Southern District of New York
Press releases recorded for this federal judicial district.
Two Defendants Charged in White Plains Federal Court with CarjackingRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), and Shawn Harris, Commissioner of the Mount Vernon Police Department (“MVPD”), announced today the unsealing of a complaint charging two defendants with allegedly engaging in carjacking and, in furtherance of the carjacking, possessing, brandishing, and discharging firearms. The defendants, CHESTER BROWN and TRAVIS SINCLAIR, were presented in White Plains federal court this afternoon before United States Magistrate Judge Paul E. Davison and ordered detained. BROWN was taken into federal custody on August 15; SINCLAIR was previously in federal custody based on prior pending criminal charges.
As alleged in the Complaint unsealed today in White Plains federal court[1]:
On or about July 27, 2018, BROWN and SINCLAIR, the defendants, entered a car in Mount Vernon carrying guns. The defendants threatened and punched the driver; BROWN hit the driver with his gun, which discharged. When the driver ran from his vehicle, at least one of the defendants fired gun shots toward him. These shots injured a person sitting in another car.
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BROWN and SINCLAIR each face a maximum term of life in prison, and a mandatory term of 10 years in prison.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.
Mr. Berman praised the outstanding investigative work of the FBI Westchester County Safe Streets Task Force and the Mount Vernon Police Department.
These cases are being handled by the Office’s White Plains Division. Assistant United States Attorneys Jamie Bagliebter and Samuel L. Raymond are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Statement of Manhattan U.S. Attorney Geoffrey S. Berman on the Conviction of Norman Seabrook, President of Correction Officers’ Benevolent AssociationRead the Press Release
“Norman Seabrook was once one of the most powerful union leaders in this City. Today he stands convicted of taking a $60,000 bribe to invest $20 million of his union members’ money in a fund that ultimately went belly-up, losing $19 million. Seabrook’s is the fifth major public corruption conviction by our Office in as many months: the governor’s right-hand man, the Speaker of the New York State Assembly, the Senate Majority Leader, and the key executive in the Buffalo Billion case. I commend the hard-working members of the FBI who worked on all of these investigations, and the career prosecutors of this office who prosecuted this case: Martin Bell, Lara Pomerantz, and the chief of our public corruption unit, Russell Capone. As long as there are public servants who put self-interest above the people they are sworn to serve, public corruption will remain a top priority of this Office.”
Bronx Man Sentenced in Manhattan Federal Court to over 24 Years in Prison for Conspiracy to Commit Sex Trafficking of A MinorRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JAMEL GODDARD, a/k/a “Payroll,” was sentenced today by United States District Judge Loretta A. Preska to 292 months in prison for his role as the leader of a sex trafficking conspiracy. GODDARD pled guilty on February 26, 2018, to one count of conspiracy to commit sex trafficking of a minor.
Manhattan U.S. Attorney Geoffrey S. Berman said: “For years, Jamel Goddard preyed on vulnerable victims and exploited them for financial gain. For his brazen and violent conduct, Goddard now faces a substantial prison term. Today’s sentence should serve as a powerful message to the sex trafficking industry that such reprehensible conduct will not be tolerated.”
According to the Indictment filed in Manhattan federal court, previous court filings, and statements made at public court proceedings:
Between approximately 2012 until approximately July 2017, GODDARD operated and led a sex trafficking and prostitution enterprise (the “Enterprise”) that recruited vulnerable women and a 15-year-old girl and subsequently exploited them for GODDARD’s personal financial gain. GODDARD typically recruited victims who lacked education, a stable home, and family support. He required the women he trafficked to engage in sex acts with multiple customers in a single day, operating from hotel rooms in the Bronx, Brooklyn, upstate New York, New Jersey, Connecticut, Rhode Island, and Florida, and using classifieds websites to advertise for commercial sex. GODDARD kept all or most of the victims’ earnings, which sometimes amounted to thousands of dollars in a single day, for himself.
Throughout the course of the Enterprise, GODDARD employed physical violence and threats of force to exert control over his victims. On multiple occasions, GODDARD hit or punched victims for, among other things: being, in GODDARD’s view, disrespectful; owing GODDARD money; or holding back their earnings from commercial sex from GODDARD.
During prior periods of imprisonment, GODDARD continued to operate the Enterprise while incarcerated, communicating directives and threats to his victims by phone. On one such occasion, GODDARD warned a victim to “watch what I do when I get out.”
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In addition to his prison sentence, GODDARD, 32, was sentenced to 10 years of supervised release.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the New York City Police Department.
This matter is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Elizabeth A. Hanft, Sagar K. Ravi, and Alexandra N. Rothman are in charge of the prosecution.
Leader of International Drug Money Laundering Organization Sentenced to 30 Years in PrisonRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that JESUS RODRIGUEZ-JIMENEZ was sentenced today to 30 years in prison by United States District Judge Katherine B. Forrest in Manhattan federal court. RODRIGUEZ-JIMENEZ ran an international money laundering business with ties to Mexico, Italy, Hungary, Panama, and China, facilitating the movement of hundreds of millions of dollars in drug proceeds on behalf of drug cartels in Mexico and Central America. Through a web of front companies, shell bank accounts, and money couriers throughout the United States and Europe, RODRIGUEZ-JIMENEZ successfully laundered in excess of $250 million, directly facilitating the trafficking of massive quantities of narcotics throughout the world.
U.S. Attorney Geoffrey S. Berman said: “Jesus Rodriguez-Jimenez led an international money laundering operation that handled the proceeds of cocaine and heroin trafficking by Mexican and Central American cartels. The Rodriguez-Jimenez organization laundered more than a quarter of a billion dollars in illegal drug trafficking proceeds through front companies, sham bank accounts, and money drops in several U.S. cities. Thanks to the efforts of the DEA, Rodriguez-Jimenez will now spend considerable time in prison for his crimes.”
According to the charging and other documents filed in the case, as well as statements made during RODRIGUEZ-JIMENEZ’s sentencing proceeding:
Since July 2013, the U.S. Drug Enforcement Administration (“DEA”) has been investigating JESUS RODRIGUEZ-JIMENEZ’s international money laundering organization and its cartel clients, which together have been involved in trafficking hundreds of kilograms of cocaine and heroin, among other narcotics, and laundering narcotics proceeds through a variety of methods, including through a network of shell corporations under their control. To date, the investigation has resulted in charges against eight defendants, including the successful extradition of alleged high-level money launderer Filippo Magni from Italy earlier this summer.
Through a network of front companies, couriers, and his own armored car company, RODRIGUEZ-JIMENEZ succeeded in repatriating millions of drug dollars from the streets of New York, Chicago, Detroit, Philadelphia, and other cities across the United States, back to cartel interests in Mexico. By introducing these drug dollars into the banking system, RODRIGUEZ-JIMENEZ was able to move money wherever the cartel interests directed it, including repatriating this value to Mexico through trade-based money laundering: At the direction of his cartel clients, RODRIGUEZ-JIMENEZ would wire drug dollars to companies in China, Hong Kong, and Taiwan. These companies would, in turn, ship merchandise to Mexico or other drug producing countries. There, merchants would accept the shipment of goods, and pay a reduced price, in local currency, to the cartels. In this way, RODRIGUEZ-JIMENEZ turned street cash in the United States into value in Mexico.
RODRIGUEZ-JIMENEZ controlled his laundering empire through fear and intimidation. For example, in July 2015, pursuant to the investigation, the DEA seized $100,000 in drug money in Atlanta from Organization courier Sergio Urbina (ultimately a co-defendant of RODRIGUEZ-JIMENEZ). When he learned of the seizure, RODRIGUEZ-JIMENEZ ordered Urbina to come to Monterrey, Mexico, to explain himself. After enduring a multiple-day interrogation by RODRIGUEZ-JIMENEZ’s underlings, complete with the administration of a false polygraph test, RODRIGUEZ-JIMENEZ coerced Urbina to execute a false promissory note that RODRIGUEZ-JIMENEZ later used to try to hold Urbina liable for the value of the seizure – even commencing a fraudulent civil action against Urbina, which RODRIGUEZ-JIMENEZ continued to pursue from jail.
In total, RODRIGUEZ-JIMENZ laundered at least $250 million on behalf of the cartels during the course of the scheme.
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In addition to the prison term, RODRIGUEZ-JIMENZ, 47, of Monterrey, Mexico, was ordered to forfeit $284 million in laundered funds.
Mr. Berman praised the outstanding work of the Las Vegas Division of the DEA and the Las Vegas Office of the Internal Revenue Service, Criminal Investigation, in the investigation of this case.
This case is being handled by this Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Andrew C. Adams and Noah Falk are in charge of the prosecution.
Manhattan U.S. Attorney Announces Criminal Charges Against Zürcher Kantonalbank of Switzerland, with Deferred Prosecution Agreement Requiring Payment of $98.5 Million, as Well as Guilty Pleas of Two Zürcher Kantonalbank BankersRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Richard E. Zuckerman, the Principal Deputy Assistant Attorney General for the Tax Division of the Department of Justice, and Don Fort, Chief, Internal Revenue Service-Criminal Investigation (“IRS-CI”), announced the filing of criminal charges against ZÜRCHER KANTONALBANK (“ZKB”), a financial institution headquartered in Zurich, Switzerland. ZKB is charged with conspiring to help U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns, and otherwise hide hundreds of millions of dollars in offshore bank accounts held at ZKB.
Mr. Berman also announced a deferred prosecution agreement with ZKB (the “Agreement”), under which ZKB admitted to its unlawful conduct in assisting U.S. taxpayer-clients in violating their legal duties. The admissions are contained in a detailed Statement of Facts attached to the Agreement. The Agreement requires ZKB to pay a total of $98.5 million. The $98.5 million figure reflects, in part, a credit given to ZKB because of its cooperation in this case. However, the amount of ZKB’s cooperation credit was reduced by the Government due to ZKB’s actions, as described in the Statement of Facts, in dissuading two indicted ZKB bankers from cooperating with U.S. authorities for years after their indictment. Those indicted bankers, STEPHAN FELLMANN and CHRISTOF REIST, also pled guilty today.
The criminal charge against ZKB is contained in an Information (the “Information”) alleging one count of conspiracy to willfully and knowingly (1) defraud the IRS, (2) file false federal income tax returns, and (3) evade federal income taxes. If ZKB abides by all of the terms of the Agreement, the Government will defer prosecution on the Information for three years and then seek to dismiss the charges.
ZKB has also agreed to provide ongoing assistance to the Department of Justice, including providing detailed information about accounts in which U.S. taxpayers have a direct or indirect interest, including detailed information as to other banks that transferred funds into those accounts or that accepted funds when the ZKB accounts were closed. In addition, ZKB has agreed to cooperate with prosecutors in making treaty requests to Switzerland or other countries for account information.
Manhattan U.S. Attorney Geoffrey S. Berman said: “ZKB and two of its bankers have admitted to conspiring to assist U.S. taxpayers in evading their tax obligations. The bank enabled taxpayers to hide accounts from the IRS and actively sought to win the business of Americans looking to evade taxes. After doing so, ZKB dissuaded the two bankers from cooperating with U.S. authorities, which has today resulted in a reduction in the bank’s cooperation credit. The substantial financial penalties imposed on the bank, and the two bankers’ pleas, should make clear that helping U.S. taxpayers to be tax evaders will not be tolerated.”
Principal Deputy Assistant Attorney General Richard E. Zuckerman said: “ZKB and the other defendants in this case knew that U.S. taxpayers were maintaining undisclosed ‘black money’ accounts at ZKB in order to avoid their tax obligations and did nothing to prevent it. Today’s agreement and guilty pleas send a clear message that this type of conduct will not be tolerated. The Department will continue to work with our partners at IRS-CI to prosecute financial institutions and individuals that conspire to defraud the United States.”
IRS-CI Chief Don Fort said: “Today’s resolution with ZKB and the guilty pleas of two bank employees send a strong message of enforcement and commitment to the international banking community as well as U.S. taxpayers. When individuals and entities hide behind shell corporations and anonymous bank accounts, they are not only cheating the U.S. government, they are cheating the honest taxpaying citizens who are obeying the law and doing the right thing.”
According to the Information, statements made during the proceedings today, and other documents filed in Manhattan federal court, including the Statement of Facts to the Agreement:
The Offense Conduct
From at least in or about 2002 through in or about 2009, ZKB helped certain U.S. taxpayers with accounts at ZKB evade their U.S. tax obligations, file false federal tax returns with the IRS, and otherwise hide accounts held at ZKB from the IRS (hereinafter, “undeclared accounts”). ZKB did so by opening and maintaining undeclared accounts for U.S. taxpayers at ZKB, and by allowing third-party asset managers to open undeclared accounts for U.S. taxpayers at ZKB. ZKB held approximately 2,000 undeclared accounts on behalf of U.S. taxpayer-clients, who collectively evaded over $39 million in U.S. taxes, between 2002 and 2013.
In furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, ZKB undertook, among other actions, the following:
- ZKB entered into approximately 349 “code word agreements” with U.S. taxpayer-clients under which the bank agreed not to identify the U.S. taxpayers by name on bank documents, but rather to identify the U.S. taxpayers by code name, in order to reduce the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers. ZKB understood that a primary reason why U.S. taxpayers sought these “code word” accounts was to evade detection by U.S. tax authorities.
- ZKB opened and maintained accounts for many U.S. taxpayer-clients held in the name of non-U.S. corporations, foundations, trusts, or other legal entities (collectively, “structures”), thereby helping those U.S. taxpayers conceal their beneficial ownership of the accounts. Some of the structures had no business purpose (“sham structures”), but rather, existed solely for the purpose of helping ZKB’s U.S. taxpayer-clients hide their offshore assets.
- ZKB agreed to hold bank statements and other mail relating to approximately 750 accounts of U.S. domiciled taxpayer-clients at ZKB’s offices in Switzerland, rather than send them to U.S. taxpayer-clients in the United States, which helped ensure that documents reflecting the existence of the accounts remained outside the United States and beyond the reach of U.S. tax authorities.
- ZKB solicited new business through the website www.swiss-bank-accounts.com, which was operated by a third party, and which resulted in the opening of accounts at ZKB for U.S. taxpayer-clients whose accounts were undeclared.
ZKB knew that certain U.S. taxpayer-clients were maintaining undeclared accounts at ZKB in order to evade their U.S. tax obligations, in violation of U.S. law. ZKB understood the legal prohibitions regarding tax evasion to be distinct from ZKB’s obligations under its Qualified Intermediary Agreement. Certain ZKB bankers commonly used the term “Schwarzgeld” – German for “black money” – internally to refer to undeclared accounts, including those held by U.S. citizens. Until the middle of 2008, ZKB did not prevent any U.S. persons from opening an account if they refused to fill out a Form W-9, even though ZKB knew that such accounts were, or were highly likely to be, undeclared. Indeed, in May 2006, internal ZKB documents explicitly discussed the profitability of “[n]on-disclosed U.S. persons.”
At its high-water mark in 2008, ZKB had approximately $794 million in assets under management relating to undeclared accounts held by U.S. taxpayer-clients. From 2002 through 2013, ZKB earned approximately $21 million in profits on approximately $24 million gross revenues from its undeclared U.S. taxpayer accounts, including accounts held through structures.
In early 2008, U.S. enforcement actions against the Swiss banking institution UBS became public. In or about July 2008, UBS announced that it would cease providing cross-border private banking services to U.S.-domiciled clients. Rather than immediately closing down its own U.S. taxpayer undeclared accounts as a result of the UBS investigation, ZKB, through its external asset manager (“EAM”) desk, instead treated UBS’s decision to stop accepting U.S. taxpayer-clients as a business opportunity, and actively sought to increase its U.S. taxpayer-client base. ZKB gained many U.S. taxpayer-clients through EAMs working with the bank.
However, in 2008 and 2009, at the same time as ZKB’s EAM Desk proactively sought to increase its U.S. taxpayer-client base, ZKB also began implementing a number of measures that gradually limited securities accounts held by U.S. taxpayer-clients. At first the restrictions applied only to former UBS clients, but ZKB expanded its restrictions over time. By June of 2009, ZKB decided to close its business with all U.S. domiciled clients holding securities accounts, and in 2011, ZKB decided to exit its business with all remaining U.S.-domiciled customers. By 2012, ZKB had closed virtually all accounts held by U.S. domiciled taxpayers, and for those U.S. clients domiciled outside of the U.S., ZKB sought a Form W-9 and proof of U.S. tax compliance. ZKB has now terminated all U.S. cross-border business.
Indictment of ZKB Employees and ZKB’s Response to the Indictment
Despite ZKB’s cooperation with the Government in this case, the Government views the actions of ZKB with respect to indicted bankers FELLMANN and REIST, described in the Statement of Facts, as inconsistent with a policy of full cooperation. Those actions, accordingly, have reduced the amount of cooperation credit afforded by the Government to ZKB.
In December 2012, three ZKB bankers – FELLMANN, REIST, and Otto Hüppi – were charged in the Southern District of New York with conspiracy to defraud the United States and the IRS for their role in ZKB’s offense. Although ZKB retained independent U.S. counsel for the bankers, beginning in 2013 and continuing through 2015, ZKB’s in-house counsel and, at times, ZKB employees from the Human Resources department and other departments, regularly met with FELLMANN and REIST. At those meetings, which were not attended by FELLMANN and REIST’s independent U.S. counsel, ZKB, among other things, made statements that caused FELLMANN and REIST to feel dissuaded from reaching out to the U.S. Attorney’s Office in order to explore the possibility of cooperating. In addition, ZKB’s in-house counsel suggested to FELLMANN that he did not have any information of value to contribute to the U.S. Attorney’s Office’s ongoing investigation. Furthermore, based on conversations with ZKB, FELLMANN and REIST felt that their continued employment at ZKB and ZKB’s ongoing payment of their legal fees would be threatened should they take steps that were viewed by ZKB as inconsistent with the bank’s own interests. Due in part to these discussions with ZKB, FELLMANN and REIST did not seek to cooperate with the investigation until the summer of 2015, approximately two and a half years after being indicted.
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FELLMANN, 53, a Swiss citizen, and REIST, 60, a Swiss citizen, each pled guilty to one count of conspiracy to willfully fail to file returns, supply information, or pay tax. FELLMANN and REIST each face a maximum sentence of one year in prison. The statutory maximum sentence is prescribed by Congress and is provided here for information purposes only, as any sentences imposed on the defendants will be determined by the judge.
FELLMANN and REIST are each scheduled to be sentenced before U.S. District Judge J. Paul Oetken on November 30, 2018.
Hüppi remains a fugitive.
Mr. Berman praised the outstanding investigative work of IRS-CI, and thanked the Justice Department’s Tax Division for its assistance in the investigation.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Sarah E. Paul, Noah Solowiejczyk, and Andrew D. Beaty are in charge of the prosecution.
- ZKB entered into approximately 349 “code word agreements” with U.S. taxpayer-clients under which the bank agreed not to identify the U.S. taxpayers by name on bank documents, but rather to identify the U.S. taxpayers by code name, in order to reduce the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers. ZKB understood that a primary reason why U.S. taxpayers sought these “code word” accounts was to evade detection by U.S. tax authorities.
Former C.E.O. of Cocoa Trading Company Sentenced to 36 Months in Prison for $350 Million FraudRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that PETER G. JOHNSON was sentenced to 36 months in prison for leading a scheme to defraud a group of lenders (the “Banks”) by submitting false “borrowing base” reports designed to secure and maintain a $400 million line of credit for his cocoa trading company, Transmar Commodity Group Ltd. (“Transmar” or the “Company”). JOHNSON pled guilty on March 9, 2018, to one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution. The sentence was imposed by United States District Judge Jed S. Rakoff.
U.S. Attorney Geoffrey S. Berman said: “Peter G. Johnson, CEO of Transmar, a commodities trading company specializing in cocoa trading, previously admitted to his role in a scheme to defraud the banks which extended high lines of credit to Transmar. Johnson and his co-defendants fudged the company’s required reports, which banks used to gauge the amount they extended Transmar, to make the company seem financially healthier, thus receiving higher credit than deserved. All told, Johnson’s scheme led to the bankruptcy of Transmar, unpaid debt of over $350 million, and now he has been sentenced to 36 months in prison time.”
According to the allegations in the Indictment and other documents filed in federal court, as well as statements made in public court proceedings:
Transmar was a closely-held, family-run cocoa commodity trading company. PETER G. JOHNSON was Transmar’s founder, President, and chief executive officer.
From at least 2014 through at least December 2016, Transmar maintained a credit facility from the Banks that varied from approximately $250 million to approximately $400 million. To secure and maintain these hundreds of millions of dollars in credit, PETER G. JOHNSON, his son, Peter B. Johnson, Transmar’s Vice President of Finance, Thomas Reich, and others schemed to misrepresent material information about Transmar’s finances, making it appear that Transmar had far more credit-eligible collateral than it actually had.
The scheme centered on periodic “borrowing base” reports (“BB Reports”) that the Banks required Transmar to submit, sometimes as frequently as weekly, as a condition to continued credit extension. The BB Reports were supposed to accurately reflect and quantify those portions of Transmar’s collateral that qualified for financing under the terms of credit agreements between Transmar and the Banks.
Beginning no later than 2014, Transmar employees, acting with JOHNSON’s knowledge and at his direction, manipulated the BB Reports and related documents to give the false impression that Transmar had sufficient eligible collateral to support the amount of credit the Banks were extending. The manipulation involved, among other devices, counting inventory that Transmar had already sold or was otherwise ineligible for inclusion, counting accounts receivable for which Transmar had already received payment, recording fake accounts receivable, and arranging “circle” transactions through which amenable third-party intermediaries agreed to “buy” goods from Transmar with Transmar’s own money, funneled to the third parties through Euromar Commodities GMBH, Transmar’s affiliate.
Following the discovery of the fraud, Transmar filed for bankruptcy in December 2016. At that time, the Company owed the Banks approximately $360 million.
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In addition to the prison term, JOHNSON, 69, of Harding Township, New Jersey, was sentenced to two years of supervised release.
Peter B. Johnson, 39, of Morristown, New Jersey, and Thomas Reich, 60, of Montvale, New Jersey, each pled guilty to the same offenses for their participation in the scheme to defraud the Banks. They are scheduled to be sentenced on September 17 and 21, 2018, respectively.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorneys Benet J. Kearney and Daniel M. Tracer are in charge of the prosecution.
California Man Pleads Guilty to Insider Trading Scheme Based on Confidential Information Misappropriated from an Investment BankRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that JEFFREY ROGIERS pled guilty today before United States District Judge Alison J. Nathan to conspiracy to commit securities fraud and fraud in connection with a tender offer for his role in an insider trading scheme relating to material nonpublic information misappropriated from an investment bank by Daniel Rivas, a former employee at the bank. In August 2017, ROGIERS, as well as Michael Siva, Roberto Rodriguez, Rodolfo Sablon, and Jhonatan Zoquier, were arrested and charged in a 54-count Indictment for their involvement in three overlapping insider trading chains, all stemming from information misappropriated by Rivas. Prior to the unsealing of the Indictment last year, Rivas and another participant in the scheme, James Moodhe, pled guilty and both have been cooperating with the Government in this investigation. Since the unsealing of the Indictment, Sablon and Zoquier, in addition to ROGIERS, have pled guilty and will be sentenced by Judge Nathan.[1]
U.S. Attorney Geoffrey S. Berman said: “Jeffrey Rogiers traded on stolen confidential corporate information that he received, through a friend, from an insider at an investment bank in order to generate illicit profits. Our Office and our law enforcement partners remain committed to identifying and prosecuting those who engage in such abuses of our nation’s securities markets.”
According to the allegations contained in the Indictment filed against ROGIERS 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 the 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 the misappropriated Inside Information 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 Rogiers Tipping Chain
With respect to ROGIERS, Rivas passed inside information to his close friend Zoquier, who passed inside information to his close friend ROGIERS.
From at least 2013 through August 2017, Rivas and Zoquier, who lives and works in New Jersey, had a close relationship. ROGIERS lived and worked in California as a computer and network security analyst and had a close relationship with Zoquier. In or about 2013, Zoquier introduced Rivas to ROGIERS. In or about 2015, at Zoquier’s request, Rivas and ROGIERS met in person and Rivas explained to ROGIERS the nature of the Inside Information to which he had access. Between at least in or about March 2016 and in or about April 2017, Rivas repeatedly provided Zoquier with Inside Information misappropriated from the Investment Bank so that Zoquier could execute profitable trades. Beginning in approximately March 2016, Zoquier began sharing the Inside Information he received from Rivas with ROGIERS so that ROGIERS could execute profitable trades for himself. Throughout the time that ROGIERS was obtaining Inside Information from Zoquier, ROGIERS understood that Rivas was the source of the Inside Information. In addition to trading himself, ROGIERS also caused at least one other individual to execute profitable trades based on the Inside Information.
In total, Zoquier and ROGIERS caused trades generating more than $200,000 in illicit profits based on Rivas’s Inside Information.
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ROGIERS, 34, of Oakland, California, pled guilty to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer (Count Thirty-Nine of the Indictment), 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 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. ROGIERS will be sentenced before United States District Alison J. Nathan later this year.
Sablon and Zoquier, two of the co-defendants named in the Indictment along with ROGIERS, have also pled guilty and will be sentenced by Judge Nathan. Any trial of the remaining co-defendants, Siva and Rodriguez, will occur next year before Judge Nathan, on charges of conspiracy to commit securities fraud and fraud in connection with a tender offer, conspiracy to commit wire fraud, multiple counts of securities fraud, and tender offer fraud. The allegations contained in the Indictment as to those defendants are merely accusations, and they are presumed innocent unless and until proven guilty.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance. He added that the investigation is continuing.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Andrea M. Griswold and Samson Enzer are in charge of the prosecution.
[1] As for the defendants who have not pled guilty (Michael Siva and Roberto Rodriguez), the charges described herein constitute only allegations.
Brooklyn Man Charged in Connection with String of Arsons in Midtown ManhattanRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ashan M. Benedict, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), and Daniel A. Nigro, the Commissioner of the New York City Fire Department (“FDNY”), announced today the arrest of JAMAL DEESE in connection with a string of arsons in New York, which occurred from August 5, 2018, through August 7, 2018. DEESE was arrested yesterday evening, and was presented today in Manhattan federal court before the U.S. Magistrate Judge Katharine H. Parker.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Jamal Deese set more than a dozen fires in midtown Manhattan locations during a three-day span. His alleged serial arsons threatened public safety and necessitated the deployment of valuable firefighting and law enforcement resources. Thanks to the work of the ATF, NYPD, and FDNY, Deese is in custody and will be prosecuted.”
ATF Special Agent-in-Charge Ashan M. Benedict said: “The defendant’s alleged conduct placed New Yorkers, commuters, and visitors at extreme and indiscriminate risk of injury or worse, and had the potential to cause extensive damage to businesses and property. While we are fortunate that there were no known injuries, the defendant will nonetheless face the consequences for his alleged arson spree. I’d like to thank the members of ATF’s SEAR Task Force and the U.S. Attorney’s Office for their efforts thus far in this investigation.”
NYPD Commissioner James P. O’Neill said: “The potential for serious injury or death was very real as Jamal Deese allegedly went on a spree across a swath of Midtown Manhattan. Fortunately, the collaborative efforts of our city and federal partners stopped him before further mayhem could occur. Today’s arrest is the result of the type of quick and effective investigative work performed each day in New York City.”
FDNY Commissioner Daniel A. Nigro said: “I’m proud of the outstanding collaborative investigation by the Arson Response Task Force to apprehend an individual whose alleged crimes needlessly put many lives in danger. Arson is a dangerous, potentially deadly crime; and thanks to our Fire Marshals, NYPD Detectives and ATF agents, an alleged serial arsonist has been stopped before anyone could be injured.”
According to the allegations in the Complaint sworn out in Manhattan federal court:[1]
From August 5, 2018, through August 7, 2018, DEESE set trashcan fires in the bathrooms of at least four midtown restaurants. He also set trashcan fires outside and inside the Amtrak terminal at Penn Station. During the course of his arson spree, DEESE ignited at least 14 fires at Penn Station and in the restaurants. DEESE was apprehended when he returned to one of the restaurants in which he had previously ignited a fire.
* * *
DEESE, 24, of Brooklyn, New York, is charged with four counts of arson, each of which carries a mandatory minimum sentence of five years in prison and a maximum 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding investigative work of ATF, NYPD, FDNY, and the Strategic Explosive and Arson Response Task Force.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Kyle A. Wirshba is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
12 Defendants Charged in Manhattan Federal Court with Nationwide Cellphone Fraud Scheme, Which Caused Losses of over $1 MillionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent in Charge of the New York Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced charges today against 12 individuals involved in a nationwide fraud conspiracy from 2014 to the present: ISAAC CONCEPCION AQUINO, a/k/a “Kaka,” MARIO DIAZ, a/k/a “Memin,” TOMAS GUILLEN, a/k/a “Diddy,” RONNIE DE LEON, JOSE ARGELIS DIAZ, JOEL PENA, JHONATAN DIAZ, a/k/a “Nino,” EDDY MORROBEL, RUDDY SANCHEZ, MICHAEL ROQUE, RAYNIEL ROBLES, and JOANDRA TEJADA GONZALEZ. In connection with the fraud, the defendants and their associates improperly accessed more than 3,300 customers’ cellphone accounts, fraudulently obtained more than 1,200 cellphones, and caused losses exceeding $1 million. Six defendants were arrested in the Southern District of New York and will be presented today before Magistrate Judge Katharine H. Parker: MARIO DIAZ, a/k/a “Memin,” TOMAS GUILLEN, a/k/a “Diddy,” JOSE ARGELIS DIAZ, JHONATAN DIAZ, a/k/a “Nino,” EDDY MORROBEL, and RAYNIEL ROBLES. In addition, RONNIE DE LEON was arrested this morning in Ohio and will be presented this afternoon, in the Southern District of Ohio, before Chief Magistrate Judge Elizabeth A. Preston Deavers.
The following defendants remain un-apprehended at this time: ISAAC CONCEPCION AQUINO, a/k/a “Kaka,” JOEL PENA, RUDDY SANCHEZ, MICHAEL ROQUE, and JOANDRA TEJADA GONZALEZ.
U.S. Attorney Geoffrey S. Berman said: “The defendants allegedly engaged in a sophisticated nationwide conspiracy to hack into the accounts of ordinary people and exploit those accounts for their own gain, obtaining valuable electronic devices at others’ expense. The defendants allegedly perpetrated their scheme through various means, including buying victims’ account information over the dark web. Thanks to the dedicated work of our partners at HSI, this alleged ring of cellphone fraudsters will now face the call of justice.”
HSI Special Agent in Charge Melendez said: “Those arrested today were allegedly part of a fraud network operating in New York, the Dominican Republic and the Darknet. Their activities left a trail of unsuspecting victims across the United States and cost businesses significant losses. They traveled to 30 states to obtain cellphones that were later sold through fencing operations in the Bronx. Telecommunications fraud is a huge business and where there is a profit to be made by criminals, HSI’s longstanding El Dorado Task Force will follow the money to bring those perpetrators to justice.”
According to the allegations in the Complaint unsealed today[1]:
From at least 2014 to the present, a group of individuals (the “Fraud Ring”) perpetrated a wide-ranging scheme to obtain valuable, new electronic devices – primarily iPhones, but also iPads, tablets, and watches – at others’ expense. During the course of the conspiracy, the Fraud Ring fraudulently obtained more than $1 million worth of devices. To facilitate the scheme, the Fraud Ring traveled to at least 30 different states, but often brought or shipped the fraudulently obtained cellphones back to the Bronx, where they regularly sold them.
The Fraud Ring regularly engaged in intrusions into existing customers’ accounts with cellular service companies and obtained new phones or “upgrade” phones by paying only a small fee in the store, while charging the vast majority of the purchase price to existing customers’ accounts, without the consent or knowledge of these existing customers. The scheme’s victims therefore included both customers, whose identities were stolen and/or whose accounts were accessed without authorization, and cellphone service providers, which typically bore financial losses for fraudulently obtained devices.
The Fraud Ring used various mechanisms to perpetrate their scheme, including buying cellphone customers’ personal identifying information (“PII”) over the dark web; phishing, in which the Fraud Ring sent a link to cellphone customers that, if pressed, allowed the Fraud Ring to hack into the customers’ accounts; using fraudulent identifications to persuade retail store employees that conspirators were someone else; and opening accounts using social security numbers that appeared to match conspirators’ names but in fact belonged to victims.
During the course of the investigation, HSI executed a search warrant on a suspected hub of the Fraud Ring in Mt. Vernon, New York (the “Residence”). Law enforcement encountered six of the 12 charged defendants in the Residence and seized (among other things) approximately 47 electronic devices, including 12 computers. Two IP addresses associated with the Residence were used to access at least approximately 3,300 cellphone company customer accounts, and to fraudulently purchase at least approximately 1,294 cellphones. The seized computers contained various indicators of involvement in the fraud, including:
- A 15-minute-long “How-to” video, which detailed the steps necessary to commit cellphone fraud, including how to use victim PII to fraudulently purchase devices;
- Many indicators that the computers had accessed the darkweb, several websites where victim PII is sold (sometimes for as little as $3), and cryptocurrency exchanges, including for Bitcoin; and
- Numerous Google searches in furtherance of the fraud (e.g., “best buy upgrade checker phone,” “att activate phone,” “verizon.com check order status,” “check my order status sprint,” “add authorized user last name,” “California driver license number format,” “Utah driver license photo,” and “most common last names for Spanish rich people”).
* * *
Each of the 12 defendants is charged with one count of conspiracy to commit wire fraud, which carries a maximum penalty of 20 years in prison, and one count of aggravated identity theft, which carries a mandatory minimum penalty of two years in prison, which must run consecutively to any other term of imprisonment imposed. The maximum and mandatory minimum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Michael D. Neff and Brett M. Kalikow are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
“Broadway Bandit” Convicted in Manhattan Federal Court for 2017 Robbery SpreeRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that JAMIE FRIERSON was found guilty of five robberies in connection with a robbery spree in Manhattan, during which thousands of dollars were stolen. FRIERSON was convicted after a three-day trial before U.S. District Judge Analisa Torres.
U.S. Attorney Geoffrey S. Berman said: “Jaime Frierson went on a one-man crime spree, brazenly attempting to rob five Manhattan banks in broad daylight in less than two weeks. Frierson threatened the lives of bank tellers to get away with thousands of dollars in cash, endangering the safety of New Yorkers and traumatizing bank employees. This swift verdict shows that our community will not stand for these acts.”
According to the allegations in the Complaint and evidence at trial:
On August 16, 2017, FRIERSON entered a bank in midtown Manhattan and handed a bank teller a note claiming that he had a gun, demanding money, and threatening violence. In response, the teller gave FRIERSON approximately $1,500 in United States currency. Frierson then fled.
On August 18, 2017, FRIERSON entered a bank on the Upper West Side of Manhattan and handed a bank teller a note claiming he had a gun, demanding money, and threatening violence. After FRIERSON was unable to obtain any money, he fled the bank.
On August 24, 2017, FRIERSON entered a bank on the Upper West Side of Manhattan and handed a bank teller a note claiming he had a gun, demanding money, and threatening to kill bank employees. In response, the teller gave FRIERSON approximately $2,000 in United States currency. FRIERSON then fled.
On August 29, 2017, FRIERSON entered a bank in Harlem and handed a bank teller two notes claiming he had a gun, demanding money, and threatening to kill bank employees. After FRIERSON was unable to obtain any money, he fled the bank.
On August 29, 2017, FRIERSON entered a bank on the Upper West Side of Manhattan and handed a bank teller a note claiming that he was armed, demanding money, and threatening to kill bank employees. In response, the teller gave FRIERSON over $8,000 in United States currency. FRIERSON then fled.
* * *
FRIERSON, 47, of New York, New York, was convicted of three counts of robbery and two counts of attempted robbery. FRIERSON is facing a maximum sentence of 20 years in prison on each count, and is scheduled to be sentenced on December 10, 2018, before Judge Torres. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Aline R. Flodr, Sheb Swett, and Sagar K. Ravi are in charge of the prosecution.
Father and Son Plead Guilty to Selling Fentanyl and Oxycodone on the Dark WebRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL LUCIANO and PHILIP LUCIANO, a father and son, pled guilty today to selling fentanyl and oxycodone over the “dark web,” including on AlphaBay. Fentanyl is a synthetic opioid that is significantly more potent than heroin, and is a major contributor to overdose fatalities. The defendants also admitted to selling fentanyl that substantially contributed to a victim’s non-fatal overdose in 2015. MICHAEL LUCIANO and PHILIP LUCIANO pled guilty before United States Magistrate Judge Katharine H. Parker, and were remanded into federal custody.
Manhattan U.S. Attorney Geoffrey S. Berman said: “The defendants’ fentanyl contributed to a victim’s overdose, which fortunately, the victim survived. Subsequently, the defendants used the dark web – a place where some criminals think they can hide – to sell fentanyl and oxycodone, two highly addictive and potentially lethal opioids. I commend our partners at HSI for bringing this father-son duo’s misconduct out of the dark.”
According to the allegations in the Complaint and the Indictment to which the defendants pled guilty, as well as statements made in court:
From at least in or about January 2015 through July 2017, MICHAEL LUCIANO and PHILIP LUCIANO conspired to distribute fentanyl, butyryl fentanyl (a fentanyl analogue), and oxycodone. They sold these narcotics both in person and – from at least February 2016 through July 2017 – over the dark web. In March 2015, the LUCIANOs sold fentanyl to a repeat customer who overdosed, was administered naloxone, taken to the hospital, and survived. The overdose victim sent text messages to PHILIP LUCIANO from the hospital, stating, “I called you / Your dad at the house and saw him / I got back home and shot some. I thought it might have been too much, especially considering my last dose of sub was Saturday. I became unresponsive and my friend called an ambulance. They gave me narcan and I’m at the hospital now / Can I settle up and get 60 more tomorrow?” PHILIP LUCIANO replied, “Give me a call when u can.”
Despite this overdose in 2015, the LUCIANOs continued to sell drugs, including over the darkweb in 2016 and 2017. On AlphaBay, they sold narcotics using the vendor name “Zane61.” AlphaBay customers repeatedly provided positive feedback on fentanyl and oxycodone they purchased from Zane61. One of the LUCIANOs’ AlphaBay customers wrote, for example: “Great stealth, fast shipping, legit product. Perfect 10/10.” During a confession in July 2017, MICHAEL LUCIANO told HSI agents, among other things, that PHILIP LUCIANO had handled the technological aspects of their drug transactions over the darkweb, PHILIP had reported to MICHAEL drug orders they had received online, and MICHAEL had shipped the narcotics, via the United States Postal Service, to the LUCIANOs’ customers.
* * *
MICHAEL LUCIANO, 59, and PHILIP LUCIANO, 30, both of Staten Island, each pled guilty to one count of conspiracy to distribute and possess with intent to distribute three controlled substances – fentanyl, butyryl fentanyl (a fentanyl analogue), and oxycodone. This charge carries a mandatory minimum sentence of five years in prison and a maximum sentence of 40 years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as the defendants’ sentences will be determined by the judge. Sentencing has been scheduled for November 8, 2018, before United States District Judge Lewis A. Kaplan.
Mr. Berman praised HSI for its outstanding work on the investigation. Mr. Berman also thanked the U.S. Postal Inspection Service, U.S. Customs and Border Protection, and the New York City Police Department for their valuable assistance in this investigation.
This matter is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Michael D. Neff is in charge of the prosecution.
Congressman Christopher Collins and Others Charged in Manhattan Federal Court with Insider Trading and Lying to Federal Law Enforcement AgentsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of CHRISTOPHER COLLINS, a Congressman representing the 27th District of New York, CAMERON COLLINS, the son of CHRISTOPHER COLLINS, and STEPHEN ZARSKY, the father of CAMERON COLLINS’s fiancée, on charges of participating in a scheme to commit insider trading relating to securities of Innate Immunotherapeutics (“Innate”), an Australian biotechnology company on whose Board of Directors CHRISTOPHER COLLINS served. As alleged in the Indictment, in June 2017, CHRISTOPHER COLLINS, who possessed material, nonpublic information through his service on Innate’s board of directors, betrayed his duties of trust and confidence to Innate by providing inside information to his son, CAMERON COLLINS, about confidential drug trial results so that his son and others, including ZARSKY, could trade before the drug trial results were publicly announced. As a result of CHRISTOPHER COLLINS’s illegal tips, CAMERON COLLINS, ZARSKY, and others who received the inside information avoided a total of approximately $768,000 in losses. When later interviewed by the FBI, CHRISTOPHER COLLINS, CAMERON COLLINS, and ZARSKY each made false statements to cover up their participation in the insider trading scheme.
CHRISTOPHER COLLINS, CAMERON COLLINS, and ZARSKY are each charged with conspiracy, securities fraud, wire fraud, and making false statements to the FBI. All three defendants surrendered this morning and will be presented and arraigned at 2:30 p.m. today before United States District Judge Vernon S. Broderick in federal court in the Southern District of New York.
In a separate action, the United States Securities and Exchange Commission (“SEC”) filed a civil action against CHRISTOPHER COLLINS, CAMERON COLLINS, and ZARSKY.
U.S. Attorney Geoffrey S. Berman said: “Congressman Christopher Collins is charged with insider trading and lying to the FBI, as are his son, Cameron Collins, and Stephen Zarsky, the father of Cameron’s fiancée. As alleged, Christopher Collins tipped confidential corporate information to his son, who traded on the inside information and passed it on to others, including Zarsky. Zarsky allegedly also traded on the information and tipped others. Representative Collins, who, by virtue of his office, helps write the laws of this country, acted as if the law did not apply to him. These charges are a reminder that this is a nation of laws, and everyone stands equal before the bar of justice. The charges demonstrate again that no matter what the alleged crime, or who allegedly committed it, we stand dedicated to the pursuit of justice, without fear or favor.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Congressman Christopher Collins sat on Innate Immunotherapeutics’ Board of Directors for a period of more than three years, spanning the run-up to the company’s clinical drug trial announcement in 2017. When he received confidential information that the drug had failed its trial, he tipped off investors with whom he shared a personal relationship, as we allege. Congressman Collins thought giving his family and friends a heads-up about material, nonpublic information would benefit them in the long run, but here's a better inside tip for those who think they can play by different rules: Access to this kind of information carries with it a significant responsibility, especially for those who hold a position of trust in our society. Act honorably and in accordance with the law, and do not lie to a special agent of the FBI.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]
The Insider Trading Scheme
The Scheme
In or about June 2017, CHRISTOPHER COLLINS, who, in addition to serving on Innate’s board of directors, was also one of Innate’s largest shareholders, participated in a scheme to commit insider trading. Specifically, on or about June 22, 2017, CHRISTOPHER COLLINS learned that MIS416 – a multiple sclerosis drug that Innate was developing – had failed a critical drug trial that was meant to determine the drug’s clinical efficacy (the “Drug Trial”). The negative Drug Trial results were highly confidential, and, as an insider who owed duties of trust and confidence to Innate, CHRISTOPHER COLLINS was obligated to keep the Drug Trial results secret until Innate publicly released them. Instead, in breach of those duties, CHRISTOPHER COLLINS tipped his son, CAMERON COLLINS, who was also a substantial Innate shareholder, so that CAMERON COLLINS could make timely trades and tip others before Innate publicly released the Drug Trial results. CAMERON COLLINS traded on the inside information and passed it to ZARSKY, as well as to three conspirators not named in the Indictment (“CC-1,” “CC-2,” and “CC-6”), so that they could utilize the information for the same purpose. ZARSKY, in turn, traded on the information and used it to tip three more conspirators not named in the Indictment (“CC-3,” “CC-4,” and “CC-5,”) so that they too could engage in timely trades in Innate stock. All of the trades preceded the public release of the negative Drug Trial results.
In total, these trades allowed CHRISTOPHER COLLINS, CAMERON COLLINS, and ZARSKY, as well as CC-1 through CC-6, to avoid over $768,000 in losses that they would have otherwise incurred if they had sold their stock in Innate after the Drug Trial results became public.
The Drug Trial Results
In or about October 2014, Innate initiated a Phase 2B clinical trial of its primary drug, MIS416. Successful completion of the Drug Trial was a necessary prerequisite to the commercialization of MIS416. Because Innate had no other significant products in development, its stock price was tied to the success of MIS416.
The Drug Trial was widely expected to be completed around the summer of 2017. For example, on or about June 9, 2017, Innate’s chief executive officer (“CEO”) sent various individuals, including CHRISTOPHER COLLINS, an email stating that “the delivery date for [the] review and ‘verdict’” of the Drug Trial “will [] occur at COB on US Thursday June 22nd.” As the summer progressed, individuals within Innate remained optimistic that MIS416’s Drug Trial results would be positive. The initial Drug Trial results were made available by trial administrators to Innate’s CEO on June 22, 2017. These results established that MIS416 lacked therapeutic value in the treatment of multiple sclerosis. The results were not publicly released at that time. Instead, they were released publicly on June 26, 2017, after the U.S. markets had closed (the “Public Announcement”). Innate’s stock price subsequently crashed, dropping 92% on the first trading day following the Public Announcement.
Dissemination of the Drug Trial Results
On or about June 22, 2017, at approximately 6:55 p.m., Innate’s CEO sent an email describing the Drug Trial results to the company’s board of directors, including CHRISTOPHER COLLINS. The email explained to Innate’s board of directors for the first time that the Drug Trial had been a failure. The email began, in part, “I have bad news to report,” and continued to explain that “the top line analysis of the ‘intent to treat’ patient population (ie every subject who was successfully enrolled in the study) would pretty clearly indicate[s] ‘clinical failure.’” The email continued, “Top-line 12-month data . . . show no clinically meaningful or statistically significant differences in [outcomes] between MIS416 and placebo,” and concluded by stating, “No doubt we will want to consider this extremely bad news. . . .”
At the time CHRISTOPHER COLLINS received this email, he was attending the Congressional Picnic at the White House. At 7:10 p.m., CHRISTOPHER COLLINS replied to the email, stating, in part, “Wow. Makes no sense. How are these results even possible???” After responding to the Innate CEO’s email, CHRISTOPHER COLLINS called his son, CAMERON COLLINS. They traded six missed calls between 7:11 p.m. and 7:15 p.m.. At 7:16 p.m., CHRISTOPHER COLLINS and CAMERON COLLINS spoke for more than six minutes. During that six-minute phone call, CHRISTOPHER COLLINS told CAMERON COLLINS, in sum and substance, that MIS416 had failed the Drug Trial.
CHRISTOPHER COLLINS did not trade himself, and his Innate stock ultimately declined by millions of dollars in value when the Drug Trial results were made public on June 26, 2017. As CHRISTOPHER COLLINS well knew, however, he was virtually precluded from trading his own shares for practical and technical reasons. For example, CHRISTOPHER COLLINS was already under investigation by the Office of Congressional Ethics (“OCE”) in connection with his holdings in, and promotion of, Innate. Indeed, he had been interviewed by OCE personnel on or about June 5, 2017, just 17 days earlier. Accordingly, he did not trade his own stock and instead tipped CAMERON COLLINS.
Trading and Tipping by CAMERON COLLINS and ZARSKY
CAMERON COLLINS began placing orders to sell his Innate shares the morning after he received inside information from CHRISTOPHER COLLINS. Between the morning of Friday, June 23, 2017, and the close of the market on Monday, June 26, 2017, CAMERON COLLINS sold approximately 1,391,500 shares of Innate stock. These sales allowed CAMERON COLLINS to avoid approximately $570,900 in losses.
Furthermore, after learning the Drug Trial results from CHRISTOPHER COLLINS, on or about the night of June 22, 2017, CAMERON COLLINS provided the Drug Trial results to at least the following three sets of individuals so that they could trade in advance of the Public Announcement: (1) his now fiancée, CC-1; (2) ZARSKY and ZARSKY’s wife, CC-2; and (3) CAMERON COLLINS’s friend, CC-6. Collectively, these individuals avoided approximately $186,620 in losses as a result of their trading on inside information.
On or about the morning of June 23, 2017, ZARSKY provided the negative Drug Trial results that he had learned from CAMERON COLLINS and CC-1 to at least the following individuals, among others, or otherwise caused them to trade or attempt to trade in advance of the Public Announcement: (1) his brother, CC-3; (2) his sister, CC-4; and (3) his longstanding friend, CC-5. Collectively, these individuals avoided approximately $10,900 in losses as a result of their trading on inside information.
Concealment of Trading
After the Public Announcement, CHRISTOPHER COLLINS took steps to prevent the public from learning that CAMERON COLLINS had sold significant portions of his Innate stock on or about June 23, 2017, and June 26, 2017, before the Public Announcement. For example, on or about June 28, 2017, one of CHRISTOPHER COLLINS’s staff members issued a statement to a local reporter. This statement stated that “Neither Christopher Collins, [nor] his daughter . . . have sold shares prior, during or after Innate’s recent stock halt,” and that “Cameron Collins has liquidated all his shares after the stock halt was lifted, suffering a substantial financial loss.” This statement was written in a manner designed to mislead the public into believing that CAMERON COLLINS had not sold any Innate shares prior to the Public Announcement. As CHRISTOPHER COLLINS explained in an email about press coverage surrounding Innate, “We want this to go away.”
False Statements to the FBI
On or about April 25, 2018, Special Agents from the FBI separately interviewed CHRISTOPHER COLLINS, CAMERON COLLINS, and ZARSKY. During these interviews, and as detailed in the Indictment, CHRISTOPHER COLLINS, CAMERON COLLINS, and ZARSKY made false statements to the FBI to cover up their participation in the insider trading scheme.
* * *
A chart identifying the charges and the maximum penalties applicable to CHRISTOPHER COLLINS, CAMERON COLLINS, and ZARKSY is below.
Count
Charge
Defendants
Maximum Penalty
1
Conspiracy to commit securities fraud (18 U.S.C. § 371)
All
5 years in prison
2
Securities fraud (15 U.S.C. §§ 78j(b) & 78ff; Title 18 U.S.C. § 2)
CHRISTOPHER COLLINS; CAMERON COLLINS
20 years in prison
3
Securities fraud (15 U.S.C. §§ 78j(b) & 78ff; Title 18 U.S.C. § 2)
All
20 years in prison
4
Securities fraud (15 U.S.C. §§ 78j(b) & 78ff; Title 18 U.S.C. § 2)
CHRISTOPHER COLLINS; CAMERON COLLINS
20 years in prison
5-7
Securities fraud (15 U.S.C. §§ 78j(b) & 78ff; Title 18 U.S.C. § 2)
All
20 years in prison
8
Securities fraud (15 U.S.C. §§ 78j(b) & 78ff; Title 18 U.S.C. § 2)
CHRISTOPHER COLLINS; CAMERON COLLINS
20 years in prison
9
Conspiracy to commit wire fraud (18 U.S.C. §§ 1349)
All
20 years in prison
10
Wire fraud (18 U.S.C. §§ 1343 & 2)
All
20 years in prison
11
False Statements (18 U.S.C. §§ 1001 & 2)
CHRISTOPHER COLLINS
5 years in prison
12
False Statements (18 U.S.C. §§ 1001 & 2)
CAMERON COLLINS
5 years in prison
13
False Statements (18 U.S.C. §§ 1001 & 2)
STEPHEN ZARSKY
5 years in prison
Defendants’ Ages and Residences
Defendant
Residence
Age
Christopher Collins
Clarence, New York
68
Cameron Collins
Morristown, New Jersey
25
Stephen Zarsky
Summit, New Jersey
66
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
Mr. Berman praised the work of the FBI and thanked the SEC for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Scott Hartman, Robert W. Allen, Max Nicholas, and Damian Williams are in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Biotechnology Executive Convicted of Defrauding Investors and Making False Statements to Federal Law EnforcementRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today the conviction in Manhattan federal court of PATRICK MURACA for wire fraud and making false statements. The jury found MURACA guilty on both counts of the Superseding Indictment following a trial before United States District Judge Ronnie Abrams.
U.S. Attorney Geoffrey S. Berman stated: “Patrick Muraca, who promised investors their money would be used to expand his businesses, instead used those funds for personal expenses, including rent, payments on two mortgages, and expenses related to his fiancée’s restaurant. Thanks to the investigative work of the FBI, Muraca has been convicted of his fraudulent scheme.”
According to the allegations contained in the Complaint, the Superseding Indictment, and the evidence presented in Court during the trial:
In 2016, MURACA, the former President of Nuclea Biotechnologies, Inc., founded two new businesses: NanoMolecularDX LLC (“NMDX”) and MetaboRx LLC (“Metabo”). Between 2016 and July 2017, MURACA solicited and obtained more than approximately $1 million from investors by making false and misleading representations that the investors’ money would be used to expand the business of NMDX and Metabo. MURACA then misappropriated hundreds of thousands of dollars of investors’ funds and used the misappropriated money for personal expenses. For example, MURACA spent tens of thousands of dollars of investor funds on rent, utilities, and food distributor expenses related to the operation of a restaurant owned by his fiancée. In addition, MURACA wrote more than approximately $175,000 in checks to himself from the bank accounts associated with NMDX and Metabo. MURACA also used investor funds to make payments on his mortgage and the mortgage on a home belonging to his mother and for hundreds of dollars in purchases at a cigar store and a tattoo and piercing establishment, among other businesses.
MURACA was arrested by the Federal Bureau of Investigation (“FBI”) in July 2017. On November 17, 2017, MURACA met with a Special Agent with the FBI and an Assistant United States Attorney. In the course of the November 17, 2017 meeting, Muraca made a material false statement about his use of investor funds.
* * *
MURACA, 49, of Pittsfield, Massachusetts, was found guilty of one count of wire fraud, which carries a maximum term of 20 years in prison, and one count of making false statements to federal law enforcement, which carries a maximum term 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. A sentencing date has not yet been set.
Mr. Berman praised the outstanding investigative work of the FBI.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys David Abramowicz, Katherine Reilly, and Christopher DiMase are in charge of the prosecution.
5 Defendants Charged in Manhattan Federal Court with Multimillion-Dollar Counterfeiting SchemeRead the Press Release
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 (“ICE”), Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Policy Department (“NYPD”), announced charges today against five individuals for conspiring to traffic in more than $70 million worth of counterfeit Nike Air Jordans. Defendants MIYUKI SUEN, JIAN MIN HUANG, SONGHUA QU, KIN LUI CHEN, and FANGRANG QU are charged with importing hundreds of thousands of athletic shoes from China into the United States. Once those shoes arrived, the defendants and other co-conspirators affixed counterfeit Nike-trademarked logos to those shoes in New York, and sold the now-counterfeit Air Jordans in the United States. All five defendants were arrested this morning and will be presented before U.S. Magistrate Katharine H. Parker today.
Manhattan U.S. Attorney Geoffrey S. Berman said: “The five defendants in this case allegedly counterfeited over $70 million in fake Nike shoes and sold them to buyers on the U.S. market. I commend our law enforcement partners for helping to bring today’s charges, which send a clear message to would-be counterfeiters: ‘Just don’t do it.’”
ICE HSI Special Agent-in-Charge Angel M. Melendez said: “These five individuals are alleged to have been a part of a large scale counterfeiting scheme, importing nearly a half million pairs of knock-off Nike sneakers. These counterfeiting networks can be both detrimental to our economy and threaten our national security, and HSI will continue to take every measure in investigating and dismantling these organizations.”
According to the allegations in the Complaint:
From at least in or about January 2016 up to and including in or about July 2018, SUEN, HUANG, SONGHUA QU, KIN LUI CHEN, and FANGRANG QU, the defendants, imported at least 42 shipping containers holding an estimated more than 380,000 pairs of sneakers from China. These sneakers were manufactured to resemble Nike Air Jordans. Once these shoes arrived, the defendants added trademarked logos to the shoes, rendering them counterfeit. The defendants then stored the counterfeit Nike Air Jordans in multiple storage units and warehouses in New York City and elsewhere.
On August 7, 2018, pursuant to court-authorized search warrants, federal law enforcement agents conducted searches of a warehouse, storage units, and a residence related to this scheme, and found thousands of counterfeit shoes, counterfeit trademarks, and machinery to finish counterfeit shoes. The estimated loss attributable to the defendants’ efforts amounts to more than $70 million.
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SUEN, 43, HUANG, 42, and CHEN, 53, of New York, New York, and SONGHUA QU, 54, and FANGRANG QU, 31, of Hicksville, New York, are each charged with one count of conspiring to traffic in counterfeit goods, and one count of trafficking in counterfeit goods. Each defendant faces a maximum potential sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the HSI and the NYPD. He also thanked U.S. Customs and Border Protection for its assistance.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Daniel G. Nessim is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Former Public Utility Employee Pleads Guilty in Theft of More Than $4 Million from Public Utility and CustomersRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOHN FARCHIONE, a former Manager at a public utility company (the “Public Utility”), pled guilty today in Manhattan federal court to four felony counts in connection with a scheme to steal more than $4 million from the Public Utility and its customers between 2005 and 2016. During that time period, FARCHIONE obtained and kept millions of dollars in customer payments intended for the Public Utility and then manipulated the Public Utility’s computer and accounting systems to conceal the theft. FARCHIONE pled guilty before U.S. District Judge J. Paul Oetken to one count of honest services fraud, one count of mail fraud, one count of conspiracy to commit mail fraud, and one count of aggravated identity theft.
U.S. Attorney Geoffrey S. Berman said: “As he has now admitted, for more than a decade, John Farchione abused his position to steal millions of dollars from his employer, a public utility company New Yorkers rely upon. We will continue to work aggressively to protect New York’s public utilities and their customers from such brazen criminal conduct.”
According to allegations contained in the Indictment and statements made in related court filings and proceedings:
From at least in or about 2005, up to and including in or about November 2016, FARCHIONE orchestrated fraudulent schemes that allowed him to steal millions of dollars from the Public Utility.
FARCHIONE, who was employed by the Public Utility as a manager in Customer Operations during the relevant time period, devised and implemented the scheme, using his knowledge of the Public Utility’s billing and payment processes. FARCHIONE carried out the scheme with a co-conspirator, Louis Bendel, who has previously pled guilty in connection with his role in the scheme. Bendel operated a business that aggregated payments from customers of the Public Utility for the purpose of passing such payments on to the Public Utility. FARCHIONE and Bendel effected the fraud in part through conspiring to submit fraudulent checks and payments to the Public Utility, in amounts owed by customers who provided cash to Bendel believing he would submit those payments to the Public Utility on their behalf.
In fact, however, FARCHIONE and Bendel kept the customer cash for themselves and submitted fraudulent checks to the Public Utility that purported to convey aggregated payments by multiple customers of the Public Utility. FARCHIONE, by virtue of his position as an employee of the Public Utility, was able to conceal the nature of the fraudulent checks, and thereby perpetuate the fraudulent scheme, through his knowledge of and access to the Public Utility’s account payment system.
Additionally, FARCHIONE and Bendel conspired to create false and fraudulent positive balances on certain customer accounts related to the scheme, and then caused the Public Utility to issue refunds that were not actually due, the proceeds of which were obtained and shared by FARCHIONE and Bendel.
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FARCHIONE, 65, pled guilty to one count each of honest services fraud, which carries a maximum sentence of 20 years in prison; mail fraud, which carries a maximum sentence of 20 years in prison; conspiracy to commit mail fraud, which carries a maximum sentence of 20 years in prison; and aggravated identity theft in connection with the fraudulent schemes, which carries a mandatory sentence of two years in prison, to be served consecutively to any other sentence imposed. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. In addition, FARCHIONE will be subject to financial penalties including restitution and forfeiture in amounts to be determined at sentencing.
FARCHIONE is scheduled to be sentenced by Judge Oetken on November 16, 2018.
Mr. Berman praised the outstanding work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Alex Rossmiller and Sidhardha Kamaraju are in charge of the prosecution.
Member of the Genovese Family of La Cosa Nostra Charged in 1997 Murder-For-Hire of Richard OrtizRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Charles Gardner, the Commissioner of the City of Yonkers Police Department (“YPD”), announced the arrest of JOHN TORTORA JR., a/k/a “Johnny T,” on charges of racketeering conspiracy, murder in aid of racketeering, and murder for hire. The murder charges arise out of TORTORA’s role in the November 11, 1997, murder of Richard Ortiz, 29, in Yonkers. TORTORA was arrested this morning in Yonkers by FBI agents and Yonkers PD detectives. TORTORA will be presented later today before the U.S. Magistrate Judge Gabriel W. Gorenstein at the United States Courthouse in Manhattan. The case has been assigned to United States District Judge Sidney H. Stein. An initial pretrial conference is scheduled for August 14, 2018, at 3:00 p.m., before Judge Stein.
Manhattan U.S. Attorney Geoffrey Berman said: “As alleged in the indictment, the defendant was responsible for the stabbing death of Richard Ortiz over 20 years ago. Today, thanks to the remarkable dedication and perseverance of the FBI and the Yonkers Police Department, the defendant faces charges for his crimes.”
FBI Assistant Director William F. Sweeney Jr. said: “The arrest of John Tortora should remind everyone that justice delayed is not justice denied. Whether a crime was allegedly committed decades ago or just days ago, the FBI will maintain the same tenacity and we will be relentless toward ensuring those who commit violent crimes be held accountable for their actions. The FBI New York Office never does these investigations alone, and we want to thank the Yonkers Police Department for their help in successfully solving a case from more than 20 years ago.”
Yonkers Police Commissioner Charles Gardner said: “This arrest for the 1997 murder of Mr. Ortiz demonstrates the resolve and commitment of law enforcement to hold those accountable for their actions and serves as a warning to all members of La Cosa Nostra engaging in violent criminal activity in our communities. We will continue to work with our federal partners to aggressively target alleged criminals and criminal enterprises operating in our City.
I would like to thank the U.S. Attorney’s Office for the Southern District of New York and the FBI for their invaluable support and efforts in this investigation.”
According to the allegations contained in the Indictment[1] and statements made in court:
From in or about 1997 up to and including in or about 2018, TORTORA, an associate and later a member of the Genovese Crime Family, along with other members and associates of La Cosa Nostra, committed a wide range of crimes, including murder, extortion, gambling, and narcotics trafficking. In particular, TORTORA hired others to kill Richard Ortiz in order to further the goals of the Genovese Family. As a result, on November 11, 1997, Ortiz was brutally stabbed multiple times, causing his death.
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TORTORA, 61, of Yonkers, New York, is charged with conspiracy to commit racketeering, murder in aid of racketeering, and murder for hire. A chart showing the charges and maximum penalties for each count of the Indictment is below. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
COUNT
CHARGE
MAXIMUM PENALTY
1
Conspiracy to commit racketeering
Life in prison
2
Murder in aid of racketeering
Mandatory life in prison or the death penalty
3
Murder for hire
Mandatory life in prison or the death penalty
Mr. Berman praised the outstanding investigative work of the FBI, the Yonkers Police Department, and the Special Agents of the United States Attorney’s Office for the Southern District of New York.
Assistant U.S. Attorneys Jessica Lonergan, Jessica Fender, and Lauren Schorr are in charge of the prosecution. The case is being handled by the Office’s Violent and Organized Crime Unit.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
Founder and Managing Partner of Accounting Firm Pleads Guilty to Making False Filings with the U.S. Department of LaborRead the Press Release
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”), and Thomas Licetti, Acting New York Regional Director of the U.S. Department of Labor-Employee Benefits Security Administration (“DOL-EBSA”), announced that SALVATORE ARMAO, the founder and managing partner of an accounting firm (the “Firm”), pled guilty today to making false filings with DOL in order to conceal an embezzlement scheme in which more than $100,000 was embezzled from a labor union (the “Union”) and its employee welfare benefit plan (the “Plan”). ARMAO pled guilty before United States District Judge Vernon S. Broderick.
U.S. Attorney Geoffrey S. Berman said: “As a professional accountant and certified fraud examiner, Salvatore Armao was supposed to serve as a check on labor fraud, not a facilitator of it. As he admitted today, Armao knowingly submitted false filings with the Department of Labor and the Internal Revenue Service in order to facilitate and conceal a long-running embezzlement scheme involving a labor union.”
DOL-OIG Special Agent-in-Charge Michael C. Mikulka said: “Salvatore Armao, a CPA and Certified Fraud Examiner for Armao LLP, should have been the first line of defense in protecting the members of a union, and the fund serving members and their families. Instead, he abused his position by filing false documents to conceal a multi-year embezzlement scheme. We will continue to work with the Employee Benefit Security Administration, the Office of Labor-Management Standards, and our law enforcement partners to safeguard the assets of union members.”
DOL-EBSA Acting New York Regional Director Thomas Licetti said: “Accurate reporting is an essential part of maintaining employee benefit plan integrity. EBSA’s efforts in this case exemplify our commitment to protecting employee benefits and working in coordination with fellow federal agencies.”
According to the allegations in the Complaint and the Information to which ARMAO pled guilty, as well as statements made in court:
From at least in or about 2010 through in or about 2014, the president of the Union, who also served as a trustee of the Plan (the “President-Trustee”), 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. The President-Trustee used his Union credit card to pay for personal expenses and then “reimbursed” the Union with funds transferred from the Plan. In total, the President-Trustee embezzled more than $100,000 from the Union over approximately three years.
During the period of the embezzlement, the Firm served as the accountant and auditor for the Union and the Plan. To facilitate and conceal the President-Trustee’s embezzlement, ARMAO falsely classified as “loans” the personal expenses for which the President-Trustee paid using Union and Plan funds in accounting records and in DOL filings for the Union. In at least 2012, 2013, and 2014, ARMAO falsely classified the President-Trustee’s personal expenses as loans in DOL filings for the Union. ARMAO also provided false information on DOL filings for the Plan, concealing from DOL the President-Trustee’s prohibited transfers of tens of thousands of dollars from the Plan to the Union which, in turn, facilitated and concealed the President-Trustee’s use of Union funds to pay his personal expenses. ARMAO repeatedly caused these false filings to be made to DOL despite being a Certified Fraud Examiner.
Under the terms of his plea agreement, ARMAO 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.
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SALVATORE ARMAO, 64, of Howard Beach, New York, pled guilty to a one-count Information charging him with making false statements in employee benefit plan records and reports required by the Employee Retirement Income Security Act of 1974 (“ERISA”). This offense carries a maximum sentence of five years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. ARMAO’s sentencing is scheduled for November 8, 2018, at 2:30 p.m., before Judge Broderick.
Mr. Berman praised the DOL’s Office of Inspector General, Employee Benefits Security Administration, Office of Chief Accountant, and Office of Labor-Management Standards for their outstanding work on this investigation. 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.
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.
Doctor Sentenced to 18 Months in Prison for Participating in $30 Million Scheme to Defraud Medicare and MedicaidRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that physician MUSTAK Y. VAID was sentenced today by U.S. District Judge Lorna G. Schofield to 18 months in prison for his participation in a $30 million scheme to defraud Medicare and the New York State Medicaid Program. VAID falsely posed as the owner of a medical clinic, when that clinic was in fact owned by a corrupt businessman, and falsely claimed that he had examined and treated hundreds of patients whom he had not in fact seen. VAID pled guilty on November 13, 2017, to health care fraud and conspiracy to commit health care fraud, mail fraud, and wire fraud before U.S. Magistrate Judge Henry B. Pitman.
U.S. Attorney Geoffrey S. Berman said: “The Medicare and Medicaid programs are designed to provide essential medical care to the elderly and the needy, not to enrich corrupt doctors and other fraudsters. The real victims of Mustak Vaid and his co-conspirators are U.S. taxpayers and needy patients with legitimate medical needs. Today’s sentence sends a strong message that those who cheat Medicare and Medicaid, including physicians and other health care providers who abuse their positions of trust, will be held accountable and will face serious penalties.”
According to the Indictment and other documents filed in federal court, as well as statements made during VAID’s plea proceeding and sentencing:
Between 2007 and 2013, Aleksandr Burman owned and operated six medical clinics in Brooklyn (the “Clinics”) that fraudulently billed Medicare and Medicaid approximately $30 million for medical services and supplies that were not provided, were provided without regard to medical necessity, or were otherwise fraudulently billed. Under New York State law, medical clinics must be owned and operated by a medical professional. To circumvent this requirement, Burman, who was not a medical professional, hired doctors to pose as the nominal owners of each of the Clinics. VAID was one of those doctors, agreeing to sign a variety of fraudulent documents that falsely represented to banks, Medicare, Medicaid, and others that VAID was the sole owner of Ocean Side Medical of Brooklyn, P.C., one of the six Clinics. VAID and his co-conspirators also helped prepare false medical records to support fraudulent reimbursement claims provided to Medicare and Medicaid. VAID signed medical charts falsely stating that he had examined patients, and wrote prescriptions and referrals for medically unnecessary and/or non-existent tests and supplies.
VAID is the seventh defendant, and the first physician, who has been sentenced after pleading guilty in this case and a related case. The other defendants include:
- Aleksandr Burman, the leader of the scheme, who was sentenced in a related case on May 8, 2017, to 10 years in prison;
- Marina Burman, the former wife of Aleksandr Burman and the owner of a related medical supply company, was sentenced on May 17, 2018, to three years in prison;
- Asher Oleg Kataev, a Burman business partner, was sentenced on May 31, 2018, to three years in prison;
- Alla Tsirlin, a Clinic office manager, was sentenced on June 5, 2018, to a year and a day in prison;
- Edward Miselevich and Ivan Voychak, Burman’s partners who jointly ran a related ambulette company, were sentenced on June 12 and July 19, 2018, respectively, to three years in prison each.
In addition, physician Ewald J. Antoine has pled guilty and is scheduled to be sentenced on August 21, 2018. Three additional defendants – a doctor (Paul J. Mathieu), a physical therapist (Hatem Behiry), and an occupational therapist (Lina Zhitnik) – are scheduled to go to trial before Judge Schofield on November 26, 2018. These three remaining defendants are presumed innocent unless and until proven guilty.
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In addition to the prison term, VAID, 45, of Roundtown, Michigan, was sentenced to three years of supervised release. Judge Schofield also ordered VAID to pay restitution of $2,669,231 and to forfeit $103,843 in ill-gotten gains.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, the Office of the Inspector General of the U.S. Department of Health and Human Services, and the New York State Office of the Medicaid Inspector General (“OMIG”).
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys David Raymond Lewis and Won S. Shin are in charge of the prosecution.
Statement by Manhattan U.S. Attorney on Conviction of Gang Member for His Role in the Murder of Jessica WhiteRead the Press Release
On June 11, 2016, Jessica White did what so many parents love to do – she took her children to the playground. There, she was killed before her children’s eyes, the victim of a stray bullet in a gang shooting. Today, a jury in the Southern District of New York unanimously found that Stiven Siri-Reynoso gave the order for that shooting. We recognize that this verdict cannot fill the gaping hole that Jessica’s death left in so many hearts. But in the face of such tragedy, we, along with our law enforcement partners, maintain our commitment to ridding our neighborhoods and playgrounds of senseless gang violence. That is what we accomplished today, thanks to the extraordinary efforts of the FBI and NYPD.
Gang Member Convicted in Manhattan Federal Court for His Role in the Murder of Jessica WhiteRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that STIVEN SIRI-REYNOSO was found guilty of the June 11, 2016, murder of Jessica White, who was killed by a stray bullet while watching her children play in the playground of the John Adams Houses in the Bronx, New York. SIRI-REYNOSO was convicted after an eight-day trial before Chief U.S. District Judge Colleen McMahon.
U.S. Attorney Geoffrey S. Berman: “On June 11, 2016, Jessica White did what so many parents love to do – she took her children to the playground. There, she was killed before her children’s eyes, the victim of a stray bullet in a gang shooting. Today, a jury in the Southern District of New York unanimously found that Stiven Siri-Reynoso gave the order for that shooting. We recognize that this verdict cannot fill the gaping hole that Jessica’s death left in so many hearts. But in the face of such tragedy, we, along with our law enforcement partners, maintain our commitment to ridding our neighborhoods and playgrounds of senseless gang violence. That is what we accomplished today, thanks to the extraordinary efforts of the FBI and NYPD.”
According to the allegations in the Indictment and evidence at trial:
On June 11, 2016, Jessica White was struck and killed by a stray bullet while sitting on a bench watching her three children play on a playground at the John Adams Houses where she lived. SIRI-REYNOSO, a member of the “Dominicans Don’t Play” or “DDP” street gang, was engaged in an ongoing gang dispute between the DDPs and the rival “Trinitarios” street gang involving, among other things, SIRI-REYNOSO’s drug sales near the John Adams Houses. On the night of June 11, 2016, Trinitarios members tried to attack SIRI-REYNOSO. In retaliation, SIRI-REYNOSO sent another individual to shoot at the Trinitarios. One of the bullets fired by that individual struck and killed Jessica White.
SIRI-REYNOSO also committed other crimes in connection with his membership in the DDP’s, including drug selling and robbery.
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SIRI-REYNOSO, 24, of the Bronx, was convicted of conspiring to commit racketeering, conspiring to sell narcotics, murder in aid of racketeering, and murder through the use of a firearm. SIRI-REYNOSO is facing a mandatory minimum sentence of life in prison, and is scheduled to be sentenced on October 30, 2018, before Judge McMahon. 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 Federal Bureau of Investigation and the New York City Police Department.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Drew Skinner, Allison Nichols, and Frank Balsamello are in charge of the prosecution.Former New York State Assembly Speaker Sheldon Silver Sentenced to 7 Years in PrisonRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that former New York State Assembly Speaker SHELDON SILVER was sentenced this afternoon to seven years in prison after having been found guilty a second time by a federal jury of using his official position to obtain nearly $4 million in bribes in exchange for his official acts and obtaining another $1 million through laundering the proceeds of his crimes. SILVER had previously been found guilty of the same offenses by a jury in November 2015, but the conviction was 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.
SILVER was sentenced in Manhattan federal court by U.S. District Judge Valerie E. Caproni, who also presided over the two-week jury trial.
U.S. Attorney Geoffrey S. Berman said: “When he assumed his powerful position at the top of New York State government, Sheldon Silver took an oath to do the work of the people. Instead, he leveraged his tremendous influence to pad his bank account and line his pockets. Sheldon Silver has been given a lengthy sentence of seven years in federal prison. We hope today’s fittingly stiff sentence sends a clear message: brokering official favors for your personal benefit is illegal and will result in prison time. I thank the career prosecutors of this Office for their perseverance in this important case for the people of New York.”
According to the evidence introduced at trial, court filings, and statements made in Manhattan federal court:
For more than two decades, SHELDON SILVER served as Speaker of the New York State Assembly, a position that gave him significant power over the operation of state government. SILVER used this immense power – including, in particular, his power over the real estate industry and his control over certain health care funding – to unlawfully and corruptly enrich himself. Among other things, SILVER unlawfully solicited and obtained client referrals worth millions of dollars in exchange for his official acts, and attempted to disguise this money as legitimate outside income earned from his work as a private lawyer. In particular, SILVER claimed, on financial disclosure forms required to be filed with New York State and in public statements, that the millions of dollars he received in outside income while also serving as Speaker of the Assembly came from a Manhattan-based law firm, Weitz & Luxenberg P.C., where SILVER claimed to work representing individual clients in personal injury actions. These claims were materially false and misleading – and made to cover up unlawful payments SILVER received due to his official power and influence as an elected legislator and the Speaker of the Assembly.
The schemes provided SILVER with two different streams of unlawful income: (i) approximately $700,000 in kickbacks SILVER received by steering two real estate developers with business before the state legislature to a law firm with which he was associated, and (ii) more than $3 million in asbestos client referral fees SILVER received by, among other official acts, awarding $500,000 in state grants to a university research center of a physician who referred patients made ill by asbestos to Weitz & Luxenberg.
Unlawful Income From a Real Estate Law Firm
SILVER, a lawyer, entered into a corrupt relationship with Jay Arthur Goldberg, P.C., later known as Goldberg & Iryami, P.C., which specialized in making applications to New York City to reduce taxes assessed on properties. Beginning in at least approximately 2000, SILVER approached a prominent developer of residential properties in Manhattan, Glenwood Management Corp. (“Glenwood”), and later approached another developer, The Witkoff Group LLC (“Witkoff”), and asked them to hire Goldberg & Iryami. The developers – both of whom lobbied SILVER and others on real estate issues because their businesses depended heavily on favorable state legislation – agreed to use Goldberg & Iryami as SILVER had requested. Over the years, Witkoff and Glenwood paid millions of dollars in legal fees to Goldberg & Iryami. SILVER received a cut from the legal fees amounting to nearly $700,000. SILVER had no public affiliation with Goldberg & Iryami and performed no legal work to earn those fees, which were payments for SILVER having arranged the business through his official power and influence.
While continuing to receive the fees and in furtherance of the scheme, SILVER took official action beneficial to Glenwood and Witkoff. For example, while SILVER was publicly associated with advocating for tenants, a proposal that benefitted Glenwood was in substantial part enacted in real estate legislation in 2011 with SILVER’s support. SILVER also approved more than $1 billion dollars in state financing for Glenwood.
Unlawful Income From Asbestos Client Referrals
SILVER also entered into a corrupt arrangement with Dr. Robert Taub, who was a leading physician specializing in the treatment of asbestos-related diseases, through which SILVER issued state grants and otherwise used his official position to provide favors to Dr. Taub and his family so that Dr. Taub would refer and continue to refer his patients to SILVER at Weitz & Luxenberg, a firm with which SILVER was affiliated as counsel. Specifically, SILVER arranged for New York State to fund two grants – each for $250,000, and paid out of a then-secret and un-itemized pool of funds controlled entirely by SILVER – for a research center Dr. Taub had established. SILVER used his official position to provide Dr. Taub with other benefits as well, including helping to direct $25,000 in state funds to a not-for-profit organization for which one of Dr. Taub’s family members served on the board, and asking the CEO of a second not-for-profit to hire a second family member of Dr. Taub.
From approximately 2005 until his arrest, SILVER received more than $3 million from legal fees Weitz & Luxenberg received from patients Dr. Taub had referred to SILVER at the firm while SILVER was agreeing to and taking official actions to benefit Dr. Taub. SILVER did no legal work whatsoever on these asbestos cases, his sole role having been to use his official position and access to state funds to induce Dr. Taub to provide him with these lucrative referrals.
Silver’s Efforts to Cover Up the Schemes
SILVER took various efforts to disguise his unlawful outside income and prevent the detection of his criminal schemes. For years, SILVER listed on his official public disclosure forms that his outside income consisted of “limited practice of law in the principal subject area of personal injury claims on behalf of individual clients,” which was false and misleading. Beginning in 2010, SILVER’s disclosures changed to state that the source of his legal income was a “Law Practice” that “includ[ed]” being of counsel to Weitz & Luxenberg. SILVER never disclosed his relationship with Goldberg & Iryami or any work beyond what he claimed was a “personal injury” practice.
SILVER also repeatedly made false and misleading statements about his outside work and income in his public statements, including the following:
- SILVER claimed he performed legal work consisting of spending several hours each week evaluating legal matters brought to him by potential clients and then referring cases that appeared to have merit to lawyers at Weitz & Luxenberg. In fact, SILVER did no such work on the asbestos cases and obtained those referrals to Weitz & Luxenberg based on his corrupt arrangement with Dr. Taub.
- SILVER claimed his law practice involved the representation of “plain, ordinary simple people.” In fact, SILVER steered legal work to Goldberg & Iryami for some of the largest real estate developers in the state, for which favorable state legislation was critical to their business interests.
- SILVER claimed through his spokesperson that SILVER principally found clients by virtue of his having been a “lawyer for more than 40 years,” in a manner that was “not unlike any other attorney in this state, anywhere.” In fact, SILVER received money from referring his lucrative asbestos and real estate developer clients solely by virtue of his official position.
- SILVER stated through his spokesperson that “[n]one of his clients have any business before the state.” In fact, SILVER’s outside income included millions of dollars of fees obtained through Glenwood and Witkoff, both of which had significant business before the state, and Dr. Taub, to whose benefit SILVER provided state funding and other benefits related to SILVER’s official position.
In addition, SILVER attempted to thwart the Moreland Commission to Investigate Public Corruption, by filing legal motions on behalf of the Assembly and taking other action to block the Moreland Commission’s investigation into legislators’ outside income.
Finally, SILVER laundered part of crime proceeds through private investment vehicles, not available to the public, which yielded him another $1 million in ill-gotten gains.
* * *
In addition to the prison sentence, SILVER, 74, of New York, New York, was sentenced to three years of supervised release.
SILVER was found guilty by a unanimous jury on May 11, 2018, of two counts of honest services wire fraud, two counts of honest services mail fraud, two counts of extortion under color of official right, and one count of engaging in illegal monetary transactions.
U.S. Attorney Berman praised the work of the Special Agents of the United States Attorney’s Office and the Federal Bureau of Investigation, which jointly conducted this investigation.
This case was prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Daniel C. Richenthal and Damian Williams are in charge of the prosecution.
William McFarland Pleads Guilty in Manhattan Federal Court to Engaging in A Fraudulent Ticket Scam, Committing Bank Fraud, and Making False Statements to Federal Law Enforcement AgentRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that WILLIAM McFARLAND pled guilty today to 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. McFARLAND also pled guilty to 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 he, among other things, falsely denied the wire fraud and bank fraud conduct to which he now has pled guilty. McFARLAND pled guilty before U.S. District Judge Naomi Reice Buchwald. During today’s plea proceeding, McFARLAND affirmed his previously entered guilty plea to 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 hold a music festival over two weekends in the Bahamas. McFARLAND also affirmed his previously entered guilty plea to one count of wire fraud in connection with a scheme to defraud a ticket vendor for the Fyre Festival. Sentencing is scheduled for September 17, 2018 at 3:30 p.m. before Judge Buchwald.
Manhattan U.S. Attorney Geoffrey S. Berman said: “William ‘Billy’ McFarland, CEO of Fyre Media, previously pled guilty to defrauding investors of Fyre Media and the infamous Fyre Festival and a ticket vendor of over $26 million. While that fraud case was pending, McFarland engaged in yet another scam, purporting to sell tickets through a company called NYC VIP Access to exclusive events, such as the 2018 Met Gala, Burning Man 2018, Coachella 2018, the 2018 Grammy Awards, and the Super Bowl. McFarland concealed his association with NYC VIP Access so that he could solicit customers of Fyre Festival and his other company Magnises to buy tickets without raising suspicion. These customers later learned that the tickets didn’t exist, and that this was just another fraud in McFarland’s disturbing pattern of deception. McFarland’s fraudulent schemes cost real people real money, and now he faces real time in federal prison for his crimes.”
According to the allegations in the Complaint and Superseding Information to which McFARLAND pled guilty, as well as statements made in court:
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.
From at least in or about late 2017, up to and including at least in or about 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. 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, pled guilty to one count of wire fraud while on pretrial release, which carries a maximum sentence of 30 years in prison, one count of bank fraud while on pretrial release, which carries a maximum sentence of 40 years in prison, and one count of making false statements, which carries a maximum sentence of 5 years in prison. McFARLAND also affirmed his previously entered guilty plea to two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison. In connection with his previously entered plea, McFARLAND agreed to forfeit $26,040,099.48. In connection with today’s guilty plea, McFARLAND agreed to forfeit an additional $151,206.80.
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 Judge Buchwald.
Mr. Berman praised the investigative work of the FBI’s New York Field Office.
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.
Eight Men Sentenced in Manhattan Federal Court for Their Roles in Bronx Mail Theft ConspiracyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that eight defendants have been sentenced to prison terms by United States District Judge Gregory H. Woods for their participation in a long-running scheme to steal mail from Bronx mailboxes. All eight defendants previously pled guilty before Judge Woods. Between May 2015 and at least January 2017, BRIAN MARTE, a/k/a “Trini Rabiia,” ERICKSON BATISTA, a/k/a “Niike Batista,” JUNIOR TAVERAS, a/k/a “Tuh Relambio,” ANGEL ARISTY, a/k/a “Frekiitho Lindo Colon,” LUIS ROSADO, a/k/a “El Menolsito Tejada,” EOSCATERYS POLANCO, BRAYAN RODRIGUEZ, a/k/a “New Black El Paisano,” and RONARDO BAEZ, a/k/a “Tuchokoo Baez,” the defendants, each participated in a scheme to steal mail and deposit stolen checks and money orders using other individuals’ debit cards.
U.S. Attorney Geoffrey S. Berman said: “These defendants ‘fished’ for checks and money orders from U.S. Postal Service mailboxes like shooting fish in a barrel, and in doing so caused serious harm to Bronx residents. As a result of their crimes, the defendants have been delivered to the criminal justice system and will now serve prison sentences.”
According to the Indictment filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:
Since 2015, U.S. Postal Inspection Service (“USPIS”) and other local and federal agencies, including the New York City Police Department (“NYPD”), Homeland Security Investigations, and the Bureau of Alcohol, Tobacco, Firearms and Explosives, have been investigating mail theft from mailboxes in the Bronx, New York. The investigation has revealed that individuals steal mail either by illicitly obtaining mail box keys or by “fishing.” Fishing involves inserting homemade mail theft devices into mailboxes located on street corners or other publicly accessible places. After gaining access to the mail in the mailbox, a thief typically will remove any mail that appears to contain checks or money orders. During the beginning and end of the month, when many people mail checks for rent and bills, a thief can steal checks worth tens of thousands of dollars in a single night.
After perpetrators fish checks and money orders out of mailboxes, they sell the checks and money orders to others, remove the payees’ names by “washing” the checks and money orders, or simply deposit the checks and money orders into a bank account. In various iterations of the scheme, those bank accounts have belonged to the mail thieves, to complicit accountholders, or to unsuspecting third parties whose debits cards or personal identifying information have been stolen.
Since late 2015, USPIS and NYPD enforcement operations have resulted in over 50 state arrests of individuals for theft of mail in the Claremont Park area of the Bronx, and over $750,000 in checks and money orders has been traced to these mail theft schemes. The eight defendants sentenced by Judge Woods each participated in these related schemes. Additionally, MARTE illegally possessed a defaced firearm.
* * *
POLANCO, 24, of the Bronx, New York, was sentenced by Judge Woods on July 25, 2018, to a total term of 24 months in prison, and five years of supervised release.
BATISTA, 26, of the Bronx, New York, was sentenced by Judge Woods on May 18, 2018, to a total term of 30 months in prison, and three years of supervised release.
RODRIGUEZ, 24, of the Bronx, New York, was sentenced by Judge Woods on May 16, 2018, to a total term of seven months in prison, and three years of supervised release.
ROSADO, 21, of the Bronx, New York, was sentenced by Judge Woods on April 17, 2018, to a total term of six months in prison, and three years of supervised release.
MARTE, 21, of the Bronx, New York, was sentenced by Judge Woods on April 5, 2018, to a total term of 27 months in prison, and three years of supervised release.
TAVERAS, 20, of the Bronx, New York, was sentenced by Judge Woods on March 27, 2018, to a total term of 24 months in prison, and one year of supervised release.
ARISTY, 20, of the Bronx, New York, was sentenced by Judge Woods on March 26, 2018, to a total term of 11 months in prison, and three years of supervised release.
BAEZ, 22, of the Bronx, New York, was sentenced by Judge Woods on March 19, 2018, to a total term of six months in prison, and three years of supervised release.
In addition to the prison terms, Judge Woods also ordered that the defendants pay over $150,000 in restitution to victims of the offenses.
Mr. Berman praised the outstanding investigative efforts of the USPIS and NYPD.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Catherine Ghosh and Stephanie Lake are in charge of the prosecution.
Three Defendants Charged in White Plains Federal Court with “Forced Posting” FraudRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a complaint charging three defendants with allegedly engaging in conspiracy to commit wire fraud and wire fraud in a scheme known as “forced posting.” Two defendants, LATOYA ROBINSON and DASHAWN JOHNSON, were arrested and presented yesterday before United States Magistrate Lisa Margaret Smith. Defendant TANYA HATWOOD remains at large.
U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendants took advantage of a security feature of the debit card processing system, which allowed for nearly $1 million in fraudulent merchandise charges. Thanks to our federal and local law enforcement partners, the scam is over and the defendants face significant criminal charges.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “As technology continues to evolve, the complexity of fabricated schemes evolves almost faster than humans can keep up. Nevertheless, the FBI remains committed to investigating fraud in its many facets. By allegedly using fictitious codes in the attempt to take more than $900,000 in merchandise, the defendants believed their scheme would go undetected. However, now that the two defendants are facing federal charges today, it is clear that their misguided criminal behavior was wrong.”
As alleged in the Complaint unsealed in White Plains federal court[1]:
When a customer presents a debit card to purchase merchandise at a store and the card is swiped at an electronic card reader maintained by the merchant, electronic signals are routed from the merchant to the brand of the customer’s debit card, and then routed to the underlying bank that issued the debit card. The bank then verifies whether the customer has sufficient funds in the account to cover the requested transaction, which is then relayed back to the merchant. When there are insufficient funds on the debit card presented by the customer, the card reader will display a message that the transaction request was denied.
Many card readers have a functionality, though, that allows someone to input a code that serves to take the card reader offline, overriding the denial message and verifying the transaction. Malign actors can take advantage of this functionality by inputting a fictitious code not provided by the issuing bank under the guise of entering a pin code or other authorization code, which could cause the card reader to show that the transaction was authorized. The merchant may then let the customer leave with any merchandise the customer attempted to purchase; the merchant would not learn that the code was fictitious and the transaction invalid until days or even months later. The process by which a customer could take advantage of the functionality is called “forced posting” or “forcing the off.”
Bank records, corroborated by interviews with more than 30 merchants, show that from 2013 up to May 2018, LATOYA ROBINSON, DASHAWN JOHNSON, and TANYA HATWOOD, together and separately, performed forced posting on dozens of occasions, and schemed to take or attempt to take more than $900,000 in merchandise in total.
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ROBINSON, 29, of the Bronx, JOHNSON, 25, of Manhattan, and HATWOOD, 27, of the Bronx, are each charged with one count of conspiracy to commit wire fraud and one count of wire fraud. Each count carries a maximum sentence of 20 years. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.
Mr. Berman praised the outstanding investigative work of the FBI, the Yonkers Police Department, the New York City Police Department, and the Nassau County Police Department.
These case is being handled by the Office’s White Plains Division. Assistant United States Attorney Samuel L. Raymond is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Luxury Watch Dealer Sentenced to 24 Months in Prison for Laundering Narcotics Proceeds for International Drug OrganizationsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH STERN was sentenced to 24 months in prison for his role laundering money related to his concealment of narcotics proceeds generated in the United States through the purchase and sale of luxury watches by the company at which STERN was employed. A jury convicted STERN on May 26, 2017, following a 10-day trial before U.S. District Judge John G. Koeltl, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Joseph Stern ran his own shadow banking system to turn dirty drug money into new luxury watches, allowing millions of drug dollars to be laundered through the U.S. and back to Mexican drug cartels. Thanks to the dedicated work of the DEA, the time has come for Stern to pay for his money laundering crimes.”
According to the charging documents filed in the case, as well as the evidence developed at STERN’s trial and statements made during the sentencing proceedings and earlier court appearances:
For years prior to his arrest in May 2016, STERN fostered and profited from a cycle of crime and money designed to facilitate the secretive movement of funds from the U.S. to Mexico under the cover of a seemingly legitimate business. As part of that cycle, narcotics organizations based in, or with contacts in, Mexico, sold narcotics, including heroin and marijuana, for cash in the U.S., including in the Bronx, Manhattan, Brooklyn, and Baltimore. Money couriers then transported the cash from those sales to the defendant, who would accept bulk cash in amounts as large as $200,000 in clandestine hand-offs taking place on the street or in isolated areas within his workplace.
STERN disposed of that drug money in various ways, principally by using the cash to extinguish debts owed to his employer by Mexico-based customers who, in turn, had incurred debts to Mexico-based narcotics operations. STERN’s Mexico-based customers would sell watches, sourced from STERN, to narcotics organizations, which used those items and purchases as a substitute for the narcotics proceeds earned by their organizations in the United States.
Through this cycle of drugs and money, STERN facilitated a shadow banking system for international drug organizations, while taking a percentage of the cash that he moved on behalf of this criminal network.
* * *
In addition to the prison term, STERN, 62, of Brooklyn, New York, was sentenced to three years of supervised release, including six months of home confinement, and was ordered to forfeit $1,899,700.
Mr. Berman praised the outstanding work of the Drug Enforcement Administration in the investigation of this case.
This case is being handled by this Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Noah Falk, Benet Kearney, and Andrew C. Adams are in charge of the prosecution.
Bookkeeper Pleads Guilty in Manhattan Federal Court to Embezzling over $3.3 Million from Literary Agency and Its ClientsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that DARIN WEBB pled guilty to defrauding a Manhattan-based literary agency (the “Agency”) and its clients of over $3.3 million. WEBB provided bookkeeping services for the Agency and carried out his scheme by making unauthorized transfers from the Agency’s bank accounts, and then making changes to the Agency’s accounting system to evade detection. WEBB pled guilty to one count of wire fraud before U.S. District Judge Edgardo Ramos.
U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Darin Webb was cooking the books for his employer when his duty was to provide bookkeeping services. Webb stole over $3 million that belonged to the literary agency and its clients, and he now awaits sentencing for his crime.”
According to allegations contained in the Information filed against Webb and statements made in related court filings and proceedings:
From in or about 2001 through in or about March 2018, DARIN WEBB, the defendant, was engaged as a bookkeeper for the Agency. From at least January 2011 through March 2018, WEBB used his position as the Agency’s bookkeeper to transfer more than $3.3 million of funds, belonging to the Agency and the Agency’s clients, from the Agency’s bank accounts to bank accounts that WEBB controlled. In order to evade detection of his criminal conduct and carry out his scheme, WEBB made changes to the Agency’s accounting records to disguise the nature of the transfers.
* * *
WEBB, 47, of Manhattan, New York, 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 would be determined by the Court.
WEBB is scheduled to be sentenced on November 26, 2018, at 11:30 a.m.
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 U.S. Attorney Christine I. Magdo is in charge of the prosecution.
12 Members of Bronx Crew Charged in Manhattan Federal Court with Narcotics OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging 12 members of a crew operating in and around the Murphy Houses and the Lambert Houses in the Bronx with participating in a narcotics conspiracy.
A total of eight defendants were taken into custody today; seven were arrested in the Bronx, and one defendant was arrested in Delaware. Four defendants remain at large. The seven defendants arrested in the Bronx will be presented and arraigned before U.S. Magistrate Judge James L. Cott later today. The case is assigned to U.S. District Judge Katherine Polk Failla.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendants conspired to sell narcotics in a number of locations, including the Murphy Houses, a NYCHA development. NYCHA residents, and all New Yorkers, should be free to go about their daily lives free from the scourge of narcotics trafficking. Thanks to the excellence of our partners at HSI and the NYPD, these defendants now face federal charges for bringing drugs to our buildings and to our streets.”
HSI Special Agent-in-Charge Angel M. Melendez said: “These crew members allegedly pushed crack cocaine and heroin in low income neighborhoods of the Bronx. The alleged dealers have no regard for their neighbors as long as they are making a profit, which is why we will continue to partner with NYPD in these investigations to remove the drugs, and those who push it, off city streets.”
NYPD Commissioner James P. O’Neill said: “Today’s indictment is a perfect example of how well the law enforcement community works together to dismantle drug organizations and put these criminals behind bars. Removing them from our streets sends a clear message to others who many choose to engage in similar activity. These substances cause immeasurable damage in our neighborhoods, and we will remain vigilant in our commitment to expose and arrest anyone who poses such a threat to the safety of New Yorkers.”
As alleged in the Indictment unsealed today in Manhattan federal court and in other court papers and proceedings[1]:
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From 2016 up to June 2018, KAWAIN NELSON, a/k/a “Kobe,” a/k/a “Kobi,” a/k/a “Slope,” JAMES CROOMS, a/k/a “Butter,” ANTHONY CORLEY, a/k/a “Tone,” ALBERT COLLINS, a/k/a “A,” DARRELL HUDSON, a/k/a “Skip,” JONATHAN PADILLA, SILVIO CIPRIAN, a/k/a “T.P.,” LAMAR GRIFFIN, a/k/a “Louch,” JACKIE COOPER, a/k/a “Jack,” SHARON HATCHER, ALLEN WALKER, a/k/a “Fat Boy,” and EFRAIN REYES, a/k/a “Stone,” participated in a conspiracy to distribute and possess with the intent to distribute crack cocaine, heroin, marijuana in and around the Murphy Houses, a public housing complex, and the Lambert Houses, an affordable housing development, in the Bronx.
A chart containing the names and maximum penalties for the defendants is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of HSI and the NYPD’s Bronx Violent Crimes Squad.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Sarah Krissoff, Gina Castellano, and Frank Balsamello are in charge of the prosecution.
The charges contained in the Indictments are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Narcotics
Conspiracy
21 U.S.C. § 846
KAWAIN NELSON, 32
JAMES CROOMS, 31
ANTHONY CORLEY, 35
ALBERT COLLINS, 28
DARRELL HUDSON, 28
JONATHAN PADILLA, 29
SILVIO CIPRIAN, 30
LAMAR GRIFFIN, 28
JACKIE COOPER, 53
SHARON HATCHER, 51
ALLEN WALKER, 38
EFRAIN REYES, 49
Life in prison
Mandatory minimum of 10 years in prison
[1] As the introductory phrase signifies, the entirety of the text of the Indictment constitutes only allegations, and every fact described herein should be treated as an allegation.
Manhattan U.S. Attorney Announces Money Laundering Charges Against Operators of Nationwide Prostitution Enterprise and Seizure of Online Escort WebsiteRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Angel M. Melendez, Special Agent in Charge of Immigration and Customs Enforcement’s Homeland Security Investigations in New York (“HSI”), announced today the arrest of BRANDON MARTIN and TAMEKO LINDO for money laundering and conspiracy to commit money laundering in connection with their ownership and operation of Flawless Escorts, a nationwide business offering prostitution services, as well as the seizure of Flawless Escorts’ website. MARTIN and LINDO will be presented today in Fort Lauderdale federal court.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Brandon Martin and Tameko Lindo ran a nationwide prostitution ring, requiring their ‘employees’ to service as many as seven clients a day. However, the fatal flaw in Martin and Lindo’s alleged scheme was their underestimation of law enforcement’s ability to detect and halt their illicit activities.”
HSI Special Agent in Charge of Angel M. Melendez said: “In just under four years, these defendants are alleged to have secured more than three thousand hotel bookings to use in the furtherance of their prostitution scheme. In this case, members of HSI’s El Dorado Task Force were able to follow the money, tracking the advertising funds, payments and movement of dollars to locate the perpetrators, and they now face prosecutions for their actions.”
According to the allegations in the Complaint sworn out in Manhattan federal court:[1]
From 2014 to the present, MARTIN and LINDO have operated an online prostitution service through their website, www.flawlessescorts.com (the “Website”). As part of their prosecution business, MARTIN and LINDO arranged for escorts to travel throughout the United States to engage in prostitution, securing more than 3,000 hotel bookings under the names of various women. MARTIN and LINDO also required escorts to follow certain protocols when traveling on behalf of the Website, including an expectation that each escort would see a minimum of seven clients per day. MARTIN and LINDO also required escorts to deposit the proceeds of their commercial sex acts into a number of corporate and personal bank accounts that they controlled.
MARTIN and LINDO then used the proceeds of the prostitution scheme for personal gain and to further their illegal prostitution business. They paid, for example, over $180,000 from bank accounts under their control to advertise for the Website and to pay expenses of individual escorts.
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MARTIN, 42, and LINDO, 38, of Parkland, Florida, are charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and two counts of money laundering, each of which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of HSI, the New York City Police Department, and the Broward County Sherrif's Office.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Tara M. La Morte and Kyle A. Wirshba are in charge of the prosecution.
The charge contained in the Complaint is merely an accusation, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
25 Defendants Charged in Manhattan Federal Court with Multimillion-Dollar Wire Fraud and Money Laundering SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment charging Diyora Ashirova, Elvin Baghir-Pur, Kirill Dedusev, Roman Eliozashvili, Sarkhan Imamverdiyev, Mikheil Inadze, Aziza Jalolova, Elvin Javadzade, Igor Kalinitchev, a/k/a “Irvin Kalinitchev,” Tengiz Khukhiashvili, Yelena Kudaibergenova, Mishel Levinski, Stanislav Lisitskiy, a/k/a “Giedrius Girnius,” Aleksei Livadnyi, Durra Mehdiyeva, Mikhail Morozov, Ielyzaveta NAzina, Gocha Paposhvili, Matiss Puke, Ketevan Sepiashvili, Aleksandr Starikov, Igor Stasovskiy, Nikolay Tupikin, Karlis Vitols, and Melvut Yazici with conspiracy to commit wire fraud and conspiracy to commit concealment money laundering. Eleven of the defendants were arrested on these charges today in New York. These defendants will be presented and arraigned today before United States Magistrate Judge James L. Cott in Manhattan federal court. BAGHIR-PUR was arrested in Miami this morning and will be there presented there later today. KHUKIASHVILI is in custody on state charges in Alachua County, Florida, and PUKE and VITOLS are in custody on state charges in Charlevoix County, Michigan. All three will be transferred to federal custody. DEDUSEV, ELIOZASHVILI, KUDAIBERGENOVA, LISITSKIY, LIVADNYI, MOROZOV, STARIKOV, and TUPIKIN remain at large. The case has been assigned to United States District Judge George B. Daniels.
U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendants participated in a nationwide scheme to defraud, duping victims who responded to fake internet advertisements designed to resemble advertisements posted by legitimate merchants. Then the defendants allegedly created dozens of shell companies to receive victim payments and withdrew the funds and sent them out of the country. Thanks to the hard work of the FBI, these defendants will now face prosecution.”
FBI Assistant Director William F. Sweeney Jr. said: “Trusting that they were conducting legitimate business with automotive dealers, these victims lost over $4 million as a result of this scheme. While allegedly operating under this façade, the defendants were diligent in the theft of the funds, but showed no regard to the financial impact on the victims. As shown by the charges brought today, the FBI will continue to work tirelessly with our law enforcement partners to uncover duplicitous conspiracies, regardless of the vast intricacy of their cover-ups.”
According to the allegations in the Indictment and statements made during court proceedings in this matter[1]:
From November 2016 through July 2018, the defendants carried out a wide-ranging fraudulent scheme that typically involved impersonating legitimate sellers of cars, tricking victims into providing payment for those cars, withdrawing the funds from banks around the country using efforts designed to evade scrutiny, and wiring the proceeds outside the United States.
The fraud most commonly operated as follows: first, co-conspirators impersonated automotive dealers and collectors and claimed to be selling classic cars on various well-known internet auction and trading websites. Victims responding to the ads were in fact corresponding with a fraud scheme participant. After the victims and co-conspirators came to terms on a sale price, including down payment and shipping costs, victims were next directed to purported automotive transportation companies and were told that these companies would accept payment and transport the cars. These companies were in fact shell corporations established by the conspiracy to help perpetrate the fraud, whose corporate bank accounts were established and controlled by the defendants, awaiting wired funds from the fraud’s victims. After victims had wired payment, the defendants went to the banks to drain the victim’s funds, often starting the same day payment had been transmitted. The defendants would draw money from different bank branches in numerous withdrawals on the same day, in denominations that were varied and often kept to an amount they believed would prevent the financial institutions from recording and reporting the fraud. The co-conspirators then sent the fraud proceeds outside the United States to Eastern European countries, from where many of the conspirators originated. Victims never received the goods they believed they had purchased, and many were unable to recover their money or were left paying loans for cars that were never truly for sale. The defendants’ scheme defrauded victims of more than $4.5 million.
* * *
Each of the defendants is charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years in prison, and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. The table below lists the name, age, nationality, and residence of each defendant.
Mr. Berman praised the outstanding investigative work of the FBI, Customs and Border Protection, the New York Police Department, and U.S. Immigration and Customs Enforcement’s Enforcement and Removal Operations.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Jeffrey C. Coffman, Thane Rehn, and Matthew J.C. Hellman 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.
Name
Age
Nationality
Residence
ASHIROVA
27
Kazakhstan
Brooklyn
BAGHIR-PUR
24
Azerbaijan
Brooklyn
ELIOZASHVILI
44
Georgia
Brooklyn
IMAMVERDIYEV
30
Azerbaijan
Brooklyn
INADZE
37
Georgia
Brooklyn
JALOLOVA
23
Kazakhstan
Brooklyn
JAVAZADE
30
Azerbaijan
Brooklyn
LEVINSKI
23
United States
Brooklyn
KHUKIASHVILI
63
Georgia
Brooklyn
KHUDAIBERGENOVA
48
Kazakhstan
Brooklyn
KALINITCHEV
62
Ukraine
Brooklyn
MEHDIYEVA
23
Azerbaijan
Brooklyn
NAZINA
29
Ukraine
Brooklyn
PAPOSHVILI
43
Georgia
Brooklyn
SEPIASHVILI
64
Georgia
Brooklyn
STASOVSKIY
58
Russia
Brooklyn
YAZICI
36
Turkey
Brooklyn
PUKE
31
Latvia
Delray Beach, FL
VITOLS
29
Latvia
Delray Beach, FL
DEDUSEV
29
Russia
Los Angeles
LISITSKIY
30
Russia
Los Angeles
LIVADNYI
39
Russia
Los Angeles
TUPIKIN
32
Russia
Los Angeles
MOROZOV
29
Russia
Moscow
STARIKOV
34
Russia
Moscow
[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.
Third Defendant Arrested and Charged in White Plains Federal Court with 2012 Poughkeepsie MurderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and William V. Grady, Dutchess County District Attorney, announced today that DAVONTE HAMILTON, a/k/a “Vont,” an alleged member of the “Uptown” street gang operating in Poughkeepsie, New York, was arrested in connection with the December 2012 murder of Daquelle LeBlanc. The defendant is charged in a Superseding Indictment with racketeering conspiracy, murder in aid of racketeering activity, and a firearms offense. HAMILTON was arrested tooday and arraigned in White Plains federal court before United States Magistrate Judge Lisa Margaret Smith.
Twelve members and associates of the Uptown gang, and 19 members and associates of the rival Downtown gang, which also operates in Poughkeepsie, New York, were previously charged in separate Indictments – United States v. Douglas Owens et al., 17 Cr. 506 (NSR) and United States v. Ronald Johnson et al., 17 Cr. 505 (VLB) – in August 2017 with murders, attempted murders, racketeering, narcotics, and firearms offenses. The Superseding Indictment adds HAMILTON as the third defendant charged with murder in aid of racketeering activity and firearms offenses in connection with the 2012 murder of LeBlanc.
U.S. Attorney Geoffrey S. Berman stated: “As alleged, Devonte Hamilton aided and abetted the murder of Daquelle LeBlanc nearly six years ago. Together with our law enforcement partners, we will continue to pursue justice for victims like Mr. Leblanc against all involved in such violent offenses.”
FBI Assistant Director William F. Sweeney Jr. said: “The work done on this investigation is a perfect example of how our law enforcement partnerships have a positive impact helping innocent people. Getting these alleged gang members, dealers, and murderers off the streets has made Poughkeepsie safer. The FBI Hudson Valley Safe Streets Task Force won’t let up on our pursuit of these alleged violent criminals until we stop their destructive hold on the community.”
Dutchess County District Attorney William V. Grady said: “I would like to compliment the City of Poughkeepsie Police Department and their law enforcement partners for their dedication in pursuing this important homicide investigation since 2012. Thanks to our additional partnership with the United States Attorney’s Office on this case, we have been able to charge those individuals we feel responsible for this homicide.”
According to the Superseding Indictment[1] filed on July 18, 2018, in White Plains and Manhattan federal court and other documents in the public record:
The Superseding Indictment arose from a joint investigation by the FBI’s Hudson Valley Safe Streets Task Force, the City of Poughkeepsie Police Department, the Dutchess County District Attorney’s Office, and the Dutchess County Sherriff’s Office into a gang war between Uptown and Downtown, which led to multiple fatal and non-fatal shootings between 2012 and 2017 in the City of Poughkeepsie.
Uptown is a criminal organization whose members referred to themselves by, and were known by, several different names, including “Spready Gang,” the “400 Savages,” the “Boogotti Boys,” the “Young Bosses” or “YB’s,” and the “Mob Stars.” Uptown is based within the eastern portion of Poughkeepsie, from east of Hamilton Street to the city line and, more specifically, within the Hudson Gardens housing development (commonly referred to as the “Bricks”). Uptown gang members and associates control the narcotics trade within the Bricks, distributing heroin, crack cocaine, and marijuana primarily. Uptown gang members stored shared guns in various locations known to gang members to protect the narcotics business, to protect each other from rival gangs, and to strike against rival gangs.
In addition to many non-fatal acts of violence against rival gang members and innocent victims, the rivalry between Uptown and Downtown led to the murder of Downtown gang member Daquelle LeBlanc, a/k/a “Hamo,” who was killed by a single gunshot wound to the chest at the age of 16 in the vicinity of Main Street, between Academy and North Hamilton Streets, on or about December 23, 2012. According to the allegations contained in the Superseding Indictment, HAMILTON and two other defendants – who were charged and arrested in connection with the August 2017 Indictments – murdered LeBlanc to enhance their position in Uptown and advance the criminal objectives of that organization.
* * *
HAMILTON, a/k/a “Vont,” was in custody on state charges and was transferred to federal custody this morning. If convicted, HAMILTON faces a maximum sentence of 20 years in prison on Count One (Racketeering Conspiracy), a maximum sentence of life in prison on Count Three (Murder in Aid of Racketeering Activity), and a mandatory minimum sentence of five years in prison and a maximum sentence of life in prison on Count Five (Murder Through Use of a Firearm in Furtherance of a Crime of Violence).[2] 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 Hudson Valley Safe Streets Task Force, the City of Poughkeepsie Police Department, the Dutchess County Sheriff’s Office, the Dutchess County Drug Task Force, as well as the United States Marshals’ Service, the New York State Police, and the New York State Department of Corrections and Community Supervision for their assistance in today’s arrests. Mr. Berman also thanked the Bureau of Alcohol, Tobacco, Firearms, and Explosives for their assistance in the investigation.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorneys Christopher J. Clore, Maurene Comey, and Emily Deininger are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
[2] DAVONTE HAMILTON was charged only in Counts One, Three, and Five of the thirteen-count Superseding Indictment. The other counts of the Superseding Indictment relate solely to other, previously arrested members of the Uptown gang.
Operator of Bitcoin Investment Platform Pleads Guilty to Securities Fraud and Obstruction of JusticeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JON E. MONTROLL, a/k/a “Ukyo,” pled guilty today to securities fraud and obstruction of justice. MONTROLL, who issued and sold securities related to a bitcoin investment platform that he ran through false statements about the success of the business, later provided false sworn testimony to the United States Securities and Exchange Commission (the “SEC”) and provided the SEC with a false document during the course of the SEC’s investigation into his operation of the bitcoin investment platform. MONTROLL’s plea was taken by U.S. Magistrate Judge James L. Cott. The case is assigned to U.S. District Judge Richard M. Berman.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Jon Montroll deceived his investors and then attempted to deceive the SEC. He repeatedly lied during sworn testimony and misled SEC staff to avoid taking responsibility for the loss of thousands of his customers’ bitcoins.”
According to the Information, the allegations in the Complaint, and statements made during the proceedings in Manhattan federal:
JON E. MONTROLL operated two online bitcoin services: WeExchange Australia, Pty. Ltd. (“WeExchange”) and BitFunder.com (“BitFunder”). WeExchange functioned as a bitcoin depository and currency exchange service. BitFunder facilitated the purchase and trading of virtual shares of business entities that listed their virtual shares on the BitFunder platform.
Between the launch of Bitfunder, in or about December 2012, and at least in or about July 2013, MONTROLL converted a portion of WeExchange users’ bitcoins to his personal use without the users’ knowledge or consent. For example, MONTROLL exchanged numerous bitcoins taken from WeExchange into United States dollars, then spent those funds on personal expenses, such as travel and groceries.
Beginning on or about July 18, 2013, MONTROLL promoted a security referred to as “Ukyo.Loan.” As described by MONTROLL in a public post about Ukyo.Loan, MONTROLL encouraged investors to “think of [Ukyo.Loan] as a sort of round-about investment” in BitFunder and WeExchange and, at the same time, described Ukyo.Loan as “a personal loan” and “for private investment purposes.” MONTROLL further promised to pay purchasers of Ukyo.Loan daily interest on their investment and promised shares could be “redeemed at face value anytime upon request.”
During the summer of 2013, one or more individuals (the “Hackers”) exploited a weakness in the BitFunder programming code to cause BitFunder to credit the Hackers with profits they did not, in fact, earn (the “Exploit”). As a result, the Hackers were able to wrongfully withdraw from WeExchange approximately 6,000 bitcoins, with the majority of those coins being wrongfully withdrawn between July 28, 2013, and July 31, 2013. As a result of the Exploit, BitFunder and WeExchange lacked the bitcoins necessary to cover what MONTROLL owed to users.
Notwithstanding the scope of the Exploit, MONTROLL failed to disclose the Exploit to users of BitFunder and WeExchange, or investors in Ukyo.Loan. Instead, MONTROLL continued to promote and sell Ukyo.Loan to customers and, on at least one occasion, falsely represented to customers that BitFunder was commercially successful. As a result of his omissions and misrepresentations, MONTROLL raised approximately 978 bitcoins through Ukyo.Loan after his discovery of the Exploit.
The SEC’s New York Regional Office began an investigation into BitFunder and the Exploit. During the course of the investigation, MONTROLL provided the SEC with a falsified screenshot purportedly documenting, among other things, the total number of bitcoins available to BitFunder users in the WeExchange Wallet as of October 13, 2013. Additionally, during sworn investigative testimony on both November 14, 2013, and October 6, 2015, MONTROLL provided materially false and misleading answers to certain questions about, among other things, the timing of MONTROLL’s discovery of the Exploit.
* * *
MONTROLL, 37, of Saginaw, Texas, pled guilty to one count of securities fraud and one count of obstruction of justice. Each charge carries a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
MONTROLL will be sentenced by Judge Berman at a date to be determined.
U.S. Attorney Geoffrey S. Berman praised the outstanding work of the Federal Bureau of Investigation. He also thanked the SEC, which previously filed civil charges against MONTROLL in a separate action.
The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Andrew Thomas is in charge of the case.
Leader of Violent Drug Crew Sentenced to 35 Years in Prison for 2016 Murder of Nelson Dubon and Other CrimesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), and Ashan M. Benedict, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, announced that KENNETH RUDGE, 28, of the Bronx, New York, received a sentence of 420 months’ imprisonment from District Judge Kimba M. Wood at a proceeding held today in Manhattan federal court. Rudge previously pleaded guilty to firearms charges arising from his use of a firearm in the murder of Nelson Dubon on January 21, 2016. Rudge murdered Dubon in the course of a robbery in the South Bronx, which Rudge and other members of the violent street crew “YNR” committed as part of that crew’s drug business.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Kenneth Rudge and his YNR crew inflicted violence and death upon our community. Thanks to the extraordinary efforts of the NYPD and the ATF, Rudge will now spend the next 35 years in prison.”
According to the charging documents filed in the case, as well as statements made during the plea proceedings and earlier court appearances:
Since at least 2012, a group of young men and women living in the vicinity of 188th Street and Webster Avenue, and referring to itself as “YNR,” engaged in a conspiracy to distribute crack cocaine and heroin to addicts in that area. YNR managed to bring large quantities of crack cocaine and heroin into its neighborhood and to inflict mindless and, ultimately, deadly violence on its community.
RUDGE personally organized and participated in multiple acts of narcotics sales by junior members of YNR, including groups of minors working at RUDGE’s direction. RUDGE also instigated multiple acts of drug-related violence. Those incidents included the following, each of which was committed in the Bronx, New York: 1) a robbery in or about 2015, of a marijuana dealer in that marijuana dealer’s apartment, during which robbery a victim was pistol-whipped by one of RUDGE’s co-conspirator; 2) a robbery, in or about 2015, of a marijuana dealer, resulting in a shooting by RUDGE and others in order to thwart the victim’s attempt to retaliate for that robbery; 3) an attempted armed robbery, on or about January 21, 2016, of a marijuana stash apartment; and 4) a robbery, on or about January 21, 2016, of a narcotics dealer and others located inside a billiards club, during which RUDGE shot and killed Nelson Dubon.
Following his arrest by the NYPD in connection with the murder of Dubon, RUDGE attempted to corruptly influence and silence witnesses against him, including by attempting to have other YNR members find and silence an eyewitness to the murder. RUDGE also continued his firearms use and violence in the days after the murder of Dubon, including through the pistol-whipping of a livery cab driver in a failed attempt to rob that person of his fares on or about January 25, 2016, in the Bronx.
* * *
Mr. Berman praised the outstanding work of the NYPD and ATF for their investigative efforts and ongoing support and assistance with the case.
The prosecution of this case is being overseen by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Andrew C. Adams and Sarah Krissoff are in charge of the case.
Kathy Scott and George Santiago, Former New York State Correction Officers at Downstate Prison, Sentenced for Beating Inmate Kevin Moore and Falsifying RecordsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that KATHY SCOTT and GEORGE SANTIAGO JR., both former New York State Correction Officers, were sentenced today by U.S. District Judge Kenneth M. Karas to 100 months and 87 months, respectively, for the November 12, 2013, beating of Kevin Moore, an inmate at the Downstate Correctional Facility in Fishkill, New York, and for falsifying records to cover up the beating.
SCOTT and SANTIAGO were convicted on November 20, 2017, following a two-week jury trial, of assaulting Moore in violation of his rights under the United States Constitution by repeatedly punching and kicking him in the head and body as he lay restrained on the floor. Moore was hospitalized for two weeks with multiple serious injuries from the beating, including facial bone fractures, five broken ribs, and a collapsed lung. SCOTT and SANTIAGO were also convicted of conspiring to violate Moore’s civil rights, as well as falsifying and conspiring to falsify Department of Correction records concerning the assault. SCOTT and SANTIAGO were taken into custody immediately after sentencing.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Kathy Scott and George Santiago participated in a vicious beating of inmate Kevin Moore within an inch of his life. Then they concocted a phony story to hide what they did, repeatedly lying in Department of Correction records and even creating a fake injury. The U.S. Constitution protects all of us, including those in prison. Correction officers who physically abuse inmates and lie about it will be punished as criminals. Today, Scott and Santiago were held accountable for their crimes.”
According to the evidence introduced at trial:
On November 12, 2013, Kevin Moore, then 54 years old, was brought to the 1D Housing Unit at Downstate Correctional Facility to be housed overnight. Moore objected to his cell assignment and a verbal dispute ensued between Moore and a group of correction officers. After Moore yelled, in sum and substance, “I’m a monster,” multiple officers, including SANTIAGO, forced Moore to the floor, restrained him, and then proceeded to assault Moore as he lay there, repeatedly punching and kicking Moore in the head and body. At no time did Moore ever try to attack, touch, or even make a threatening gesture toward any of the officers. While Moore lay defenseless on the floor, SANTIAGO, who was wearing boots, cocked back his leg and delivered a soccer-style kick to Moore’s face. SANTIAGO also continued to strike Moore after Moore was handcuffed. During the beating, SANTIAGO laughed and taunted Moore, yelling “Who’s the monster now.”
SCOTT, who was then a sergeant and the supervising officer on the scene, was present for the entire beating and was required to stop the excessive force being used by her subordinates. Instead of taking action to stop the unlawful violence, SCOTT encouraged it, ordering an officer to hold Moore down on the floor while other officers continued to kick and punch him. During the beating, Moore repeatedly cried out in pain and begged SCOTT and the other officers to stop hurting him.
Immediately after the beating, SANTIAGO and other officers, led by SCOTT, engaged in an elaborate cover-up of the crime they had committed. They made up a false cover story that Moore had attacked one of the officers and that another officer had to strike Moore once in the head to save his fellow officer. To make this lie believable, the officers claimed that Moore had injured the officer’s back by pushing the officer backward onto a table. But because nothing of the sort had occurred, they created a phony injury. Specifically, SANTIAGO hit one of the other officers repeatedly on the back with a baton and SCOTT photographed the fake injury. SCOTT then prepared a false Use of Force Report describing the incident and incorporating the photos and false statements from herself and other officers, including SANTIAGO, and submitted the false report to her superiors. SCOTT and SANTIAGO also repeatedly pressured other officers to lie to investigators about what had occurred.
Moore was severely injured, suffering multiple facial fractures, five broken ribs, and a collapsed lung, among other injuries. According to the medical evidence, Moore received at least four forceful blows to the face and torso, including one crushing strike to the right eye that was consistent with a kick from a boot.
* * *
SCOTT, 44, of Saugerties, New York, was sentenced to 100 months in prison and one year of supervised release. SANTIAGO, 36, of Fremont Center, New York, was sentenced to 87 months in prison and one year supervised release.
Three other former Downstate correction officers pled guilty to the same offenses in connection with the beating and cover-up. Andrew Lowery pled guilty on July 27, 2016, Donald Cosman pled guilty on August 31, 2016, and Carson Morris pled guilty on November 1, 2017. Lowery and Morris are scheduled to be sentenced on July 25, 2018, and September 14, 2018, respectively. The sentencing of Cosman has not yet been scheduled.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the Special Agents at the United States Attorney’s Office. Mr. Berman also thanked the New York State Department of Correction Office of Special Investigation, and the Dutchess County District Attorney’s Office for their assistance in the investigation.
This case is being handled by the Office’s Civil Rights Unit and the White Plains Division. Assistant U.S. Attorneys Andrew Dember and Pierre Armand are in charge of the prosecution.
Tax Preparer Arrested for Fraudulent Scheme to Steal over $1 Million from His ClientsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James D. Robnett, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Nonie Manion, Acting Commissioner of the New York State Department of Taxation and Finance (“NYSDTF”), announced today the arrest of TOM SHIN on charges of aiding the preparation of a false tax return and wire fraud. The Complaint charges that SHIN, a tax preparer in New York, participated in a scheme to obtain over $1.3 million of his clients’ money that was intended to be paid to the IRS and NYSDTF for taxes the clients owed. SHIN was arrested this morning and will be presented today in Manhattan federal court before U.S. Magistrate Judge Debra Freeman.
U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendant betrayed his clients’ trust and engaged in a brazen scheme to defraud his clients of more than $1.3 million that was intended to be used to pay taxes owed to the federal and state governments. Thanks to the investigative work of the IRS and the NYSDTF, the defendant will be prosecuted for his actions.”
IRS-CI Special Agent-in-Charge James D. Robnett said: “The IRS enforces the nation’s tax laws, but also takes particular interest in cases where someone, for their own personal gain, allegedly takes what belongs to others. Our special agents are uniquely qualified to assist state and federal law enforcement agencies with these types of investigations by following the money.”
NYSDTF Acting Commissioner Nonie Manion said: “The blatant deceit and theft allegedly carried out by this tax preparer is unconscionable. The honesty and integrity New Yorkers expect from their tax preparer must never be compromised, which is why we’ll continue to work with all levels of law enforcement to root out unscrupulous preparers and hold them accountable.”
According to the allegations in the Complaint unsealed today[1]:
SHIN was hired to prepare joint federal and state tax returns for two individuals (the “Clients”) for tax year 2017. SHIN showed the Clients completed tax return forms indicating that the Clients owed approximately $1.3 million in taxes. However, SHIN actually filed false returns on behalf of the Clients without their knowledge, which concealed the Clients’ tax liability. SHIN then, in connection with applications for extensions of time to file his personal tax returns, directed tax authorities to withdraw approximately $1.3 million from the Clients’ bank account, and then filed personal tax returns seeking an approximately $1.3 million refund. The net result of the alleged scheme would have been a transfer of approximately $1.3 million from the Clients’ bank account to SHIN.
* * *
SHIN, 36, of Staten Island, New York, is charged with one count of aiding the preparation of a false tax return, which carries a maximum penalty of three years in prison, and one count of wire fraud, which carries a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Brett M. Kalikow is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint forth herein constitute only allegations, and every fact described should be treated as an allegation.
Statement of Manhattan U.S. Attorney’s Office on the Convictions of State Senate Majority Leader Dean Skelos and His Son AdamRead the Press Release
Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, said: “Yet again, a New York jury heard a sordid tale of bribery, extortion, and the abuse of power by a powerful public official of this State. And yet again, a jury responded with a unanimous verdict of guilt, in this case of Dean Skelos and his son Adam – sending the resounding message that political corruption will not be tolerated.”
South Carolina Man Charged in Manhattan Federal Court with Firearms TraffickingRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ashan M. Benedict, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the arrest of DAYVON CHESTNUT, a/k/a “Dayvon Denaris Wynez Chestnut,” for trafficking in firearms, including the trafficking of firearms from South Carolina to the New York City area. CHESTNUT was arrested this morning in South Carolina by the ATF and the NYPD, and will be presented today on a complaint in federal court in the District of South Carolina.
U.S. Attorney Geoffrey S. Berman said: “A big part of keeping our city safe is curtailing the flow of illegal guns to our streets. As alleged, until today, trafficking in illegal firearms was Dayvon Chestnut’s stock in trade. Now, thanks to the ATF and NYPD, he is in custody and awaiting prosecution by our Office.”
ATF Special Agent-in-Charge Ashan M. Benedict said: “As alleged, Dayvon Chestnut conspired to traffic firearms into the state of New York. Those who traffic in firearms are a direct focus of the ATF mission to combat violent crime. ATF and its partners at the NYPD work together every day to disrupt and dismantle these organizations and groups that circumvent the law by putting illegal firearms on the streets of New York. I would like to thank the Special Agents and NYPD Detective Task Force Officers of the ATF Crime Gun Intelligence Center for their diligent work on this case. I would also like to extend my gratitude to the United States Attorney’s Office for their work in prosecuting the case.”
According to the allegations in the Complaint[1]:
Since in or about 2016 through the present, CHESTNUT has been purchasing firearms in South Carolina, and directing others to purchase firearms in South Carolina, and selling those firearms to other individuals. CHESTNUT utilizes Facebook communications and phone communications, among other methods, to communicate with some of his co-conspirators. In April and May 2018, CHESTNUT traveled to the New York City area on at least four occasions to distribute those firearms.
* * *
CHESTNUT, 25, of Bishopville, South Carolina, is charged with conspiracy to traffic in firearms and firearms trafficking, each of which carries a maximum statutory penalty of five years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the efforts of the ATF and NYPD in this case.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Sarah Krissoff in charge of the prosecution.
The charges contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint forth herein constitute only allegations, and every fact described should be treated as an allegation.
Second Honduran Congressman Charged with Conspiring to Import Cocaine into the United States and Related Firearms OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Raymond P. Donovan, the Special Agent in Charge of the Special Operations Division of the U.S. Drug Enforcement Administration (“DEA”), announced today that charges have been filed in Manhattan federal court against Honduran congressman MIDENCE OQUELI MARTINEZ TURCIOS and, in a separate indictment, ARNALDO URBINA SOTO, CARLOS FERNANDO URBINA SOTO, and MIGUEL ANGEL URBINA SOTO. The charges in each indictment include conspiring to import cocaine into the United States and related weapons offenses involving the use and possession of machineguns and destructive devices. The United States is seeking the defendants’ extraditions from Honduras.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, these defendants include a Honduran congressman and a former Honduran mayor. All are charged with conspiring to import cocaine into the U.S. and conspiring to use and carry machineguns and destructive devices in furtherance of cocaine importation. Politically connected defendants in Honduras allegedly working in league with violent drug cartels is a recipe for harm here in the U.S. We are committed to working with the DEA to police and prosecute such conduct.”
Special Agent in Charge Raymond P. Donovan said: “DEA and our partners continue to expose drug-related corruption across the world, which fuels violence and insurgency while upending the rule of law. These Honduran elected officials and their associates allegedly conspired with the Sinaloa Cartel and flooded American communities with huge amounts of deadly poison. DEA looks forward to their extradition to the United States to face American justice and answer for their many alleged crimes.”
As alleged in the Indictments unsealed in federal court:[1]
From at least in or about 2004, up to and including in or about 2014, multiple drug trafficking organizations in Honduras and elsewhere worked together, and with support from MARTINEZ TURCIOS, the Urbina Soto defendants, and others, to receive multi-hundred-kilogram loads of cocaine sent to Honduras via air and maritime routes from, among other places, Venezuela and Colombia. The cocaine shipments were transported westward within Honduras toward the border with Guatemala and eventually imported into the United States, often in coordination with high-ranking members of Mexico’s Sinaloa Cartel.
MARTINEZ TURCIOS is a legislator, referred to as a diputado, in the National Congress of Honduras. MARTINEZ TURCIOS is the second Honduran congressman to be charged in connection with the DEA’s investigation of politically connected drug trafficking in Honduras. In January 2018, Honduran congressman Fredy Renan Najera Montoya was also charged with conspiring to import cocaine into the United States and related firearms offenses. See United States v. Najera Montoya, S1 15 Cr. 378 (PGG).
MARTINEZ TURCIOS was a member of a violent Honduran drug trafficking organization known as the Cachiros. Between in or about 2004 and in or about 2014, MARTINEZ TURCIOS received a total of over $1 million in bribes and other payments from the leaders of the Cachiros, which he used to, among other things, enrich himself and fund his campaign activities and political operations. MARTINEZ TURCIOS helped provide the appearance of legitimacy to the leaders of the Cachiros by virtue of his political position and authority, and by acting at times as a nominal partial owner of one of the organization’s money laundering front companies, Ganaderos Agricultores del Norte, S. de R.L. de C.V. MARTINEZ TURCIOS also provided direct support for violent drug trafficking activities by the Cachiros. For example, MARTINEZ TURCIOS personally escorted some Cachiros cocaine shipments as they were transported through Honduras, managed heavily armed security teams responsible for protecting large quantities of drugs, participated in weapons training provided to paid Cachiros assassins recruited from the gang known as Mara Salvatrucha, or MS-13, and helped plan and participated in acts of violence perpetrated by members and associates of the Cachiros.
As alleged in a separate Indictment, between in or about 2005 and in or about 2014, ARNALDO URBINA SOTO, CARLOS FERNANDO URBINA SOTO, and MIGUEL ANGEL URBINA SOTO operated a drug trafficking organization based in Yoro, Honduras, where ARNALDO URBINA SOTO acted as mayor between in or about 2009 and in or about 2014. The Urbina Soto defendants capitalized on their power in the Yoro Department and aligned with other major Honduran criminal syndicates, such as the Cachiros and the Copan-based group led by Miguel Arnulfo Valle Valle and Luis Alonso Valle Valle, to receive cocaine-laden aircraft at various locations in Honduras, including clandestine airstrips in remote areas as well as public roads in the vicinity of Yoro. The Urbina Soto defendants coordinated – and at times personally joined – heavily armed security details that oversaw the unloading of the planes and the transportation of the illicit cargo in connection with importing massive quantities of cocaine into the United States.
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MARTINEZ TURCIOS, 57, is charged in three counts: (1) conspiring to import cocaine into the United States, (2) using and carrying machineguns and destructive devices during, and possessing machineguns and destructive devices in furtherance of, the cocaine importation conspiracy, and (3) conspiring to use and carry machineguns and destructive devices during, and to possess machineguns and destructive devices in furtherance of, the cocaine importation conspiracy. If convicted, MARTINEZ TURCIOS faces a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, a mandatory minimum sentence of 30 years in prison and a maximum term of life in prison on Count Two, and a maximum term of 20 years in prison on Count Three.
The second Indictment charges CARLOS FERNANDO URBINA SOTO, 44, and MIGUEL ANGEL URBINA SOTO, 39, with violating the same statutes as MARTINEZ TURCIOS. ARNALDO URBINA SOTO, 37, is charged in two counts: (1) conspiring to import cocaine into the United States, and (2) conspiring to use and carry machineguns and destructive devices during, and to possess machineguns and destructive devices in furtherance of, the cocaine importation conspiracy. If convicted, CARLOS FERNANDO URBINA SOTO and MIGUEL ANGEL URBINA SOTO each face a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, a mandatory minimum sentence of 30 years in prison and a maximum term of life in prison on Count Two, and a maximum term of 20 years in prison on Count Three. If convicted, ARNALDO URBINA SOTO faces a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on Count One, and a maximum term of 20 years in prison on Count Three.
The maximum potential sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
Mr. Berman praised the outstanding efforts of the DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and Tegucigalpa Country Office. Mr. Berman also thanked the U.S. Department of Justice’s Office of International Affairs and the U.S. Attorney’s Office for the Eastern District of Virginia.
These cases are being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Emil J. Bove III and Mathew J. Laroche are in charge of the prosecutions.
The charges contained in the Indictments are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment charging Martinez, and the separate Indictment charging Arnaldo Urbina Soto, Carlos Fernando Urbina Soto, and Miguel Angel Urbina Soto, as well as the descriptions of the Indictments set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Founder of Meridian Capital Asset Management Charged with Scheme to Defraud InvestorsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the arrest and unsealing of a complaint charging JOHN GERACI with investment adviser fraud, securities fraud, wire fraud, and conspiracy in connection with a scheme to defraud clients of his company, Meridian Capital Asset Management. GERACI caused two clients (“Victim-1” and “Victim-2”) to invest in a hedge fund called the Meridian Matrix Long Short Fund (the “Meridian Matrix Fund”). Between in or about December 2015 and November 2016, GERACI provided fictitious account statements and updates to Victim-1 and Victim-2, telling them that their investment was worth millions when, in reality, GERACI knew that large portions of it had been stolen by the Meridian Matrix Fund’s administrator. GERACI eventually liquidated the Meridian Matrix Fund and misappropriated significant portions of the remaining funds. Although he had recovered over $1 million of Victim-1 and Victim-2’s investment, GERACI falsely told them that their entire investment had been lost, and improperly used their money to pay his own personal and business expenses.
In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against GERACI.
U.S. Attorney Geoffrey S. Berman said: “As alleged, when John Geraci realized that Nicholas Mitsakos was a con artist, he withheld this fact from investors he had solicited for the purportedly high-yield fund run by Mitsakos. Geraci allegedly concealed Mitsakos’s fraud because it was lucrative for him. Mitsakos is now a convicted felon in this district, and Geraci faces prosecution for his alleged crimes.”
According to the allegations in the Complaint unsealed in Manhattan federal court:[1]
JOHN GERACI was the principal and founder of a company called Meridian Capital Asset Management, which provided investment advice to clients. In or about February 2015, GERACI was introduced to another individual, Nicholas Mitsakos, who purported to operate a hedge fund called Matrix Capital (“Matrix”). Mitsakos told GERACI that Matrix had tens of millions of dollars under management and had achieved annual returns between 19.4% and 66.3% from 2012 to 2014. GERACI and Mitsakos subsequently entered into an arrangement whereby GERACI would raise money for Mitsakos; Mitsakos would manage that money through a new vehicle, the Meridian Matrix Fund; and GERACI and Mitsakos would then split any fees that the Meridian Matrix Fund generated. As part of this arrangement, GERACI convinced Victim-1 and Victim-2 to invest approximately $2 million in the Meridian Matrix Fund, in large part by relying on Mitsakos’s claims about his supposed fund’s assets under management and performance returns.
In or about December 2015, however, GERACI learned that Mitsakos had only invested approximately $1.2 million of Victim-1 and Victim-2’s investment, and had misappropriated significant portions of the remaining money. GERACI also learned that Mitsakos never had any actual assets under management, and that his performance returns were accordingly fictitious and misleading. Nonetheless, GERACI never told Victim-1 or Victim-2 that their investment was in jeopardy or had been solicited with misleading information. To the contrary, GERACI sent Victim-1 and Victim-2 updates that hid Mitsaskos’s misappropriation and falsely claimed that their investment had appreciated. GERACI sent these fictitious updates even after Mitsakos sustained significant trading losses and even after GERACI himself had liquidated the Meridian Matrix Fund’s trading positions in or about June 2016.
In or about August 2016, Mitsakos was charged in this District with securities fraud and other offenses. In or about September 2016, GERACI changed course: instead of providing fictitious account updates to Victim-1 and Victim-2, GERACI told them, in substance and in part, that their entire investment had been wiped out through Mitsakos’s fraud. GERACI did this even though he had ultimately received approximately $1.1 million of Victim-1 and Victim-2’s investment back from Mitsakos after liquidating the Meridian Matrix Fund’s trading positions. Rather than returning this amount to Victim-1 and Victim-2, GERACI used it to pay for his own personal and business expenses, including, for example, payments on a BMW automobile, a gym membership, gas, groceries, travel expenses, and his cellphone bill.
In addition to sending false account updates to Victim-1 and Victim-2 even after learning that Mitsakos had lied about his fund’s assets and performance and that Mitsakos had stolen significant portions of Victim-1 and Victim-2’s investment, GERACI continued to try to raise money for the Meridian Matrix Fund. In attempting to do so, moreover, GERACI relied on the same representations about Matrix’s assets and performance that he knew to be false.
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GERACI, 61, of Miami, Florida, is charged with one count of investment adviser fraud, one count of securities fraud, one count of wire fraud, and one count of conspiring to commit securities and wire fraud. The investment adviser fraud and conspiracy charges each carry a maximum term of five years in prison. The securities and wire fraud charges each carry a maximum term of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the exceptional work of the Office’s Special Agent criminal investigators and thanked the SEC for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Robert Allen is in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Former New York State Senate Majority Leader Dean Skelos and His Son, Adam Skelos, Convicted Again of Corruption Offenses in Manhattan Federal CourtRead the Press Release
Robert Khuzami, Attorney for the United States, acting under authority conferred by 28 U.S.C. § 515, announced the convictions of former New York State Senate Majority Leader DEAN SKELOS and his son ADAM SKELOS on bribery, extortion, and honest services fraud counts, following a five-week jury trial before the U.S. District Judge Kimba M. Wood. As a unanimous jury found for a second time, DEAN SKELOS repeatedly abused his official position to obtain more than $300,000 in bribes and extortion payments made to his son, ADAM SKELOS. 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.
Deputy U.S. Attorney Robert Khuzami said: “Yet again, a New York jury heard a sordid tale of bribery, extortion, and the abuse of power by a powerful public official of this State. And yet again, a jury responded with a unanimous verdict of guilt, in this case of Dean Skelos and his son Adam – sending the resounding message that political corruption will not be tolerated.”
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 stormwater 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 and ADAM SKELOS then threatened to use DEAN SKELOS’s official powers to block Abtech’s bid for a Nassau County contract 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, DEAN SKELOS took and agreed to take numerous official actions to benefit Abtech.
For example, when Abtech and ADAM SKELOS believed Nassau County was withholding funding due to Abtech under its contract, 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 raised the issue, 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 make payments to Abtech, which the County subsequently did.
DEAN SKELOS also used his official position in an attempt to direct State funding that had been recovered in litigation with financial services companies (the “Settlement Funds”) in a way that would benefit water projects and contracts being pursued by Abtech. For example, at the same time ADAM SKELOS was attempting to obtain additional Abtech stormwater projects with local municipalities by claiming that the projects could be funded with State money, DEAN SKELOS advocated for a portion of the Settlement Funds to be allocated for stormwater projects.
The PRI Scheme
During the same time period as the Glenwood and Abtech schemes, DEAN SKELOS solicited payments for his son ADAM SKELOS from yet another company, Physician Reciprocal Insurers (“PRI”). PRI, a medical malpractice insurance firm whose existence depends on the renewal of certain New York State legislation, complied with the request, giving 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 said, “Guys like you couldn’t shine my shoes. Guys like you will never amount to anything, and if you talk to me like that again, I’ll smash your f**king 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 “work 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.
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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DEAN SKELOS, 70, and ADAM SKELOS, 36, each face a maximum sentence of 20 years in prison on Count One (conspiracy to commit extortion), a maximum sentence of 20 years in prison on Count Two (conspiracy to commit honest services fraud), a maximum sentence of 20 years in prison on each of Counts Three through Five (extortion), and a maximum sentence of 10 years in prison on each of Counts Six through Eight (bribery). 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 Judge Wood. Both defendants are scheduled to be sentenced on October 24, 2018.
Mr. Khuzami praised the work of the Criminal Special Agent 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, Thomas McKay, and Douglas S. Zolkind are in charge of the prosecution.
Former Bank Teller Convicted in White Plains Federal Court with Participating in Violent Bank Robbery in October 2013Read the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that VIRGINIA BLANCO was found guilty on all counts of a three-count Indictment yesterday that charged her with participating in the robbery of a Wells Fargo Bank branch in Yonkers, New York, in October 2013, and with aiding and abetting the discharge of a firearm in furtherance of the robbery. The verdict came following a four-day jury trial in White Plains federal court before U.S. District Judge Cathy Seibel.
U.S. Attorney Geoffrey S. Berman said: “The robbery of the Wells Fargo Bank branch in Yonkers was an inside job. With yesterday’s verdict, Virginia Blanco, the insider who made the violent robbery possible, stands convicted.”
According to the Superseding Indictment and the evidence at trial:
In or about October 2013, BLANCO was working as a teller at a Wells Fargo Bank branch located at 500 Odell Avenue in Yonkers, New York (the “Wells Fargo Branch”). She conspired with co-defendant Giovanny Marte to rob the Wells Fargo Branch and provided critical information to Marte that allowed him and his co-conspirators to carry out the robbery successfully. On October 29, 2013, at approximately 3:17 p.m., Marte and three co-conspirators arrived at the Wells Fargo Branch. One co-conspirator remained in the car while Marte and two co-conspirators entered the bank. Marte and another robber each brandished a firearm and the third robber brandished a wood saw. During the robbery, Marte fired two shots but did not hit anyone. He accessed the vault, filled a laundry bag with approximately $303,500 in cash, and fled the Wells Fargo Branch with the other robbers. Following the robbery, BLANCO and Marte took a trip together to Aruba using proceeds from the robbery.
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BLANCO, 29, faces a maximum sentence of five years in prison on Count One (conspiracy), a maximum sentence of 20 years in prison on Count Two (bank robbery); and a maximum sentence of life in prison, with a mandatory minimum of 10 years, on Count Three (firearm 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. Judge Seibel remanded BLANCO following her conviction and she is scheduled to be sentenced on October 19, 2018.
Mr. Berman praised the outstanding investigative work of the FBI’s Westchester County Safe Streets Task Force, which comprises agents and detectives of the FBI, United States Probation, the City of Yonkers Police Department, the City of Peekskill Police Department, the City of Mount Vernon Police Department, the New York City Police Department, the Westchester County Police, the Greenburgh Police Department, New York State Police, and the Westchester County District Attorney’s Office.
The prosecution is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Sam Adelsberg, Jamie Bagliebter, Margery Feinzig, Douglas Zolkind, and James McMahon are in charge of the prosecution.
Florida Man Pleads Guilty to $2 Million Insider Trading Scheme Based on Confidential Information Misappropriated from an Investment BankRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York announced that RODOLFO SABLON, a/k/a “Rudy,” pled guilty today before United States Magistrate Judge Debra Freeman to conspiracy to commit securities fraud and fraud in connection with a tender offer for 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, SABLON, Michael Siva, Roberto Rodriguez, 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.[1] Rivas and an additional participant, James Moodhe, have pled guilty and are cooperating with the Government in this investigation.
U.S. Attorney Geoffrey S. Berman said: “As Rodolfo Sablon admitted today, he traded on his friend’s confidential corporate information, reaping millions of dollars in illegal profits. Further, Sablon and his co-conspirators intended to use their profits to create an investment fund with the intention of sharing further illicit profits with their insider friend. They were arrested before they could do so. Our 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 SABLON 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 Sablon Tipping Chain
SABLON was a member of the second of three tipping chains outlined in the Indictment. In this tipping chain, Rivas passed inside information to SABLON and Rodriguez, a childhood friend of Rivas with whom Rodriguez had maintained a close relationship as adults.
Since 2014, Rodriguez lived and worked in Miami, Florida, with SABLON, with whom he was also friends. In 2015, Rodriguez introduced Rivas to SABLON. Rivas and SABLON then communicated with each other directly and developed an independent relationship.
In the fall of 2015, Rivas disclosed to Rodriguez that Rivas had access to Inside Information by virtue of his position as a corporate insider at an Investment Bank. At Rodriguez’s request, Rivas also agreed to share Inside Information with SABLON. While Rivas had originally agreed to divulge Inside Information to Rodriguez because of their history of friendship, Rivas also learned that Rodriguez and SABLON intended to start an investment fund with the proceeds of the insider trading scheme. Rivas understood that in exchange for the Inside Information Rivas was providing to Rodriguez and SABLON, Rivas would be invited to join the investment fund as a partner once it was successfully launched.
At first, Rivas communicated with Rodriguez and SABLON primarily via phone and text message. As the scheme progressed, however, Rodriguez and SABLON increased their efforts to hide their illegal activity. On several occasions, Rivas met personally with Rodriguez and/or SABLON in Miami in order to provide them with Inside Information. Rivas also provided Rodriguez and SABLON with Inside Information using an encrypted mobile messaging application (the “Messaging App”), which allows users to set a timer to messages to irretrievably “self-destruct.”
In order to maximize the illicit profits that could be earned using Rivas’s Inside Information, Rodriguez and SABLON, in consultation with Rivas, initiated an aggressive strategy of purchasing short-term, out-of-the money call options. In total, from 2015 through April 2017, Rodriguez and SABLON earned more than $2 million in illicit profits through insider trading in more than two dozen securities based on Inside Information divulged by Rivas.
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SABLON, 38, of Miami, Florida, pled guilty to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer (Count Twenty-One), 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. SABLON will be sentenced before U.S. District Alison J. Nathan.
Trial against defendants Siva, Rodriguez, Zoquier, and Rogiers is scheduled for September 10, 2018, before Judge Nathan, on charges of conspiracy to commit securities fraud and fraud in connection with a tender offer, conspiracy to commit wire fraud, multiple counts of securities fraud, and tender offer fraud. The allegations contained in the Indictment as to those defendants are merely accusations, and they are presumed innocent unless and until proven guilty.
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.
[1] As for the defendants who have not pled guilty (Michael Siva, Roberto Rodriguez, Jhonatan Zoquier and Jeffrey Rogiers), the charges described herein constitute only allegations.
Chinese National Charged with Insider Trading Scheme Conducted with Principal of Private Equity FundRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Paul D. Delacourt, the Assistant Director-in-Charge of the Los Angeles Field Office of the Federal Bureau of Investigation (“FBI”), announced the indictment late yesterday of MICHAEL YIN, a/k/a “Shaohua Yin,” on charges of conspiracy to commit securities fraud and securities fraud in connection with an insider trading scheme relating to the securities of Lattice Semiconductor Corporation (“Lattice”). YIN remains at large. The case is assigned to U.S. District Judge John G. Koeltl.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Michael Yin reaped illegal gains of more than $5 million by trading on inside information he received from his friend and business associate Benjamin Chow in breach of Chow’s duties to Lattice. Yin and Chow executed their scheme through text message exchanges neither ever thought would see the light of day and in meetings far away in Beijing, China. Thanks to the efforts of law enforcement, Yin’s abuse of the United States markets has been uncovered and he stands indicted for his crimes.”
FBI Assistant Director Paul Delacourt said: "Yin’s alleged use of material, nonpublic information as a road to revenue produced millions in unlawful proceeds. The FBI and our partners at the Securities and Exchange Commission will continue to investigate subjects who use criminal tactics that illegally create overnight millionaires and threaten the credibility of the marketplace."
According to the allegations in the Indictment filed today in Manhattan federal court:[1]
From approximately March 2016 to February 2017, YIN obtained from a friend and business associate, Benjamin Chow, material nonpublic information relating to a potential merger between Lattice and successive private equity firms managed by Chow, one based in Beijing, China (“Firm-1”), and one based in Palo Alto, California, with offices in Beijing, China (“Firm-2”). YIN used such information to make more than $5 million in profitable securities trades through accounts opened in the names of YIN’s family members and associates.
Specifically, as Managing Director of Firm-1 and later Managing Partner of Firm-2, Chow obtained material nonpublic information regarding potential merger agreements between Lattice and Firm-1 and later Firm-2. Information concerning the potential merger agreements was subject, among other things, to nondisclosure agreements executed between Lattice and Chow on behalf of Firm-1 and later Firm-2.
Through multiple meetings in Beijing, China, voice messages, and text exchanges, YIN obtained from Chow material nonpublic information regarding the potential merger between Lattice and Firm-1 and later Firm-2, which Chow provided to YIN in violation of the nondisclosure agreements Chow executed with Lattice on behalf of Firm-1 and Firm-2. YIN made profitable trades in Lattice shortly after receiving the material nonpublic information from Chow, yielding a total of at least approximately $5 million in profits. For example, on one occasion, Chow told YIN, in substance and as transcribed and translated from Chinese, that Chow should soon be able to execute a merger agreement with Lattice. Beginning the following day, and over the course of the next three weeks, YIN purchased more than 2.2 million shares of Lattice stock.
Chow was previously charged in this District and found guilty in a jury trial of several offenses for his role in the scheme and is presently awaiting sentencing in front of U.S. District Judge Gregory H. Woods.
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YIN, 45, of Beijing, China, is charged with one count of conspiring to commit securities fraud, which carries a maximum prison sentence of five years in prison, and 13 counts of securities fraud, which carry maximum sentences of 20 and 25 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the exceptional work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Max Nicholas, Scott Hartman, and Elisha J. Kobre are in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Bronx Drug Dealer Pleads Guilty to Selling Heroin That Caused Woman’s Overdose Death in A Hospital Rehabilitation ClinicRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DUANE MARTINEZ pled guilty today in Manhattan federal court to conspiring to distribute more than one kilogram of heroin between 2015 and 2017. As part of that conspiracy, MARTINEZ arranged to deliver heroin to a 41-year-old woman, Ivy Katz, while she was a patient in a hospital rehabilitation clinic, causing Katz to overdose and die.
U.S. Attorney Geoffrey S. Berman said: “The trafficking of heroin and other opioids is a serious crime that often leads to the tragic overdoses that are a public health crisis in our city and around the country. Duane Martinez sold large amounts of heroin over a long period of time, and he arranged for his heroin to be delivered to an inpatient rehabilitation clinic located inside a hospital. Martinez’s disregard led to a tragic death and undermined the efforts of health professionals to provide treatment for someone with the courage to seek it. Thanks to the outstanding investigative work of our partners in the New York City Police Department, Duane Martinez is out of business, and heroin dealers should know that they cannot escape the consequences of their crimes.”
According to the allegations contained in the Complaint, the Indictment, and statements made in court and publicly available documents:
From at least in or about November 2015 through in or about April 2017, in the Southern District of New York and elsewhere, MARTINEZ and others conspired to sell more than one kilogram of heroin.
In particular, on or about January 1, 2017, MARTINEZ arranged for heroin to be delivered to Ivy Katz at an inpatient rehabilitation clinic located in a hospital in Manhattan. In mid-December 2016, Katz had voluntarily checked herself into the hospital’s inpatient rehabilitation program for opioid dependence. MARTINEZ arranged for another individual to deliver heroin to Katz in the hospital, evading measures designed to prevent patients in recovery from receiving drugs. Approximately 30 minutes after the person sent by MARTINEZ left the hospital, Katz was found comatose in her room with a needle containing heroin in her arm. Katz never regained consciousness and ultimately died on or about January 16, 2017.
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DUANE MARTINEZ, 44, faces a maximum sentence of life in prison, and a mandatory term of 10 years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. MARTINEZ is scheduled to be sentenced by Judge Caproni on October 25, 2018.
Charges against the other individual named in the indictment – Anthony Dodaj – are pending. The charges and allegations against Dodaj are merely accusations, and he is presumed innocent unless and until proven guilty.
Mr. Berman praised the outstanding investigative work of the New York City Police Department’s Manhattan South Narcotics Heroin Overdose Team.
This matter is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys David W. Denton Jr. and Stephanie Lake are in charge of the prosecution.
Yorktown Heights Truck Driver Sentenced to 48 Months in Prison for Heist of over $1 Million Worth of Computers Bound for Public High School StudentsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ANTON SALJANIN was sentenced today by U.S. District Judge Kenneth M. Karas to 48 months in prison for participating in a scheme to steal, transport, and sell a shipment of approximately 1,200 computers, valued at over $1 million, that were bound for two public high schools in New Jersey. SALJANIN pled guilty on October 18, 2017, before U.S. Magistrate Judge Lisa Margaret Smith to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property and one count of theft from an interstate shipment.
U.S. Attorney Geoffrey S. Berman said: “Anton Saljanin was the ringleader and insider in an inside job that resulted in the theft of over $1 million worth of computers meant for school kids. Now, having admitted his role in this truck hijacking scheme, he has been sentenced to prison for his crimes.”
According to the Complaint and Superseding Indictment filed in White Plains federal court, as well as materials submitted in connection with the plea and sentencing proceedings:
On or about January 15, 2014, ANTON SALJANIN, a driver for a shipping company, drove a truck from Yorktown Heights, New York, to a technology company located in Massachusetts to pick up a shipment of approximately 1,200 computers. SALJANIN brought his brother, Gjon Saljanin, with him. The computers were being shipped to two public high schools located in New Jersey, and were valued at over $1 million.
The next morning, SALJANIN reported to the Yorktown Police Department that the truck had been stolen from a parking lot located in Yorktown Heights. Later that day, SALJANIN reported to Yorktown Police that he had been driving around looking for the truck when he happened to spot it from the highway in a parking lot in Danbury, Connecticut. The truck would not have been visible in the Danbury parking lot to a driver passing by on the highway. Furthermore, historical cell site data for SALJANIN’s cellphone contradicts his claims about the route he took to look for the truck.
Yorktown Police detectives examined the truck and found that a window had been broken. The detectives found broken glass on the scene in the Danbury parking lot but found no broken glass on the scene in the Yorktown Heights parking lot, suggesting that the window had been broken at the Danbury parking lot rather than at the Yorktown Heights parking lot.
During interviews with the Yorktown Police, SALJANIN and Gjon Saljanin both falsely claimed that on the night of January 15, 2014, they drove directly from a convenience store outside of Yorktown Heights to the Yorktown Heights parking lot. Security camera footage from various locations in Yorktown Heights shows that a truck matching the description of the truck driven by ANTON SALJANIN and Gjon Saljanin departed from their claimed route, and instead traveled in the direction of the residence of Ujka Vulaj, a long-time friend of ANTON SALJANIN. The video surveillance footage also shows that the duration of the detour corresponds to the approximate length of time it would have taken to drive to Vulaj’s residence, unload the computers from the truck, and return to the route to the Yorktown Heights parking lot.
From in or about January 2014 through at least in or about April 2014, Vulaj sold the stolen computers, some with the help of a co-worker, Carlos Caceres. They sold the computers, which had a retail value of approximately $1,000 each, for far below the market price. Vulaj and Caceres charged approximately $500 to $800 in cash for each computer, and handed over each computer in plain brown cardboard packaging.
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In addition to the prison sentence, SALJANIN, 46, of Yorktown Heights, New York, was sentenced to three years of supervised release. Judge Karas also ordered ANTON SALJANIN to forfeit $989,424.15 in ill-gotten gains and to pay $989,424.15 in restitution.
ANTON SALJANIN’s co-defendants have been convicted and sentenced. Vulaj, 56, of Yorktown Heights, New York, pled guilty on June 17, 2016, to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property, and was sentenced by Judge Karas on May 12, 2017, to 12 months and one day in prison and two years of supervised release (including 6 months of home confinement). Judge Karas also ordered Vulaj to forfeit $989,424.15 in ill-gotten gains and to pay $989,424.15 in restitution.
Caceres, 40, of the Bronx, New York, pled guilty on July 21, 2016, to one count of conspiracy to commit receipt, possession, and sale of stolen property, and was sentenced by Judge Karas on January 6, 2017, to 27 months in prison and three years of supervised release. Judge Karas also ordered Caceres to forfeit $331,188 in ill-gotten gains and to pay $331,188 in restitution.
Gjon Saljanin, 43, of Yorktown Heights, New York, pled guilty on October 16, 2017, to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property, and was sentenced by Judge Karas on May 4, 2018, to 12 months and one day in prison and two years of supervised release. Judge Karas also ordered Gjon Saljanin to forfeit $989,424.15 in ill-gotten gains and to pay $989,424.15 in restitution.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, the Yorktown Police Department, the Westchester County Police Department, and the New York City Police Department. He also thanked the Bronx County District Attorney’s Office for its assistance.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Won S. Shin, Benjamin Allee, and Scott Hartman are in charge of the prosecution.
Woman Sentenced for Defrauding Donors of over $50,000 by Misrepresenting That She Had Terminal CancerRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that VEDOUTIE HOOBRAJ, a/k/a “Shivonie Deokaran,” was sentenced today to 24 months in prison for wire fraud in connection with her scheme to defraud donors by falsely claiming that she had been diagnosed with terminal cancer and needed money to pay for her treatments. HOOBRAJ pled guilty to an Information on January 12, 2018, before U.S. Magistrate Judge Lisa Margaret Smith. HOOBRAJ was sentenced by U.S District Judge Vincent L. Briccetti.
U.S. Attorney Geoffrey S. Berman said: “In a cynical exploitation of people’s generosity, Vedoutie Hoobraj created an elaborate fiction about having cancer to reap charitable contributions from well-meaning donors. Hoobraj even falsified medical records to conceal the fraud. Today, she has learned to the price of such brazen conduct.”
According to the Information, other documents filed in this case, and statements made during court proceedings:
From 2014 through 2016 in Westchester County, New York, and elsewhere, HOOBRAJ, then a resident of Dobbs Ferry, New York, solicited donations by falsely stating that she had been diagnosed with terminal stage leukemia, had been given only 18 months left to live, and needed money for medical care and other expenses. HOOBRAJ obtained donations through two GoFundMe fundraising websites, direct giving, and a fundraising event hosted by parents and students of Ardsley High School, the high school attended by both of her sons. HOOBRAJ publicized her fundraisers in press interviews, online postings, and emails, among other means. HOOBRAJ received in excess of $50,000 in donations from over 400 individuals in Ardsley, New York, and elsewhere based her misrepresentations.
When questioned by the Ardsley Police Department on or about January 20, 2016, HOOBRAJ falsely stated, among other things, that she had been diagnosed with terminal cancer by a specific oncologist who she claimed died in an earthquake in Nepal in April 2015. Subsequently, HOOBRAJ checked herself into Jacobi Medical Center in the Bronx, New York, (“Jacobi”) for an examination. HOOBRAJ then provided donors forged lab work from that examination, indicating that her hemoglobin, platelet counts, and red blood cell counts were supposedly consistent with a cancer patient’s. In fact, the actual medical record provided by Jacobi to HOOBRAJ stated, “Your labs turned out to show no abnormalities.”
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In addition to the prison, term, HOOBRAJ, 38, of Orlando, Florida, was sentenced to three years of supervised release and ordered to pay forfeiture in the amount of $51,938 and restitution to victims in the amount of $47,741.20.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the Ardsley Police Department. Mr. Berman also thanked the Westchester County District Attorney’s Office for its assistance.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney Vladislav Vainberg is in charge of the prosecution.
Manhattan U.S. Attorney Announces Extradition of Irish Man Who Helped Run the “Silk Road” WebsiteRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that GARY DAVIS, a/k/a “Libertas,” was extradited from the Republic of Ireland to the United States. DAVIS was arrested in January 2014 for charges arising out of his role as a member of the 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 is expected be presented this afternoon in Manhattan federal court, before U.S. Magistrate Judge Sarah Netburn. DAVIS’s case is assigned to U.S. District Judge Jesse M. Furman.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Gary Davis allegedly served as an administrator who helped run the Silk Road, a secret online marketplace for illegal drugs, hacking services, and an assortment of other criminal activities. Thanks to our partner agencies here and abroad, Davis now faces justice in an American court.”
According to the allegations in the Superseding Indictment[1], court filings, 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 June 2013 up to October 2, 2013, GARY DAVIS, a/k/a “Libertas,” the defendant, worked as a site administrator on Silk Road. In that role, 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 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.
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The charges in the Superseding Indictment against DAVIS, 30, of Wicklow, Ireland, include: one count of conspiracy to distribute narcotics, which carries a maximum sentence of life in prison and a mandatory minimum of 10 years in prison; one count of conspiracy to commit computer intrusion, which carries a maximum sentence of five years in prison; and one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
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Mr. Berman praised the outstanding joint efforts of the Federal Bureau of Investigation and its New York Special Operations and Cyber Division, 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 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 and are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment, and the descriptions thereof, constitute only allegations, and every fact described should be treated as an allegation.
Statement of U.S. Attorney Geoffrey S. Berman on the Conviction of Buffalo Billion DefendantsRead the Press Release
Manhattan U.S. Attorney Geoffrey S. Berman said: “The inscription, ‘The true administration of justice is the firmest pillar of good government,’ is set in stone in the New York County courthouse. Those words have never been more poignant for the citizens of New York, as in quick succession less than four months apart they have seen this Office secure convictions in separate prosecutions against the State Assembly Speaker, a close confidant and executive aide to the governor, and now the president of SUNY Polytech, the executive leading the expansive ‘Buffalo Billion’ initiative. The guiding principle of the Southern District holds that true justice can only be achieved through independence from politics or influence, and that has never been more important than today. I commend the career prosecutors of our Public Corruption unit for their enduring commitment to true justice in our government.”
Manhattan U.S. Attorney and FBI Announce Recovery of Stolen Robert Motherwell PaintingRead the Press Release
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 return of a stolen painting, Untitled, created in 1967 by Robert Motherwell.
Manhattan U.S. Attorney Geoffrey Berman said: “The storied past of this magnificent piece may never be known. But now, thankfully, 40 years after Robert Motherwell began painting this piece, this work of art is where it should be: with the Dedalus Foundation and for the benefit of the public.”
FBI Assistant Director-in-Charge William F. Sweeny Jr. said: “Robert Motherwell was an influential and iconic artist of his time. His love of the abstract inspired him to create works enjoyed by many still today. Unfortunately, several of his paintings went missing about four decades ago – the 1967 Untitled piece is but one of them. Motherwell never titled this work of art before it vanished. Maybe, after all, that’s part of its story – one that begins a new chapter here today. We are honored to restore this extraordinary piece to the Dedalus Foundation, so that those who appreciate the value of fine art may now come to know the true narrative of the painting’s past, present, and future.”
Robert Motherwell, a 20th century American painter, printmaker, and editor, was among a group of visual artists – including Willem de Kooning, Jackson Pollock, and Mark Rothko – often considered together as the “New York School.” Throughout much of the 1960s and 1970s, Motherwell exclusively employed the Santini Moving Company (“Santini”) to transport and store his artwork. In or around 1978, Motherwell changed storage companies, and in the process of preparing and itemizing his artwork for the move, identified dozens of paintings, including Unitled, as missing or stolen.
Following Motherwell’s death in 1991, virtually all of his paintings were deeded to the Dedalus Foundation (“Dedalus”). In 2017, the son of a former and now deceased Santini worker contacted the Dedalus Foundation regarding the authenticity of Untitled, which had been in his father’s possession for the past 30 years. After being contacted by Dedalus, the FBI approached that individual, who voluntarily relinquished Untitled to a special agent assigned to the FBI’s Art Crime Team. The U.S. Attorney’s Office and the FBI are now returning the painting to its rightful owners.
Mr. Berman thanked the FBI’s Art Crime Team and the Dedalus Foundation for their assistance.
The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorney Jonathan E. Rebold is in charge of the case.
Former Director of Fixed Income and Head of Portfolio Strategy at New York State Common Retirement Fund Is Sentenced to 21 Months for “Pay-To-Play” Bribery SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that NAVNOOR KANG, the former Director of Fixed Income and Head of Portfolio Strategy at the New York State Common Retirement Fund (“NYSCRF”), was sentenced today in Manhattan federal court to 21 months in prison for participating in a massive “pay-to-play” bribery scheme involving the nation’s third largest public pension fund. KANG pled guilty to conspiracy to commit securities fraud and conspiracy to commit honest services wire fraud on November 8, 2017, before U.S. District Judge J. Paul Oetken, who also imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Combining public corruption with securities fraud, Navnoor Kang betrayed his duty to safeguard public retirement money, bought off with jewelry, cash, drugs, strippers, and prostitutes. His crimes have bought him a prison sentence.”
According to the Indictment charging KANG, other filings in Manhattan federal court, and statements made during the sentencing proceeding:
The NYSCRF is a pension fund administered for the benefit of public employees of the State of New York. From January 2014 through February 2016, KANG served as Director of Fixed Income and Head of Portfolio Strategy for the NYSCRF. In that capacity, KANG was responsible for investing more than $53 billion in fixed-income securities and was entrusted with discretion to manage those investments on behalf of the NYSCRF. KANG owed a fiduciary duty to the NYSCRF and its members and beneficiaries, and was required to make investment decisions in their best interests and free of any conflict of interest. New York State law and NYSCRF policies prohibited KANG and other NYSCRF employees from receiving any bribes, gifts, benefits, or consideration of any kind.
KANG’s Scheme to Steer NYSCRF Fixed-Income Business in Exchange for Secret Bribes
From 2014 through 2016, KANG and others participated in a scheme to defraud the NYSCRF and its members and beneficiaries, and to deprive the NYSCRF of its intangible right to KANG’s honest services. The scheme involved, among other things, an agreement among KANG, Deborah Kelley, a managing director of institutional fixed income sales at a New York-based broker-dealer (“Broker-Dealer-1”), and Gregg Shonhorn, a vice president of fixed income sales at a New York-based broker-dealer (“Broker-Dealer-2”), to pay KANG bribes – in the form of entertainment, travel, lavish meals, prostitutes, nightclub bottle service, narcotics, tickets to sports games and other events, luxury gifts, and cash payments for strippers and KANG’s personal expenses – in exchange for fixed-income business from the NYSCRF. Such bribes – which totaled more than $100,000 – were strictly forbidden by the NYSCRF, and were paid secretly and without any disclosure to the NYSCRF and its members and beneficiaries concerning the conflicts of interest inherent therein.
In exchange for the bribes paid by Kelley, Schonhorn, and others, KANG used his position as Director of Fixed Income and Head of Portfolio Strategy at the NYSCRF to promote the interests of Kelley, Schonhorn, and their respective brokerage firms. KANG steered more than $2 billion in fixed-income business to Broker-Dealer-1 and Broker-Dealer-2, from which Kelley, Schonhorn, and their respective employers earned millions of dollars in commissions from the NYSCRF. In so doing, KANG, with the knowledge and approval of Kelley and Schonhorn, breached his fiduciary duty to make investment decisions in the best interest of the NYSCRF and its members and beneficiaries, and free of conflict, and deprived the NYSCRF of its intangible right to KANG’s honest services.
As the bribes paid by Schonhorn to KANG increased, so too did Broker-Dealer-2’s fixed-income business with the NYSCRF. The value of the NYSCRF’s domestic bond transactions with Broker-Dealer-2 skyrocketed from zero in the fiscal year ending March 31, 2013, to approximately $1.5 million in the fiscal year ending March 31, 2014, to approximately $858 million in the fiscal year ending March 31, 2015, and to approximately $2.378 billion in the fiscal year ending March 31, 2016. Broker-Dealer-2 became the third largest broker-dealer with which the NYSRCF executed domestic bond transactions for the fiscal year ending March 31, 2016, having not even been on the approved list in the fiscal year ending March 31, 2013. As the NYSCRF’s third largest broker-dealer in this asset class, Broker-Dealer-2 brokered approximately eight percent of the total value of the NYSCRF’s domestic bond transactions – a figure greater than that of all but two of the major international banks and brokerage houses on the list. Similarly, the value of NYSCRF’s domestic bond transactions with Broker-Dealer-1 increased from zero in the fiscal year ending March 1, 2014, to approximately $156 million in the fiscal year ending March 1, 2015, and to approximately $179 million in the fiscal year ending March 1, 2016.
KANG’s Obstruction of Justice
In late 2015, the Securities and Exchange Commission (“SEC”) opened an investigation into the entertainment and benefits that Kelley had provided KANG, and the SEC subpoenaed both KANG and Kelley for their testimony. In advance of their testimony, KANG and Kelley agreed to align their stories and each testified falsely under oath before the SEC about expenses Kelley had paid for KANG. Moreover, after a federal grand jury investigation was opened, KANG instructed Schonhorn to testify falsely before the grand jury, and KANG admitted that he had hidden relevant evidence.
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KANG, 39, of Los Angeles, California, was also sentenced to three years of supervised release, ordered to forfeit $ $78,716, and to pay restitution to the NYSCRF in the amount of $242,724.17.
Kelley and Schonhorn have each pled guilty for participating in the scheme. Kelley was sentenced by Judge Oetken to three years of probation.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation. He also thanked the SEC, which filed civil charges against Kang, Kelley, and Schonhorn in a separate civil action, and the Office of Inspector General for the Office of the New York State Comptroller, for their assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore and Joshua A. Naftalis are in charge of the prosecution.
Alain Kaloyeros, President of Suny Polytechnic Institute, and Three Executives of Real Estate Development Companies Found Guilty of Fraud in Connection with Buffalo Billion ProjectsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ALAIN KALOYEROS, the former president of the State University of New York Polytechnic Institute (“SUNY Poly”), was convicted of defrauding and conspiring to defraud a SUNY Poly-affiliated not-for-profit organization in connection with Buffalo Billion construction projects worth hundreds of millions of dollars. LOUIS CIMINELLI, STEVEN AIELLO, and JOSEPH GERARDI – three executives of real estate development companies based in Syracuse and Buffalo – were also convicted of fraud and conspiracy.
U.S. Attorney Geoffrey S. Berman said: “The inscription, ‘The true administration of justice is the firmest pillar of good government,’ is set in stone in the New York County Courthouse. Those words have never been more poignant for the citizens of New York, as in quick succession less than four months apart they have seen this Office secure convictions in separate prosecutions against the State Assembly Speaker, a close confidant and executive aide to the governor, and now the president of SUNY Poly, the executive leading the expansive ‘Buffalo Billion’ initiative. The guiding principle of the Southern District holds that true justice can only be achieved through independence from politics or influence, and that has never been more important than today. I commend the career prosecutors of our Public Corruption unit for their enduring commitment to true justice in our government.”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
KALOYEROS conspired with AIELLO and GERARDI, two top executives at Syracuse-based COR Development Company (“COR Development”), and CIMINELLI, the head of Buffalo-based LPCiminelli Inc. (“LPCiminelli”), to deceive Fort Schuyler Management Corporation (“Fort Schuyler”), a State-funded entity charged with awarding State contracts worth hundreds of millions of dollars, by secretly rigging the bidding process so that the contracts would be awarded to those two companies.
KALOYEROS, who oversaw the application process for many of the State grants awarded under the Buffalo Billion and similar programs, retained Todd Howe to assist with developing the projects and identifying developers for those projects. KALOYEROS, Howe, AIELLO, GERARDI, and CIMINELLI worked together to deceive Fort Schuyler by, among other things, secretly tailoring the required qualifications for those development deals so that COR Development and LPCiminelli would be awarded contracts in Syracuse and Buffalo, respectively, without any meaningful competition, while falsely representing to Fort Schuyler that the bidding process was fair, open, and competitive.
More specifically, in or about October 2013, Fort Schuyler issued requests for proposals (“RFPs”) to solicit bids from interested and qualified developers for the Syracuse and Buffalo projects. KALOYEROS, with Howe’s assistance, oversaw the drafting of the RFPs and, unbeknownst to Fort Schuyler, KALOYEROS and Howe secretly solicited from AIELLO, GERARDI, and CIMINELLI qualifications of COR Development and LPCiminelli to put in the RFPs so that the RFPs would request qualifications specifically held by those companies. For example, the Syracuse RFP requested the use of specific project management software used by COR Development. After Howe emailed GERARDI and AIELLO a draft of the Syracuse RFP approximately two weeks before its public issuance, GERARDI sent back a handwritten mark-up of the draft RFP, on which GERARDI had, among other things, underlined the software names and wrote “too telegraphed??” For its part, the Buffalo RFP, as initially issued, required 50 years of experience by a local developer – a qualification touted by LPCiminelli in promotional materials provided to KALOYEROS. This requirement was later changed and claimed to be a “typographical error.” LPCiminelli also was provided internal State documents to use in drafting its response to the RFP.
In or about fall 2015, after the FBI interviewed other real estate development and construction companies that expressed interest in the Buffalo RFP, KALOYEROS deleted from his Gmail account numerous emails involving Howe, including emails in which KALOYEROS and Howe exchanged “vitals” for COR Development and LPCiminelli during the drafting of the RFPs. In addition, CIMINELLI deleted a number of emails between himself and KALOYEROS, including an email in which KALOYEROS, from his Gmail account, sent a draft of the Buffalo RFP to CIMINELLI and promised to “fine tune the developer requirements to fit.”
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KALOYEROS was convicted of one count of conspiracy to commit wire fraud, and two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison. CIMINELLI, AIELLO, and GERARDI were each convicted of one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. GERARDI was also convicted of one count of making false statements, which carries a maximum sentence of five years in prison.
KALOYEROS is scheduled to be sentenced on October 11, 2018; AIELLO is scheduled to be sentenced on October 12, 2018; GERARDI is scheduled to be sentenced on October 15, 2018; and CIMINELLI is scheduled to be sentenced on October 17, 2018. All defendants will be sentenced by U.S. District Judge Valerie E. Caproni, who presided over the trial.
Mr. Berman praised the work of the FBI Buffalo Field Office and Internal Revenue Service-Criminal Investigation, which jointly conducted this investigation with the 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 Robert Boone, David Zhou, and Matthew Podolsky are in charge of the prosecution.