonym “AlfabetoVirtual,” claimed responsibility for the intrusion and defacement.  The contents of the NYC Comptroller website were modified to display the text “Hacked by AlfabetoVirtual,” “#FREEPALESTINE” and “#FREEGAZA.”  The defacement was performed by exploiting security vulnerabilities associated with the version of a plugin being used on the website.   

On October 4, 2016, a website for the Combating Terrorism Center at West Point was defaced, and ANDERSON, using the online pseudonym “AlfabetoVirtual,” claimed responsibility for the intrusion and defacement.  The content of the Combating Terrorism Center website was modified to display the text “Hacked by AlfabetoVirtual.”  The defacement was performed by an unauthorized administrative account that exploited a known cross-site script vulnerability, thereby enabling ANDERSON to bypass access controls and target an internal Combating Terrorism Center website address. 

ANDERSON also committed unauthorized intrusions of thousands of web servers located around the world by surreptitiously installing malicious code on victim web servers that provided ANDERSON with administrative rights to the victimized web servers, thereby enabling ANDERSON to commit defacements and to maintain persistent unauthorized access to the victimized web servers.  

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ANDERSON, 41, of Torrance, California, pled guilty to two counts of computer fraud for causing damage to a protected computer, each of which carries a maximum sentence of 10 years in prison.  Sentencing before Judge Swain is scheduled for February 13, 2019, at 2:00pm.

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

Mr. Berman praised the outstanding investigative work of the FBI.  Mr. Berman also thanked the Computer Crime Investigative Unit of the United States Army Criminal Investigation Command and the Brazilian Federal Police Cyber Crime Unit for their assistance with the investigation.  

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Raymond Donovan, Special Agent in Charge of the Drug Enforcement Administration’s Special Operations Division, announced today that Carlos ALBERTO VALLADARES GARCIA, a former high-ranking member of the Honduran National Police, was sentenced yesterday to 14 years in prison for conspiring to import cocaine into the United States and for conspiring to possess firearms in furtherance of his drug-trafficking activities.  VALLADARES pled guilty April 24, 2018, and was sentenced by U.S. District Judge Lorna G. Schofield. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Carlos Alberto Valladares Garcia, a former Honduran National Police chief, worked from the inside to ensure a criminal enterprise operated with impunity.  Not only did he provide clearance for a drug trafficking organization’s drugs to flow through his country and into the United States, but Valladares – a sworn law enforcement officer – participated directly in drug-related murders and cover ups.  For his heinous acts, Valladares will serve 14 years in an American prison.”

Special Agent in Charge Raymond Donovan said:  “The sentencing of Carlos Alberto Valladares Garcia sends a strong message to drug traffickers across the globe.  As a member of the Honduran National Police, Valladares betrayed the trust of the people he served.  This case confirms that anyone who associates and benefits from drug trafficking can and will be held accountable.”

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

From approximately 1995 through 2013, VALLADARES served as a member of the Honduran National Police, holding positions including, among others, Chief of the Homicide Division in San Pedro Sula; Chief of Police for the city El Progreso, Yoro Department; and Chief of Police for the city of Quimistan, Santa Barbara Department.  Between at least approximately 2005 and 2013, VALLADARES worked with members of a drug-trafficking organization known as the Cachiros, which was a prolific and violent criminal syndicate that relied on connections to politicians, military personnel, and law enforcement to transport cocaine to, within, and from Honduras.  During that time, and while VALLADARES was purportedly enforcing the law as a police officer, VALLADARES participated in the Cachiros’ criminal enterprise by engaging in acts of violence, including several murders, and supporting their drug-trafficking activities.

For example, in approximately 2008, VALLADARES participated in a shootout in a nightclub that left several people dead.  Prior to the shooting, the then-leaders of the Cachiros—Devis Leonel Rivera Maradiaga and Javier Eriberto Rivera Maradiaga—and a Honduran congressman also working with the Cachiros agreed to kill an individual in retaliation for drug-related violence.  Leonel Rivera and Javier Rivera lured the intended victim to a nightclub in San Pedro Sula where a shootout occurred in which VALLADARES participated by firing his weapon.  Several members of the intended victim’s security team were killed during this incident.  VALLADARES also participated in additional acts of violence with the Cachiros.  In October 2011, VALLADARES drove Leonel Rivera to an airport in San Pedro Sula to observe a shootout between members of the Cachiros and rival drug traffickers, which left six people dead.  Prior to the shooting, Leonel Rivera told VALLADARES that he would be witnessing a “war.”  And in approximately 2012, VALLADARES helped Leonel Rivera kill two individuals by identifying them as perpetrators of a murder and assisting in their kidnapping.

VALLADARES also was a significant part of the Cachiros’ drug-trafficking operations.  On several occasions, VALLADARES accompanied Leonel Rivera during the transportation of drugs; was present at airstrips when substantial quantities of drugs were received by the Cachiros; and communicated with Leonel Rivera while the Cachiros transported drugs through Honduras.  VALLADARES also carried a firearm during some of this conduct and was present with security teams that were armed with assault rifles. 

To commit these crimes, VALLADARES took advantage of his position as a member of the Honduran National Police.  The abuse of his position began in approximately 2004 when VALLADARES met Leonel Rivera and agreed to end an investigation that had identified Leonel Rivera as the perpetrator of a homicide.  Over the next decade, and while VALLADARES rose through the ranks of the Honduran National Police and received awards for his purportedly honorable conduct, VALLADARES continued to use his position to assist the Cachiros.  For example, Valladares (i) convinced a witness to not press charges against Leonel Rivera for a homicide; (ii) provided information to the Cachiros concerning police checkpoints; (iii) recruited other Honduran National Police officers to assist the Cachiros; (iv) worked with other corrupt cops to remove a seized truck from a secure premises to recover approximately 100 kilograms of cocaine in exchange for approximately $80,000 in U.S. currency; and (v) recovered $2 million in U.S. currency in drug-trafficking proceeds that was seized by law enforcement and returned it to the Cachiros.

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In addition to the prison term, VALLADARES, 43, was sentenced to four years of supervised release.            

Six other former members of the Honduran National Police, including, among others, Mario Guillermo Mejia Vargas, Victor Oswaldo Lopez Flores, Ludwig Criss Zelaya Romero, Juan Manuel Avila Meza, and Carlos Jose Zavala Velasquez, are also charged in this case with firearms and/or drug trafficking offenses relating to a separate conspiracy to import cocaine into the United States.  Each of those individuals have pled guilty in federal court, along with co-conspirator Fabio Porfirio Lobo.  On September 5, 2017, Lobo was sentenced to 24 years in prison; on February 6, 2018, Flores was sentenced to five years in prison; and on June 27, 2018, Velasquez was sentenced to 12 years in prison.  The remaining defendants await sentencing by Judge Schofield.  

Mr. Berman praised the outstanding efforts of the Special Operations Division of the DEA Bilateral Investigations Unit, New York Strike Force, and Tegucigalpa Country Office.  Mr. Berman also thanked the U.S. Department of Justice’s Office of International Affairs for their ongoing assistance. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DONQUE TYRELL, a/k/a “Polo Rell,” a member of a violent street gang in the Bronx called the “Big Money Bosses” (“BMB”), was sentenced today on racketeering, murder, and other charges.  TYRELL was sentenced to the mandatory minimum sentence of life plus 55 years in prison for, among other crimes, aiding and abetting the June 22, 2014, murder of 17-year-old Keshon Potterfield.  TYRELL was sentenced by United States District Judge Jed S. Rakoff.

U.S. Attorney Geoffrey S. Berman said:  “As a result of the BMB gang’s wave of violence, Keshon Potterfield – a teenager, just beginning his life – was senselessly killed.  Today, the defendant has been sentenced for his role in this terrible murder.  We will continue to work with our law enforcement partners to prevent gang violence and keep our streets safe.”

TYRELL was convicted of murder in aid of racketeering, racketeering conspiracy, and other offenses in connection with his membership in BMB after a six-day jury trial.

According to court documents, as well the evidence at trial and statements made during other public proceedings in this case:

BMB is a subset of the “Young Bosses,” or “YBz” street gang, which operates throughout New York City.  Between 2007 and 2016, members and associates of BMB committed numerous acts of violence against rival gang members in the Bronx – including murders, attempted murders, and armed robberies – and sold crack cocaine, marijuana, and oxycodone.   

TYRELL was a member of BMB.  On June 22, 2014, TYRELL and other members of BMB attended a birthday party in the backyard of a residence on East 232nd Street in the Bronx.  TYRELL obtained a gun from an associate at the party, pointed it in Keshon Potterfield’s direction, and then passed it to another BMB member who shot and killed Potterfield in connection with a gang rivalry.  TYRELL celebrated Potterfield’s murder in public Facebook postings and in rap music videos posted on YouTube in which he taunted rival gang members and threatened future violence.  

In addition to the murder in aid of racketeering conviction, TYRELL was convicted of conspiring to commit racketeering as a result of his membership in BMB, conspiring to sell narcotics, selling narcotics within 1000 feet of schools and playgrounds, using firearms in connection with the gang and drug offenses, an attempted assault with a firearm in connection with his BMB membership, and attempting to rob a livery cab driver in the Bronx by hitting him in the head with a firearm. 

*                      *                     *

TYRELL was arrested in this case as a result of a multi-year investigation by the New York City Police Department’s (“NYPD”) Bronx Gang Squad, the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Violent Gang Unit (“HSI”), the New York Field Division of the Drug Enforcement Administration (“DEA”), and the Joint Firearms Task Force of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) into gang violence in the Northern Bronx. 

Mr. Berman praised the outstanding work of the NYPD’s Bronx Homicide Task Force, the NYPD’s 47th Precinct Detective Squad, the NYPD’s Bronx Gang Squad, HSI, DEA, and ATF.  

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Rachel Maimin, Hagan Scotten, Jessica Feinstein, Drew Skinner, and Allison Nichols are in charge of the prosecution.

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EZRA CHOWAIKI was sentenced to 18 months in prison for his role in an elaborate scheme to defraud art dealers and collectors of millions of dollars.  CHOWAIKI fleeced his victims by entering into fraudulent agreements with dealers and collectors to buy or sell artwork through a private art gallery located on Park Avenue in New York, New York (the “Gallery”), and by using these dealers’ and collectors’ funds and artwork for unauthorized purposes, such as to repay other dealers to whom CHOWAIKI had outstanding debts.  CHOWAIKI pled guilty on May 3, 2018, before United States District Judge Jed S. Rakoff, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Ezra Chowaiki ran a multimillion-dollar fraud on art dealers and collectors around the country.  He sold clients’ artwork without authorization, and he took clients’ money for the purchase of artwork he never purchased.  Chowaiki has now been sentenced to prison, and ordered to forfeit the spoils of his scheme and make restitution to his victims.”

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

Until November 2017, EZRA CHOWAIKI was the president and the minority owner of the Gallery.  CHOWAIKI founded the Gallery in 2004 and thereafter used the Gallery to facilitate the purchase, sale, and consignment of works of fine art, as well as for hosting various art exhibitions featuring works of art and sculptures by well-known artists such as Pablo Picasso, Alexander Calder, Marc Chagall, Edgar Degas, and others.  CHOWAIKI lost control of the Gallery in November 2017 when the Gallery filed for bankruptcy and was taken over by a trustee to oversee its liquidation.

Between 2015 and 2017, through the Gallery, CHOWAIKI engaged in a scheme to deceive other dealers and collectors of fine artwork into sending him money or valuable artwork under the false pretenses that CHOWAIKI would engage in legitimate transactions such as the purchase, sale, or consignment of these and other artworks.  In truth, however, CHOWAIKI did not, and often could not, conduct the transactions as promised, and instead kept funds and artwork for himself and the Gallery, or sold or consigned them to others both in and outside the United States, without authorization.  Through these fraudulent transactions, CHOWAIKI fraudulently transferred millions of dollars’ worth of artwork.     

*                *                *

In addition to the prison term, CHOWAIKI, 49, of New York, New York, was sentenced to three years of supervised release and ordered to forfeit his interest in more than 20 works of art that had been fraudulently transferred, including works by Picasso, Degas, and Calder.  Restitution amount was deferred to a later date. 

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation.  To date, the FBI has seized millions of dollars of artwork that was fraudulently transferred through CHOWAIKI’s scheme.  Any person who believes he/she is a victim of this crime is encouraged to send an email to [email protected].  Mr. Berman also thanked the Chapter 7 trustee and his attorneys at Togut, Segal & Segal LLP for their assistance.

The case is being prosecuted by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorney Daniel M. Tracer is in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that LEWIS STAHL, the owner of a Manhattan medical technology company, pled guilty to tax evasion based on his failure to report over $21 million in business income to the IRS, and his evasion of over $6.3 million in income taxes.  STAHL pled guilty before U.S. District Judge Ronnie Abrams.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Lewis Stahl, the owner of a successful medical technology company, earned over $21 million in profit.  However, despite amassing personal wealth in the tens of millions, Stahl grossly underreported his income to the IRS, reporting income as low as less than $10,000 for the 2011 tax year.  Stahl has now pled guilty to tax evasion and faces serious time in federal prison.  This case is a prime example that attempting to conceal earned income is far costlier than paying your fare share like honest taxpayers.”

According to the Information to which STAHL pled guilty, and statements made during the proceedings today:

Since at least in or about 2010, STAHL has owned and operated a medical technology company located in New York, New York (the “Medical Technology Company”), a limited liability company that develops and sells medical software applications.  The Medical Technology Company holds itself out as a provider of “computer ready” and “fully mobile” applications, which allow physicians to prescribe medications and to order and view diagnostic information, lab results, and cardiology/radiology images.

Between in or about 2010 and in or about 2014, the Medical Technology Company earned over $32 million in gross income.  These earnings resulted in over $21 million in business income to STAHL, which he accessed by using business bank accounts and business credit cards.  STAHL used this money to fund the purchase of personal items for himself such as clothing, jewelry, watches, real estate rentals, country club benefits, and a firearms collection.  Prior to 2015, despite earning this business income from the Medical Technology Company, STAHL failed to file individual tax returns reporting any of the income to the IRS.  The Medical Technology Company, likewise, failed to file partnership or corporate tax returns reporting any of the income to the IRS.

In or around March of 2015, an IRS revenue agent (the “IRS Revenue Agent”) contacted STAHL regarding his failure to file for the tax years 2010 through 2014, and asked STAHL to address the situation by filing delinquent Form 1040s for those years (the “Delinquent Returns”).  Shortly thereafter, STAHL retained a certified public accountant (the “Accountant”) to file the Delinquent Returns for STAHL.  STAHL, however, falsely stated to his Accountant, in sum and substance, and in part, that he was a “W-2” employee only of the Medical Technology Company, that his W-2 income was his only income, and that he had no ownership interest in the Medical Technology Company.  In truth and in fact, STAHL had an ownership interest in the Medical Technology Company, and had earned over $21 million in business income from the company, well beyond the income reported on his W-2s.

The Accountant subsequently filed the Delinquent Returns for STAHL, which, as a result of the lies that STAHL told the Accountant, were false and fraudulent.  Specifically, the Delinquent Returns falsely claimed that STAHL’s total income was $38,652 in 2010; $7,115 in 2011; $84,615 in 2012; $100,000 in 2013; and $100,000 in 2014.  The Delinquent Returns further falsely reported that STAHL did not receive any business income in any of these years, and failed to include a Schedule C detailing the significant amount of business income that STAHL earned from the Medical Technology Company.  STAHL’s failure to report over $21 million in business income to the IRS – first by failing to file returns, and then by causing the false Delinquent Returns to be filed by the Accountant – resulted in a loss to the IRS of over $6.3 million in taxes due and owing. 

            *                *                *

STAHL, 62, of Florida, pled guilty to one count of attempt to evade or defeat tax, which carries a maximum sentence of five years in prison.  STAHL has agreed to pay restitution to the IRS, representing the additional tax due and owing as a result of STAHL’s conduct, in the amount of at least $6,349,689.  Sentencing before Judge Abrams is scheduled for January 25, 2019, at 2:30.

The statutory maximum sentence is prescribed by Congress and is provided here for information purposes only, as any sentence imposed on the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of IRS-CI in this case.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MICHAEL WRIGHT pled guilty in Manhattan federal court to his participation in a scheme to defraud investors who invested millions of dollars based on false representations that their funds would be used to purchase tickets to various live events for re-sale at a profit on the secondary market.  WRIGHT pled guilty before U.S. Magistrate Judge Stewart D. Aaron. 

U.S. Attorney Geoffrey S. Berman said:  “Michael Wright admitted today that he and his partners in crime conducted an elaborate ticket-buying scheme to defraud investors of millions of dollars.  From creating phony contracts to outright lies, Wright and his cohorts ensured that the money his backers thought they were investing actually went directly into his and his co-defendant’s pockets.  Now, Wright has pled guilty to his audacious crimes and faces time in prison for his misdeeds.”

According to allegations in an Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:           

WRIGHT participated in a scheme along with Craig Carton and Joseph Meli to induce investors to provide them with millions of dollars, based on representations that the investor funds would be used to purchase blocks of tickets to concerts and other live events, which would then be re-sold on the secondary market.  Carton and Meli purportedly had access to those blocks of tickets based on agreements that Meli had with a company that promotes live music and entertainment events (the “Concert Promotion Company”) and that Carton had with a company that operates two arenas in the New York metropolitan area (the “Sports and Entertainment Company”).  In fact, neither the Concert Promotion Company nor the Sports and Entertainment Company had any such agreement with Carton, Wright, or Meli, or any entity associated with them.  After receiving the investor funds, Carton, Wright, and Meli misappropriated those funds, using them to, among other things, pay personal debts and repay prior investors as part of a Ponzi-like scheme.  

For example, on December 8, 2016, a New York-based hedge fund (the “Hedge Fund”) and Carton executed a revolving loan agreement (the “Revolving Loan Agreement”), under which the Hedge Fund agreed to provide Carton with up to $10 million, for the purpose of funding investments in the purchase of tickets of events.  The Revolving Loan Agreement provided, in sum and substance, that the proceeds of the loan would be used only to purchase tickets pursuant to agreements for the acquisition of tickets and for limited business expenses. The Hedge Fund would receive a share of the profits from the resale of the tickets.

The Hedge Fund then sent $700,000 to an entity controlled by Meli (the “Meli Entity”) to finance the purchase of tickets.  Meli, however, then sent this money to a bank account controlled by WRIGHT, who then, on December 12, 2016, sent $200,000 to Carton’s personal bank account (the “Carton Bank Account”), which Carton then wired to a casino.  Also on December 12, WRIGHT sent another $500,000 to an individual who had previously lent Carton $500,000, which was due to be repaid that day.

Later in December 2016, Carton induced the Hedge Fund to wire $2 million to the Sports and Entertainment Company, based purportedly on an agreement he had with the Sports and Entertainment Company (the “Sports and Entertainment Company Agreement”).  The Sports and Entertainment Company Agreement gave an entity controlled by Carton (the “Carton Entity”) the right to purchase $2 million of tickets to concerts at one of the venues operated by the Sports and Entertainment Company.  Carton, among other things, sent the Hedge Fund a copy of the Sports and Entertainment Company Agreement that purportedly had been signed by the chief executive officer of the Sports and Entertainment Company.  However, this agreement was fraudulent and had never been entered into by the Sports and Entertainment Company or signed by the chief executive officer. 

On December 20, 2016, when the Hedge Fund wired the $2 million to the Sports and Entertainment Company, Carton contacted the Sports and Entertainment Company and told them, in sum and substance, that the wire had been sent in error and should be sent to the bank account for an entity operated by Carton and WRIGHT, for which WRIGHT is the signatory. After the money was rewired to that account, WRIGHT wired $966,000 to WRIGHT’s personal bank account and $700,000 to the Carton Bank Account.  Carton then wired approximately $188,000 from the Carton Bank Account, including at least $133,000 in wires to several casinos.

*                *                *

WRIGHT, 42, of Upper Saddle River, New Jersey, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Carton is scheduled for trial on October 29, 2018, before the U.S. District Court Judge Colleen McMahon.  The pending charges against Carton are merely accusations, and he is presumed innocent unless and until proven guilty.

Meli pled guilty to securities fraud in October 2017 and is currently serving a 78-month sentence imposed by U.S. District Court Judge Kimba M. Wood in April 2018.  

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and thanked the Boston Regional Office of the U.S. Securities and Exchange Commission.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Brendan F. Quigley and Elisha J. Kobre are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL SCRONIC, the former manager of the Scronic Macro Fund (the “Fund”), was sentenced to 96 months in prison today in connection with his scheme to defraud the Fund’s 45 investors of more than $22 million.

U.S. Attorney Berman said:  “For years, Scronic lied to his investors about his Fund’s return, but he has now been brought to justice.  We will continue to pursue aggressively frauds like this one, which caused millions of dollars in losses, in order to preserve investor confidence in our capital markets.”

According to the allegations contained in the Indictment and the defendant’s plea hearing:

SCRONIC raised more than $22 million from 45 investors in the Scronic Macro Fund (the “Fund”) from April 2010 to the October 2017.  SCRONIC told investors that the Fund had positive returns in all but one of the 22 quarters from January 2012 through June 2017, with the highest reported quarterly return being 13.4 percent in the fourth quarter of 2014.  In reality, the Fund lost money in 28 out of 29 quarters of its operation, with a total net loss of about $15.7 million before commissions.  The Fund’s only positive quarter was its first quarter of operation in 2010.

As a result of these trading losses, the total assets SCRONIC claimed the Fund had in each quarter far exceeded its actual assets.  For example, SCRONIC sent account statements to investors that together showed total fund assets of $21.7 million as of June 30, 2017.  In actuality, on that date, the combined balance of SCRONIC’s brokerage and bank accounts was just $102,376.

In addition to losing money on trades, SCRONIC used investor money for personal expenses.  His personal expenditures averaged more than $500,000 annually, including monthly rent of $12,275 for his primary residence in Westchester, New York, mortgage payments on a vacation home in Stratton, Vermont, fees for multiple beach and country clubs, including a $30,000 payment to the Stratton Mountain Club in July 2017, and miscellaneous items charged to credit cards in amounts averaging more than $15,000 a month.

As of the summer of 2017, SCRONIC was unable to pay redemptions requested by Fund investors because he did not have sufficient funds on hand.  He told investors seeking redemptions that he would pay redemptions only at quarter-end, that he was too busy and preoccupied with a relative’s medical condition to pay redemptions, and that he was unavailable to pay redemptions because he was on vacation.  In some cases, SCRONIC ignored redemption requests.

*                *                *

In addition to the prison term, SCRONIC, 46, of New York, New York, was sentenced to

3 years of supervised release, and ordered to pay $22,026,427 in restitution to his victims.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and also thanked the Securities & Exchange Commission for its assistance in the investigation.

The criminal case is being prosecuted by the Office’s White Plains Division.  Assistant U.S. Attorneys James McMahon and Daniel Loss are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that earlier today, ROBERT PIZARRO and JUAN RIVERA were convicted of murdering a witness to prevent reporting to law enforcement, kidnapping conspiracy, kidnapping resulting in death, robbery conspiracy, robbery, and firearms offenses, arising out of the murder of federal cooperating witness Robert Bishun on September 20, 2016. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Just over two years ago, Robert Bishun was violently kidnapped and brutally murdered by the defendants because he was a federal cooperating witness.  Today, the jury in this case returned a unanimous verdict holding the defendants accountable for their heinous crimes.  We hope that today’s result brings some small measure of peace to Robert Bishun’s family.”

According to the proof introduced at trial:

On September 20, 2016, PIZARRO and RIVERA attempted to rob Robert Bishun at gunpoint inside his auto body shop in the Bronx; during the attempted robbery, two customers were bound with zip ties and locked in the trunks of separate vehicles inside the shop.  Upon learning that Bishun was a federal cooperating witness, PIZARRO and RIVERA kidnapped Bishun from his shop and strangled him to death with a plastic zip tie, before abandoning Bishun’s body in the back of his own vehicle on the side of the road.

On a prior occasion, in January 2015, PIZARRO and another accomplice stormed into Bishun’s auto body shop and robbed Robert Bishun at gunpoint, taking approximately $10,000 in cash from Bishun.  During the course of the robbery, two customers were bound with zip ties.

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PIZARRO, 38, of the Bronx, faces a mandatory minimum sentence of life in prison plus 32 years.  RIVERA, 41, also of the Bronx, faces a mandatory minimum sentence of life in prison plus 7 years.  

Mr. Berman praised the investigative efforts of the DEA and the NYPD, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Jason Swergold, Jessica Fender, Jared Lenow, and Margaret Graham are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor Office of Inspector General (“DOL-OIG”), Thomas Licetti, Acting New York Regional Director, U.S. Department of Labor Employee Benefits Security Administration (“DOL-EBSA”), and Andriana Vamvakas, New York Regional Director, U.S. Department of Labor Office of Labor-Management Standards (“DOL-OLMS”), announced that ROCCO FAZZOLARI, who previously served as the president of a labor union (the “Union”) and a trustee of the Union’s employee welfare benefit plan (the “Plan”), pled guilty today to embezzling from the Union and the Plan and to participating in a kickback scheme involving the Plan.  Through these embezzlement and kickback schemes, FAZZOLARI and a co-conspirator illegally obtained a total of more than $1.3 million from the Union and the Plan.  FAZZOLARI pled guilty before United States District Judge Analisa Torres.

U.S. Attorney Geoffrey S. Berman said:  “Rocco Fazzolari abused his position as the president of a labor union to line his own pockets.  As he admitted today, he embezzled funds and he engaged in a kickback scheme that cost an employee benefit plan – which was established to provide medical care for union members – more than $1 million.  Our Office is committed to prosecuting those who misuse positions of trust for their own gain.”

DOL-OIG New York Region Special Agent-in-Charge Michael C. Mikulka said:  “While president of a labor union, Rocco Fazzolari stole union assets to pay for lavish personal items, including designer clothing, spa treatments, and a second vehicle for his family, betraying the members of the union.  We will continue to work with our law enforcement partners and the U.S. Department of Labor’s Office of Labor-Management Standards and the Employee Benefits Security Administration to protect the financial integrity of labor unions and their benefit plans.”

DOL-EBSA Acting New York Regional Director Thomas Licetti said:  “Plan administrators and trustees of union sponsored health plans have a fiduciary obligation under ERISA to provide health benefits to union members and plan participants.  In this case, the plan administrator intentionally broke that promise in order to serve his own interest.  EBSA will pursue strong enforcement action against those responsible for depriving employees of the benefits to which they are entitled.”

DOL-OLMS New York Regional Director Andriana Vamvakas said:  “Combatting financial fraud and investigating embezzlement of union funds helps safeguard financial integrity in labor unions.  This is a major priority for the U.S. Department of Labor’s Office of Labor-Management Standards.  We will work with our investigative partners to identify criminal violations and pursue appropriate legal action whenever anyone puts personal financial gain ahead of the best interests of union members.”

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

From at least in or about 2012 through in or about June 2016, FAZZOLARI repeatedly used Union funds to pay for his personal expenses, including payments for spa treatments, a gym membership, a second car, medical expenses, dues for an actors’ union, personal credit card charges, and ATM cash withdrawals.  FAZZOLARI then “reimbursed” the Union with funds from the Plan.  The Plan was established to provide, among other things, medical, surgical, and hospital care or benefits to Union members.  In total, FAZZOLARI embezzled more than $128,000 from the Union over approximately four years, and improperly transferred more than $89,000 from the Plan to “reimburse” the Union. 

In addition, from at least in or about 2000 through in or about June 2016, FAZZOLARI engaged in a kickback scheme with another individual (“CC-1”).  Using Plan funds, FAZZOLARI paid CC-1’s company, Acclaim Administrators, Inc. (“Acclaim”), more than $1.1 million for purported services, even though Acclaim did not actually provide the Plan with these services.  CC-1 then kicked back the vast majority of these payments to FAZZOLARI.

Under the terms of his plea agreement, FAZZOLARI has agreed to a 13-year ban, pursuant to 29 U.S.C. §§ 504 and 1111, which generally prohibits him from, among other things, being employed by a labor union or employee benefit plan.  FAZZOLARI has also agreed to forfeit $941,828 and to pay restitution to the Union and the Plan.

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ROCCO FAZZOLARI, 58, of Manhasset Hills, New York, pled guilty to three counts: embezzlement from a labor organization, embezzlement from an employee benefit plan, and conspiracy to embezzle from an employee benefit plan, each of which carries a maximum sentence of five years in prison. 

The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  Sentencing before Judge Torres is scheduled for January 28, 2019, at 11:40 a.m.

Mr. Berman praised the Department of Labor’s Office of Inspector General, Employee Benefits Security Administration, Office of Chief Accountant, and Office of Labor-Management Standards for their outstanding investigative work.  Mr. Berman also thanked the Federal Bureau of Investigation and the Department of Justice’s Labor-Management Racketeering Unit of the Organized Crime and Gang Section for their assistance in this case.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH DATELLO pled guilty today before United States District Judge Cathy Seibel to numerous acts of racketeering, including attempting to kill a witness against him.  In May 2017, DATELLO and 18 other members and associates of the Luchese Family of La Cosa Nostra were arrested and charged in a nine-count Indictment.  Since the unsealing of the Indictment, DATELLO and 12 other defendants have pled guilty, and have been or will be sentenced by Judge Seibel.

U.S. Attorney Geoffrey S. Berman said:  “Witness safety is paramount to ensuring the prosecution of criminal organizations.  Thanks to the FBI’s Joint Organized Crime Task Force, who uncovered Datello’s crimes without risking the security of the witness, Datello now faces life in prison for threatening a federal witness.”

According to the plea agreement DATELLO signed as part of his guilty plea, his statements when pleading guilty, the allegations in the Indictment, and statements made in related court filings and proceedings:

In 2002, an individual (the “Witness”) who had been working with DATELLO and Steven L. Crea, a leader in the Luchese Family, provided information to state and federal authorities concerning DATELLO’s and Crea’s participation in racketeering activity.  That information, and other evidence, led to the successful prosecution of DATELLO, Crea, and others.  In October 2016, DATELLO learned information that he thought revealed the Witness’s current whereabouts.  DATELLO travelled to what he believed was the Witness’s address and waited there, trying to find the Witness.  Had DATELLO found the Witness, he intended, with the blessing of Crea, to kill the Witness.

Crea is also charged with attempting to have the Witness killed, and other crimes, and is scheduled to begin trial before Judge Seibel in 2019.

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DATELLO, 67, of Staten Island, New York, pled guilty to one count of conspiracy to commit racketeering, and as part of that plea admitted racketeering acts including the attempted murder of the Witness, narcotics trafficking, and collecting debts through the threat of violence.  These crimes carry a maximum sentence of life in prison.  DATELLO will be sentenced before Judge Seibel.

The allegations contained in the Indictment as to Crea and the other defendants who have not pled guilty are merely accusations, and these defendants are presumed innocent unless and until proven guilty.

Mr. Berman praised the outstanding investigative work of the FBI’s Joint Organized Crime Task Force, which comprises agents and detectives of the FBI, NYPD, Homeland Security Investigations, and the Waterfront Commission of New York Harbor.

The case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Scott Hartman, Hagan Scotten, and Jacqueline Kelly are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH PERCOCO, the former executive deputy secretary to the Governor of the State of New York, was sentenced to six years in prison for soliciting and accepting more than $315,000 in bribes in return for taking official state action to benefit energy company Competitive Power Ventures (“CPV”) and Syracuse-based real estate developer COR Development (“COR”).  On March 13, 2018, PERCOCO was convicted of two counts of honest services fraud conspiracy and one count of bribery following an eight-week trial before United States District Judge Valerie E. Caproni, who imposed today’s sentence.   

U.S. Attorney Geoffrey S. Berman said:  “Joseph Percoco, the former executive deputy secretary to the Governor, was a powerful New York State official who sold his influence and his office in exchange for more than $300,000 in bribes.  For those crimes, he will now serve time in federal prison.  Today’s sentence sends a strong message that public officials who violate their duties to faithfully serve the citizens of New York will be held accountable for their corrupt actions.”

Judge Caproni stated during the sentencing:  “I hope this sentence will be heard in Albany.”

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

PERCOCO, who served as the executive deputy secretary to the Governor between January 2012 and mid-2014, and again in 2015, abused his official position and extensive influence within the executive branch of New York State (the “State”) by seeking and accepting bribe payments from executives at companies that were seeking benefits and business from the State, in exchange for PERCOCO’s use of his official authority and influence to benefit those companies. 

PERCOCO solicited the bribe payments from executives at two clients of Todd Howe – CPV and COR – both of which had retained Howe as a consultant to help them obtain official State action.  In email correspondence between PERCOCO and Howe, PERCOCO and Howe referred to the bribe payments as “ziti,” a reference to a term for money used by the characters in the television show “The Sopranos.” 

Bribes from CPV

PERCOCO, Howe, and others conspired for PERCOCO to receive more than $287,000 in bribe payments in exchange for PERCOCO’s official assistance for CPV on an as-needed basis. 

State action was critical to CPV’s business.  Starting as early as 2010, CPV provided personal benefits to PERCOCO, including expensive meals and a Hamptons fishing trip, in an effort to cultivate access to PERCOCO.  In response to CPV’s requests for official State assistance, PERCOCO, who was experiencing financial difficulties at the time, requested that CPV hire his then-unemployed wife.  In or around the end of 2012, CPV executive Peter Galbraith Kelly Jr. created a position for PERCOCO’s wife that paid approximately $90,000 per year while requiring PERCOCO’s wife to do little work.  In exchange for these payments, PERCOCO agreed to use his official position and influence, and did in fact use his official position and influence, to help CPV with specific State matters as the opportunities arose. 

Among other things, PERCOCO agreed to use his official position and influence to assist the CPV’s efforts to obtain (i) a valuable agreement from the State allowing CPV to buy lower-cost emissions credits in New York for a power plant proposed to be built in New Jersey and (ii) a long-term power purchase agreement with the State guaranteeing a buyer for the power to be produced at a power plant proposed to be built in New York, which was expected to save CPV approximately $100 million in development costs.

CPV’s payments to PERCOCO’s wife were concealed in various ways to hide their true source.  For example, monthly payments to PERCOCO and his wife were made through a consultant who worked for CPV in order to disguise the source of the payments.  For his part, PERCOCO concealed the criminal scheme by failing to include CPV as the source of payments on his State-mandated financial disclosure forms. 

Bribes from Aiello and the Syracuse Developer

Beginning in early 2014, PERCOCO was also paid bribes totaling approximately $35,000 from COR.  These bribe payments were orchestrated by Steven Aiello, the COR president.  Aiello arranged for the payment of these bribes in exchange for PERCOCO’s official assistance for COR on an as-needed basis. 

Specifically, PERCOCO agreed 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 for 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 executive chamber.

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.

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In addition to the prison term, PERCOCO, 49, of South Salem, New York, was sentenced to three years of supervised release.  Restitution and forfeiture amounts will be determined at a later date.

PERCOCO is the first defendant who has been sentenced after being convicted in this case.  Steven Aiello, who was found guilty at the same trial of one count of honest services fraud conspiracy, will be sentenced on November 29, 2018.  Peter Galbraith Kelly Jr., who pled guilty on May 11, 2018, to one count of conspiracy to commit wire fraud, will be sentenced on October 16, 2018.     

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, as well as the Special Agents from the U.S. Attorney’s Office, who jointly conducted the investigation.

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, announced today that MARK CINA, a former comptroller of two Poughkeepsie companies, was sentenced to 41 months in prison for mail fraud and tax evasion.  CINA pled guilty on April 11, 2018, before U.S. District Judge Cathy Seibel, who imposed today’s sentence. 

U.S. Attorney Geoffrey S. Berman stated:  “Mark Cina embezzled millions of dollars to line his pockets at the great expense and suffering of his trusting employer, a Hudson Valley entrepreneur and small businessman.  Theft like the defendant’s is intolerable, and today’s sentencing shows that an employee’s choice to engage in such a crime is a choice to go to prison.”

As set forth in the Complaint and Information in the case, other court filings, and during court proceedings:

During all times relevant to the case, two manufacturing companies were in operation, with plants located in the Town of Poughkeepsie (“Company-1” and “Company-2,” collectively the “Companies”).  Company-1 designed and manufactured solar energy products such as solar-powered roof shingles.  Company-1’s work included, for example, a solar-powered ring of lights encircling the top of MetLife Stadium, in New Jersey.  Company-2 fabricated molded plastic.

The Companies were founded by an entrepreneur (“Victim-1”).  Victim-1 was the primary investor in, and owner of, the Companies. 

In 2008, Victim-1 hired CINA as a part-time bookkeeper for Company-1.  In 2010, CINA became employed full-time for the Companies as comptroller.  In his position, CINA was responsible for the day-to-day financial operations of the Companies.  CINA had authority to sign checks for the Companies and to carry and use the Companies’ credit cards and ATM cards.  CINA remained so employed until August 2015, when he was terminated.

In September 2015, Victim-1 appeared at a New York State Police barracks in Dutchess County.  Victim-1 reported, in part and substance, that a former employee of the Companies had stolen company funds.  Thereafter, the New York State Police commenced an investigation, which federal law enforcement officers later joined.  As summarized in the Complaint, the investigation yielded voluminous evidence showing that CINA had defrauded Victim-1, via the Companies, of millions of dollars over the course of at least seven years.  CINA did so by, among other things, using the Companies’ funds for himself to gamble, pay his rent, drive rental cars, dine out, get his car washed, bail out an arrestee, and, in one instance, pay a phone charge for an inmate’s call.

According to, among other things, business and financial records obtained during the criminal investigation, and a forensic report prepared by an accounting firm, CINA made the following disbursements of the Companies’ funds, from 2009 through 2015, which were not authorized, and which had no apparent or recorded business purpose:

• Payments to a mini-mart (approximately $457,000)
• Payments to a gas station (approximately $180,000)
• Payment of CINA’s rent (approximately $25,000)
• Payment of CINA’s personal credit card bills (approximately $125,000)
• Checks payable to CINA (non-payroll) (approximately $599,000)
• Checks payable to cash (approximately $282,000)
• Cash withdrawals (approximately $825,000)
• Additional unauthorized charges (including charges to pharmacies, medical and dental facilities, a rental car company, a car wash facility, an inmate phone service, and for purported loans from family members of CINA)

*                *                *

In addition to the prison term, CINA, 56, of Poughkeepsie, New York, ordered to pay restitution in the total amount $3,385,665 and forfeiture in the total amount $2,548,820.

Mr. Berman praised the outstanding investigative efforts of the United States Postal Inspection Service, the New York State Police, the Internal Revenue Service, Criminal Investigation, and the Office’s Special Agents.  He also thanked the Dutchess County District Attorney’s Office for their assistance. 

The case is being handled by the Office’s White Plains Division.  Assistant U.S. Attorneys Kathryn Martin and Benjamin Allee are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that REYNALDO LOPEZ, a former New York City Police Department (“NYPD”) officer, was sentenced to four years in prison in connection with narcotics, credit card fraud, identity theft, and counterfeiting offenses.  LOPEZ previously pled guilty to the charges on February 16, 2018, in Manhattan federal court before United States District Judge Edgardo Ramos, who also imposed LOPEZ’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Reynaldo Lopez betrayed and abused the trust placed in him by the NYPD and the people of New York.  He swore to protect the public from criminal activity, only to turn around and participate in significant crimes of his own, including not only credit card and identity fraud, but also agreeing to distribute multiple kilograms of heroin.  His sentence today is a reminder that this Office and its law enforcement partners will continue to fight this kind of corruption, and that no one is above the law.”

In sentencing LOPEZ, Judge Ramos said: “[LOPEZ] is an individual that we as a society trusted to enforce our laws, trusted him enough to give him a weapon, trusted him enough to go out into the streets and protect our communities, our children, our businesses, etc.  He is an individual with excellent resources who absolutely did not have to do what he did, absolutely did not have to engage in these crimes.”

According to the allegations in the Information to which LOPEZ pled guilty, a criminal complaint filed against LOPEZ, and other filings made in the case, and statements made during the plea and other proceedings in the case:

During the time periods charged, LOPEZ was an NYPD police officer assigned to the Anti-Terrorism Unit of the Transit Bureau.

On November 29, 2017, LOPEZ attempted to traffic approximately three kilograms of heroin from a location in New Jersey to the Bronx, New York.  LOPEZ agreed to transport and protect what he believed were three kilograms of heroin to a drug dealer located in the Bronx under LOPEZ’s protection as an NYPD police officer.  During the attempted transaction, LOPEZ described having previously engaged in narcotics trafficking and stated that “with me it’s guaranteed, they know for sure, they just send me out, do your thing, get an address, meet the person, do your thing, and I’m gone.”  LOPEZ was arrested when he attempted to make the delivery.

In addition, from May 2017 through November 2017, LOPEZ engaged in a scheme to create and utilize fraudulent credit cards, including by using stolen identity information.  He was part of a counterfeit credit card operation whose participants used stolen or otherwise illicitly obtained personal identifying information to create fraudulent credit cards, and then used those cards to purchase merchandise for themselves.  As part of his role in these crimes, LOPEZ also possessed and used a device that applies electronic data to blank physical credit cards.

Also from May 2017 through November 2017, LOPEZ possessed and used counterfeit United States currency.  In multiple recorded conversations, LOPEZ discussed his possession of counterfeit money and provided a sample to an undercover NYPD officer, stating that he previously had successfully used the counterfeit currency.

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In addition to the prison term, LOPEZ, 27, of Brooklyn, New York, was sentenced to three years of supervised release.

Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the NYPD Internal Affairs Bureau.

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