Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JUDIE OLIVERA was sentenced today to a term of 40 years in prison for her role in the May 2012 home-invasion robbery of victim Miles Klein, which resulted in Klein’s death.  On June 26, 2018, GIBRON LOPEZ was sentenced to a term of 40 years in prison, which must run consecutively to a prior prison sentence of five years, for his role in the home-invasion robbery.  Both sentences were imposed by United States District Judge Katherine Polk Failla.  LOPEZ and OLIVERA were convicted of Hobbs Act robbery and Hobbs Act robbery conspiracy following a jury trial in October 2017 before Judge Failla.

U.S. Attorney Geoffrey S. Berman said:  “The defendants committed a violent home-invasion robbery, resulting in the brutal death of Miles Klein.  Having been convicted at trial, the defendants will now spend decades in prison for this horrific crime.  We thank our remarkable partners at the ATF and NYPD for their tireless efforts to bring these defendants to justice.”                       

According to the Indictment, other filings in Manhattan federal court, and the evidence admitted at trial: 

In May 2012, OLIVERA, who had a preexisting relationship with Klein, set up a home invasion robbery, which targeted Klein’s drugs and drug proceeds.  OLIVERA recruited LOPEZ and another man to commit the robbery.  On May 15, 2012, OLIVERA gained access to Klein’s apartment in the Bronx, and LOPEZ and the other man, armed with a wrench and a rubber mallet, respectively, followed her there.  LOPEZ and the other man struggled with Klein at the door, striking him in the head repeatedly with the wrench and the mallet, binding his eyes and mouth with duct tape, and gagging him.  During the assault, OLIVERA stole a safe containing cash, among other items, from Klein’s apartment.  LOPEZ and the other man then dragged Klein’s body to the bathroom, where they left him.   They discarded the murder weapons and their bloody clothes in a sewer, and later split the proceeds of the robbery.  Police responded to the scene on May 16, 2012, after receiving a 911 call from concerned family members.  Klein was ultimately pronounced dead as a result of the blunt force trauma to the head and obstruction of his airway.

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In addition to prison terms, LOPEZ, 37, and OLIVERA, 40, both of the Bronx, New York, were each sentenced to three years of supervised release. 

Mr. Berman praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms, and Explosives, the Strategic Pattern Armed Robbery Task Force, and the New York City Police Department. 

This case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Gina M. Castellano, Christopher J. DiMase, and Justina L. Geraci are in charge of the prosecution.

ROBERT KHUZAMI, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that JOHN GALANIS, a/k/a “Yanni,” DEVON ARCHER, and BEVAN COONEY were each convicted today of conspiracy to commit securities fraud and securities fraud, following a five and half week trial before U.S. District Judge Ronnie Abrams.

Mr. Khuzami said:  “As a unanimous jury swiftly found, these defendants orchestrated a highly complex scheme to defraud a Native American community and multiple pension funds, all to corruptly bankroll their own personal and business interests.  This Office remains steadfast in its commitment to prosecuting the most complex financial frauds and protecting the investing public.”

According to the allegations in the charging documents and statements made in court proceedings:

From March 2014 through April 2016, JOHN GALANIS, ARCHER, and COONEY, along with their co-conspirators Jason Galanis, Hugh Dunkerley, Gary Hirst, and Michelle Morton, engaged in a fraudulent scheme that involved (a) causing the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity, to issue a series of bonds (the “Tribal Bonds”) through lies and misrepresentations; (b) deceptively causing clients of asset management firms controlled by Morton and others to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market; and (c) misappropriating the proceeds resulting from those bond sales.  

The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by JOHN GALANIS.  Simultaneously, Jason Galanis, with the backing of ARCHER and COONEY, worked to acquire Hughes Capital Management (“Hughes”), a registered investment adviser.  Morton and Hirst were installed respectively as Hughes’ chief executive officer and chief investment officer.  Within weeks of taking control of Hughes, Morton and Hirst caused the entire $28 million first series of Tribal Bonds to be purchased by Hughes clients, primarily pension funds, but never disclosed to these clients material facts about the Tribal Bonds, including the fact that the Tribal Bonds fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients.  In addition, Hughes’s clients were not told about substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf. 

After securing the sale of the Tribal Bonds to these unwitting clients, the defendants and their co-conspirators then misappropriated the proceeds of first Tribal Bond issuance.  Specifically, although the Tribal Bonds were supposed to be invested in an annuity, Hugh Dunkerley, at the direction of Jason Galanis, transferred significant amounts of the bond proceeds to support the defendants’ business and personal interests.  JOHN GALANIS, for example, secretly received $2.35 million in proceeds of the first bond issuance, which he spent on a variety of personal expenses and luxury items, including cars, jewelry, and hotel expenses.  Similarly, Jason Galanis used a portion of the proceeds of the first Tribal Bond issuance to finance the purchase of a $10 million luxury apartment in Tribeca.

In addition, after JOHN GALANIS induced the WLCC to issue a second round of Tribal Bonds, ARCHER and COONEY used $20 million of bond proceeds from the first issuance to buy the entirety of the second issuance.  As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase.  The bonds purchased by ARCHER and COONEY were then used to meet net capital requirements at two broker dealers in which ARCHER and COONEY had interests.  COONEY also obtained a $1.2 million loan based on his purported ownership of the bonds, a loan he subsequently failed to repay.  In addition, millions of dollars in bond proceeds from the first and second issuances were used finance the acquisition of companies that the defendants and their co-conspirators acquired as part of a strategy to build a financial services conglomerate.

In the spring of 2015, JOHN GALANIS induced the WLCC to issue an additional $16 million worth of Tribal Bonds.  Simultaneously, Jason Galanis, ARCHER, and others purchased a second investment adviser, Atlantic Asset Management (“Atlantic”), and again installed Morton as the chief executive officer.  Within days of obtaining control of Atlantic, Morton placed the entirety of the $16 million Tribal Bond with an Atlantic client, without the client’s consent and without disclosing the fact that the Tribal Bonds were outside the client’s investment parameters and that numerous conflicts of interest existed.  The proceeds of the $16 million issuance were again not invested in an annuity as promised, but instead were diverted to, among other things, finance the defendants’ acquisition of another company in furtherance of their plan to build a financial services conglomerate and make payments to one of the broker dealers in which ARCHER and COONEY had interests. 

Jason Galanis, Michelle Morton, Gary Hirst, and Hugh Dunkerley each pled guilty prior to trial to participation in the scheme.

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Defendants’ Ages and Residences

Defendant

Residence

Age

 

John Galanis

Oceanside, California

74

Devon Archer

Brooklyn, New York

44

Bevan Cooney

Missoula, Montana

45

            Mr. Khuzami praised the work of the Federal Bureau of Investigation and the United States Postal Inspection Service, and thanked the U.S. Securities and Exchange Commission.

            This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Rebecca Mermelstein, Brendan F. Quigley, and Negar Tekeei are in charge of the prosecution.  

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 (“HSI”), announced today that IGNACIO FONCILLAS pled guilty to operating an unlicensed money transmitting business in connection with his transfer of over $9 million between the United States and Mexico.  This illegal scheme allowed FONCILLAS’s customers to secretly send money to Mexico while avoiding anti-money laundering safeguards and obligations imposed upon legal money services businesses. FONCILLAS surrendered to federal agents this morning and his plea was taken by U.S. District Judge George B. Daniels. 

U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Ignacio Foncillas, an attorney, established an illegal money transmitting service between the U.S. and Mexico.  Foncillas did not register his company with FinCEN, the regulatory agency that oversees the U.S. financial system and reports suspicious financial transactions.  Attempts by individuals or corporations to circumvent their regulatory obligations will be met with swift justice.” 

HSI Special Agent in Charge Angel M. Melendez said:  “Foncillas operated a transnational money transmitting business, moving millions without ever ensuring he had the proper licensing. The movement of money is regulated to limit fraudulent and criminal activity, which is why law enforcement is paying close attention to those operating without a license, and looking even more closely at money transactions crossing borders.”

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

IGNACIO FONCILLAS is a lawyer in New York, New York.  Between approximately September 2013 and September 2014, FONCILLAS used a company he had previously incorporated in Delaware (the “Company”) to transfer millions of dollars from the United States to Mexico.  During this time, the Company was not registered with the Financial Crimes Enforcement Network (FinCEN), a component of the U.S. Department of the Treasury, or any of the states in which the Company operated, including New York, Delaware, or California, as required by both state and federal laws applicable to money transmitting businesses like the Company.  

Unlicensed money transmitting businesses like the Company enable entities and individuals to move money into and through the U.S. financial system while avoiding licensed U.S. financial institutions that monitor for suspicious activity and report it to U.S. authorities, including through suspicious activity reports, or SARs.  Instead, by going through unlicensed entities like the Company, foreign businesses ensure that suspicious patterns of transmissions will not be detected and reported as potential money laundering activity or other financial crime.

In order to move money in this manner, FONCILLAS opened bank accounts in the name of the Company at banks including Bank of America, Citibank, and Wells Fargo.  When opening these accounts, FONCILLAS provided false and contradictory descriptions of the Company’s business, including investment, consulting, and wholesale trade.  On many occasions, individuals around the country, mainly in the Southern California region, who had no affiliation with FONCILLAS or the Company, deposited cash into the Company’s bank accounts.  On other occasions, FONCILLAS deposited cash he had received from others into the Company’s bank accounts in New York.  At times, FONCILLAS lied to the banks about the purpose of these large cash deposits, including telling a bank teller that a cash deposit of over $150,000 was money he had been paid for a loan. 

Following these deposits, FONCILLAS directed the transfer of that money to individuals and entities in Mexico, minus a fee.  This fee was retained by FONCILLAS as payment for this money transmitting service and used to pay personal expenses such as credit cards and other bills.  Through this conduct, the defendant and the Company have functioned as an unregulated financial institution, allowing others to move funds through and out of the U.S. with impunity, including not being subject to the filing of SARs that licensed transmitting businesses are required to file.

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FONCILLAS, 50, of New York, New York, pled guilty to one count of operating an unlicensed money transmitting business.  The charge carries a maximum penalty of five years in prison.  The maximum potential sentence in this case are prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

FONCILLAS is scheduled to be sentenced November 8, 2018.

Mr. Berman praised the outstanding investigative work of the Department of Homeland Security, Homeland Security Investigations.

This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorneys Daniel M. Tracer and Niketh V. Velamoor are in charge of the prosecution.   

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the Office is soliciting applications from qualified individuals to serve as Court-appointed monitor in connection with a proposed consent decree submitted to the Court for approval in the case of United States v. New York City Housing Authority, 18 Civ. 5213 (WHP).  

Pursuant to the terms of the consent decree, the Government is to propose a monitor for approval by the Court.  As set forth at greater length in the proposed consent decree, the monitor will be responsible for the remediation of extensive health and safety deficiencies in NYCHA housing, as well as oversight and reform of NYCHA management, controls, and operations.  

The application and related materials, and instructions for submission, are available at https://www.justice.gov/usao-sdny/monitors-receivers-claims-administrators.  Applications must be received by this Office by July 11, 2018.

The consent decree remains subject to review and approval by the Court.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Robert E. Perez, Director, Field Operations, New York, U.S. Customs and Border Protection (“CBP”), and 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”), announced today that the United States filed and settled civil fraud claims brought under the False Claims Act against TEMPLE ST. CLAIR LLC (“TEMPLE ST. CLAIR”), a fine jewelry designer, manufacturer, and importer based in New York, New York, with merchandise sold in retail stores and online throughout the United States.  As alleged in the Government’s complaint, TEMPLE ST. CLAIR systematically and unlawfully avoided payment of customs duties it owed on goods imported from Thailand, Sri Lanka, and Italy by falsely stating to CBP that the value of the goods was substantially less than the true value, and by senior leadership of TEMPLE ST. CLAIR hand-carrying jewelry into the United States for commercial purposes without declaring it to CBP.  Additionally, TEMPLE ST. CLAIR failed to properly affix to jewelry that was manufactured in Sri Lanka and Thailand permanent markings indicating its country of origin, in violation of CBP regulations.  As part of the settlement, approved yesterday in Manhattan federal court by U.S. District Judge Katherine Polk Failla, TEMPLE ST. CLAIR admitted to and accepted responsibility for underpaying customs duties and failing to properly mark its merchandise, and agreed to pay $796,000 to the United States and implement corrective measures to prevent future customs violations.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “This Office is committed to pursuing customs fraud and holding importers accountable for evading customs duties and disregarding CBP requirements.”

ICE HSI Special Agent-in-Charge Angel M. Melendez said:  “Temple St. Clair LLC employed fraudulent schemes that resulted in the underpayment of customs duties and the significant loss of revenue to the U.S. government.  Unfair trade practices hurt industries and consumers alike.  HSI stands committed with CBP, to vigorously investigate those people and businesses that seek to make a larger profit by circumventing, or even disregarding, customs regulations.”

CBP Director of New York Field Operations Robert E. Perez said:  “Today’s settlement is a testament to the dedication of our partners in the United States Attorney's Office, Homeland Security Investigations, and the men and women of CBP in enforcing our nation’s trade laws and taking effective action against those who seek to defraud the government.”  

As part of the settlement, TEMPLE ST. CLAIR admitted, acknowledged, and accepted responsibility for engaging in the following conduct:

• From January 2011 through July 2016, TEMPLE ST. CLAIR repeatedly understated the actual value of jewelry it imported from Italy, Sri Lanka, and Thailand in documents presented to CBP to establish the import duties owed on the jewelry.
• From January 2011 through July 2016, to obtain duty-free treatment pursuant to the Generalized System of Preferences trade-preference program, TEMPLE ST. CLAIR misrepresented to the United States that at least 35% of the value of jewelry was added in Sri Lanka or Thailand.
• In 2017, TEMPLE ST. CLAIR failed to ensure that the jewelry it was importing from Sri Lanka and Thailand was permanently marked with its country of origin at the time of entry.
• Between 2011 and 2016, TEMPLE ST. CLAIR senior management brought jewelry into the country for commercial purposes, and improperly failed to declare those items to CBP.  As a result, TEMPLE ST. CLAIR improperly avoided paying import duties for those items.

The settlement also requires TEMPLE ST. CLAIR to implement procedures to properly mark its jewelry with the country of origin.  TEMPLE ST. CLAIR must affix markings to the jewelry prior to the time of importation and with sufficient permanence to withstand normal shipping and handling. 

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

Mr. Berman praised the investigative work of HSI on this case.  He also thanked CBP for its assistance.

This case is being handled by the Office’s Civil Frauds Unit.  Assistant United States Attorneys Kirti Vaidya Reddy and Peter Aronoff are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Raymond Donovan, Special Agent in Charge of the Drug Enforcement Administration’s Special Operations Division, announced that Carlos Jose Zavala Velasquez, a former high-ranking member of the Honduran National Police, was sentenced yesterday to 12 years in prison for conspiring to import cocaine into the United States.  VELASQUEZ previously pled guilty before U.S. District Judge Lorna G. Schofield, who imposed yesterday’s sentence. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Carlos Jose Zavala Velasquez was a high-ranking Honduran police official who betrayed his duty and sold his office and sensitive law enforcement information to drug traffickers.  Velasquez assisted a major trafficking organization and its leader by tipping them off about investigations and even accompanying them during a shipment of cocaine.  Now he has been sentenced for his crimes.”

Special Agent in Charge Raymond Donovan said:  “Any corrupt law enforcement official who contributes to instability and drug-related violence around the world deserves American justice and that is what Mr. Velasquez will get.  Velasquez helped facilitate huge cocaine shipments bound for the United States and elsewhere and was a key facilitator for a significant Honduran drug trafficking and criminal network.  DEA is pleased at the result of this investigation and we will continue to pursue and attack those who threaten the United States and do damage to countless lives, families, and communities.”

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

From approximately 1991 through 2016, VELASQUEZ served as a member of the Honduran National Police, holding positions including, among others, second in command to the Chief of Police for the city San Pedro Sula; Chief of Police for the city Villanueva; Chief of Regional Special Services, a position responsible for investigations into organized crime; and the officer in charge of the “COBRAs” in San Pedro Sula, a commando-style unit dedicated to combatting organized crime.  Between at least approximately 2009 and 2012, VELASQUEZ facilitated the drug trafficking activities of an organization operated by one of the most significant drug traffickers in Central America, Hector Emilio Fernandez Rosa, a/k/a “Don H.”  On numerous occasions, and while VELASQUEZ was purportedly responsible for investigating Fernandez Rosa, VELASQUEZ provided information to Fernandez Rosa’s organization regarding ongoing law enforcement investigations so that the traffickers could plan transportation routes through Honduras for large loads of cocaine.  On at least one occasion, VELASQUEZ accompanied members of the drug trafficking organization during the transportation of a load of cocaine.  VELASQUEZ was paid between $5,000 and $20,000 each time he assisted the organization. 

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

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In addition to the prison term, VELASQUEZ, 46, was sentenced to three years of supervised release. 

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID BERGSTEIN, a film producer and entrepreneur, was sentenced today in Manhattan federal court to 8 years in prison for defrauding investors of more than $26 million.  BERGSTEIN was found guilty on March 1, 2018 following a four-week jury trial before U.S. District Court Judge P. Kevin Castel, who imposed today’s sentence.    

Manhattan U.S. Attorney Berman said:  “As a Hollywood film producer and entrepreneur, David Bergstein is versed in common themes for fictional writing.  Deception, truth, and lies fit the narrative for Bergstein’s real life scheme to bilk investors of more than $26 million.  A unanimous jury has found Bergstein’s plot to be full of holes, and he has now been sentenced to 8 years in federal prison.”

The jury found Bergstein guilty of all counts of the Indictment, which charged him with one count of conspiracy to commit investment adviser fraud and securities fraud, two counts of investment adviser fraud, two counts of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. 

According to the Indictment, other filings in Manhattan federal court, and the evidence presented at trial:

From 2011 through 2012, BERGSTEIN engaged in a scheme to defraud investors in Weston Capital Asset Management (“WCAM”), a New York-based registered investment adviser, by (i) concealing material information from Weston investors about financial transactions involving their money; (ii) transferring funds from one pool of Weston’s investors to make payments to, provide a security interest for, or otherwise benefit, another pool of Weston’s investors, without the required disclosures to investors concerning conflicts of interest; and (iii) misappropriating a portion of funds transferred from investor accounts for their own and others’ benefit.  BERGSTEIN orchestrated this scheme in part through two transactions involving Weston investors’ assets: first, a loan from a Weston fund called the Partners 2 (or “P2”) Fund, and, second, a swap agreement with a Weston fund called the Wimbledon TT Portfolio (the “TT Portfolio”). 

The Partners 2 Loan Scheme

In 2010, Weston agreed to a transaction with an entity named Gerova Financial Corporation (“Gerova”), an international reinsurance company, in which Weston sent assets from one of its hedge funds (the Wimbledon Financing Fund, or “WFF”) to Gerova in exchange for restricted shares of Gerova stock.  This exchange was intended to replace illiquid hedge fund assets with stock, which could be bought and sold more easily.  In 2011, however, Gerova’s stock price plummeted.  Weston subsequently sought to unwind the transaction, and Weston’s president was introduced to BERGSTEIN for this purpose.  BERGSTEIN and Weston’s principals subsequently formulated the outlines of a structure in which Weston would return its Gerova stock, receive its assets back from Gerova, and place those assets into another entity called Arius Libra Inc. (“Arius Libra”) as part of an investment in a separate business.  Certain payments would be made along the way to facilitate the transfers.  

In order to complete this transaction, BERGSTEIN and Weston’s principals agreed to loan money from the P2 Fund, another Fund operated and managed by Weston, to Arius Libra.  The purpose of this loan (the “P2 Loan”) was purportedly (i) to pay certain debts associated with Gerova, and (ii) to fund Arius Libra’s purported medical billing businesses.  Bergstein arranged for the P2 Loan to be secured by certain of the assets of WFF.  Thus, in the event the P2 Loan was not repaid, the P2 Fund had the ability to liquidate WFF assets to make P2 investors whole, to the detriment of investors in WFF.  In total, approximately $9 million in investor money was disbursed from the P2 Fund pursuant to the P2 Loan. 

As BERGSTEIN well knew, however, P2 Fund investors were neither informed of the existence of the P2 Loan nor given any information about Arius Libra.  And no disclosures were made to inform either P2 Fund or WFF investors of the conflict of interest arising from the P2 Fund’s security interest in WFF assets, as BERGSTEIN also knew.  And although BERGSTEIN had represented to Weston that disbursements made pursuant to the P2 Loan would be used both to pay off Gerova creditors and to fund Arius Libra’s medical billing businesses, in fact, BERGSTEIN misappropriated millions of dollars of P2 Loan proceeds and used them to pay for, among other things, his own personal expenses, including credit card bills and attorney’s fees.

The TT Portfolio Swap Agreement Scheme
 

In late 2011, BERGSTEIN and Weston’s principals secretly arranged for Weston’s TT Portfolio to enter into a swap agreement with an entity controlled by BERSTEIN known as Swartz IP Services (“Swartz IP”), a transaction that was not disclosed to TT Portfolio investors.  As part of this swap agreement, Bergstein arranged for approximately $17.7 million from the TT Portfolio to be transferred to Swartz IP.  In exchange, BERGSTEIN agreed to provide certain investment returns and to meet investor redemption requests.  Bergstein induced this transaction by misrepresenting to Weston’s principals that a wealthy investor had capitalized Swartz IP and guaranteed the transaction.

The TT Portfolio transaction was completed without disclosure to investors, even though, for other swap agreements, Weston had amended the TT Portfolio offering memorandum to reflect the particular swap agreement at issue.  Of the money that was transferred to Swartz IP, BERGSTEIN directed that approximately $3 million be transferred to the P2 Fund to pay back part of the P2 Loan.  BERGSTEIN thus arranged for money from one set of Weston’s investors (the TT Portfolio investors) to be used to pay back part of a debt owed to another set of Weston’s investors (the P2 Fund investors) – another conflict of interest that was not disclosed to P2 or TT Portfolio investors.

As a further part of the scheme, BERGSTEIN made false representations about Swartz IP’s assets and ability to meet redemption requests and secretly diverted TT Portfolio investor proceeds to pay BERGSTEIN’s personal expenses, including credit card bills, impressionist artwork, and private jets.

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In addition to his prison term, BERGSTEIN, 55, of Hidden Hills, California, was sentenced to three years of supervised release, forfeiture and restitution amounts to be determined at a later time.  BERGSTEIN was remanded on March 1, 2018, following the return of the jury’s verdict, and he remains in custody. 

Mr. Berman praised the investigative work of the FBI, the IRS, and the Office’s Criminal Investigators.  He also 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 U.S. Attorneys Edward A. Imperatore, Robert W. Allen, and Elisha J. Kobre are in charge of the prosecution. 

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”), Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and Peter R. Rendina, Inspector-in-Charge of the New York Field Division of the U.S. Postal Inspection Service (“USPIS”), announced today that JONATHAN RIENDEAU and JADE PLANTE have been charged with operating websites that sold more than $1 million of synthetic cannabinoids throughout the United States.  Both defendants were arrested this morning.  RIENDEAU will be presented today in federal court in the Southern District of California.  PLANTE will be presented today in federal court in the Southern District of Florida.  The case has been assigned to United States District Judge Naomi Reice Buchwald.

U.S. Attorney Geoffrey S. Berman said:  “Trafficking of synthetic cannabinoids – sometimes called K2 or Spice – is on the rise and poses a serious threat to public health and safety.  Packaged attractively to appeal to teenagers and young adults, synthetic cannabinoids are in reality a toxic cocktail that can be very dangerous to consume.  As alleged, Jonathan Riendeau and Jade Plante used the internet to peddle massive quantities of synthetic cannabinoids.  Thanks to our law enforcement partners, Riendeau and Plante have been arrested and their dangerous business has been dismantled.”

NYPD Commissioner James P. O’Neill said:  “As NYPD detectives continue to do remarkable work in investigating those responsible for directing smokeable synthetic cannabinoids onto our streets – and the resulting scourge of related overdoses – we are grateful for the collaboration of our federal partners, whose reach and expertise greatly strengthens our impact on this crisis.  The composition of these toxic chemicals varies by batch, and the results of taking them are unpredictable. What is predictable, however, is our relentless investigation of anyone who produces or sells so-called ‘synthetic marijuana’ in New York City or anywhere else in America.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “These individuals allegedly sold and distributed massive quantities of laced smokeable synthetic cannabinoids, throughout the country using the internet.  These arrests are so timely, considering amount of K2 related overdoses we have experienced here in New York City.  Law enforcement is full steam ahead on investigations to bring down those online drug dealers and prosecute them to the fullest extent of the law.”

USPIS Inspector-in-Charge Peter R. Rendina said:  “Dealers in synthetic drugs never think of the lasting impact on the lives destroyed and the communities devastated by their greedy and illegal operation. Their only goal is to make money off of the users. Whether it be a clever name or packaging, these illegal operations will never go unnoticed by law enforcement.  Today’s arrests are a strong message to drug traffickers that Postal Inspectors and their law enforcement partners will spare no resource or expense to protect our customers and the sanctity of the U.S. Mail.”

According to the allegations in the Indictment[1]:

From February 2014 until June 2018, RIENDEAU and PLANTE operated a scheme to distribute massive quantities of smokeable synthetic cannabinoids (“SSC”), containing controlled substances and controlled substance analogues, throughout the United States.  SSC, which can be addictive, are often marketed as safe, legal alternatives to marijuana.  In fact, SSC are not safe and may affect the brain much more powerfully than marijuana; their actual effects can be unpredictable and, in some cases, more dangerous or even life-threatening.

RIENDEAU and PLANTE operated three different websites on which they sold SSC, colloquially referred to as “K2” or “Spice,” which included dried, shredded plant material onto which synthetic cannabinoid chemicals had been sprayed, and liquids containing synthetic cannabinoid chemicals for users to vaporize and inhale with e-cigarettes or other similar devices.  The SSC distributed by the scheme were branded with colorful graphics and distinctive names, including “Dead Man Walking,” “Brainfreeze,” “Klimax,” “Twilite,” “Delirium,” “Purple Haze,” “Diablo,” “AK-47,” “ScoobySnax,” “F*cking Crazy,” and “Dafuq.”  Many of the SSC were marketed as having flavors, including chocolate, apple, and strawberry.  The SSC were sometimes marked “not for human consumption,” or “potpourri.”

Over the course of the scheme, RIENDEAU and PLANTE shipped approximately 6,000 packages of SSC through the United States mail to customers throughout the U.S., including locations in Manhattan, the Bronx, and all 50 states, containing a total of more than 120 kilograms of SSC.  RIENDEAU and PLANTE were paid more than $1 million for SSC in the course of the scheme.

*                      *                      *

RIENDEAU, 38, of San Diego, California, is charged with three counts of conspiring to distribute narcotics.  PLANTE, 39, of Port Saint Lucie, Florida, is charged with one count of conspiring to distribute narcotics.  Each count carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  

Mr. Berman praised the outstanding investigative work of HSI, USPIS, and the NYPD, and thanked the Drug Enforcement Administration for its assistance.  The long-term investigation of this case was partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (“HIDTA”), which is a federally funded crime fighting initiative and part of the Organized Crime Drug Enforcement Task Force program.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Robert B. Sobelman is in charge of the prosecution. 

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

 

---

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), and James J. Hunt, the Special Agent-in-Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), announced the unsealing today of a Superseding Indictment charging a total of 20 members and associates of a branch of the MacBallas street gang operating primarily in and around the Andrew Jackson and Melrose Houses in the Bronx with racketeering, narcotics, robbery, and firearms offenses.  Two defendants are charged with the 2011 murder of Daniel Delgado.

A total of 12 defendants were taken into custody today; three other defendants were already in federal custody; and three are in state custody.  Fourteen of the 20 defendants will be presented and arraigned before U.S. Magistrate Judge Kevin N. Fox later today.  The case is assigned to U.S. District Judge Denise L. Cote.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the Indictment, the defendants brought violence, fear, and drugs to the streets of New York.  The people of this city will not stand for it, and neither will we.  Thanks to the extraordinary work of the NYPD and DEA, the defendants will now face justice for their alleged crimes.” 

NYPD Commissioner James P. O’Neill said:  “Gang and crew activity, particularly in the Bronx as we’ve seen of late, is responsible for much of the violence in our city.  This behavior will never be tolerated by New Yorkers, and I thank our federal partners at the DEA and the Southern District for strengthening the NYPD’s relentless efforts to rid our streets of these criminals.”

DEA Special Agent-in-Charge James J. Hunt said:  “Gang violence begets violence and turns neighborhoods into battlegrounds.  Law enforcement knows that shutting down gangs’ drug and gun networks lays a foundation for safer communities.  Today’s arrests demonstrate that we are proactively safeguarding our communities by dismantling one gang at a time.”

As alleged in the Superseding Indictment unsealed today in Manhattan federal court and in other court papers[1]:

From 2011 through June 2018, in the Southern District of New York and elsewhere, TOSHNELLE FOSTER, a/k/a “Tosh,” CHRISTOPHER ASHE, a/k/a “Chips,” DAWAYNE BELL, JASON CHRISTIAN, a/k/a “Hungry,” NAVONE DOZIER, a/k/a “Dollaz,” KEVON GAITHER, a/k/a “KK,” CLARENCE GLASGO, a/k/a “Chuck,” XAVIER HOLMAN, a/k/a “Rico,” JAFARI JONES, a/k/a “JJ,” SEAN JONES, a/k/a “S Dot,” KEENAN MCFARLAND, AUSTIN MORRISHOW, a/k/a “Chuckey,” DEANDRE MORRISON, a/k/a “D Nice,” DEONTE MORRISON, a/k/a “Suki,” KEITH OUTLAW, a/k/a “Keefy,” LASYAH PALMER, a/k/a “Timbo,” JASON RAMOS, a/k/a “Chico,” FRANCISCO TORRES, a/k/a “Baby,” and BO WILLIAMS, a/k/a “Boski,” were all members and associates of the MacBallas street gang, whose territory was centered in and around the Andrew Jackson and Melrose housing projects in the Bronx, New York.  In order to fund the gang, protect its territory, and promote its standing, members of the MacBallas engaged in, among other things, narcotics trafficking, robbery, and other acts of violence, including murder.  MacBallas members sold heroin, crack cocaine, and marijuana in the gang’s territory, promoted their gang affiliation on social media sites like Facebook, possessed shared firearms, and engaged in shootings as part of their gang membership.

In particular, on August 1, 2011, DEANDRE MORRISON and NATHANIEL FLUDD murdered Daniel Delgado in order to maintain and increase their status in the MacBallas gang.

Members of the MacBallas gang also participated in a conspiracy to distribute narcotics in and around the MacBallas territory in the Bronx.  In particular, CHRISTIAN, ASHE, DOZIER, GAITHER, JAFARI JONES, SEAN JONES, McFARLAND, MORRISHOW, DEONTE MORRISON, OUTLAW, PALMER, RAMOS, TORRES, and WILLIAMS participated in a conspiracy to distribute heroin, marijuana, and more than 280 grams of crack cocaine.

*          *          *

Charts containing the names, charges, and maximum penalties for the defendants are set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the NYPD’s Bronx Violent Crimes Squad and the New York Field Division of the DEA.

The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jordan Estes, Maurene Comey, and Christopher Clore 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

Racketeering

Conspiracy

 

18 U.S.C. § 1962(d) 

TOSHNELLE FOSTER, 26

CHRISTOPHER ASHE, 21

DAWAYNE BELL, 27

JASON CHRISTIAN, 37

NAVONE DOZIER, 23

KEVON GAITHER, 22

CLARENCE GLASGO, 23

XAVIER HOLMAN, 28

JAFARI JONES, 23

SEAN JONES, 28

KEENAN McFARLAND, 22

AUSTIN MORRISHOW, 20

DEANDRE MORRISON, 26

DEONTE MORRISON, 24

KEITH OUTLAW, 26

LASYAH PALMER, 29

JASON RAMOS, 23

FRANCISCO TORRES, 27

BO WILLIAMS, 27

20 years

 

 

2

Narcotics

Conspiracy

 

21 U.S.C. § 846

JASON CHRISTIAN

CHRISTOPHER ASHE

NAVONE DOZIER

KEVON GAITHER

JAFARI JONES

SEAN JONES

KEENAN McFARLAND

AUSTIN MORRISHOW

DEONTE MORRISON

KEITH OUTLAW

LASYAH PALMER

JASON RAMOS

FRANCISCO TORRES

BO WILLIAMS

 

 

 

 

Life in prison

 

Mandatory minimum of 10 years in prison

3

Murder in Aid of

Racketeering

 

18 U.S.C. § 1959(a)(1)

NATHANIEL FLUDD

DEANDRE MORRISON

Death, or Life in prison

4

Causing Death through use of a Firearm

 

18 U.S.C. § 924(j)

NATHANIEL FLUDD

DEANDRE MORRISON

Death, or Life in prison

 

5

Violent Crime in Aid of Racketeering

 

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

SEAN JONES

NAVONE DOZIER

DAWAYNE BELL

CLARENCE GLASGO

20 years in prison

6

Firearms Offense

 

18 U.S.C. § 924(c)(1)(A)(iii) and 2

SEAN JONES

NAVONE DOZIER

DAWAYNE BELL

CLARENCE GLASGO

Life in prison

 

Mandatory minimum of 10 years in prison

 

 

7

Hobs Act Robbery

 

18 U.S.C. § 1951

JAFARI JONES

20 years in prison

8

Firearms Offense

 

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

JAFARI JONES

Life in prison

 

Mandatory minimum of 10 years in prison

9

Violent Crime in Aid of Racketeering

 

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

KEITH OUTLAW

20 years in prison

10

Firearms Offense

 

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

KEITH OUTLAW

Life in prison

 

Mandatory minimum of 10 years in prison

11

Violent Crime in Aid of Racketeering

 

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

DEONTE MORRISON

20 years in prison

12

Firearms Offense

 

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

DEONTE MORRISON

Life in prison

 

Mandatory minimum of 10 years in prison

13

Violent Crime in Aid of Racketeering

 

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

TOSHNELLE FOSTER

20 years in prison

14

Firearms Offense

 

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

TOSHNELLE FOSTER

Life in prison

 

Mandatory minimum of 10 years in prison

15

Violent Crime in Aid of Racketeering

 

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

KEITH OUTLAW

20 years in prison

16

Violent Crime in Aid of Racketeering

 

18 U.S.C. §§ 1959(a)(3), 1959(a)(5) and 2

XAVIER HOLMAN

20 years in prison

17

Firearms Offense

 

18 U.S.C. §§ 924(c)(1)(A)(iii) and 2

XAVIER HOLMAN

Life in prison

 

Mandatory minimum of 10 years in prison

18

Felon in Possession of Ammunition

 

18 U.S.C. § 922(g)

XAVIER HOLMAN

10 years in prison

19

Felon in Possession of Ammunition

 

18 U.S.C. § 922(g)

KEENAN McFARLAND

10 years in prison

20

Firearms Offense

 

18 U.S.C. § 924(c)(1)(A)(iii) and 2

JASON CHRISTIAN

KEENAN McFARLAND

AUSTIN MORRISHOW

LASYAH PALMER

JASON RAMOS

FRANCISCO TORRES

BO WILLIAMS

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.

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 SEBASTIAN PINTO-THOMAZ, ABELL OUJADDOU, and JEREMY MILLUL for their participation in a scheme to trade on material, nonpublic information (the “Inside Information”) misappropriated by PINTO-THOMAZ from his employer, a credit rating agency based in New York (the “Firm”).  The scheme yielded almost $300,000 in illegal profits.

PINTO-THOMAZ, OUJADDOU, and MILLUL were arrested this morning in New York, New York, and will be presented today before United States Magistrate Judge Nathaniel Kevin Fox.  In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against PINTO-THOMAZ, OUJADDOU and MILLUL.

U.S. Attorney Geoffrey Berman said:  “As alleged, Sebastian Pinto-Thomaz used his position with a credit rating agency, where he was privy to business acquisition plans before they were publicly announced, to provide inside information to two friends who traded on the information and reaped thousands in profits.  Then, when asked about this illicit trading, Pinto-Thomaz painted himself into a corner, falsely denying any relationship with his two co-conspirators.  Our Office has always been – and remains – committed to ensuring that the nation’s securities markets remain fair for everyone, not just those who have friends in the know.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:   “Aiming to fill their pockets, the defendants allegedly conspired to use Inside Information to advance their greedy agendas.  This alleged fraud triangle produced nearly $300,000 in profit among the three defendants.  As alleged, Pinto-Thomaz abandoned his duties of loyalty and confidentiality by passing material nonpublic information to his co-conspirators who then made illegal trades. We hope that today’s arrests will show all like-minded schemers that this alleged behavior ultimately does get you to the inside – of a federal prison.”

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

Rating Evaluation Services and the Insider

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

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

The Insider Trading Scheme

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

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

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

PINTO-THOMAZ Makes False Statements About

OUJADDOU and MILLUL in Connection with a FINRA Inquiry

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

*                    *                    *

PINTO-THOMAZ, 32, ABELL OUJADDOU, 55, and JEREMY MILLUL, 31, all of New York, New York, are each charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense, and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the Court.

In addition, the Government, pursuant to Court authorized seizure warrants, has seized $100,000 from a bank account belonging to MILLUL, and over 25,000 shares of BlackBerry stock from brokerage accounts belonging to OUJADDOU, as these assets constitute, or are traceable to, proceeds of the illegal conduct alleged in the Complaint.

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

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

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 therein should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced non-prosecution agreements (the “Agreements”) with tribal corporations controlled by two Native American tribes: the Modoc Tribe of Oklahoma and the Santee Sioux Tribe of Nebraska.  As part of the Agreements, the tribal corporations agreed to forfeit, collectively, $3 million in proceeds from the illegal payday lending enterprise owned and operated by Scott Tucker.  As part of the Agreements, the tribal corporations acknowledged, among other things, that Tucker used his agreements with the tribal corporations to evade state usury laws and that representatives of the tribes filed affidavits containing false statements in state enforcement actions against parts of Tucker’s payday lending enterprise.

Mr. Berman also announced that monies forfeited to the Office in connection with its investigation of Tucker’s scheme, including monies recovered as part of the Agreements, will be remitted to the Federal Trade Commission (“FTC”) for distribution to victims of the payday lending scheme.  In total, the U.S. Attorney’s Office expects to remit in excess of $500 million to the FTC for victims.

U.S. Attorney Geoffrey S. Berman stated:  “To hide their criminal payday lending scheme, Scott Tucker and Timothy Muir tried to claim their business was owned and operated by Native American tribes.  Today’s settlements with two of those tribes will add $3 million to the hundreds of millions already recovered – from Tucker, from U.S. Bancorp, and from a non-prosecution agreement with a third native American tribe – to compensate Tucker’s millions of victims.”           

Tucker’s Payday Lending Scheme

On January 5, 2018, Tucker was sentenced to 200 months in prison for operating a nationwide internet payday lending enterprise that systematically evaded state laws for more than 15 years in order to charge illegal interest rates as high as 1,000 percent on loans.  Tucker’s co-defendant, Timothy Muir, an attorney, was sentenced to 84 months in prison for his participation in the scheme.  In addition to their willful violation of state usury laws across the country, Tucker and Muir lied to millions of customers regarding the true cost of their loans to defraud them out of hundreds, and in some cases, thousands of dollars.  In furtherance of their multi-year effort to evade law enforcement, Tucker and Muir formed sham relationships with Native American tribes and laundered billions of dollars obtained from customers through bank accounts nominally held by the tribes in order to hide Tucker’s ownership and control of the business.  Tucker and Muir were sentenced following their convictions on all 14 counts against them after a five-week jury trial that concluded on October 13, 2017.

The Sham Tribal Ownership of Tucker’s Businesses

In response to complaints that Tucker’s payday lending enterprise was extending abusive loans in violation of their usury laws, several states filed actions to enjoin the enterprise from operating in their states.  To thwart these state actions, Tucker devised a scheme to claim that his lending businesses were protected by sovereign immunity, a legal doctrine that, among other things, generally prevents states from enforcing their laws against Native American tribes.  Beginning in 2003, Tucker entered into agreements with several Native American tribes (the “Tribes”), including the Modoc Tribe of Oklahoma, the Santee Sioux Tribe of Nebraska, and the Miami Tribe of Oklahoma.  The purpose of these agreements was to make it appear that the Tribes owned and operated parts of Tucker’s payday lending enterprise so that when states sought to enforce laws prohibiting usurious loans, Tucker’s lending businesses could claim to be protected by sovereign immunity.  In return, the Tribes received payments from Tucker, typically one percent of the revenues from the portion of Tucker’s payday lending business that the Tribes purported to own. 

Recovery and Distribution of Money for Victims of Tucker’s Payday Lending Scheme

Through various actions, the U.S. Attorney’s Office has recovered hundreds of millions of dollars that will be remitted to victims of Tucker’s scheme.  In addition to the recoveries from the Modoc and Santee Sioux Tribes announced today, the Office has also recovered $48 million pursuant to a non-prosecution agreement with the Miami Tribe of Oklahoma and tens of millions of dollars in cash and properties from Tucker.  In addition, as announced on February 15, 2018, the Office intends to remit money recovered by the Government from U.S. Bancorp for Bank Secrecy Act (“BSA”) violations to victims of the scheme.  In total, the Office has recovered in excess of $500 million for victims.

To facilitate distributions to victims, the Office is transferring the recovered funds to the FTC, which successfully brought a related civil action against Tucker and various entities involved in the illegal payday lending scheme.  Monies recovered by this Office will be pooled with monies recovered by the FTC and distributed to victims by the FTC according to terms and in a manner to be announced later this year.  Victims seeking restitution are encouraged to visit www.ftc.gov/amg for updated information regarding the FTC’s redress program and to sign up to receive email updates.  www.ftc.gov/news-events/press-releases/2018/06/statement-ftc-chairman-simons-dojs-remitting-more-500-million-ftc

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

*                      *                     *

Mr. Berman praised the outstanding investigative work of the St. Louis Field Office of the Internal Revenue Service-Criminal Investigation.  Mr. Berman also thanked the Criminal Investigators at the United States Attorney’s Office, the Federal Bureau of Investigation, and the Federal Trade Commission for their assistance with the case.

The prosecution is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Niketh Velamoor, Hagan Scotten, and Sagar Ravi are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the arrest of JOEL DAVIS on charges of enticement of a minor to engage in sexual activity, attempted sexual exploitation of a minor, and possession, receipt, and distribution of child pornography.  DAVIS was arrested today and will be presented today in Manhattan federal court before the Honorable Kevin N. Fox.

U.S. Attorney Geoffrey S. Berman said:  “Joel Davis started an organization devoted to stopping sexual violence, while allegedly engaged in the duplicitous behavior of sharing explicit images of infants engaged in sexual activity.  Davis also allegedly solicited an undercover officer – whom he thought to be a willing participant – to send sexually explicit videos of his nine-year-old daughter, and even to set up a sexual encounter between himself and a two-year-old.  The conduct alleged against Joel Davis is as unfathomable as it is sickening, and as this case demonstrates, law enforcement will keep its watchful eye on the darkest corners of the internet to bring predators to justice.” 

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “Having started an organization that pushed for the end of sexual violence, Davis displayed the highest degree of hypocrisy by his alleged attempts to sexually exploit multiple minors. As if this wasn’t repulsive enough, Davis allegedly possessed and distributed utterly explicit images of innocent infants and toddlers being sexually abused by adults. Crimes against children such as those alleged are taken very seriously by the FBI, and we continue to work tirelessly to investigate those who place the most helpless members of the American public at risk.”

According to the allegations in the Complaint sworn out today in Manhattan federal court and statements made during court proceedings:[1]

Over the course of several weeks in June 2018, DAVIS, who started an organization devoted to ending sexual violence, exchanged text messages with law enforcement officers operating in an undercover capacity.  During the course of these conversations, DAVIS told the undercover officers that he was sexually interested in children of all ages.  DAVIS sent the undercover officers sexually explicit photographs of infants and toddlers, including photographs in which the infants and toddlers were engaged in sexual activity with adults.  During the course of text conversations with one of the undercover officers, DAVIS described explicit sexual activity that he intended to engage in with the purported nine-year-old daughter of the undercover officer and with the purported two-year-old daughter of the undercover officer’s girlfriend.  DAVIS also repeatedly asked that undercover officer to take naked and sexually explicit pictures and videos of his purported daughter and his purported girlfriend’s toddler daughter and to send the pictures and videos to DAVIS. 

*                      *                     *

DAVIS, 22, of Manhattan, New York, is charged with one count of enticement of a minor under the age of 18 to engage in sexual activity, which carries a mandatory minimum term of 10 years in prison and a maximum of life in prison; one count of attempted sexual exploitation of a minor, which carries a mandatory minimum term of 15 years in prison and a maximum of 30 years in prison; one count of possession of child pornography, which carries a mandatory minimum term of 5 years in prison and a maximum of 20 years in prison; and one count of receipt and distribution of child pornography, which carries a maximum term of imprisonment 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 Juliana N. Murray 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.

Geoffrey Berman, the United States Attorney for the Southern District of New York, and Melinda Plaisier, Associate Commissioner for Regulatory Affairs for the U.S. Food and Drug Administration (“FDA”), announced today the filing of a Complaint against defendants RAHSAN A. HAKIM (“Hakim”) and ADONIIAH A. RAHSAN (“Rahsan”) for repeated violations of the Food, Drug, and Cosmetic Act.  HAKIM and RAHSAN do business as Sundial Herbal Products. 

U.S. Attorney Geoffrey Berman said:  “As alleged in the complaint, the defendants are the modern incarnation of snake oil salesmen, selling the unsuspecting public unapproved or misbranded drugs that they claim, without basis, will cure cancer, diabetes, and other serious illnesses.  They have repeatedly been warned that their conduct violates the law, yet have continued to sell unapproved, adulterated, and misbranded drugs.  Our lawsuit seeks an injunction preventing them from continuing this illegal conduct.”

FDA Associate Commissioner for Regulatory Affairs Melinda Plaisier said:  “Dietary supplements pose a public health risk when they claim to treat medical conditions, such as asthma, diabetes or cancer, which puts them into the category of misbranded and unapproved drugs.  The FDA will continue to take action to protect the public when companies violate the law.”

The Complaint, filed today in federal court in Manhattan, alleges that defendants manufacture and sell various unapproved drugs and dietary supplements that claim to cure, treat, and/or prevent numerous diseases and conditions, including but not limited to syphilis, diabetes, high blood pressure, arthritis, asthma, heart disease, and cancer.  None of their products has been tested or approved by the FDA for safety or effectiveness.  Their sale of such products poses a threat to public health because the products’ disease treatment claims may cause consumers to delay appropriate medical care for the serious medical issues described above.  Further, defendants cannot guarantee the identity, purity, strength, and composition of their dietary supplements.

Defendants have been inspected by the FDA multiple times, and, despite repeated promises to do so, have failed to correct their violations of the Food, Drug, and Cosmetic Act.           

*                      *                     *

The Complaint seeks an order enjoining defendants from manufacturing and selling drugs and dietary supplements in violation of the Food, Drug, and Cosmetic Act.

Mr. Berman thanked the FDA for its work leading to the Complaint.

This case is being handled by the Office’s Environmental Protection Unit in the Civil Division.  Assistant United States Attorney Emily Bretz is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that THOMAS CARRANO was convicted today by a unanimous Manhattan jury of conspiring to possess, sell, and transport roosters for purposes of participation in animal fights around the United States. The defendant was convicted after a five day trial before the Honorable Sidney H. Stein.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Thomas Carrano, the leader of an association that claimed to ‘not promote cockfighting in any way,’ was convicted of that very thing.  Carrano cared not a whit for the welfare of the roosters he raised, sold, and transported for participation in the cruel and inhumane ‘sport’ of cockfighting.  Thanks to the ASPCA and our law enforcement counterparts, justice has come home to roost for Thomas Carrano.”

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

Cockfighting is an activity in which two roosters are put forward to fight one another for sport and entertainment.  The roosters typically have metal spurs, known as gaffs, or plastic spurs, known as “postiza,” affixed to their legs for use in the fight.  The fights between roosters are ended when one rooster is dead or refuses to continue to fight.  If not killed during the fight, the losing rooster is typically killed afterwards.  Roosters involved in cockfighting will often be mutilated in preparation for fights, typically by cutting off the rooster’s comb and wattle and shaping the rooster’s spur. 

From January 2012 up June 2017, THOMAS CARRANO, a member and former president of the New York chapter of the United Gamefowl Breeders Association (“NYUGBA”), conspired with others – including a co-conspirator in the Bronx, New York – to buy, sell, transport, and receive roosters for cockfighting and to buy, sell, and transport cockfighting weapons.  CARRANO used two social media accounts – one in his own name, and one in NYUGBA’s name – to communicate with co-conspirators, including members of NYUGBA and others who were located in the Southern District of New York.  The NYUGBA claimed to be devoted solely to breeding rare gamefowl for poultry shows.  Yet in messages sent through these social media accounts, CARRANO discussed breeding and training roosters for cockfighting, the sale and purchase of gaffs and postizas for cockfighting, and CARRANO’s personal participation in cockfighting.

On May 23, 2017, law enforcement personnel executed a search warrant at CARRANO’s gamefowl farm in Ontario, New York.  During the search, law enforcement officers discovered, among other things, gaffs, postizas, shears for dubbing roosters, a rooster sparring dummy, a specialized ladder used to train fighting roosters, cockfighting supplements, and videos of roosters being trained for cockfights.  In addition, law enforcement officers recovered approximately 104 chickens, including 19 adult roosters and 12 adolescent roosters, many of which had their natural spurs, combs, wattles, and/or earlobes removed. 

*                      *                     *                   

CARRANO, 44, of Ontario, New York, is convicted of one count of conspiring to sell, possess, and transport animals for purposes of participating in an animal fight, which carries a maximum penalty of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the U.S. Department of Agriculture, Office of Inspector General, and the New York City Police Department’s Animal Cruelty Investigations Squad, and thanked them for their ongoing support and assistance with the case.  Mr. Berman also thanked the American Society for the Prevention of Cruelty to Animals and the Spotsylvania County Sheriff’s Office for their assistance in this case. 

The prosecution of this case is being overseen by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Alison G. Moe and Michael C. McGinnis are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MACHLI JOSEPH was sentenced to 20 months in prison for embezzling more than $700,000 in funds intended for Baruch College for the rental of their athletic facilities.  JOSEPH pled guilty in January 2018 before U.S. District Judge Paul A. Crotty, who imposed today’s sentence.    

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Machli Joseph used the facilities of Baruch College as his own cash machine, renting them out without approval and without compensation to the school.  All told, his scheme diverted nearly three-quarters of a million dollars that should have been paid to the college.  Our Office is committed to pursuing those who misappropriate educational funds for their own profit.”

According to the Information and Complaint filed in this case, and statements made during the plea proceeding:     

MACHLI JOSEPH served as an athletic department official at Baruch College between 2002 and 2016.  He served as Baruch’s women’s basketball head coach between 2004 and 2014, its men’s basketball coach in 2002, as assistant athletic director from 2003 to 2011, and as associate athletic director from 2011 until August 2016.  At times when the Baruch College gym was not being used by the school’s athletic teams, it could be rented out to outside parties.  In his administrative capacity, JOSEPH had control over those gym rentals and their scheduling.

On numerous occasions between 2010 and 2016, JOSEPH rented the gym to outside parties, ostensibly on behalf of Baruch College.  In instructing the renting parties on how to provide payment, however, JOSEPH directed that payment be made to entities that were not, in fact, connected to Baruch College.  Instead, they were entities with bank accounts over which JOSEPH had personal control, some of which merely sounded like Baruch-affiliated entities.  On several occasions, JOSEPH simply directed that payment be made directly to him or individual associates of his.  Many of these funds were ultimately spent on personal expenses and items for JOSEPH and his family, including renovations to his home in New Jersey.  All told, the scheme improperly diverted over $700,000 of payments intended for Baruch College.

*                *                *

In addition to the prison term, JOSEPH, 43, of Elizabeth, New Jersey, was sentenced to three years of supervised release and ordered to forfeit $787,194, and to pay the same amount in restitution. 

Mr. Berman praised the investigative work of the Department of Education – Office of the Inspector General and the New York State Inspector General’s Office.  

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of an Indictment charging 22 members of a crew operating in and around the Thomas Jefferson Houses in Manhattan with narcotics conspiracy and firearms offenses. 

A total of 14 defendants were taken into custody today; two other defendants were already in federal custody.  Sixteen of the 22 defendants will be presented and arraigned before U.S. Magistrate Judge Henry B. Pitman later today.  The case is assigned to U.S. District Judge Andrew L. Carter.   

U.S. Attorney Geoffrey S. Berman said:  “In this Office’s continuing effort to improve the quality of life for the law-abiding and rent-paying residents of NYCHA housing, today’s indictment charges 22 members with allegedly operating a serious drug distribution network to deal crack cocaine in and around the Jefferson Houses in East Harlem.  These drugs destroy lives and cripple communities.  In addition, members of the crew allegedly possessed firearms to further their drug operation, bringing the danger of gun violence to the streets of New York.  Thanks to the outstanding work of the FBI and NYPD, the defendants will now face justice in federal court.” 

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “As alleged, these drug dealers hold communities hostage by creating an atmosphere of fear, and the wares they’re pushing are now having a deadly impact beyond our city.  The FBI Metro Safe Streets Task Force, which made today’s arrests, is committed to deterring street violence and will continue to pursue those that endanger New York City communities.”  

As alleged in the Indictment unsealed today in Manhattan federal court and in other court papers[1]:

From 2014 up to June 2018, JOSE HERNANDEZ, a/k/a “Cheerio,” a/k/a “Bheerio,” CHRISTOPHER LAWRENCE, a/k/a “Hood,” a/k/a ”H.O.,” a/k/a “Peanut,” LUIS AVILES, a/k/a “Toby,” GERALDO BUSANET, a/k/a “Bunazie,” SAMMUEL CABAN, a/k/a “Sammy,” JASON DAVENPORT, a/k/a “Jay,” JAMER DAVIS, a/k/a “J-Rock,” JERRELL FULCHER, a/k/a “Relly,” a/k/a “Butta,” RICO GONZALEZ, CLARENCE GRANDY, a/k/a “Butta,” TITO LLANES, a/k/a “Reek,” BENJAMIN LUCRE, a/k/a “Gotti,” DERRICK RICHARDSON, a/k/a “Fazo,” PARIS ROBERTS, a/k/a “Rambo,” ROCKY SANCHEZ, EDWIN SANTANA, a/k/a “E.B.,” a/k/a “Fat,” a/k/a “Defat,” LARRY SMITH, a/k/a “Scrap,” SHAHIEME SMITH, a/k/a “Mills,” a/k/a “Ira,” ISAAC SOLER, a/k/a “Doughboy,” DYLAN WILLIAMS, a/k/a “Rock,” a/k/a “Rockyo,” JAMES WILSON, a/k/a “Gotti,” and ROBERT WRIGHT, a/k/a “Rob Santana,” participated in a conspiracy to distribute 280 grams and more of crack cocaine and in around the Jefferson Houses, a public housing project in East Harlem, New York.

From 2014 up to June 2018, certain members of this Crew, namely JOSE HERNANDEZ, CHRISTOPHER LAWRENCE, BENJAMIN LUCRE, EDWIN SANTANA, LARRY SMITH, ISAAC SOLER, and DYLAN WILIAMS used, carried, and possessed firearms in furtherance of the crack cocaine conspiracy of which they were members.

*                      *                     *       

Charts containing the names, charges, and maximum penalties for the defendants are set forth below.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI and NYPD, and commended the NYPD's Manhattan North Narcotics, Major Case. 

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Lauren Schorr, Jessica Feinstein, Jacob Warren, and Christopher Clore 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. §§ 841(b)(1)(A) and 846 

JOSE HERNANDEZ, 31

CHRISTOPHER LAWRENCE, 34

LUIS AVILES, 31

GERALDO BUSANET, 31

SAMMUEL CABAN, 28

JASON DAVENPORT, 30

JAMER DAVIS, 23

JERRELL FULCHER, 21

RICO GONZALEZ, 21

CLARENCE GRANDY, 20

TITO LLANES, 22

BENJAMIN LUCRE, 18

DERRICK RICHARDSON, 21

PARIS ROBERTS, 19

ROCKY SANCHEZ, 23

EDWIN SANTANA, 29

LARRY SMITH, 28

ISAAC SOLER, 27

DYLAN WILLIAMS, 20

JAMES WILSON, 29

ROBERT WRIGHT, 23

 

 

 

Life in prison

 

Mandatory minimum of 10 years in prison

2

Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of a drug trafficking crime

 

18 U.S.C. §§ 924(c ) and 2

JOSE HERNANDEZ

CHRISTOPHER LAWRENCE

BENJAMIN LUCRE

EDWIN SANTANA

LARRY SMITH

ISAAC SOLER

DYLAN WILLIAMS

 

 

 

 

Life in prison

 

Mandatory minimum of five 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ALEXANDER FERNANDEZ, a/k/a “Det,” a/k/a “D,” a/k/a “Fat D,” a/k/a “Gordo,” was sentenced yesterday to 20 years in prison for murdering Edwin Honoret, 28, in Manhattan in August 2000.  FERNANDEZ pled guilty on March 2, 2018, before U.S. District Judge Jesse M. Furman, who imposed the sentence. 

U.S. Attorney Geoffrey S. Berman said: “Almost 18 years ago, Alexander Fernandez callously murdered Edwin Honoret over a drug dispute.  Thanks to the remarkable efforts of the New York City Police Department, Fernandez has finally been held accountable for his terrible crime.  We will continue our partnership with the NYPD to make our neighborhoods safer.”

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

FERNANDEZ was a member of a drug trafficking organization that transported large quantities of narcotics from New York City to West Virginia and other states.  FERNANDEZ believed that he was underpaid for his role in the organization.  On August 13, 2000, FERNANDEZ lured one of his partners, Edwin Honoret, to a secluded location under the George Washington Bridge in the middle of the night and shot Honoret five times, killing him.  FERNANDEZ then stole thousands of dollars in drug proceeds that belonged to Honoret.

*                *                *

In addition to the prison sentence, FERNANDEZ was sentenced to three years of supervised release. 

Mr. Berman praised the investigative work of the Cold Case Homicide Squad of the New York City Police Department.  Mr. Berman also thanked the Special Agents of the United States Attorney’s Office for the Southern District of New York.

This case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Anden Chow, Thomas McKay, and Laurie A. Korenbaum are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York,  announced that RAZHDEN SHULAYA, a vor v zakone or “thief-in-law,” and AVTANDIL KHURTSIDZE, a boxing champion and SHULAYA’s enforcer, were found guilty of racketeering and related charges in connection with a sprawling and violent criminal enterprise operating in New York, New Jersey, Pennsylvania, Nevada, and abroad.           

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As a unanimous jury found, Razhden Shulaya and his chief enforcer, Avtandil Khurtsidze, engaged in an array of criminal schemes that included violence, extortion, theft, trafficking in stolen goods, and fraud.  Shulaya, a Russian ‘vor v zakone’ or ‘thief-in-law,’ is now a convicted thief under U.S. law.  Both defendants now await sentencing for their crimes.”

As established by the evidence at trial:

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

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

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

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

SHULAYA was found guilty of one count of racketeering conspiracy, which carries a potential maximum penalty of 20 years in prison, one count of conspiring to traffic in stolen goods such as luxury watches, which carries a potential maximum penalty of five years in prison, one count of conspiracy to traffic in contraband tobacco, which carries a potential maximum penalty of five years in prison, one count of identification document fraud, which carries a potential maximum penalty of 15 years in prison, and one count of wire fraud conspiracy, which carries a potential maximum penalty of 20 years in prison.  KHURTSIDZE was found guilty of one count of racketeering conspiracy and one count of wire fraud conspiracy, each of which carries a potential maximum penalty of 20 years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of SHULAYA and KHURTSIDZE will be determined by the judge.  

*                *                *

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LUIS DIAZ JR. and LUIS JAVIER DIAZ were sentenced to eight months and four months in prison, respectively, for their roles in funneling more than $100 million through the U.S. financial system on behalf of various foreign businesses based predominantly in Venezuela.  They did so through their Miami-based import/export company, which, for nearly five years, the defendants also used to operate an unlicensed money transmitting business.  LUIS DIAZ JR. and LUIS JAVIER DIAZ were convicted of operating an unlicensed money transmitting business and international money laundering following a jury trial in November 2017 before U.S. District Judge William H. Pauley III, who also imposed today’s sentences.

U.S. Attorney Geoffrey S. Berman said:  “This father-and-son duo used their small for a large-scale illegal money transmission and money laundering operation.  By skirting the anti-money laundering safeguards required of licensed institutions, the defendants moved more than $100 million through U.S. financial institutions.  Today’s sentence is a sign of the seriousness of these crimes and our Office’s commitment to prosecute them.”

According to the Indictment, other filings in Manhattan federal court, and the evidence presented at trial:   

Between 2010 and 2016, LUIS DIAZ, JR., and LUIS JAVIER DIAZ used Miami Equipment and Export Company (the “Company”), a company they owned in Doral, Florida, to effect the transmission of at least $100 million on behalf of entities outside the United States, mostly located in Venezuela, to bank accounts in the United States and elsewhere, in exchange for a fee.  During this time, the Company was not registered with the State of Florida or the Financial Crimes Enforcement Network (FinCEN), a component of the United States Department of the Treasury, as required by both state and federal laws applicable to money transmitting businesses. 

Using unlicensed money transmitting businesses like the Company enables entities and individuals to move money into and through the U.S. financial system while avoiding licensed U.S. financial institutions that monitor for suspicious activity and report it to U.S. authorities, including through suspicious activity reports, or SARs.  Instead, by going through unlicensed entities like the Company, foreign businesses ensure that suspicious patterns of transmissions will not be detected and reported as potential money laundering activity or other financial crime.

Through their unlicensed money transmitting business, LUIS DIAZ JR. and LUIS JAVIER DIAZ enabled a number of foreign businesses to move money into and around the United States.  For instance, the defendants used the Company to transmit over $100 million into the United States on behalf of KCT, a large Venezuelan consortium of construction companies, and other entities located in Central and South America.  After they received these funds from KCT or other companies, the defendants received instructions concerning where to send the money as well as fake invoices and contracts purporting to set forth a valid business reason for these payments.  The fake invoices and contracts made the payments appear connected to legitimate business services being provided to the Company, such as consulting or engineering services.  In this manner, the defendants sent money on behalf of KCT and other companies to U.S. and foreign bank accounts of shell companies located around the world, Venezuelan government officials, KCT employees in Venezuela, and others who had no relationship with the defendants or the Company.  For all of these transmitting activities, the Company received over  $1 million in fees. 

*                *                *

In addition to the prison terms, LUIS DIAZ JR., 76, and LUIS JAVIER DIAZ, 51, both of Miami, Florida, were sentenced to two years of supervised release.  The amount of forfeiture will be determined at a later date.   

Mr. Berman praised the outstanding investigative work of HSI, DEA, the Englewood, New Jersey, Police Department, and the Border Enforcement Security Task Force.

The case is being prosecuted by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant U.S. Attorneys Edward B. Diskant, Daniel M. Tracer, and Benet J. Kearney are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that VOLVY SMILOWITZ, a/k/a “Zev Smilowitz,” pled guilty yesterday to conspiracy to corrupt the electoral process, in connection with an election in Bloomingburg, New York.  SMILOWITZ pled guilty before United States District Judge Vincent Briccetti in White Plains federal court. 

U.S. Attorney Geoffrey S. Berman stated:  “In the biggest federal voter fraud case in the modern era, Volvy Smilowitz admitted to taking part in a cynical scheme to rig an election in Bloomingburg.  There is no place in our democracy for the criminal conduct admitted to by the defendant, which included falsely registering dozens of voters.  Those who conspire to corrupt the electoral process must and will be held accountable.”

According to the allegations contained in the Indictment, as well as statements made in related court filings and proceedings:

Starting in 2006, VOLVY SMILOWITZ, a consultant, and Shalom Lamm and Kenneth Nakdimen, real estate developers, sought to build and sell real estate in Bloomingburg, New York.  From these real estate development projects, SMILOWITZ, Lamm, Nakdimen, and others hoped for and anticipated making hundreds of millions of dollars.  But by late 2013, the first of their real estate developments had met local opposition, and still remained under construction and uninhabitable.  When met with resistance, rather than seek to advance their real estate development project through legitimate means, SMILOWITZ, Lamm, and Nakdimen instead decided to corrupt the democratic electoral process in Bloomingburg by falsely registering voters and paying bribes for voters who would help elect public officials favorable to their project.

Specifically, in advance of an election in March 2014 for Mayor of Bloomingburg and other local officials, SMILOWITZ, Lamm, Nakdimen, and others developed and worked on a plan to falsely register numerous people who were not entitled to register and vote in Bloomingburg because they actually lived elsewhere.  Those people included some who never intended to live in Bloomingburg, some who had never kept a home in Bloomingburg, and indeed, some who had never set foot in Bloomingburg in their lives.  SMILOWITZ, Lamm, and Nakdimen took steps to cover up their scheme to register voters who did not actually live in Bloomingburg by, among other things, creating and back-dating false leases and placing items like toothbrushes and toothpaste in unoccupied apartments to make it seem as if the falsely registered voters lived there.

SMILOWITZ and Lamm also bribed potential voters by offering payments, subsidies, and other items of value to get non-residents of Bloomingburg to register unlawfully and vote there. 

*                      *                     *

SMILOWITZ, 29, of Monroe, New York, pled guilty to one count of conspiracy to corrupt the electoral process, which carries a maximum sentence of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

SMILOWITZ’s sentencing is scheduled for October 24, 2018, at 11:30 a.m.

Mr. Berman praised the outstanding investigative work of the FBI-Hudson Valley White Collar Crime Task Force, the Sullivan County District Attorney’s Office, the Sullivan County Sherriff’s Office, the Orange County Sheriff’s Office, the Orange County District Attorney’s Office, the Internal Revenue Service, and the United States Postal Inspection Service.  Mr. Berman also thanked the Department of Justice’s Public Integrity Section, Election Crimes Branch, for its assistance in the case.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Kathryn Martin, Benjamin Allee, and Perry Carbone are in charge of the prosecution.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, John C. Demers, Assistant Attorney General for National Security, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that JOSHUA ADAM SCHULTE was charged in a 13-count Superseding Indictment (the “Indictment”) in connection with his alleged theft of classified national defense information from the Central Intelligence Agency (“CIA”) and the transmission of that material to an organization that purports to publicly disseminate classified, sensitive, and confidential information (“Organization-1”).  The Indictment also charges SCHULTE with the receipt, possession, and transportation of child pornography, as well as criminal copyright infringement.  SCHULTE, who is presently detained on the child pornography charges, will be arraigned by U.S. District Judge Paul A. Crotty.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Joshua Schulte, a former employee of the CIA, allegedly used his access at the agency to transmit classified material to an outside organization.  During the course of this investigation, federal agents also discovered alleged child pornography in Schulte’s New York City residence.  We and our law enforcement partners are committed to protecting national security information and ensuring that those trusted to handle it honor their important responsibilities.  Unlawful disclosure of classified intelligence can pose a grave threat to our national security, potentially endangering the safety of Americans.”

Assistant Attorney General John C. Demers said:  “The National Security Division, alongside our partners in the Intelligence Community, will not waver in our commitment to pursue and hold accountable these officials, and I commend all those at the Department of Justice and the FBI who have worked diligently to investigate this matter and bring these charges.”

Assistant Director-in-Charge William F. Sweeney, Jr. said:  “As alleged, Schulte utterly betrayed this nation and downright violated his victims. As an employee of the CIA, Schulte took an oath to protect this country, but he blatantly endangered it by the transmission of Classified Information. To further endanger those around him, Schulte allegedly received, possessed, and transmitted thousands of child pornographic photos and videos. In an effort to protect this nation against crimes such as these, the FBI's Counterintelligence Division in New York will continue to keep our mission at the forefront of our investigations in protecting the American public."

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

On March 7, 2017, Organization-1 released on the Internet classified national defense material belonging to the CIA (the “Classified Information”).  In 2016, SCHULTE, who was then employed by the CIA, stole the Classified Information from a computer network at the CIA and later transmitted it to Organization-1.  SCHULTE also intentionally caused damage without authorization to a CIA computer system by granting himself unauthorized access to the system, deleting records of his activities, and denying others access to the system.  SCHULTE subsequently made material false statements to FBI agents concerning his conduct at the CIA.         

SCHULTE was previously arrested on August 24, 2017, on charges relating to his receipt, possession, and transportation of approximately ten thousand images and videos of child pornography.  In March 2017, members of the FBI had searched SCHULTE’s residence in New York, New York, pursuant to a search warrant and recovered, among other things, multiple computers, servers, and other portable electronic storage devices, including Schulte’s personal desktop computer (the “Personal Computer”).  On the Personal Computer, FBI agents found an encrypted container (the “Encrypted Container”), which held over 10,000 images and videos of child pornography.  The Encrypted Container with the child pornography files was identified by FBI computer scientists beneath three layers of password protection on the Personal Computer.  Each layer, including the Encrypted Container, was unlocked using passwords previously used by SCHULTE on one of his cellphones.  Moreover, FBI agents identified Internet chat logs in which SCHULTE and others discussed their receipt and distribution of child pornography.  FBI agents also identified a series of Google searches conducted by SCHULTE in which he searched the Internet for child pornography.

*          *         *

SCHULTE, 29, of New York, New York, is charged with one count each of (i) illegal gathering of national defense information, (ii) illegal transmission of lawfully possessed national defense information, (iii) illegal transmission of unlawfully possessed national defense information, (iv) unauthorized access to a computer to obtain classified information, (v) theft of Government property, (vi) unauthorized access of a computer to obtain information from a Department or Agency of the United States, (vii) causing transmission of a harmful computer program, information, code, or command, (viii) making material false statements to representatives of the FBI, (ix) obstruction of justice, (x) receipt of child pornography, (xi) possession of child pornography, (xii) transportation of child pornography, and (xiii) copyright infringement.  A chart containing the charges and maximum penalties is 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 defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative efforts of the FBI. 

The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Sidhardha Kamaraju and Matthew Laroche are in charge of the prosecution, with assistance from Trial Attorney Scott McCulloch of the National Security Division’s Counterintelligence and Export Control Section.

 

Count Number

Description

Maximum Penalty

One

Illegal Gathering of National Defense Information

18 U.S.C. §§ 793(b) and 2

10 years in prison

Two

Illegal Transmission of Lawfully Possessed National Defense Information

18 U.S.C. §§ 793(d) and 2

10 years in prison

Three

Illegal Transmission of Unlawfully Possessed National Defense Information

18 U.S.C. §§ 793(e) and 2

10 years in prison

Four

Unauthorized Access to a Computer To Obtain Classified Information

18 U.S.C. §§ 1030(a)(1) and 2

10 years in prison

Five

Theft of Government Property

18 U.S.C. §§ 641 and 2

10 years in prison

Six

Unauthorized Access of a Computer to Obtain Information from a Department or Agency of the United States

18 U.S.C. §§ 1030(a)(2) and 2

5 years in prison

Seven

Causing Transmission of a Harmful Computer Program, Information, Code, or Command

18 U.S.C. §§ 1030(a)(5) and 2

10 years in prison

Eight

Making False Statements

18 U.S.C. §§ 1001 and 2

5 years in prison 

Nine

Obstruction of Justice

18 U.S.C. §§ 1503 and 2

10 years in prison

Ten

Receipt of Child Pornography

18 U.S.C. §§ 2252A(a)(2)(B), (b)(1), and 2

20 years in prison

Eleven

Possession of Child Pornography

18 U.S.C. §§ 2252A(a)(5)(B), (b)(2), and 2

10 years in prison

Twelve

Transportation of Child Pornography

18 U.S.C. § 2252A(a)(1)

20 years in prison

Thirteen

Criminal Copyright Infringement

17 U.S.C. § 506(a)(1)(A) and 18 U.S.C. § 2319(b)(1)

5 years in prison

 

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James D. Robnett, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Angel M. Melendez, Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today the unsealing of an Indictment charging ROGER THOMAS CLARK, who was a senior adviser to Ross Ulbricht, a/k/a “Dread Pirate Roberts,” a/k/a “DPR,” the owner and operator of the “Silk Road” online illicit black market that operated from January 2011 until October 2, 2013.  During its operation, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute illegal drugs and other illicit goods and services to over a hundred thousand buyers, and to launder hundreds of millions of dollars derived from those unlawful transactions.  CLARK was a close confidante of Ulbricht’s who advised him on all aspects of Silk Road’s operations, and who hired and managed a staff of computer programmers who helped develop Silk Road’s technical infrastructure.  CLARK was arrested in Thailand on December 3, 2015, and was extradited to the United States today.  CLARK is expected to be presented this afternoon before U.S. Magistrate Judge Gabriel W. Gorenstein.  CLARK’s case is assigned to U.S. District Judge William H. Pauley III.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Silk Road was a secret online marketplace for illegal drugs, hacking services, and a whole host of other criminal activity. Roger Thomas Clark allegedly served as a trusted confidante to Silk Road founder and operator Ross Ulbricht, advising him on all aspects of this illegal business, including how to maximize profits and use threats of violence to thwart law enforcement.  Thanks to the investigative work of our fellow law enforcement agencies and our international partners, Clark now faces justice in an American court.”

IRS-CI Special Agent-in-Charge James D. Robnett said:  “The unsealed indictment again shows that the supposed anonymity of the dark web is not a protective shield from prosecution.  Working with our law enforcement partners, IRS-CI used its unique financial and cyber expertise to help shine a bright light on a shadowy black marketplace, and we intend to continue pursuing these kinds of criminals no matter where they hide.”

FBI Assistant Director William F. Sweeney Jr. said:  “Whether on the streets or on the Internet, the illegality of selling unlawful goods remains unchanged.  Under the operation of Ross Ulbricht, the Silk Road was a criminal hub for illicit goods and services.  As Ulbricht’s right-hand man, Roger Clark allegedly advised him of methods to thwart law enforcement during the operation of this illegal ploy, pocketing hundreds of thousands of dollars in the process. Today’s extradition of Roger Clark shows that despite alleged attempts to operate under the radar, he was never out of our reach.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “The extradition of this man today should be a reminder to those who think they can hide within the confines of the dark web, that you are never out of reach of the long arm of the law.  These investigations are important in combatting the illicit drug market and we will continue to work with our law enforcement partners to fight this fight.”

According to the allegations contained in the Indictment unsealed today in Manhattan federal court, the previously unsealed criminal complaint, and evidence presented at Ulbricht’s trial in January and February 2015[1]:

Ulbricht created Silk Road in approximately January 2011, and owned and operated the underground website until it was shut down by law enforcement authorities in October 2013.  Silk Road emerged as the most sophisticated and extensive criminal marketplace on the Internet at the time, serving as a sprawling black-market bazaar where unlawful goods and services, including illegal drugs of virtually all varieties, were bought and sold regularly by the site’s users.  While in operation, Silk Road was used by thousands of drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over 100,000 buyers, and to launder hundreds of millions of dollars deriving from these unlawful transactions.     

Silk Road enabled its users to buy and sell drugs and other illegal goods and services anonymously and outside the reach of law enforcement.  Silk Road was operated on what is known as “The Onion Router,” or “Tor” network, a special network of computers on the Internet, distributed around the world, designed to conceal the true IP addresses of the computers on the network and thereby the identities of the network’s users.  Silk Road also included a Bitcoin-based payment system that served to facilitate the illegal commerce conducted on the site, including by concealing the identities and locations of the users transmitting and receiving funds through the site.

CLARK – who went by the online nicknames “Variety Jones,” “VJ,” “Cimon,” and “Plural of Mongoose” – was described by Ulbricht as a “real mentor” who advised Ulbricht about, among other things, security vulnerabilities in the Silk Road site, technical infrastructure, management of the Silk Road users, and operating in a manner to attempt to thwart law enforcement.  CLARK provided advice to Ulbricht on developing a “cover story” to make it appear as though Ulbricht had sold Silk Road, and also assisted with hiring programmers to help improve the infrastructure of, and maintain, Silk Road.  CLARK also communicated at length with Ulbricht regarding the rules that governed Silk Road vendors and users, and regarding the promotion of sales on Silk Road, including the sales of narcotics.  CLARK also was responsible for gathering information on law enforcement’s efforts to investigate Silk Road. 

CLARK was paid at least hundreds of thousands of dollars for his assistance in operating Silk Road.

 

CLARK, 56, a citizen of Canada, is charged with narcotics trafficking conspiracy; narcotics trafficking; distributing narcotics by means of the internet; conspiracy to commit, and aid and abet, a computer hacking conspiracy; conspiracy to traffic in fraudulent identification documents; and money laundering conspiracy.  If convicted, he faces, among other penalties, a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

*                *                *

Mr. Berman praised the outstanding joint efforts of the FBI and its New York Special Operations and Cyber Division, HSI Chicago-O’Hare, the DEA’s New York Field Division, and IRS-CI’s New York Field Office.  Mr. Berman also thanked the HSI Attache Bangkok, Thailand, for its assistance and support.  Mr. Berman also thanked the Royal Thai Police and 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, Richard Cooper, and Timothy T. Howard are in charge of the prosecution.

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

 

 

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[1] As the introductory phrase signifies, the entirety of the texts of the Complaint and the Indictment, and the descriptions thereof, constitute only allegations, and every fact described therein should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and David J. Downing, Special Agent in Charge of the Los Angeles Division of the U.S. Drug Enforcement Administration (“DEA”), announced today the extradition of FILIPPO MAGNI, who is charged, along with co-defendant GIACOMO MANCI, with money laundering and narcotics offenses in a Superseding Indictment (the “Indictment”).  MAGNI was extradited from Italy to the United States on June 14, 2018, and presented today before Chief United States Magistrate Judge Gabriel W. Gorenstein.  MANCI’s extradition from Italy remains pending.  This case is assigned to United States District Judge Katherine B. Forrest.

The Indictment, which was returned under seal on November 10, 2016, alleges that MAGNI and MANCI were members of an international narcotics trafficking and money laundering organization involved in trafficking hundreds of kilograms of cocaine and heroin, among other narcotics, and laundering hundreds of millions of dollars in narcotics proceeds through a variety of methods, including through seemingly “legitimate” corporations, shell bank accounts, and money couriers based in the United States and Europe.  MAGNI and MANCI were arrested in Italy and taken into custody by the Italian authorities pursuant to an extradition request made by the United States in January 2017. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Filippo Magni and Giacomo Manci were key members of an international drug trafficking organization responsible for cleaning more than $250 million of drug dollars, ensuring that their criminal network could spend their illegal profits.  Now, Magni is on U.S. soil and will have to answer for his alleged crimes.”

DEA Special Agent in Charge David J. Downing said:  “This extradition demonstrates the reach of US law enforcement and exemplifies successful collaborations between federal, state, and local as well as international law enforcement.  Targeting the financial components of these organizations – no matter where in the world those components are located – enables us to put drug traffickers completely out of business.”

According to the allegations in the Indictment [1], the previously filed criminal complaints against the defendants, and statements made in Court:

The Investigation

Since July 2013, the DEA has been investigating an international drug trafficking and money laundering organization (the “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.  The Organization has ties to Panama, Mexico, Italy, Spain, and the United States, among other locations, and its members are believed to include the defendants.

MAGNI and MANCI are charged with membership in the Organization, which was led by Jesus Rodriguez-Jimenez.  Rodriguez-Jimenez, along with five co-defendants, were charged for their participation in the conspiracy in June 2016 in the Southern District of New York.  In June 2017, Rodriguez-Jimenez pled guilty to offenses stemming from his leadership role in the organization, and for laundering in excess of $250 million in proceeds on behalf of drug cartels in Mexico and Central America. 

This case is also related to the prosecution of Roberto Ponce-Rocha, a large-scale international narcotics trafficker based in Central and South America, who used various methods, including commercial shipments, drivers, and couriers to move narcotics around the world, and to import narcotics into the United States.  Ponce-Rocha and three other individuals were indicted separately in 2016.  In June 2017, Ponce-Rocha pled guilty to conspiring to import narcotics into the United States.

MAGNI and MANCI were essential players in the Organization, providing money laundering expertise in Europe and the United States, and facilitating the European distribution of narcotics provided by Roberto Ponce-Rocha.  For example, in August of 2013, MAGNI met with Ponce-Rocha in Panama to arrange for the shipment of vast amounts of narcotics to Italy; to this end, a test shipment of cocaine was sent to MANCI.

MAGNI facilitated the laundering of narcotics proceeds for the Organization in Italy, Switzerland, and the United Kingdom.

In January 2014, MAGNI and MANCI laundered hundreds of thousands of dollars in narcotics proceeds through a Las Vegas casino, and later deposited the laundered cash into bank accounts controlled by the Organization.

In February 2014, MAGNI and other members of the Organization orchestrated the physical movement of nearly a million dollars in narcotics proceeds across the United States.  MANCI, along with a co-conspirator, was arrested in Chicago while transporting this cash in a roller suitcase through an Amtrak station.

These activities were interconnected with the Organization’s front companies, including an LED screens business in Las Vegas, as well as stash houses operated by the Organization in various cities throughout the United States, including Atlanta and Philadelphia, in order to receive drug proceeds from criminal clients who wanted those proceeds funneled into the international banking system.  The Organization also arranged and facilitated cash money pick-ups in, among other places, New York City and Atlanta, receiving cash from narcotics traffickers and bringing that cash to co-conspirators with directions to wire it to shell accounts in Mexico, Hong Kong, and Italy, among other places.

In this way, the Organization laundered hundreds of millions of dollars through the international banking system, and facilitated the distribution of hundreds of kilograms of cocaine and heroin, among other narcotics.

*                *                *

MAGNI, 44, of Rome, Italy, and MANCI, 55, of Rome, Italy, are each charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and one count of conspiracy to distribute narcotics, which carries a maximum sentence of life in prison.  The statutory maximum penalties 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 DEA for its work in the investigation.  Mr. Berman also expressed his appreciation to the Italian Government and Italian law enforcement in executing the arrests and preparing for extradition of the defendants to the United States.

This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Andrew C. Adams and Noah Falk are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that MICHAEL HARRINGTON was sentenced to two years of probation and 180 hours of community service for misapplying police resources while serving in the New York City Police Department (“NYPD”) as, among other things, a Deputy Chief and Executive Officer for the Chief of Department’s Office.  He was sentenced by the U.S. District Judge Gregory H. Woods.

HARRINGTON diverted those police resources – including dispatching police officers and diverting land, sea, and air vehicles intended for the NYPD’s public service usage – for the personal benefit of Jeremy Reichberg, a private citizen, as well as Reichberg’s friends and associates. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “After years of service to the NYPD, Michael Harrington abused the sacred trust placed in him by the NYPD and the people of New York by applying the people’s resources, including its officers, to the interests and whims of a connected few.  That Harrington’s behavior has resulted in a felony conviction is a sad but necessary reminder that, along with our law enforcement partners, we will continue to fight this type of corruption.”

In sentencing HARRINGTON, Judge Woods said: “This is a very serious offense.   [T]his does matter.  As a senior official of the NYPD, Mr. Harrington was entrusted to protect the public without fear or favor.  He misused that trust.   . . . .[H]e applied the public’s resources to provide special favors to a select few.  And Mr. Harrington misdirected NYPD resources at the request of [Jeremy] Reichberg while receiving personal benefits from him.”

Reichberg and an additional co-defendant, former NYPD Deputy Inspector James Grant, continue to face honest services fraud, bribery, and conspiracy charges related to an alleged scheme in which Reichberg and another individual provided luxurious benefits to high-ranking members of the NYPD, including Grant and HARRINGTON, so as to be able to call upon those members for police-related assistance for themselves and their associates as opportunities arose.  Reichberg and Grant are to face trial before Judge Woods on October 4, 2018.

According to the Superseding Information, Indictment, and Complaint filed in this case, other court filings, and statements made during court proceedings:         

HARRINGTON was previously an Inspector in Brooklyn North and, beginning around November 2013, the Executive Officer in the NYPD’s Chief of Department’s Office, which is responsible for overseeing all of the Department’s uniformed operations.  After November 2014, HARRINGTON was a Deputy Chief assigned to the NYPD’s Housing Bureau.  Between 2011 and June 2016, HARRINGTON diverted police resources for the benefit of Reichberg and his associates, including another individual, Jona Rechnitz, who has pled guilty and is now cooperating with the Government. 

During the relevant period, Reichberg and Rechnitz provided HARRINGTON with personal benefits and gifts, including tens of thousands of dollars in business to a security company run by HARRINGTON’s family members and friends, thousands of dollars’ worth of meals in high-end restaurants, hundreds of dollars’ worth of premium tickets to sporting events, and a video game system and other gifts for his children.  During the same period, HARRINGTON helped Reichberg and his associates get rides in police cars for non-police purposes, used a helicopter for a flyover at a private event, and secured the use of a police boat for private boat rides at another private event.  He further sent officers to resolve private, civil disputes, pressured other NYPD personnel to respond to requests from Reichberg and Rechnitz, and took steps to assist in the promotion and transfer of NYPD officers handpicked by Reichberg and Rechnitz at their request.

*                *                *

In addition to the probation term, HARRINGTON, 52, of Staten Island, New York, was fined $5,000 and ordered to pay $6,000 in restitution to the NYPD.  

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the New York City Police Department, Internal Affairs Bureau.  

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Martin S. Bell, Jessica Lonergan, and Kimberly J. Ravener are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Peter R. Rendina, Inspector in Charge, U.S. Postal Inspection Service, New York Field Division (“USPIS”), announced today that MARK MUSHKIN was arrested today and charged with mail fraud for operating a multi-year, multimillion-dollar scheme to defraud small businesses.  MUSHKIN is expected to be presented this afternoon in the Central District of California. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, the defendant tricked hundreds of small businesses into paying him over $3 million for products that were never ordered or received.  Over more than five years, the defendant was unjustly enriched by money sent to him from businesses throughout the country under false pretenses.”

USPIS Inspector in Charge Peter R. Rendina said:  “Mr. Mushkin banked on each companies' belief the invoice received was from a legitimate vendor, not an alleged scammer. What he didn't bank on was the resolve of Postal Inspectors and the US Attorney to uncover his greedy scheme and bring him to justice for his crimes against unsuspecting businesses.”

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

Between about 2011 and 2017, MARK MUSHKIN operated a scheme in which he sent false invoices to small businesses throughout the country, predominately law firms, from a purported company run by MUSHKIN called IT Tech Products.  The invoices falsely stated shipment dates for copier toner and demanded payment to IT Tech Products.  Over 800 businesses mailed over 1,900 checks to IT Tech Products based on their mistaken belief that the invoices were legitimate.  These checks totaled approximately $3.3 million and were deposited into a bank account controlled by MUSHKIN.  In the event that a business inquired about the origin of the invoice after payment had been made, MUSHKIN or a representative of IT Tech Products would send a refund, allowing him to continue operating his scheme undetected.   

*                *                *

MARK MUSHKIN, 52, of Laguna Beach, California, is charged with one count of mail fraud, which carries a maximum penalty of 20 years in prison.  The statutory maximum potential penalty in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the work of the Postal Inspection Service for their investigative efforts and ongoing support and assistance with the case.  Mr. Berman also thanked the Federal Trade Commission for their assistance in this case.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Allison Nichols and Jamie Bagliebter are in charge of the prosecution.

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

 

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

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that RICHARD MOSELEY SR. was sentenced today to 120 months in prison, after having been found guilty in November 2017 of racketeering, fraud, and identity-theft offenses for operating an illegal payday lending enterprise in which MOSELEY charged illegally high interest rates and issued payday loans to victims who did not authorize them.  MOSELEY was convicted after a three-week jury trial before U.S. District Judge Edgardo Ramos, who imposed today’s sentence.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Richard Moseley’s illegal payday lending operation exploited more than half a million of the most financially vulnerable people in the U.S.  Charging usurious interest and exorbitant fees, and even signing people up for loans they didn’t authorize, Moseley put financially struggling people even further in debt.  Today Moseley has been rightly sentenced to prison for his predatory ways.”

According to the Indictment, other filings in Manhattan federal court, and the evidence presented at trial:     

From approximately 2004 to 2014, MOSELEY owned and operated a group of payday lending businesses (the “Hydra Lenders”) that issued and serviced small, short-term, unsecured loans, known as “payday loans,” through the Internet to customers across the United States.   

For nearly a decade, MOSELEY systematically exploited more than 620,000 financially struggling working people throughout the United States, many of whom struggled to pay for basic living expenses.  MOSELEY, through the Hydra Lenders, targeted and extended loans to these individuals at illegally high interest rates of more than 700 percent, using deceptive and misleading communications and contracts and in violation of the usury laws of numerous states that were designed to protect residents from such abusive conduct.  

In furtherance of the scheme, the Hydra Lenders’ loan agreements materially understated the amount the payday loan would cost and the total amount of payments that would be taken from borrowers’ bank accounts.  MOSELEY structured the repayment schedule of the loans such that, on the borrower’s payday, the Hydra Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched so that, on the borrower’s next payday, the Hydra Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan.  Under MOSELEY’s control and oversight, the Hydra Lenders proceeded automatically to withdraw such “finance charges” payday after payday, applying none of the money toward repayment of the loan principal.  Under the terms of the loan agreement, the Hydra Lenders withdrew finance charges from their customers’ accounts unless and until consumers took affirmative action to stop the automatic renewal of the loan. 

Through the Hydra Lenders, MOSELEY also extended numerous payday loans to victims across the country who did not even want the loans or authorize the issuance of the loans, but instead had merely submitted their personal and bank account information in order to inquire about the possibility of obtaining a payday loan.  MOSELEY then automatically withdrew the Hydra Lenders’ usurious “financing fees” directly from the financially struggling victims’ bank accounts on a bi-weekly basis.  Although hundreds of victims, over a period of years, lodged complaints that they had never approved or even been aware of the issuance of the loans, the Hydra Lenders, at MOSELEY’s direction, continued to issue loans to consumers without confirming that the consumers in fact wanted the loans that they received or had reviewed and approved the loan terms.    

Customers across the country, numerous state regulators, and consumer protection groups complained about the Hydra Lenders’ deceptive and misleading practices in issuing usurious and fraudulent loans.  Beginning in approximately 2006, in an attempt to avoid civil and criminal liability for his conduct, and to enable the Hydra Lenders to extend usurious loans contrary to state laws, MOSELEY made it appear that the Hydra Lenders were located overseas.  Specifically, MOSELEY nominally incorporated the Hydra Lenders first in Nevis in the Caribbean, and later in New Zealand, and claimed that the Hydra Lenders could not be sued or subject to state enforcement actions because they were beyond the jurisdiction of every state in the United States.  In truth, the entirety of MOSELEY’s lending business, including all bank accounts from which loans were originated, all communications with consumers, and all employees, were located at MOSELEY’s corporate office in Kansas City, Missouri.  The Hydra Lenders’ purported “offshore” operation consisted of little more than a service that forwarded mail from addresses in Nevis or New Zealand to the Kansas City, Missouri, office. 

In furtherance of the scheme, MOSELEY falsely told his attorneys that the Hydra Lenders maintained physical offices and employees in Nevis and New Zealand and that the decision whether to extend loans to particular consumers was made by employees of the Hydra Lenders in Nevis and New Zealand.  As MOSELEY well knew, at no time did the Hydra Lenders have any employees involved in the lending business in Nevis or New Zealand, and at all times the decision whether to underwrite loans was made by employees under MOSELEY’s direction in Kansas City, Missouri.  To defeat state complaints and inquiries, MOSELEY directed his attorneys at outside law firms to submit correspondence to state Attorneys General that stated – falsely, unbeknownst to MOSELEY’s attorneys – that the Hydra Lenders originated loans “exclusively” from their offices overseas and had no physical presence anywhere in the United States. 

From approximately November 2006 through approximately August 2014, the Hydra Lenders generated more than $220 million in revenue.  MOSELEY made millions of dollars from the scheme, which he spent on, among other things, a vacation home in Mexico, luxury automobiles, and country club membership dues. 

*                *                *

In addition to the 10-year prison term, MOSELEY, 73, of Kansas City, Missouri, was sentenced to three years of supervised release and ordered to forfeit $49 million. 

Mr. Berman praised the work of the Federal Bureau of Investigation and the Office Inspector General for the Board of Governors of the Federal Reserve System.  Mr. Berman also thanked the Consumer Financial Protection Bureau, which brought a separate civil action against MOSELEY, for referring the matter and for its assistance.

The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Edward A. Imperatore and David Abramowicz are in charge of the prosecution.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a criminal Complaint charging WILLIAM McFARLAND with wire fraud and money laundering, in connection with conducting a sham ticket scheme in which he purported to sell fraudulent tickets to exclusive fashion, music, and sporting events through NYC VIP Access, a company controlled by McFARLAND, and also caused the fraud proceeds to be sent to others’ financial accounts in an effort to conceal his ownership and control of the funds.  McFARLAND is expected to be presented before U.S. Magistrate Gabriel W. Gorenstein today. 

Manhattan U.S. Attorney Geoffrey Berman said:  “William McFarland, already awaiting sentencing for a prior fraud scheme, allegedly continued to conduct criminal business as usual, selling nonexistent tickets to fashion, music, and sporting events.  As alleged, McFarland’s purported exclusive event ticket company, NYC VIP Access, in fact had no access to events for which he sold bogus tickets.  Now McFarland faces criminal charges on top of those to which he already pled guilty.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “In March of 2018, William McFarland pled guilty to defrauding investors and vendors of the Fyre Festival, but it is apparent that he did not stop there.  McFarland allegedly went on to sell fraudulent tickets to many grand events, totaling almost $100,000.  Today’s charges depict our intolerance for such fraudulent activity, and we will continue to diligently investigate acts such as this.”

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

On March 6, 2018, McFARLAND pled guilty before United States District Judge Naomi Reice 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 in losses, and one count of wire fraud with a scheme to defraud a ticket vendor for the Fyre Festival of $2 million in losses.  United States v. William McFarland, 17 Cr. 600 (NRB).  McFARLAND has been on pretrial release since July 1, 2017, and is currently awaiting sentencing in that case.

From at least in or about late 2017, up to and including at least in or about March 2018, McFARLAND owned NYC VIP Access, a company based in New York, New York, that purported to be in the business of obtaining and selling for profit tickets to various exclusive events including fashion galas, music festivals, and sporting events.  NYC VIP Access purported to sell tickets to 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 and others by soliciting them to purchase tickets from NYC VIP Access to exclusive events when, in fact, no such tickets existed. 

McFARLAND took steps to make NYC VIP Access appear as it if were controlled and operated by other individuals.  In soliciting ticket sales, McFARLAND used an email account in the name of a then-employee (“Employee-1”) in order to hide his affiliation with NYC VIP Access.  McFARLAND provided prospective customers with contracts that falsely represented that NYC VIP Access had tickets to exclusive events in fashion, music, and sports.  In order to distance himself from the operation, McFARLAND directed that Employee-1 sign the contracts between NYC VIP Access and the customers.  After McFARLAND induced customers to wire money for tickets, McFARLAND either did not provide tickets at all, or did not provide tickets as advertised.  McFARLAND charged at least approximately $100,000 in fraudulent tickets to at least approximately 15 customer-victims. McFARLAND instructed and caused ticket sale proceeds to be sent to a bank account belonging to Employee-1, to which McFARLAND had access and control, or a mobile payment service account belonging to another employee (“Employee-2”), for the purpose of concealing his ownership and control of the funds.             

*                *                *

McFARLAND, 26, of New York, New York, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, and one count of money laundering, which carries a maximum sentence of 20 years in prison.

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

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.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that FRANKIE BEQIRAJ was found guilty yesterday of conspiracy to distribute heroin resulting in the death of Robert Vivolo, a 25-year-old man from City Island, New York.  BEQIRAJ was also convicted of conspiracy to distribute cocaine, oxycodone, and alprazolam.  A unanimous jury convicted BEQIRAJ after a five-day trial before United States District Judge Richard M. Berman.

U.S. Attorney Geoffrey S. Berman said:  “As proven at trial, Frankie Beqiraj peddled poison to the community of City Island and its vicinity, causing one of his many victims to die from a tragic overdose.  The verdict should send a message to those who flood our community’s streets with lethal drugs.  We will continue to work with our law enforcement partners to prosecute and convict criminals seeking to profit from the current public health crisis afflicting our city.”

According to court documents and the evidence at trial:

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

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

*              *             *

FRANKIE BEQIRAJ, 28, of the Bronx, New York, faces a maximum sentence of life in prison, and a mandatory minimum term of 20 years in prison.

The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  BEQIRAJ is scheduled to be sentenced on September 27, 2018 before Judge Berman.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ben Carson, Secretary of the U.S. Department of Housing and Urban Development (“HUD”), Helen M. Albert, Principal Deputy Inspector General, performing the duties of the Inspector General, HUD Office of the Inspector General (“HUD OIG”), and Scott Pruitt, Administrator of the U.S. Environmental Protection Agency (“EPA”), announced today the simultaneous filing of a Complaint against defendant NEW YORK CITY HOUSING AUTHORITY (“NYCHA”) and a proposed settlement agreement, in the form of a Consent Decree, with NYCHA and the City of New York (the “City”).  The Complaint alleges that NYCHA for years has violated and continues to violate basic federal health and safety regulations, including regulations requiring NYCHA to protect children from lead paint and otherwise to provide decent, safe, and sanitary housing.  The Complaint further alleges that NYCHA has repeatedly made false statements to HUD and the public regarding its lead paint compliance, and has intentionally deceived HUD inspectors.  To fundamentally reform NYCHA and ensure that it provides housing that complies with federal law, the Consent Decree – which is subject to the review and approval of the Court – imposes a strong federal Monitor and requires the City, among other things, to provide $1.2 billion of additional capital funding to NYCHA over the next five years, and $200 million every year thereafter until the problems are fixed and the Consent Decree is no longer necessary.

Along with other federal, state, and city funding, there will be approximately $ 4 billion available for capital improvements the first four years.

U.S. Attorney Geoffrey S. Berman stated:  “NYCHA’s failure to provide decent, safe, and sanitary housing is simply unacceptable, and illegal.  Children must be protected from toxic lead paint, apartments must be free of mold and pest infestations, and developments must provide adequate heat in winter and elevator service.  NYCHA has put its residents at risk.  Today’s unprecedented settlement will improve life for the 400,000 residents who call NYCHA home, while ensuring accountability, reform, and oversight at this troubled institution. The City’s commitment of resources to NYCHA is extraordinary and promises real relief for NYCHA residents.”

HUD Secretary Ben Carson said:  “This historic agreement marks a new era for New York City’s public housing, one that puts families and their children first.  New York City and New York State are making an unprecedented commitment to put NYCHA on a new path.  The cooperation of Federal, State and city officials will vastly improve the living conditions for hundreds of thousands of New Yorkers who call NYCHA home.”

HUD OIG Principal Deputy Inspector General Helen M. Albert said:  “We are proud of the integral work that the OIG staff performed which led to today’s settlement.  This represents a consequential partnership with the U.S. Attorney and others to ensure that those who reside in NYCHA housing will do so in safe and sanitary conditions.”

EPA Administrator Scott Pruitt said:  “Instead of protecting children from lead poisoning, NYCHA systematically violated EPA and HUD lead paint safety regulations and covered up its noncompliance.  Today’s landmark settlement puts a stop to that.  It is not only a great example of what EPA and HUD can achieve by working together, but it also sends a strong message to housing authorities, landlords, and renovators – violating the law and endangering public health will not be tolerated.  This agreement will dramatically improve the living conditions of New York City’s most vulnerable residents.”  

According to the Complaint filed today in Manhattan federal court:

For years, NYCHA has failed to comply with key HUD and EPA lead paint safety regulations, including by failing to inspect apartments for lead paint hazards and failing to remediate peeling lead paint.  NYCHA also fails to ensure that its workers use lead-safe work practices.  Children have been harmed as a result of NYCHA’s failures.  Between 2010 and 2016, at least 19 lead-poisoned children were found to have been exposed to deteriorated lead paint in their NYCHA apartments, and thousands more were put at risk. 

NYCHA also fails to provide “decent, safe, and sanitary” housing as required by HUD regulations.  Mold grows unchecked at many NYCHA developments, often on a very large scale, threatening the health of residents with asthma.  Across the city, NYCHA residents are provided inadequate heat in winter, leading to frigid apartment temperatures.  Pest and vermin infestations are common.  Elevators fail, leaving elderly or disabled residents trapped in their apartments or sleeping in building lobbies. 

NYCHA has repeatedly made false statements to HUD and the public regarding these matters.  These include false certifications by NYCHA each year that it would comply with HUD’s lead paint safety regulations.  NYCHA also deceived HUD about living conditions at NYCHA, going so far as to publish a “Quick Tips” training guide for how to hide conditions from HUD’s inspectors.

*                *                *

The United States has filed a proposed Consent Decree today, which would resolve the allegations in the Complaint.  The Consent Decree remains subject to review and approval by the Court.  The Consent Decree provides for the appointment of a federal monitor to oversee fundamental reform at NYCHA.  The Monitor has the authority, under the review of the Court, to set the performance standards that NYCHA must meet, devise the plans by which NYCHA will achieve those standards (including by implementing changes to NYCHA’s management, organization, and workforce structure), and require NYCHA to select independent contractors to perform certain work.  The Monitor will be selected by the United States, after consultation with City and state officials and NYCHA stakeholders, and subject to approval by the Court.

The Consent Decree also commits the City of New York to provide an additional $1 billion in capital funds over the next four years, over and above what the City has budgeted, and at least an additional $200 million in capital funds each subsequent year until the conditions identified in the Complaint are addressed.  Further, the Consent Decree requires NYCHA to comply immediately with HUD’s and EPA’s lead-safe work practices rules and to provide notice to residents in any apartment where NYCHA has identified lead paint.

*                *                *

In the Consent Decree submitted today, NYCHA admits, acknowledges, and accepts responsibility for the following:

• • At least once a year, beginning no later than 2010 and extending through 2016, NYCHA’s certifications to HUD contained untrue representations that NYCHA “will comply with” HUD’s federal lead paint safety regulations.
  •  
  • In more than half of NYCHA’s developments, NYCHA’s inspections (including statistical sampling) have confirmed the presence of lead paint somewhere on the premises, and in at least 92 developments, the inspections (including statistical sampling) have confirmed the presence of lead paint inside apartment units. 
• • Since at least 2010, NYCHA has not performed most of the biennial lead paint risk assessment reevaluations required by regulation for developments containing lead paint. 
  •  
  • From at least 2012 to 2016, NYCHA failed to perform visual assessments of apartments for lead paint hazards as required by regulation.  In 2016, NYCHA began performing visual assessments in units where children under six reside, but NYCHA has not yet performed visual assessments in the majority of apartments that may contain lead paint. 
  •  
  • Since at least 2010, NYCHA has not ensured that staff use lead-safe work practices when performing work on surfaces that may contain lead paint.
• • Currently, after NYCHA has removed mold from apartments, the mold returns at least 30% of the time. 

• • In Winter 2017-2018 alone, more than 320,000 residents, 80% of the public housing population, lost heat.

• • In 2016 alone, NYCHA experienced an average of more than 13 outages per elevator.

• • NYCHA’s data reflects more than 260,000 work orders for roaches between 2013 and 2016.  For the same period, there were more than 90,000 mouse work orders and nearly 36,000 rat work orders.

• • For a decade, NYCHA provided its staff with a list of “Quick Fix Tips” to improve its Public Housing Assessment System inspection scores.
  •  

Mr. Berman thanked HUD, HUD OIG, and EPA for their invaluable assistance in this matter.  Mr. Berman also thanked Mark Peters and the Department of Investigation for their important wok in this area.

This case is being handled by the Office’s Environmental Protection Unit in the Civil Division.  Assistant United States Attorneys Robert William Yalen, Mónica P. Folch, Jacob Lillywhite, Talia Kraemer, and Sharanya Mohan are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DONQUE TYRELL, a/k/a “Polo Rell,” was found guilty yesterday of murder in aid of racketeering, racketeering conspiracy, narcotics trafficking conspiracy, distributing narcotics near schools and playgrounds, and firearms offenses in connection with his membership in the “Big Money Bosses” (“BMB”), a violent street gang that operated primarily on White Plains Road from 215th Street to 233rd Street in the Bronx.  TYRELL was convicted of aiding and abetting the murder of 17-year-old Keshon Potterfield on June 22, 2014, at a backyard party in the vicinity of East 232nd Street in the Bronx.  A unanimous jury convicted TYRELL on all counts of the controlling indictment following a six-day trial before United States District Judge Jed S. Rakoff. 

U.S. Attorney Geoffrey S. Berman said:  “As proven at trial, Donque Tyrell participated in the murder of a 17-year-old who dared go to a backyard party in a part of the Bronx that Tyrell’s gang, the Big Money Bosses, claimed as its own.  Tyrell then celebrated that murder on Facebook and in YouTube rap videos.  Gang violence threatens the safety and security of all New Yorkers, and we will continue to work with our law enforcement partners to prevent this type of violence from happening in our neighborhoods.”

According to court documents and the evidence at trial:

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

TYRELL was a member of BMB.  On June 22, 2014, TYRELL and other members of BMB showed up at a birthday party in the backyard of a residence in the vicinity of East 232nd Street in the Bronx, in an area that BMB considered to be part of its territory.  Potterfield was one of the guests at the party, and was perceived to be associated with a rival gang.  After arriving at the party, TYRELL obtained a gun from an associate and passed it to another BMB member who then shot and killed Potterfield.  Potterfield was 17.  TYRELL celebrated Potterfield’s murder in public Facebook postings and in rap music videos posted on YouTube in which he taunted rival gang members and threatened future violence.  

TYRELL was arrested in this case as a result of a multi-year investigation by the New York City Police Department’s Bronx Gang Squad (the “Bronx Gang Squad”), U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Violent Gang Unit (“HSI”), the New York Field Division of the Drug Enforcement Administration (“DEA”), and the Joint Firearms Task Force of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) into gang violence in the Northern Bronx.  On April 27, 2016, 63 members and associates of BMB were charged with racketeering conspiracy, narcotics conspiracy, narcotics distribution, and firearms charges.  TYRELL was the last defendant outstanding in the case. 

*                      *                     *

In addition to the murder in aid of racketeering conviction, TYRELL, 22, of the Bronx, New York, was convicted of conspiring to commit racketeering as a result of his membership in BMB, conspiring to sell narcotics, selling narcotics within 1000 feet of schools and playgrounds, using firearms in connection with the gang and drug offenses, an attempted assault with a firearm in connection with his BMB membership, and attempting to rob a livery cab driver in the Bronx by hitting him in the head with a firearm.  TYRELL is facing a mandatory minimum sentence of life in prison.  TYRELL is scheduled to be sentenced on September 14, 2018, before Judge Rakoff. 

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

This case is being handled by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Drew Skinner, Hagan Scotten, and Allison Nichols tried the case. 

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 & Explosives (“ATF”) and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment charging members of a Brooklyn drug trafficking organization known as the “Boss Crew” with narcotics and firearms offenses.  Fifteen members of the organization, including TYSHAWN BURGESS, a/k/a “Ty,” a/k/a “Ty Black,” LLOYD GORDON, a/k/a “LG,” LARRY BAYER, a/k/a “L,” KERRY FELIX, a/k/a “Mack,” DEVONTAE NEWTON, a/k/a “D-Block,” a/k/a “Sneeze,” TYRELL SUMPTER, a/k/a “Rell,” a/k/a “Ruger,” MAURICE CURTIS, a/k/a “Mo,” TYQUAN ROBINSON, a/k/a “Blacko,” TYREEK OGARRO, a/k/a “Reek,” DARREN MILLER, a/k/a “Dice,” a/k/a “Darren Thomas,” ERNEST MURPHY, a/k/a “Problem G,” a/k/a “E,” RAMAL CURTIS, a/k/a “Rah,” KELLY ROYSTER, a/k/a “KK,” ROBERT RHODES, a/k/a “Charlie,” and KAEMAR WILSON, a/k/a “K,” are charged with participating in a conspiracy to distribute crack cocaine and heroin from 2015 to May 2018.  In addition, BURGESS, FELIX, NEWTON, SUMPTER, CURTIS, ROBINSON, and WILSON are also charged with possessing firearms in furtherance of the narcotics conspiracy.  Fourteen defendants were arrested this morning and will be presented before United States Magistrate Judge Robert W. Lehrburger in Manhattan federal court this afternoon.  WILSON is in custody on state charges and will be transferred to federal custody.  The case has been assigned to United States District Judge Richard J. Sullivan.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants were members of a street gang that terrorized a Brooklyn neighborhood with their drug dealing and violence.  Law enforcement has no more important duty than keeping our citizens safe.  These arrests demonstrate our continued commitment to protecting communities that are victimized by gang and gun violence.

ATF Special Agent-in-Charge Ashan M. Benedict said:  “Burgess and his co-conspirators as alleged in the Indictment ran an organized ring of narcotics dealers associated with acts of violence on the streets of Brooklyn.  ATF remains steadfast in its commitment to protecting the public from violent individuals, groups and gangs looking to do harm to fellow citizens.  I would like to thank the Special Agents and Task Force Officers of the NYPD/ATF Joint Firearms Task Force, the NYPD Gun Violence Suppression Division, and HSI.  I would also like to extend my gratitude to the United States Attorney’s Office for their work in prosecuting the case.”

NYPD Commissioner James P. O’Neill said:  “In collaboration with our federal partners, we will remain steadfast in our fight against those who traffic in illegal narcotics and the violence so often associated with it.  Today’s charges emphasize the highly efficient working relationship NYPD detectives enjoy with ATF investigators and attorneys at the Southern District.”

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

The defendants were members of a drug trafficking organization (the “Boss Crew DTO”) that distributed significant quantities of narcotics, including crack cocaine and heroin, on a daily basis, in and around the Bedford Stuyvesant neighborhood of Brooklyn, New York.  TYSHAWN BURGESS, a/k/a “Ty,” a/k/a “Ty Black,” was the leader of the Boss Crew DTO.  BURGESS supervised other members of the Boss Crew DTO, coordinated the supply of narcotics to other drug dealers within the Boss Crew DTO, and referred drug customers to members of the Boss Crew DTO for sales.  LLOYD GORDON, a/k/a “LG,” and DARREN MILLER, a/k/a “Dice,” a/k/a “Darren Thomas,” supplied wholesale quantities of crack cocaine to members and associates of the Boss Crew DTO for street-level distribution.  LARRY BAYER, a/k/a “L,” and ERNEST MURPHY, a/k/a “Problem G,” a/k/a “E,” maintained narcotics and narcotics paraphernalia at the Boss Crew DTO’s stash location, and packaged the narcotics for street-level distribution.  TYREEK OGARRO, a/k/a “Reek,” RAMAL CURTIS, a/k/a “Rah,” KELLY ROYSTER, a/k/a “KK,” and ROBERT RHODES, a/k/a “Charlie,” purchased and facilitated the purchase of wholesale quantities of narcotics from members of the Boss Crew DTO for distribution.  TYRELL SUMPTER, a/k/a “Rell,” a/k/a “Ruger,” TYQUAN ROBINSON, a/k/a “Blacko,” LARRY BAYER, a/k/a “L,” KERRY FELIX, a/k/a “Mack,” DEVONTAE NEWTON, a/k/a “D-Block,” a/k/a “Sneeze,” and MAURICE CURTIS, a/k/a “Mo,” functioned as street level distributors for the Boss Crew DTO.  

In addition, BURGESS, FELIX, NEWTON, SUMPTER, CURTIS, ROBINSON, and WILSON, possessed and used firearms to protect the Boss Crew DTO’s narcotics trafficking operation.

*                      *                      *

BURGESS, 24, GORDON, 47, BAYER, 25, FELIX, 23, NEWTON, 19, SUMPTER, 23,  CURTIS, 24, ROBINSON, 27, OGARRO, 26, MILLER,50, MURPHY, 28, RAMAL CURTIS,  31, ROYSTER, 39, RHODES, 33, and WILSON, 33, are charged with conspiring to distribute, and possess with the intent to distribute, 280 grams and more of crack cocaine and 100 grams and more of heroin, which carries a mandatory minimum sentence of ten years in prison and a maximum sentence of life in prison.  BURGESS, FELIX, NEWTON, SUMPTER, CURTIS, ROBINSON, and WILSON, are charged with possession of a firearm in furtherance of a narcotics conspiracy, which carries a maximum sentence of life in prison and a mandatory minimum sentence of five years in prison.

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

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorney Karin Portlock is in charge of the prosecution. 

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

 

---

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and Charles Gardner, the Commissioner of the Yonkers Police Department, announced today the filing of federal criminal charges against HARRY QUINTANA-CRUZ and ALEJANDRO ORTIZ-CRUZ, both of whom were charged in a complaint with forcibly assaulting, resisting, and interfering with FBI Special Agents by colliding into their vehicle after a high-speed car chase.  QUINTANA-CRUZ was also charged with being a convicted felon in possession of a firearm after a gun was found in an apartment where he resided.  Both QUINTANA-CRUZ and ORTIZ-CRUZ will be presented today in White Plains federal court before the Honorable Judith C. McCarthy.

U.S. Attorney Geoffrey S. Berman said:  “Thankfully, the FBI, the United States Probation Office, and the Yonkers Police Department put the brakes on this car chase quickly and safely.  Quintana-Cruz and Ortiz-Cruz are now in custody and facing federal felony charges.”  

FBI Assistant Director William F. Sweeney Jr. said:  “We have a responsibility to the public to protect them from criminals who pay no heed to the danger they place innocent people in while trying to evade law enforcement.  Luckily in this case, no one was hurt.  We want to thank our law enforcement partners in this investigation, and appreciate their dedication to the safety of the community.”

Yonkers Police Commissioner Charles Gardner said:  “This incident highlights both the dangers our law enforcement officers face every day, and the shared commitment the Yonkers Police Department has with our local and Federal partners in apprehending those individuals who dare to commit acts of violence in our communities. I applaud our officers, the FBI’s Westchester County Safe Streets Task Force, and the U.S. Probation Office for their exceptional efforts in making these arrests.”

According to the allegations in the Complaint unsealed in White Plains federal court:[1]

On June 1, 2018, QUINTANA-CRUZ fled on foot from officers of the U.S. Probation Office who sought to meet with him regarding non-compliance with the terms of his supervised release.  After arranging for his brother, ORTIZ-CRUZ, to pick him up in a car, a high-speed police chase ensued with ORTIZ-CRUZ at the wheel.  During the pursuit, the defendants’ vehicle drove through red lights, failed to stop at “Stop” signs, and proceeded in the wrong direction on one-way streets.  At one point, the vehicle approached two law enforcement cars blocking an intersection, one of which was an FBI car.  Instead of slowing down, the defendants’ vehicle rammed into the FBI car and continued driving for a few more blocks before finally stopping as a result of another collision.  In addition to being charged with assaulting the officers effecting his arrest, QUINTANA-CRUZ is charged with being a convicted felon in possession of a firearm after a Springfield Armory .40 caliber pistol was found in an apartment where he resided.  The investigation is continuing.

*          *          *

Both QUINTANA-CRUZ, 26, and ORTIZ-CRUZ, 18, of Yonkers, New York, are charged with one count of assaulting, resisting, and interfering with their arresting officers, which carries a maximum sentence of 20 years in prison.  QUINTANA-CRUZ is also charged with one count of being a convicted felon in possession of a firearm, which carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Berman praised the outstanding work of the U.S. Probation Office, the Yonkers Police Department, and the FBI’s Westchester County Safe Streets Task Force, which comprises agents and task force officers from the FBI, the U.S. Probation Office, the Westchester County Department of Public Safety, the Westchester County District Attorney’s Office, the New York City Police Department, the Yonkers Police Department, the Peekskill Police Department, the Greenburgh Police Department, the Mount Vernon Police Department, and the New York State Police Department.  Mr. Berman thanked the Westchester County District Attorney’s Office for its assistance in the arrest and apprehension of the defendants.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Sam Adelsberg 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.

 

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today that MAURICE HARTLEY, a/k/a “Bugz,” REGINALD SANDERS, a/k/a “Black,” HECTOR SANCHEZ, a/k/a “Jabee,” AARON CARTER, a/k/a “Cream,” RONALD BEASLEY, a/k/a “Nuke,” JONATHAN SANCHEZ, a/k/a “Nash,” TYVANN BARNETT, a/k/a “Ty,” JAVIER BENITEZ, a/k/a “Javi,” ALEJANDRO RODRIGUEZ, a/k/a “Lex,” GREGORY CARTER, a/k/a “Fat Boy,” RAY SANCHEZ, FREDDIE TORRES, a/k/a “Kiko,” EDWARD DAVIES, a/k/a “Yum Yum,” LOUIS BROWN, a/k/a “Tut,” CHRISTOPHER SIMON, JOHNNY INGRAM, MARIE PALUMBO, and TIA JASPER have been charged with participating in a conspiracy to distribute heroin and fentanyl.  Seventeen defendants were arrested yesterday evening and this morning and were presented before United States Magistrate Judge Robert W. Lehrburger in Manhattan federal court this afternoon.  BENITEZ was in custody on state charges and has been transferred to federal custody.  The case has been assigned to United States District Judge Paul A. Engelmayer.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants operated a network for the distribution of highly addictive and dangerous drugs.  Even after they realized the potency of the drugs they were distributing and selling – and the overdose risk those drugs posed – the defendants allegedly continued to sell their poison and to fuel the opioid epidemic plaguing our nation.  Today’s arrests are part of our continued commitment, along with our law enforcement partners, to stop the flow of heroin and fentanyl onto the streets of New York City.”

FBI Assistant Director William F. Sweeney Jr. said:  “The drugs these suspects were allegedly selling are killing people.  The harsh reality is the sellers and pushers are purposefully lacing heroin with a deadly mix of fentanyl to create a more powerful, and deadly high.  The FBI Metro Safe Streets Task Force and our law enforcement partners are out day after day doing all we can to stop these criminals from causing more death in our communities.  We won’t stop until we round up every last one of them.”

NYPD Commissioner James P. O’Neill said:  “Law enforcement can help end the scourge of overdose deaths related to illegal narcotics in New York City by relentlessly pursuing the individuals and groups responsible for distributing them on our streets.  Today’s charges show how effective the NYPD-federal partnership is in sharing the responsibility for public safety.”

According to the allegations in the Complaint and Indictment,[1] and statements made in Court:

The defendants were members of a drug trafficking organization (the “DTO”) that operated in the Bronx, New York, and controlled heroin sales between 182nd Street and 184th Street, primarily between Jerome Avenue and University Avenue (“the “DTO’s Drug Territory”).  As a means of marketing its heroin, and to ensure that the only heroin sold in the DTO’s Drug Territory belonged to the DTO, the DTO placed “stamps” on the glassines of heroin and fentanyl that it sold to customers.  Among the stamps the DTO used were “Heisenberg,” “Sleepless,” “Peace of Mind,” “Obsession,” “Fist with a Power Cord,” “Sold Out,” “Methadone,” “Sweet Dreams,” and “Hands Up.”  From 2015 to June 2018, the DTO is estimated to have distributed more than 100 kilograms of heroin, much of it mixed with fentanyl.

Glassines marked with the DTO’s stamps were recovered at the scene of at least five suspected overdose deaths in and around the DTO’s Drug Territory.  First, on September 11, 2017, an individual died of a suspected heroin overdose near the DTO’s Drug Territory, and a glassine marked with the stamp “Obsession” was recovered at the scene of the overdose death.  Second, on September 18, 2017, an individual died of a suspected heroin overdose near the DTO’s Drug Territory, and a glassine marked with the stamp “Fist with a Power Cord” was recovered at the scene of the overdose death.  Finally, between December 12, 2017, and on January 2, 2018, three different individuals died of suspected heroin overdoses in a building within the DTO’s Drug Territory.  Glassines marked with the stamp “Hands Up” were recovered at the scene of each of these three deaths.  Each time one of the DTO’s stamps was recovered at the scene of an overdose death, the DTO stopped using that stamp, and started using different stamps on the glassines of heroin and fentanyl that it distributed.

On June 5, 2018, law enforcement agents executed search warrants at several locations in the Bronx, New York, that were used by the DTO, and recovered, among other things, approximately three kilograms of heroin, approximately $300,000 in cash, and a loaded firearm.

*                      *                      *

HARTLEY, 35, SANDERS, 37, HECTOR SANCHEZ, 29, AARON CARTER, 40, BEASLEY, 36, JONATHAN SANCHEZ, 30, BARNETT, 21, BENITEZ, 29, RODRIGUEZ, 47, GREGORY CARTER, 35, RAY SANCHEZ, 30, TORRES, 36, DAVIES, 58, BROWN, 62, SIMON, 59, INGRAM, 55, and JASPER, 36, each of the Bronx, New York, and PALUMBO, 36, of Elizaville, New York, are each charged with one count of conspiring to distribute heroin and fentanyl, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  

Mr. Berman praised the outstanding investigative work of the FBI and NYPD, and thanked the Bronx County District Attorney’s Office for its assistance.

The prosecution is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Michael K. Krouse, Stephanie Lake, and Robert B. Sobelman are in charge of the prosecution. 

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

 

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

A New York man was arrested today and charged in U.S. District Court in the Southern District of New York with conducting an extensive cyberstalking and threats campaign that targeted a woman he dated for several months in 2013 and 2014.  The victim’s name is being withheld to protect her privacy.

 

Acting Assistant Attorney John P. Cronan of the Justice Department’s Criminal Division and U.S. Attorney Geoffrey S. Berman of the Southern District of New York made the announcement. 

 

David Waldman, 50, of New York, New York, was charged in a criminal complaint with one count of cyberstalking and two counts of sending interstate threats.  Waldman will have his initial court appearance later today before U.S. Magistrate Judge Sarah Netburn in courtroom 5A in U.S. District Court in Manhattan.

 

According to the affidavit in support of the complaint, Waldman is charged with engaging in an extensive cyberstalking campaign targeting a woman he briefly dated.  The campaign began in April 2014, shortly after Waldman and the victim ended their relationship, and continued intermittently until the date of Waldman’s arrest.  Over the course of almost four years, Waldman sent the victim hundreds of text messages, voicemail messages, and e-mail messages, and made voluminous posts on a variety of online platforms, in which he claimed, among other assertions, that she had been diagnosed with bipolar and narcissistic personality disorder, used drugs, and fabricated claims that she had been a victim of child sexual abuse.  In his online communications, Waldman also repeatedly threatened to show up at the victim’s apartment and office and threatened to injure, torture, and sexually assault her.  Waldman also sent email messages to the victim’s employers, accusing her of being a “habitual drug user” and claiming that he would sue her for defamation, theft, illegal trespass, violating HIPAA, and engaging in other “illegal behaviors.” 

 

Over the course of the alleged cyberstalking campaign, the victim obtained multiple state court orders of protection against Waldman.

 

The case was investigated by special agents with the U.S. Attorney’s Office for the Southern District of New York.  Senior Trial Attorney Mona Sedky of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Nicholas Chiuchiolo of the Southern District of New York are prosecuting the case. 

 

The details contained in the charging document are allegations.  The defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John P. Cronan, Acting Assistant Attorney General for the Criminal Division, announced that DAVID WALDMAN was arrested today and charged with conducting an extensive cyberstalking and threats campaign that targeted a woman he dated for several months in 2014.  WALDMAN will be presented this afternoon before U.S. Magistrate Judge Sarah Netburn in Manhattan federal court. 

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

Beginning in April 2014 and shortly after WALDMAN and the victim ended their relationship, WALDMAN began an extensive cyberstalking campaign that continued intermittently until the date of WALDMAN’s arrest.  Over the course of almost four years, WALDMAN sent the victim hundreds of text messages, voicemail messages, and email messages, and made voluminous posts on a variety of online platforms, in which he claimed, among other assertions, that she had been diagnosed with bipolar and narcissistic personality disorder, used drugs, and fabricated claims that she had been a victim of child sexual abuse.  In his online communications, WALDMAN also repeatedly threatened to show up at the victim’s apartment and office and threatened to injure, torture, and sexually assault her.  WALDMAN also sent email messages to the victim’s employers, accusing her of being a “habitual drug user,” and claiming that he would sue her for defamation, theft, illegal trespass, violating HIPAA, and engaging in other “illegal behaviors.” 

Over the course of the alleged cyberstalking campaign, the victim obtained multiple state court orders of protection against WALDMAN.

*          *          *

WALDMAN, 50, of Inwood, New York, is charged with one count of cyberstalking, which carries a maximum sentence of five years, and one count of sending interstate threats, which carries a maximum sentence of five years. 

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

Mr. Berman praised the outstanding investigative work of the Special Agents with the United States Attorney’s Office for the Southern District of New York.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Nicholas Chiuchiolo and Senior Trial Attorney Mona Sedky of the Criminal Division’s Computer Crime and Intellectual Property Section are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor (“DOL”) Office of Inspector General, announced today the arrests of SALVATORE ARMAO, the founder and managing partner of an accounting firm (the “Firm”), and KAREN AUER, a principal at the Firm, for aiding and abetting the embezzlement of over $100,000 from a labor union (the “Union”) and its employee welfare benefit plan (the “Plan”), and for making false filings with DOL to conceal the embezzlement scheme.  AUER was also charged with making false statements to a DOL agent during the investigation of the embezzlement scheme.  Both defendants surrendered this morning in Manhattan and are expected be presented today before U.S. Magistrate Judge Sarah Netburn.

U.S. Attorney Geoffrey S. Berman said:  “Salvatore Armao and Karen Auer are professional accountants who allegedly facilitated and concealed a long-running union embezzlement scheme by knowingly submitting false filings with the Department of Labor and the Internal Revenue Service.  Accountants and auditors like Armao and Auer are supposed to serve as safeguards against labor fraud, not facilitate it.”

DOL-OIG Special Agent-in-Charge Michael C. Mikulka said:  “The Office of Inspector General is responsible for identifying and reducing labor racketeering and corruption in employee benefit plans, labor-management relations, and internal union affairs. We will continue to work with our law enforcement partners to investigate these types of allegations.”

According to the allegations in the Complaint[1]:

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 charges, unrelated union dues for an actors’ union, purchases from retail establishments, payments to personal credit cards, 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 over $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 and AUER falsely classified as “loans” the personal expenses for which the President-Trustee paid using Union and Plan funds in accounting records and on DOL filings for the Union.  ARMAO falsely classified the President-Trustee’s personal expenses as loans for at least five years, while AUER did so for at least one year.  ARMAO and AUER 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. 

During the DOL’s investigation of the embezzlement scheme, ARMAO and AUER were interviewed by DOL.  ARMAO admitted that he was aware of the President-Trustee’s use of Union assets to pay for personal expenses based upon his review of records that showed that the President-Trustee used Union funds to pay for his family vacations and his wife’s car payments, and then used the Plan to reimburse the Union.  During her interview, AUER lied about a false response on a DOL form that AUER and ARMAO caused to be filed with the DOL.

*              *             *

SALVATORE ARMAO, 64, of Howard Beach, New York, and KAREN AUER, 47, of Bethpage, New York, are each charged with one count of aiding and abetting embezzlement from a labor organization, one count of conspiracy to make false statements in employee benefit plan records and reports, and one count of making false statements in employee benefit plan records and reports.  AUER is also charged with making false statements to a federal agent.  Each of the four counts carries a maximum sentence of five years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge. 

Mr. Berman thanked 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 expressed gratitude to 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.  Mr. Berman added that the investigation is continuing.

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.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the unsealing of a Complaint charging BETSY MONTALVO and EDWARD GONZALEZ with a wire fraud conspiracy, wire fraud, and aggravated identity theft in connection with a fraudulent scheme to provide of nursing services at a Bronx-based hospital.  Both defendants were arrested yesterday in New York and presented before United States Magistrate Judge Sarah Netburn in Manhattan federal court. 

According to the allegations in the Complaint[1]:

MONTALVO and GONZALEZ were principals of a Bronx-based nursing company (“Nursing Company-1”) that provided temporary nursing services to client companies in the New York City area.  From March 2015 to March 2017, one of Nursing Company-1’s clients was a Bronx-based hospital (“Hospital-1”), and Nursing Company-1 provided and scheduled registered and licensed practical nurses on a temporary basis to fill the staffing needs of Hospital-1. 

As alleged in the Complaint, in May 2015, a factoring company (“Factoring Company-1”) entered into a contractual relationship with Nursing Company-1 to purchase Nursing Company-1’s accounts receivable (invoices) owed to it by Hospital-1.  The Complaint alleges that MONTALVO, GONZALEZ, and a co-conspirator not named as a defendant in the Complaint engaged in a scheme in which they presented to Factoring Company-1 false, fraudulent, and inflated invoices that did not reflect the nursing services for Hospital-1 that had been performed by Nursing Company-1.  In some instances, the identities of nurses who performed no services for Nursing Company-1 or Hospital-1 were listed on the fraudulent invoices.  Relying on the fraudulent invoices, Factoring Company-1 paid Nursing Company-1 a percentage of the fraudulent invoices. 

The Complaint alleges that the attempted losses associated with the fraud scheme are $664,761. 

*                      *                      *

MONTALVO, 49, and GONZALEZ, 47, both of Bronx, New York, are each charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years; one count of wire fraud, which carries a maximum sentence of 20 years; and one count of aggravated identity theft, which carries a mandatory minimum sentence of two years.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.

Mr. Berman praised the outstanding investigative work of the Special Agents with the United States Attorney’s Office for the Southern District of New York.

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Aline R. Flodr and Nicholas W. Chiuchiolo are in charge of the prosecution. 

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EMIL RENSING was sentenced today to 51 months in prison for his scheme to defraud his former employer, a premium cable network (the “Network”), of more than $7 million through false statements about purported services to be provided to the Network by companies RENSING owned and controlled, which services were, in large part, never performed.  RENSING was sentenced by U.S. District Judge Victor Marrero, who previously accepted RENSING’s guilty plea.

U.S. Attorney Geoffrey S. Berman said:  “Emil Rensing defrauded his employer out of more than $7 million by causing the network to pay Rensing-controlled companies for services that were never rendered.  Rensing used false and stolen identities and dummy email accounts to conceal his role in the payments, and then lied to company lawyers who questioned him about the evident fraud.  Today he has been sentenced to prison for his crime.”

According to the allegations in the Indictment to which RENSING pled guilty, a criminal complaint filed against RENSING, statements made during the plea, and other court proceedings:

EMIL RENSING, who served as the chief digital officer of the Network, defrauded the Network of more than $7 million over the course of his five-year employment with the Network.  Specifically, through his position as chief digital officer of the Network, RENSING caused the Network to contract with vendor companies owned and controlled by RENSING to perform digital media services for the Network and to perform those services through vendor personnel identified in the contracts.  In truth and in fact, the services promised by RENSING were, in large part, never performed, and the vendor personnel designated in the contracts to perform the services – which included several of RENSING’s former professional associates and business partners – never performed services for the Network.  Indeed, the individuals identified by RENSING as vendor personnel were unaware that their names were being used by RENSING in this manner. 

RENSING concealed his fraudulent scheme by, among other things, using false and stolen identities to hide his own involvement in the scheme.  As to one of the vendors RENSING used to perpetrate the scheme (“Vendor-1”), RENSING provided the Network with a false name and email address as the “contact” to be used by the Network to communicate with Vendor-1.  As to a second vendor (“Vendor-2”), RENSING provided the Network with the name of a personal acquaintance as a “project manager” and “contact” for Vendor-2 when, in truth and in fact, this acquaintance had nothing to do with Vendor-2.  Unbeknownst to this personal acquaintance, RENSING also established an email account in that acquaintance’s name, which RENSING, posing as the acquaintance, regularly used to communicate with the Network about the vendor’s billing and other administrative matters.  

After the Network learned of RENSING’s fraudulent scheme, RENSING was interviewed by attorneys for the Network.  During this interview, which was recorded at the request of RENSING and his counsel, RENSING made multiple false statements to further conceal his fraudulent scheme.

*                *                *

In addition to the prison term, RENSING, 44, of Manhattan, was sentenced by Judge Marrero to three years of supervised release, and was ordered to forfeit $7,774,469.52 and to pay $7,774,469.52 in restitution to the Network plus the expenses the Network incurred during its participation in the Government’s investigation and criminal prosecution.

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

The prosecution of this case is being overseen by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Elisha J. Kobre is in charge of the prosecution.           

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of WOOJAE JUNG, a/k/a “Steve Jung,” and unsealing of a criminal complaint charging JUNG with conspiracy and securities fraud in connection with an insider trading scheme.  The defendant is expected to be presented this afternoon in the U.S. District Court for the Northern District of California.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Woojae Jung violated his duty to his company and traded on stolen insider information, over and over again.  This Office remains committed to enforcing the nation’s securities laws to protect the fairness and integrity of the markets.”

FBI Assistant Director William F. Sweeney Jr. said:  “Financial crimes, especially those that involve the exploitation of material nonpublic information of clients who have placed their trust in investment institutions, have a negative impact on the economy and individuals alike.  We will continue to investigate those who engage in these illegal acts to help prevent future fraudulent activity in the financial markets.” 

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

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

JUNG used his position at the Investment Bank to obtain MNPI about a number of the Investment Bank’s clients and then, in multiple instances, JUNG and a co-conspirator (“CC-1”) used that MNPI to cause profitable securities trades.  In an effort to conceal this illicit trading, JUNG and CC-1 conducted these illegal trades through a brokerage account held in the name of CC-1, who resides in South Korea.  In contravention of his employer’s rules about outside investment accounts, JUNG accessed, used, and traded in that brokerage account repeatedly between in or about 2015 and in or about 2017, including on hundreds of occasions when the account was accessed through IP addresses subscribed in JUNG’s name.

Over the course of the scheme JUNG and CC-1 traded in securities of at least 10 companies based on MNPI and made more than approximately $130,000.

*                *                *

JUNG, 37, of San Francisco, California, is charged with one count of conspiracy to commit securities fraud and six counts of securities fraud.  The securities fraud counts each carry a maximum penalty of 20 years in prison.  The conspiracy to commit securities fraud count carries a maximum 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 outstanding work of the FBI, and thanked the Securities Exchange Commission, which has filed civil charges 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.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Raymond P. Donovan, Special Agent in Charge of the United States Drug Enforcement Administration (“DEA”) Special Operations Division, announced today that SHAHBAZ KHAN pled guilty to conspiring to import heroin into the United States, and to attempting to import heroin into the United States.  KHAN was taken into custody by Liberian authorities on December 1, 2016, and expelled to the United States later that same day based on a pending Complaint in this District.  He pled guilty today to a Superseding Indictment in Manhattan federal court before U.S. District Judge Lorna G. Schofield.   

U.S. Attorney Geoffrey S. Berman stated:  “Shahbaz Khan boasted to an undercover officer about his ability to smuggle drugs anywhere in the world without detection.  The DEA put the lie to that boast.  Khan has now admitted to conspiring and attempting to import massive quantities of heroin into the United States, and this international narcotics kingpin is now a convicted felon awaiting what could be a substantial sentence.”           

Special Agent in Charge Raymond P. Donovan stated:  “The arrest of Shahbaz Khan was a result of DEA’s relentless pursuit of global drug traffickers and other dangerous transnational criminal networks with our partners across the world.  Khan led a massive and sophisticated heroin network based in Afghanistan and Pakistan, where the vast majority of drug trafficking proceeds have historically been used to finance terrorist insurgencies against the U.S. and our global allies.  He agreed to send huge amounts of deadly drugs to American streets and neighborhoods, which would have fueled the current opioid epidemic and facilitated addiction and abuse by supplying huge amounts of heroin to New York and nationwide.  We are pleased he is facing American justice in a United States court of law.”

According to the, Complaint, the Superseding Indictment, statements made during the plea proceeding, and other filings in this case:

KHAN, a Pakistani national, was the leader of a drug trafficking organization (the “DTO”) based in Afghanistan and Pakistan that produced and distributed massive quantities of heroin around the world.  In 2007, KHAN was designated a Narcotics Kingpin under the Foreign Narcotics Kingpin Designation Act by then-president George W. Bush.  Between approximately August 2016 and October 2016, KHAN conspired to send tens of thousands of kilograms of heroin hidden in maritime shipping containers and air cargo shipments to New York City. 

Beginning in August 2016, KHAN began communicating in a series of telephone calls and in-person meetings in countries in Southwest Asia with individuals whom KHAN believed were heroin traffickers interested in purchasing kilogram quantities of heroin for importation into the United States.  Those individuals were, in fact, working at the DEA’s direction, and included an undercover law enforcement officer (the “UC”). 

In late September 2016, KHAN traveled to a country in Southwest Asia where KHAN met with the UC and others.  During the meeting, KHAN agreed to provide the UC with an initial shipment of five kilograms of heroin for importation into the United States.  KHAN informed the UC that, once the five kilograms of heroin successfully arrived in New York City, KHAN would begin supplying the UC with larger quantities of heroin on a regular basis, including up to 10,000 kilograms of heroin at a time.  KHAN assured the UC that the heroin KHAN would provide was 100% pure.  In describing his history as a narcotics trafficker, KHAN explained he had done work that “had not been done in the past hundred years,” including supplying 114 tons of heroin and hashish to a customer over a one-year period.  KHAN explained that he could ship drugs “anywhere in the word,” hidden in maritime shipping containers or in air-cargo shipments. 

In early October 2016, one of KHAN’s employees, acting at his direction, delivered the five-kilogram initial shipment of heroin in the same country in Southwest Asia.  Through a series of recorded telephone calls, KHAN confirmed with the UC that the heroin his employee had provided was KHAN’s, that the heroin was to be transported to New York City, and that KHAN would be paid for the heroin once it arrived in the United States.

In December 2016, KHAN traveled with the UC to Liberia to inspect a warehouse that could serve as a transshipment point for maritime heroin shipments between Pakistan and New York.  KHAN was arrested by Liberian authorities upon his arrival in Liberia and expelled to the United States. 

*                *                *

KHAN, 70, of Pakistan, pled guilty to one count of conspiring to import one kilogram and more of heroin into the United States, and to one count of attempting to distribute one kilogram and more of heroin, knowing and intending that it would be imported into the United States.  KHAN faces a maximum sentence of life in prison and a mandatory minimum sentence of 10 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 a judge.  Sentencing is scheduled for October 9, 2018, before Judge Schofield. 

Mr. Berman praised the outstanding investigative efforts of the DEA’s Special Operations Division’s Bilateral Investigations Unit; the DEA Accra, Canberra, Sydney, Dubai, Islamabad, Kabul, Nairobi, and New Delhi Country Offices; the DEA New York Organized Crime Drug Enforcement Task Force Financial Investigative Team; the Government of Liberia; the Liberian Drug Enforcement Agency; the DEA Nairobi Country Office Kenyan Police Vetted Unit; the Australian Criminal Intelligence Commission; and the Maldives Police Service.  The defendant’s arrest and subsequent expulsion are also the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York and the Department of Justice’s Office of International Affairs.

The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit.  Assistant U.S. Attorneys Rebekah Donaleski, Jason A. Richman, and Shawn G. Crowley are in charge of the prosecution.

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

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Terry Johnson submitted false documents to the SEC in an attempt to obstruct its investigation of his auditing work.  He then lied to cover it up.  Regulators like the SEC play a key role in protecting the integrity of our markets, and efforts to interfere with agency investigations by means of fake documents and false testimony will not be tolerated.”

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

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

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

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

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

*                *                *

JOHNSON, 60, of Casselberry, Florida, pled guilty to one count of submitting false records in an investigation of a matter within the jurisdiction of a federal agency.  The charge carries a maximum term of 20 years in prison.  The maximum potential penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MAMDOUH ABDEL-SAYED, a tenured lecturer at the City University of New York’s Medgar Evers College (“Medgar Evers College”), pled guilty yesterday in Manhattan federal court to wire fraud related to his selling of sham Medgar Evers College certificates that purported to represent the completion of health care courses at the College.  ABDEL-SAYED pled guilty before U.S. District Judge Vernon S. Broderick.    

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted in court, Mamdouh Abdel-Sayed abused his position on the CUNY faculty to enrich himself by creating and selling fake health care program certificates.  In so doing, Abdel-Sayed put public health at risk.  I commend our partners at the New York State Inspector General and the Department of Education Office of Inspector General for their continued commitment to rooting out corruption at federally funded New York schools.”

According to the allegations contained in the Complaint, the Indictment, and statements made in court and publicly available documents:

MAMDOUH ABDEL-SAYED is a tenured lecturer in the Biology Department at Medgar Evers College.  From at least 2013 through 2017, without authorization from Medgar Evers College, ABDEL-SAYED purported to teach health care courses at the College on topics such as Electrocardiograms, Phlebotomy, and Sonography, and provided students with sham certificates of completion for the courses, in exchange for which ABDEL-SAYED charged fees of up to $1,000 per certificate, which money he kept for himself.  ABDEL-SAYED attempted to avoid scrutiny from the College’s security guards in conducting the unauthorized courses.    

In addition to charging fees for the unauthorized courses and sham certificates, ABDEL-SAYED encouraged students to use the certificates in obtaining employment in the health care field, including at New York City-area hospitals.  When asked by employment agencies to verify the authenticity of the certificates, ABDEL-SAYED falsely informed the agencies that the certificates were issued by Medgar Evers College.  In fact, ABDEL-SAYED created the sham certificates himself, and provided them to students even if the students did not attend his unauthorized courses, so long as the students paid ABDEL-SAYED for the certificates.  In addition, ABDEL-SAYED distributed copies of purported national certification examinations – which he informed students on a recorded conversation it was “illegal” for them to possess – in order to assist the students in passing licensing examinations supposedly administered by the State for certain medical techniques. 

After ABDEL-SAYED became aware of the investigation, he instructed an undercover law enforcement investigator, who had posed as a student and purchased several unauthorized certificates from him, to provide false information to federal law enforcement agents and to conceal those certificates from the agents.    

*                *                *

ABDEL-SAYED, 68, of Kearny, New Jersey, pled guilty to one count of wire fraud,  which carries a maximum penalty of 20 years in prison.

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

ABDEL-SAYED is scheduled to be sentenced by Judge Broderick on September 7, 2018.

Mr. Berman praised the investigative work of the New York State Inspector General’s Office and ED-OIG. 

The case is being prosecuted by the Office’s Public Corruption Unit.  Assistant U.S. Attorney Eli J. Mark is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ZURAB DZHANASHVILI, of Brooklyn, New York, pled guilty today before U.S. District Judge Katherine B. Forrest to the charge of conspiring to commit racketeering offenses in furtherance of the illicit activities of the Shulaya Enterprise, a violent and prolific criminal organization dismantled in June 2017 upon the arrests of DZHANASHVILI, Razhden Shulaya, and over 25 other members and associates of the Enterprise.

As part of his guilty plea, DZHANASHVILI acknowledged his leadership role within the Shulaya Enterprise and his participation in numerous criminal acts undertaken in furtherance of the Enterprise, including: a plot to seduce, subdue, and extort individuals lured by a female co-conspirator acting at DZHANASHVILI’s direction; a scheme to operate a profitable underground gambling business that recovered debts through extortion and physical violence; a scheme to steal cargo from victim trucking companies, including the theft of approximately 10,000 pounds of chocolate peanut butter confections; and a nationwide scheme to defraud businesses and banks through the use of false identification documents and forged checks. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Zurab Dzhanashvili today admitted to leading a criminal enterprise engaged in schemes that could easily be mistaken for a Hollywood thriller.  Among other crimes, the enterprise engaged in bribery of local law enforcement, use of a female member to seduce, drug, and extort their victims, and theft of over 10,000 pounds of chocolate.  This script ends with Dzhanashvili pleading guilty to his crimes and facing serious time in prison.”

According to the charging documents filed in the case, as well as statements made during the plea proceedings and earlier court appearances:

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

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

The Shulaya Enterprise was led principally by Shulaya and DZHANASHVILI, the principal lieutenant within the Enterprise. The Enterprise’s nefarious activities included:

• The operation of illicit poker businesses in Brighton Beach;
• The extortion of gamblers who became indebted to the Shulaya Enterprise;
• Attempts to extort local business owners;
• Efforts to defraud casinos in Atlantic City and Philadelphia by using electronic devices and computer servers to predict and exploit the behavior of electronic slot machines;
• The theft of cargo shipments, including a shipment containing approximately hundreds of thousands of dollars of electronic equipment, lighting equipment, agricultural products, and approximately 10,000 pounds of chocolate confections;
• DZHANASHVILI’s use of a female member of the Shulaya Enterprise to seduce men, incapacitate them with chloroform, and then rob or blackmail them;
• Attempts to create an after-hours nightclub that would host, among other things, the sale of narcotics;
• The transportation and sale of numerous cases of untaxed cigarettes;
• Plans to pay bribes to local law enforcement;
• Assaults of debtors, offending underlings, rivals, and even innocent civilians whom Shulaya perceived as having insulted or undermined his authority; and
• Creation and use of forged identification documents, checks, and invoices.

 

DZHANASHVILI’s guilty plea does not fully resolve the case against the Shulaya Enterprise.  Shulaya himself, along with key enforcer and former middleweight boxing titleholder Avtandil Khurtsidze, are scheduled for trial before Judge Forrest beginning June 4, 2018.

DZHANASHVILI faces a maximum term of 20 years in prison.  The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  DZHANASHVILI is scheduled to be sentenced by Judge Forrest on November 30, 2018.

*                *                *

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation, including the New York Eurasian Organized Crime Task Force and the Atlantic City, Los Angeles, Las Vegas, and Miami offices; U.S. Customs and Border Protection; and the New York City Police Department for their investigative efforts and ongoing support and assistance with the case.

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

Maalik Alim Jones, 33, of Baltimore, Maryland, was sentenced today to 35 years in prison, to be followed by five years of supervised release, for conspiring to provide material support to al-Shabaab, a designated foreign terrorist organization based in Somalia, conspiring to receive military training from al-Shabaab, and carrying and using an AK-47 machinegun, rocket-propelled grenades, and other destructive devices in furtherance of his support for al-Shabaab.  Jones pleaded guilty on Sept. 8, 2017, to a three-count Superseding Information. 

Assistant Attorney General for National Security John C. Demers and U.S. Attorney Geoffrey S. Berman for the Southern District of New York made the announcement.  U.S. District Judge Paul G. Gardephe imposed Jones’s sentence.

“U.S. citizens who travel overseas to fight with a terrorist organization – which is what Jones did – betray our country and pose a serious threat to our national security,” said Assistant Attorney General Demers.   “The National Security Division remains committed to committed to identifying and stopping terrorists like Jones, and we will hold them accountable.  Credit goes to all those who worked so tirelessly to bring Jones to justice.”

“We may never know what drove Maalik Jones to travel to Somalia and pledge allegiance to al Shabaab, a terrorist organization that has vowed to destroy America,” said U.S. Attorney Berman.  “But we do know that with today’s sentence, Jones is no longer a threat to America’s ideals.”

According to the Complaint, the Indictment, the Superseding Information, and statements made in court proceedings, including at sentencing:

In July 2011, Jones left Baltimore to join al-Shabaab in Somalia.  Jones traveled to New York City, then flew via commercial aircraft to Kenya, with stopovers in Morocco and the United Arab Emirates.  After arriving in Kenya, Jones traveled by land from Kenya to Somalia, which is a common travel route for foreign fighters traveling to Somalia to join al-Shabaab.

In Somalia, Jones joined al-Shabaab and was a member of the terrorist organization for approximately four years.  During this time, Jones trained, worked and fought with al-Shabaab in Somalia.  Among other things, Jones received three months of military training at an al-Shabaab training camp, where he learned, among other things, how to operate an AK-47 assault rifle and rocket-propelled grenades.  Upon completion of this training, Jones also was assigned to al-Shabaab’s specialized fighting force, Jaysh Ayman, and participated in combat against soldiers of the Kenyan government on behalf of al-Shabaab. 

In particular, after joining Jaysh Ayman, Jones and his Jaysh Ayman unit participated in a battle in Afmadow, Somalia, against Kenyan government soldiers.  Jones, armed with an AK-47 rifle, engaged in the fighting until he was injured by a missile and then hospitalized.  After his release from the hospital, Jones continued to operate with al-Shabaab and, in particular, Jaysh Ayman.

Jones has appeared with other al-Shabaab fighters in videos that were recovered from an al-Shabaab fighter who participated in and was killed during the aforementioned Lamu Attack.  In one of the videos, Jones can be seen holding a firearm, and in the company of several al-Shabaab fighters.  The al-Shabaab fighters are depicted greeting each other, hugging each other and carrying firearms.

On Dec. 7, 2015, Jones was taken into custody by Somali authorities while he was attempting to procure a boat to depart Somalia for Yemen. 

*                *                *

Mr. Demers and Mr. Berman praised the investigative work of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the NYPD.  Mr. Berman also thanked the U.S. Department of Justice’s National Security Division and Office of International Affairs, and the U.S. Department of State, for their assistance. 

Assistant U.S. Attorneys Andrew J. DeFilippis and Shawn G. Crowley of the Southern District of New York, and Trial Attorney Raj Parekh of the National Security Division’s Counterterrorism Section are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John C. Demers, Assistant Attorney General for National Security, announced that MAALIK ALIM JONES was sentenced today to 35 years in prison for conspiring to provide material support to al Shabaab, a designated Foreign Terrorist Organization based in Somalia, conspiring to receive military training from al Shabaab, and carrying and using an AK-47 machinegun, rocket-propelled grenades, and other destructive devices in furtherance of his support for al Shabaab.  In 2011, JONES, a United States citizen, traveled to Somalia, where he took up arms and provided military support to al Shabaab for approximately four years.  On September 8, 2017, JONES pled guilty to a three-count Superseding Information.  U.S. District Judge Paul G. Gardephe imposed JONES’s sentence in Manhattan federal court. 

U.S. Attorney Geoffrey S. Berman said:  “We may never know what drove Maalik Jones to travel to Somalia and pledge allegiance to al Shabaab, a terrorist organization that has vowed to destroy America.  But we do know that with today’s sentence, Jones is no longer a threat to America’s ideals.”

Assistant Attorney General John C. Demers said:  “U.S. citizens who travel overseas to fight with a terrorist organization – which is what Jones did – betray our country and pose a serious threat to our national security.  The National Security Division remains committed to committed to identifying and stopping terrorists like Jones, and we will hold them accountable.  Credit goes to all those who worked so tirelessly to bring Jones to justice.”

According to the Complaint, the Indictment, the Superseding Information, and statements made in court proceedings, including at sentencing:

In February 2008, the U.S. Department of State designated al Shabaab as a Foreign Terrorist Organization.  Al Shabaab has used violent means – including targeted assassinations of civilians and journalists, and the use of improvised explosive devices, rockets, mortars, and automatic weapons – to, among other things, destabilize the government of Somalia, quell the Somali population, and force the withdrawal of foreign troops in Somalia.  A former leader of al Shabaab, whose exhortations were echoed by the leadership of al Qaeda, called for foreign fighters to join al Shabaab in a “holy war” in Somalia.  As a result of al Shabaab’s recruitment efforts, men from other countries – including the U.S. – have traveled to Somalia to engage in violent jihad. 

Since al Shabaab’s designation as a Foreign Terrorist Organization in February 2008, it has made several public statements demonstrating its intent to harm U.S. interests.  For example, in April 2008, al Shabaab released a statement declaring a campaign against the U.S.  Similarly, after an al Shabaab member was killed in May 2008, al Shabaab leaders announced that the mujahidin would “hunt the U.S. government” and that governments supporting the U.S. and Ethiopia should keep their citizens out of Somalia.  In April 2009, al Shabaab claimed responsibility for mortar attacks against a U.S. congressman who had been visiting Somalia, and in February 2012, the then-Emir of al Shabaab swore allegiance to Ayman al-Zawahiri, the Emir of al Qaeda, stating that al Shabaab “will hereby merge into al Qa’ida.”

Al Shabaab also maintains a specialized fighting force, known as Jaysh Ayman, that is responsible for carrying out commando-style attacks and cross-border raids in which fighters, among other things, travel across the land border between Somalia and Kenya to target individuals and conduct attacks against civilian and military targets in Kenya.  Among the attacks executed by Jaysh Ayman fighters are: (i) a June 16, 2014, attack in which al Shabaab fighters opened fire in a hotel bar in Mpekatoni, Kenya, killing approximately 40 people; (ii) a July 2014 attack in Hindi, Kenya, in which approximately 12 al Shabaab fighters opened fire at a trading center and set fire to government buildings and a church, killing nine people; and (iii) a June 14, 2015, attack in which al Shabaab fighters ambushed a Kenyan Defense Force base in Lamu County, Kenya, using various weapons, including AK-47 rifles and rocket-propelled grenades, killing two Kenyan Defense Force soldiers (the “Lamu Attack”).

In July 2011, JONES left Baltimore, Maryland, to join al Shabaab in Somalia.  JONES traveled to New York City, then flew via commercial aircraft to Kenya, with stopovers in Morocco and the United Arab Emirates.  After arriving in Kenya, JONES traveled by land from Kenya to Somalia, which is a common travel route for foreign fighters traveling to Somalia to join al Shabaab.

In Somalia, JONES joined al Shabaab and was a member of the terrorist organization for approximately four years.  During this time, JONES trained, worked, and fought with al Shabaab in Somalia.  Among other things, JONES received three months of military training at an al Shabaab training camp, where he learned, among other things, how to operate an AK-47 assault rifle and rocket-propelled grenades.  Upon completion of this training, JONES also was assigned to al Shabaab’s specialized fighting force, Jaysh Ayman, and participated in combat against soldiers of the Kenyan government on behalf of al Shabaab. 

In particular, after joining Jaysh Ayman, JONES and his Jaysh Ayman unit participated in a battle in Afmadow, Somalia, against Kenyan government soldiers.  JONES, armed with an AK-47 rifle, engaged in the fighting until he was injured by a missile and then hospitalized.  After his release from the hospital, JONES continued to operate with al Shabaab and, in particular, Jaysh Ayman.

JONES has appeared with other al Shabaab fighters in videos that were recovered from an al Shabaab fighter who participated in and was killed during the aforementioned Lamu Attack.  In one of the videos, JONES can be seen holding a firearm, and in the company of several al Shabaab fighters.  The al Shabaab fighters are depicted greeting each other, hugging each other, and carrying firearms.

On December 7, 2015, JONES was taken into custody by Somali authorities while he was attempting to procure a boat to depart Somalia for Yemen. 

*                *                *

In addition to the prison term, JONES, 33, of Baltimore, Maryland, was sentenced to five years of supervised release. 

Mr. Berman and Mr. Demers praised the investigative work of the FBI’s New York Joint Terrorism Task Force – which principally consists of agents from the FBI and detectives from the New York City Police Department.  He also thanked the U.S. Department of Justice’s National Security Division and Office of International Affairs, and the U.S. Department of State, for their assistance. 

This case is being handled by the Office’s Terrorism and International Narcotics Unit.  Assistant United States Attorneys Andrew J. DeFilippis and Shawn G. Crowley, and Trial Attorney Raj Parekh of the National Security Division’s Counterterrorism Section, are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CARLOS DJEMAL NEHMAD was sentenced today to 75 months in prison for orchestrating a scheme to fraudulently obtain over $20 million in tax refunds from the government of Mexico by creating the appearance of legitimate business activity through the transfer of over $100 million through dozens of shell companies in the United States and Mexico.  DJEMAL’s sentence was imposed today in Manhattan federal court by U.S. District Judge Alvin K. Hellerstein.  In addition to his prison sentence, DJEMAL was ordered to forfeit cash, artwork, and his shareholdings of Investabank, a Mexican bank in which DJEMAL was part owner.                                                

U.S. Attorney Geoffrey S. Berman said:  “Carlos Djemal Nehmad created an international network of shell companies in the United States and Mexico to defraud the Mexican government of millions of dollars.  Today’s sentence is the cost of Djemal’s attempt to use the United States financial system to perpetrate fraud.” 

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

Beginning in or about June 2011 through in or about at least May 2016, DJEMAL orchestrated a scheme to defraud the Mexican government of tax revenue relating to Mexico’s value added tax (“VAT”).  The Mexican government imposes VAT on goods sold from one Mexican company to another; however, when certain goods (such as cellular phones) are exported from Mexico, the previously paid VAT is refunded to the exporter.  DJEMAL created companies in Mexico and recruited individuals in the United States to create and control dozens of companies in the United States (“Front Companies”) purportedly doing business as importers and exporters of cellular phones in order for DJEMAL to fraudulently obtain VAT refunds from the Mexican government. 

In order to carry out the scheme, DJEMAL caused Front Companies in Mexico to purchase outdated cellular phones from other companies seeking to sell outdated inventory.  DJEMAL then caused these phones to be exported to Front Companies in the United States owned and operated by others that he recruited to the scheme.  During the export process, DJEMAL obtained fraudulent invoices and created export documents that falsely inflated the value of the phones being exported, thereby enabling him to fraudulently seek inflated VAT refunds from the Mexican tax authority.  

Once the phones were shipped to the United States, they were transferred to one or more Front Companies in the United States only to be shipped back to a different Front Company in Mexico.  Through this process, the phones were shipped repeatedly in a circular fashion between Front Companies controlled by DJEMAL and his co-conspirators in Mexico and the United States, enabling DJEMAL to obtain multiple fraudulent VAT refunds for the same phones. 

In order to create the appearance of legitimate cell phone sales, each transfer of phones was generally accompanied by a transfer of funds to and from accounts held in the name of the relevant Front Companies.  Between approximately June 2011 to approximately May 2016, DJEMAL and his co-conspirators moved more than $100 million through dozens of accounts maintained by Front Companies in this fashion, including through accounts maintained at a financial institution in the Southern District of New York, in order to obtain over $20 million in VAT refunds from the Mexican government.

In addition to the 75-month prison term, DJEMAL was sentenced to three years of supervised release and ordered to forfeit and pay restitution in the amount of $21 million.

*                      *                      *

Mr. Berman praised the outstanding investigative work of Internal Revenue Service, Criminal Investigations, Department of Homeland Security, Homeland Security Investigations and Customs and Border Protection, the Federal Deposit Insurance Corporation, Office of the Inspector General, and the helpful assistance of the Mexican Tax Administration Service, the Mexican Secretary of Finance and Public Credit, and the Mexican Office of the General Prosecutor.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today the guilty plea of MURRAY HUBERFELD to wire fraud conspiracy in connection with funds used to bribe the former president of the nation’s largest municipal correction officers union.  Specifically, HUBERFELD, founder of the Platinum Partners hedge fund (“Platinum”), pled guilty to conspiring with an intermediary, Jona Rechnitz, to cause the fund to pay $60,000 to Rechnitz’s company by falsely representing that the money was payment for courtside tickets to eight New York Knicks basketball games.  Instead, as HUBERFELD knew, the actual purpose of the payment was to reimburse Rechnitz for having paid Norman Seabrook, then-president of the Correction Officer’s Benevolent Association (“COBA”), for Seabrook’s efforts to get COBA to invest millions of dollars in Platinum.  HUBERFELD pled guilty before U.S. District Judge Alvin K. Hellerstein.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Murray Huberfeld caused his former hedge fund to pay tens of thousands of dollars to a criminal partner in order to enable another crime – paying off the head of the correction officer’s union for the investment of millions of its members’ funds.  We will continue to work with our law enforcement partners to fight fraud and corruption.”

According to the Superseding Information, Superseding Indictment, Indictment, and Complaint filed in this case, other public filings, statements made during the plea proceeding, and evidence and testimony presented at trial proceedings in October and November of 2017:

HUBERFELD was the founder of Platinum, a hedge fund that he continued to help operate unofficially even after his formal affiliation with the fund had ceased.  In late 2013, HUBERFELD and Rechnitz, a real estate businessman who was an acquaintance of HUBERFELD, sought to attract public and institutional investors to the fund.  At or around that time, Rechnitz told HUBERFELD that a contact of his – COBA President Norman Seabrook – would likely invest COBA’s money in Platinum.  Over the next few months, Seabrook caused COBA to invest approximately $20 million of its funds into Platinum, including $15 million from a retirement benefits program funded by the City of New York that invests money for correction officers’ retirements.

In or around December 2014, arrangements were made to pay Seabrook personally for the millions of dollars the Union had invested over the course of that year.  Rechnitz paid Seabrook $60,000 in cash, delivered to Seabrook in a men’s luxury handbag.  HUBERFELD and Rechnitz then arranged for Platinum’s management company to receive a fraudulent invoice for $60,000 – generated by Rechnitz – that, on its face, billed Platinum for eight pairs of courtside tickets to New York Knick games given to Platinum by Rechnitz, who owned Knicks season tickets.  In truth, and as HUBERFELD knew, the reason given to Platinum was false, and no Knicks tickets had changed hands.  The real purpose of the payment was to reimburse Rechnitz, who had paid Seabrook for his efforts in securing COBA’s investments.  Three days later, Platinum issued Rechnitz a $60,000 check. 

*                *                *

HUBERFELD, 57, of Lawrence, New York, pled guilty to one count of conspiracy to commit wire fraud.  The charge carries a maximum term of five years in prison.  HUBERFELD is scheduled to be sentenced on September 14, 2018.  The maximum potential penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Trial against Seabrook, on charges of (i) conspiracy to commit honest services wire fraud, (ii) the substantive offense of honest services wire fraud, and (iii) the substantive crime of wire fraud with respect to COBA’s right to control its assets, is scheduled to commence on July 30, 2018, before Judge Hellerstein.  As to Seabrook, the charges in the various charging instruments are merely allegations, and Seabrook is presumed innocent unless and until proven guilty.

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the New York City Police Department, Internal Affairs Division.

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Martin S. Bell, Russell Capone, and Lara Pomerantz are in charge of the prosecution.

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”), Ashan M. Benedict, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives (“ATF”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced that RICHARD LAUGEL was arrested yesterday and charged with firearms and narcotics offenses.  LAUGEL will be presented this afternoon before U.S. Magistrate Judge Katharine H. Parker in Manhattan federal court.  

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Richard Laugel had accumulated an arsenal of dangerous weapons in his Bronx apartment, including a grenade launcher and an assault rifle.  Thankfully, the local and federal law enforcement officers were able to arrest Laugel without incident, and his trove of dangerous weapons has been seized.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “It is important to note the collaborative efforts that went into locating and apprehending this individual.  And from what was found during this investigation, he appears to be a threat to public safety and someone we don’t want on the streets.  This collaboration, brought together by HSI’s Border Enforcement Security Taskforce, is paramount to finding the criminals who bring in goods from abroad to support their criminal activity in our local communities.”

ATF Special Agent-in-Charge Ashan M. Benedict said:  “Laugel’s alleged conduct once again demonstrates the dangerous intersection between the distribution of narcotics, the illicit possession of firearms, and violent crime.  Laugel’s alleged conduct presented an extreme danger to the community, and we are grateful that he will now face prosecution in the Southern District of New York.  I would like to express my appreciation to our law enforcement partners for their work on this investigation.”

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

On May 22, 2018, HSI and the NYPD executed a search warrant at LAUGEL’s home in the Bronx in connection with an alleged illegal operation to distribute controlled substances.  During the search, law enforcement officers recovered from LAUGEL’s home and garage, among other items, firearms silencers, a grenade launcher, an AR-15 Rifle, three handguns, two of which had defaced serial numbers, plastic molds used to make the lower receiver of handguns, firearms barrels, drill press and milling machines, ammunition, and a teddy bear that contained approximately 30 grams of cocaine.   

*                      *                      *

LAUGEL is charged with the unlawful possession of firearms silencers, which carries a maximum sentence of 10 years in prison; possession with intent to distribute narcotics, which carries a maximum sentence of 20 years in prison; and the unlawful possession of firearms with defaced serial numbers ,which carries a maximum sentence of five years in prison. 

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

Mr. Berman praised the outstanding investigative work of HSI, ATF, and the NYPD.

This case is being handled by the Office’s Narcotics Unit.  Assistant United States Attorneys Alison Moe and Jacob Warren are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an Indictment charging JAMAL SIMON, DAVID BOYD, a/k/a “Fresh,” MELVIN BROWN, a/k/a “Flint,” DARREN DAVIDSON, a/k/a “Eddie Gray,” DWIGHT FORDE, YVETTE LUBRUN, RASHAUN McKAY, a/k/a “Buster,” MEGAN MONTOYA, DEMALI MOSELY, DWAYNE NORVILLE, a/k/a “Lux,” and JILLIAN WALCOTT with conspiring to commit access device fraud and wire fraud, and aggravated identity theft.  SIMON and WALCOTT also are charged with wrongfully obtaining and disclosing individually identifiable health information.  Eight of the defendants were arrested on these charges yesterday in California, New Jersey, and New York.  BROWN, LUBRUN, McKAY, MOSELY, and WALCOTT were presented and arraigned yesterday before United States Magistrate Judge Katharine H. Parker in Manhattan federal court.  BOYD and DAVIDSON will be presented and arraigned today before Judge Parker.  MONTOYA will be presented today in federal court in the Northern District of California.  In addition, NORVILLE is currently in custody on state charges in Brooklyn, New York, and will be transferred to federal custody.  SIMON and FORDE remain at large.  The case has been assigned to United States District Judge Paul A. Crotty.

U.S. Attorney Geoffrey S. Berman said:  “These 11 defendants allegedly developed a sophisticated scheme to steal from financial institutions and their customers.  Through brazen identity theft and fraud, the defendants allegedly stole millions of dollars from credit card companies and banks to line their own pockets.  Thanks to the skilled investigative work of the FBI, the defendants’ alleged crime spree has been brought to a halt.”

FBI Assistant Director William F. Sweeney Jr. said:  “While most people are careful to secure their financial accounts and personally identifiable information, there are others who are skilled at finding this information, despite any safeguards that have been put in place to protect it, and using it to their advantage.  Today’s defendants are charged with doing just that.  At the end of the day, more than $3.5 million was swindled from innocent victims and financial institutions.  While we work to bring these criminals to justice, the public should be reminded to remain aware and report any suspicious activity that could serve as an attempt to exploit their identity.”

According to the allegations in the Indictment[1]:

From March 2017 through at least July 2017, SIMON, BOYD, BROWN, DAVIDSON, FORDE, LUBRUN, McKAY, MONTOYA, MOSELY, NORVILLE, and WALCOTT carried out a wide-ranging fraudulent scheme that involved unlawfully obtaining individually identifiable information of other individuals (including names, addresses, phone numbers, email addresses, birthdates, bank account numbers, credit and debit card numbers, and cellphone service provider account numbers); impersonating those individuals in order to obtain unauthorized access to their bank accounts, credit and debit card accounts, and cellphone service provider accounts; and then using such access to, among other things, facilitate the fraudulent transfer of funds to bank accounts controlled by members of the conspiracy and the unauthorized purchasing of merchandise and gift cards at retail stores.  The defendants’ scheme defrauded financial institutions and individual victims of more than $3.5 million.

SIMON and his co-conspirators obtained individually identifiable information of prospective victims from, among other sources, WALCOTT, who stole patient information during her employment at an urgent care clinic in Manhattan, New York.

*                      *                      *

SIMON, 30, BOYD, 29, BROWN, 33, DAVIDSON, 33, FORDE, 31, LUBRUN, 27, McKAY, 35, MOSELY, 29, NORVILLE, 30, and WALCOTT, 34, each of Brooklyn, New York, and MONTOYA, 27, of Oakland, California, are each charged with one count of conspiring to commit access device fraud, which carries a maximum sentence of seven-and-a-half years in prison; one count of conspiring to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison that must be imposed consecutively to any other sentence.  SIMON and WALCOTT also are each charged with one count of wrongfully obtaining individually identifiable health information and one count of wrongfully obtaining and disclosing individually identifiable health information, each of which carries a maximum sentence of 10 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.  

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

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 Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Nicholas W. Chiuchiolo and Robert B. Sobelman are in charge of the prosecution. 

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

 

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