Southern District of New York
Press releases recorded for this federal judicial district.
Chief Digital Officer of Cable Network Sentenced to 51 Months in Prison for Defrauding His Former Employer of More Than $7 MillionRead the Press Release
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.
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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.
Investment Bank Vice President Arrested in Insider Trading SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York 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.
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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.
[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.
Head of Pakistani Drug Trafficking Network Pleads Guilty in Manhattan Federal Court to Conspiring to Import Heroin into the United StatesRead the Press Release
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.
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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.
Former Auditor Pleads Guilty to Submitting Fraudulently Backdated Documents to the Securities and Exchange CommissionRead the Press Release
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.
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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.
Cuny Medgar Evers College Lecturer Pled Guilty to Wire Fraud for Selling Fake College CertificatesRead the Press Release
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.
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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.
Key Lieutenant of “Thief-In-Law” Razdhen Shulaya Pleads Guilty in Manhattan Federal CourtRead the Press Release
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.
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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.
United States Citizen Sentenced to 35 Years for Providing Material Support to Al-ShabaabRead the Press Release
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.
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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.
United States Citizen Sentenced to 35 Years in Prison for Providing Material Support to Al ShabaabRead the Press Release
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.
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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.
Mexican Businessman Sentenced to 75 Months in Prison for Orchestrating Fraud Scheme Against the Mexican Government to Obtain over $20 MillionRead the Press Release
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.
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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.
Hedge Fund Founder Pleads Guilty to Fraud in Connection with Bribery of Former Correction Officers Union LeaderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today 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.
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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.
Bronx Man Charged with Unlawful Possession of Defaced Firearms and Firearms Silencers, and Narcotics DistributionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), 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.
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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.
[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.
11 Defendants Charged in Manhattan Federal Court with Multimillion-Dollar Identity Theft and Fraud SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced 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.
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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.
[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.
U.S. Attorney Announces Charges Against Additional Members of the “Harlem Mafia Rollin’ 30s” Crips, Including “Big Homie” Randy TorresRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James P. O’Neill, the Police Commissioner of the City of New York (“NYPD”), and Angel M. Melendez, Special Agent in Charge of Homeland Security Investigations in New York City, announced the unsealing of a Superseding Indictment charging five additional defendants, including a leader of the Rollin’ 30s Crips, RANDY TORRES, a/k/a “Rico,” with racketeering and narcotics charges as a result of their membership in the violent Crips street gang. TORRES, together with CHARLES VENTURA, a/k/a “Gutta,” DERRICK RICHARDSON, a/k/a “J Rock,” EARL BANKS, a/k/a “EJ,” and former Armed Services Member EMIL MATUTE, a/k/a “Silly,” join other members of the Rollin’ 30s who were previously charged with racketeering, firearms, and narcotics-related offenses, including WALSTON OWEN, a/k/a “Purpose,” RICHARD FELIZ, a/k/a “Dirt,” SHAQUILLE BAILEY, a/k/a “Shaq,” a/k/a “Jefe,” and MIGUEL CABA, a/k/a “Miggs.”
The Superseding Indictment charges FELIZ for the March 26, 2015, murder of Victor Chafla, an innocent bystander. OWEN, FELIZ, BAILEY, CABA, VENTURA, and RICHARDSON are already in federal custody. BANKS and MATUTE were arrested earlier today, and will be presented in Manhattan federal court before U.S. Magistrate Judge Katherine H. Parker. The case is assigned to U.S. District Judge Victor Marrero. TORRES remains at large.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, these defendants are members of a street gang that has engaged in drug trafficking, robbery, murder, and other acts of violence. The indictment unsealed today alleges that Richard Feliz murdered innocent bystander Victor Chafla in a botched attempt to kill a rival gang member. Gang violence is a threat to the safety and security of our neighborhoods, and we will continue to work to end it.”
NYPD Commissioner O’Neill said: “The high level of collaboration employed by the NYPD and our federal partners increasingly results in appropriate, meaningful prison sentences for those convicted of engaging in these types of illegal enterprises and street violence. I commend all of the detectives and investigators involved, and the U.S. Attorney for leveling these additional charges today.”
HSI Special Agent in Charge Angel M. Melendez said: “The charges against these men span from racketeering to murder; from firearms to narcotics-related offenses. These members of the violent Crips street gang allegedly did whatever it took to fund their criminal enterprise and protect their interest. But it is in the interest of HSI and its law enforcements partners, like the NYPD, to ‘close up shop’ on these alleged criminal operations by arresting the operators and bringing them to justice.”
According to the allegations contained in the Superseding Indictment[1] and other documents in the public record, and statements made in court:
From at least in or about 2013 up to and including in or about 2017, in the Southern District of New York and elsewhere, RANDY TORRES, a/k/a “Rico,” WALSTON OWEN, a/k/a “Purpose,” RICHARD FELIZ, a/k/a “Dirt,” SHAQUILLE BAILEY, a/k/a “Shaq,” a/k/a “Jefe,” MIGUEL CABA, a/k/a “Miggs,” CHARLES VENTURA, a/k/a “Gutta,” DERRICK RICHARDSON, a/k/a “J Rock,” EARL BANKS, a/k/a “EJ,” and EMIL MATUTE, a/k/ “Silly,” were members or associates of a racketeering enterprise known as the “Rollin’ 30s,” also known as the “Harlem Mafia,” or “Dirt Gang.” In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of the Rollin’ 30s committed, conspired, attempted, and threatened to commit acts of violence, including murder, attempted murder, and robbery; and they conspired to distribute and possess with intent to distribute narcotics.
During a dispute with a member of an opposing crew, on March 26, 2015, FELIZ fired a gun in an attempt to kill that individual. FELIZ instead hit an innocent father, Victor Chafla, in the head, while Chafla was standing outside the store where he worked stocking fruits and vegetables. Chafla died from his wounds a few days later.
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Count
Charges
Defendants
Maximum Penalties
1
Racketeering Conspiracy
RANDY TORRES,
WALSTON OWEN,
RICHARD FELIZ, SHAQUILLE BAILEY, MIGUEL CABA,
CHARLES VENTURA,
DERRICK RICHARDSON,
EARL BANKS, and
EMIL MATUTE
Life in prison (all defendants except FELIZ)
Life in prison or death (FELIZ)
2
Conspiracy To Commit Murder in Aid of Racketeering
RICHARD FELIZ
Life in prison
3
Murder in Aid of Racketeering
RICHARD FELIZ
Life in prison or death
4
Use of Firearms Resulting in Death
RICHARD FELIZ
Life in prison or death
5
Narcotics Conspiracy
RANDY TORRES,
WALSTON OWEN,
RICHARD FELIZ, and SHAQUILLE BAILEY
Life in prison
Mandatory minimum of ten years in prison
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by a judge
Mr. Berman praised the investigative work of the NYPD and HSI.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jessica Fender, Drew Skinner, and Anden Chow are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
Former Valeant Executive and Former Philidor Ceo Convicted for Illegal Kickback SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today the convictions of GARY TANNER, a former executive at Valeant Pharmaceuticals International, Inc. (“Valeant”), and ANDREW DAVENPORT, the former chief executive officer (“CEO”) of Philidor Rx Services LLC (“Philidor”), for engaging in a multimillion-dollar kickback scheme. TANNER and DAVENPORT were convicted on all counts of the Indictment today after a four-week trial before Senior United States District Judge Loretta A. Preska.
U.S. Attorney Geoffrey S. Berman said: “As a unanimous jury has found, Gary Tanner sold his loyalty to Andrew Davenport in exchange for $9.7 million. Tanner was entrusted by his employer to manage Valeant’s relationship with Davenport’s company. Davenport exploited that trust by promising a massive kickback in exchange for betrayal. Unbeknownst to his employer, Tanner became the fox guarding the henhouse. Our commitment to this prosecution shows that corruption of publicly traded companies will be rooted out and met with justice.”
According to the allegations in the charging documents and statements made in court proceedings:
Valeant is a publicly traded pharmaceutical manufacturer headquartered in Canada, with its principal place of business in New Jersey. Philidor was a specialty mail order pharmacy that was formed in or about January 2013 with the assistance of Valeant. During the course of Philidor’s existence, at least 90 percent of the drugs dispensed by Philidor were Valeant-branded drugs.
TANNER was the Valeant executive primarily responsible for managing Valeant’s relationship with Philidor. TANNER was also responsible more broadly for Valeant’s alternative fulfillment (“AF”) program. Through its AF program, Valeant sought to increase doctor prescriptions and patient purchases of Valeant pharmaceuticals instead of generic substitutes or alternatives by helping obtain insurance coverage for those drugs or providing other incentives for prescription and purchase of Valeant drugs. As part of his work at Valeant, TANNER interacted directly with Philidor’s executives, including DAVENPORT, and senior Valeant executives.
Valeant and Philidor began negotiations for Valeant to purchase Philidor, and Valeant ultimately purchased an option to buy Philidor (the “Option”) in exchange for $133 million in payments to Philidor’s owners, and the promise of $100 million in additional milestone payments if Philidor were to meet certain sales targets. Despite the duty of loyalty owed by TANNER to Valeant, during negotiations relating to the Option, TANNER and DAVENPORT secretly made preparations for TANNER to receive a multimillion-dollar kickback out of the money that Valeant was going to pay Philidor’s owners for the Option. Among other things, TANNER and DAVENPORT set up shell company bank accounts in order to launder the kickbacks to TANNER. While these preparations were underway, TANNER secretly advised DAVENPORT on his negotiations with Valeant. TANNER did this in contravention of his duties to Valeant and despite the fact that he was also internally advising Valeant in its negotiations with DAVENPORT about the Option.
In addition to secretly helping DAVENPORT negotiate against Valeant in exchange for the promise of a kickback from DAVENPORT, TANNER took other actions to benefit Philidor and DAVENPORT personally, and against the direction of his supervisors at Valeant. For example, TANNER’s supervisors directed him to identify other pharmacies that Valeant could use to distribute its drugs, in order to minimize the risks of overreliance on Philidor. TANNER deceived his supervisors into believing that he was pursuing their direction in good faith when, in fact, he lied about participating in meetings and doing due diligence on potential competitors to Philidor. In addition, TANNER helped Philidor and DAVENPORT secure favorable payment terms.
In order to keep their scheme hidden from Valeant, TANNER often used a Philidor email account that TANNER maintained in the name of “Brian Wilson” to communicate with DAVENPORT. TANNER also pretended to be Brian Wilson in at least one meeting that he and DAVENPORT participated in on behalf of Philidor.
In December 2014, Valeant acquired the Option. DAVENPORT, through two different entities that he controlled, received approximately $50 million of the $133 million received from Valeant. DAVENPORT transferred $9.7 million of that amount to TANNER through a shell company he controlled, and then to a shell company controlled by TANNER, an entity called Befrielse Consolidated, LLC (“Befrielse”). TANNER concealed his receipt of this money from Valeant, in violation of his fiduciary duties to Valeant, and in violation of Valeant’s conflict of interest policies. Prior to receiving the funds, TANNER had repeatedly certified to Valeant that he was in full compliance with Valeant’s Standards of Business Conduct, which prohibited any conflicts of interest without full disclosure and approval by company management.
After the Option purchase was completed, TANNER continued to use his position at Valeant to advance the interests of Philidor and DAVENPORT, including by resisting Valeant’s efforts to collect payments from Philidor owed to Valeant and pursuing milestone payments under the terms of the Option in which he secretly expected to share. In communications concerning the scheme, using TANNER’s secret Brian Wilson email account, DAVENPORT discussed with TANNER how TANNER would secretly continue to promote DAVENPORT’s interests, even while he purported to represent Valeant’s interests as the Valeant executive responsible for Philidor. Among other things, DAVENPORT stated that he pictured his and TANNER’s “butch and sundance ride into the sunset (or off the cliff as in the flick),” to which TANNER responded, using the secret Brian Wilson account: “[G]ave me a good chuckle when I just saw it. Will have to keep playing the game :).”
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TANNER, 40, of Gilbert, Arizona, and DAVENPORT, 50, of Haverford, Pennsylvania, were convicted of four counts: (1) one count of conspiracy to commit honest services wire fraud, which carries a maximum potential penalty of 20 years in prison; (2) one count of honest services wire fraud, which carries a maximum potential penalty of 20 years in prison; (3) one count of conspiracy to violate the Travel Act, which carries a maximum potential penalty of five years in prison; and (4) one count of conspiracy to commit money laundering, which carries a maximum potential penalty of 20 years in prison.
Mr. Berman praised the work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its cooperation and assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force and its Complex Frauds and Cyber Crime Unit. Assistant U.S. Attorneys Robert W. Allen, Richard Cooper, and Amanda Kramer are in charge of the prosecution.
Bronx Man Pleads Guilty to Facilitation of Sex Trafficking, Drug Trafficking, Firearms, and Identity Theft ChargesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ashan M. Benedict, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), and Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today that KEVIN PINNOCK, a/k/a “Kev Savage,” a/k/a “Sav,” pled guilty before U.S. District Judge Deborah A. Batts to using the internet to facilitate sex trafficking, possessing crack cocaine with intent to distribute, possessing a firearm in furtherance of drug trafficking, and possessing stolen identification documents.
U.S. Attorney Geoffrey S. Berman said: “Kevin Pinnock used violence and coercion to force women to engage in commercial sex for his own profit. With Kevin Pinnock’s guilty plea today, we seek to deliver justice to victims of sex trafficking and other forms of commercial exploitation and to deter others from engaging in this profoundly harmful criminal conduct. Protecting the public from sex trafficking crimes remains a top priority for us and our law enforcement partners.”
ATF Special Agent-in-Charge Ashan M. Benedict said: “Kevin Pinnock was allegedly involved in a multitude of criminal activities, which included using a firearm to protect his position on the street as a dealer in narcotics. Through the efforts of the Agents and Detectives of the ATF/ NYPD Joint Firearms Task Force (JFTF) working alongside Agents of HSI, Kevin Pinnock will be forced to contemplate his alleged crimes while serving a substantial sentence in prison. I would like to thank all of the law enforcement agencies that worked collaboratively to further this case. I would also like to extend my gratitude to the United States Attorney’s Office for their work in prosecuting the case.”
HSI Special Agent-in-Charge Angel M. Melendez said: “This man admitted his guilt in forcing women to perform sexual acts by threatening violence and abuse. Pinnock was in for making a profit any way he can, with his crimes becoming more brazen; from robbery and ID theft to drug dealing and sex trafficking. The plea today is only the beginning for Pinnock, who will now need to face the consequences of this actions.”
According to the Complaint, Indictment, Superseding Indictment, and other documents filed in the case, as well as statements made during PINNOCK’s plea proceedings:
In 2015 and 2016, PINNOCK posted online advertisements to solicit customers to engage in commercial sex with women PINNOCK forced into prostitution by violence, abuse, and coercion. PINNOCK retained virtually all of the profits from his sex trafficking business.
In at least November 2016, PINNOCK sold crack cocaine and possessed a loaded firearm, which had been stolen, in order to protect his drug dealing business. He also possessed dozens of stolen identification cards – including driver’s licenses and Social Security cards – which he sold to other individuals who were engaged in identity theft and fraud. Many of the identification cards had been obtained through the commission of robberies.
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PINNOCK, 22, of the Bronx, New York, was arrested on January 5, 2017, in the Bronx, and has been in federal custody since. PINNOCK pled guilty to one count of possession with intent to distribute cocaine base, which carries a maximum sentence of 10 years in prison; one count of possession of a firearm in furtherance of drug trafficking, which carries a mandatory minimum sentence of five years in prison to be imposed consecutively to any other sentence and a maximum sentence of life in prison; possession with intent to use or transfer five or more identification documents or authentication features, which carries a maximum sentence of 15 years in prison; aggravated identity theft, which requires a two-year prison term to be imposed consecutively to any other sentence; and use of interstate commerce to promote unlawful activity, which carries a maximum sentence of five years in prison. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
PINNOCK is scheduled to be sentenced by Judge Batts on September 23, 2018.
Mr. Berman praised the outstanding investigative work of the ATF and HSI, and thanked the United States Secret Service, the Social Security Administration’s Office of the Inspector General, the New York City Police Department, and the Bronx County District Attorney’s Office for their assistance.
This case is being prosecuted by the Office’s General Crimes Unit. Assistant U.S. Attorney Robert B. Sobelman is in charge of the prosecution.
Former Mobile Phone Industry Manager Sentenced in Manhattan Federal Court to 30 Months in Prison for Role in Multimillion-Dollar Consumer Fraud SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that CHRISTOPHER GOFF was sentenced today to 30 months in prison for his participation in a fraudulent scheme to charge mobile phone customers millions of dollars in monthly fees for unsolicited, recurring text messages without the customers’ knowledge or consent – a practice known as “auto-subscribing.” The fraud committed by GOFF and his co-conspirators resulted in the theft of over $50 million from consumers throughout the United States. In January 2018, GOFF pled guilty to one count of participating in a conspiracy to commit wire fraud. GOFF was sentenced today in Manhattan federal court by the U.S. District Judge Katherine B. Forrest.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Christopher Goff conspired with others in an auto-subscribing scam that stole $50 million from unwitting consumers. In return for lists of mobile phone users to victimize, Goff netted more than $350,000 in short-term gain – and a substantial term in prison.”
According to the Superseding Information filed in Manhattan federal court, trials in related proceedings, and statements made in connection with GOFF’s sentencing:
GOFF was an account manager for Mobile Messenger, a U.S. aggregation company in the mobile phone industry. In the relevant time period, mobile aggregators like Mobile Messenger compiled, or “aggregated,” charges for premium text messaging services – such as monthly horoscopes, celebrity gossip, and trivia facts – on consumers’ mobile phone bills. Between 2011 and 2013, GOFF and others engaged in a massive scheme to defraud ordinary consumers by placing unauthorized charges for premium text messaging services on their cell phone bills, through a practice known as auto-subscribing.
The auto-subscribing scheme involved two main players in the mobile phone industry: mobile aggregators, such as Mobile Messenger, and content providers, which sent consumers the unwanted text messages that ultimately resulted in them being billed for services they had not authorized. Mobile Messenger worked with four different content providers in the scheme, each of which was essential to the scheme’s success. GOFF participated in auto-subscribing through one of those content providers, Tatto, which was operated by co-conspirator Lin Miao.
In or about 2010, Miao, who was the CEO of Tatto, decided to begin auto-subscribing mobile phone users to Tatto’s premium text messaging services in order to boost Tatto’s sagging revenues. Miao and others built a computer program that could spoof the required consumer authorizations for premium text messaging services – i.e., a program that could generate the text message correspondence that one would ordinarily see if a consumer were genuinely signing up to receive the services, which was operational by in or about the middle of 2011. In or about July 2011, Miao met with GOFF and asked him to provide large batches of phone numbers from Mobile Messenger’s databases in exchange for payment. GOFF agreed to assist Miao and knew that Miao intended to subscribe consumers without their permission. GOFF provided hundreds of thousands of mobile phone numbers to Miao by email from mid-2011 to mid-2012. When sending the stolen phone numbers to Miao, GOFF hid his involvement in the scheme by using email addresses other than his work email address at Mobile Messenger. Ultimately, Miao and other co-conspirators used the phone numbers that GOFF provided to auto-subscribe consumers. In total, Miao and Tatto took more than $50 million from consumers via the scheme.
GOFF received more than $350,000 from Miao for the phone numbers he provided. GOFF used a shell company called 5 Tool Services and sent false invoices for consulting services that he never provided to Miao to hide his receipt of the money and role in the scheme.
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In addition to the 30-month prison term, GOFF was sentenced to two years of supervised release and ordered to forfeit $352,799.56.
To date, seven defendants other than GOFF – Andrew Bachman, Miao, Michael Pajaczkowski, Erdolo Eromo, Jonathan Murad, Francis Assifuah, and Jason Lee – have pleaded guilty in connection with their participation in the fraud. Two additional defendants, Fraser Thompson and Darcy Wedd, were convicted following three-week jury trials.
Mr. Berman praised the investigative work of the IRS-CI and the FBI, and expressed his sincere gratitude to the Federal Trade Commission for their support and assistance with the investigation.
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 of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Sarah E. Paul, Richard Cooper, Jennifer L. Beidel, and Jilan Kamal are in charge of the prosecution.
Medical Supply Executive Sentenced to 36 Months in Prison for Her Role in A $30 Million Scheme to Defraud Medicare and MedicaidRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MARINA BURMAN was sentenced today to 36 months in prison. BURMAN, the former president of a medical supply company, submitted approximately $3.4 million in fraudulent bills to the New York State Medicaid Program, falsely claiming to have dispensed adult diapers and other medical supplies that were not medically necessary and, in many cases, not dispensed at all. BURMAN was sentenced today by United States District Judge Lorna G. Schofield.
U.S. Attorney Geoffrey S. Berman said: “The Medicare and Medicaid programs are intended to provide essential medical care to the elderly and the needy, not to line the pockets of fraudsters and opportunists. Ultimately, the real victims of Marina Burman and her co-conspirators’ crimes are U.S. taxpayers and needy patients with legitimate medical needs. Today’s sentence sends a strong message that those who cheat Medicare and Medicaid will not go unpunished.”
According to the Indictment and other documents filed in federal court, as well as statements made during BURMAN’s plea proceeding and sentencing:
Between 2007 and 2013, BURMAN’s ex-husband and co-defendant, Aleksandr Burman, owned and operated six medical clinics in Brooklyn (the “Clinics”) that fraudulently billed Medicare and Medicaid approximately $30 million for medical services and supplies that were medically unnecessary or otherwise fraudulently billed. Under New York State law, medical clinics must be owned and operated by a medical professional. To circumvent this requirement, Aleksandr Burman, who was not a medical professional, hired doctors to pose as the nominal owners of each of the Clinics. As part of the fraud, the doctors also signed medical charts falsely stating that they had examined patients, and wrote prescriptions and referrals for medically unnecessary tests and supplies, including the $3.4 million in adult diapers and other supplies dispensed by BURMAN’s medical supply company. Instead of actually obtaining many of these supplies, patients exchanged their prescriptions for merchandise, such as bed linens, tablecloths, dishes, kitchen appliances, and other housewares. In furtherance of the fraud, BURMAN also falsely held herself out to Medicare and Medicaid as the sole owner of the medical supply company and concealed the fact that she actually owned that company jointly with her then-husband, Aleksandr Burman.
In all, 11 defendants have been charged for their participation in this healthcare fraud scheme. Aleksandr Burman pled guilty and on May 8, 2017, was sentenced to 120 months in prison. Two medical doctors (Mustak Y. Vaid and Ewald J. Antoine), two Clinic executives (Asher Oleg Kataev and Alla Tsirlin), and two individuals who helped run two of the Clinics and a related ambulette company (Ivan Voychak and Edward Miselevich) have pled guilty and are awaiting sentencing. Three additional defendants – a doctor (Paul J. Mathieu), a physical therapist (Hatem Behiry), and an occupational therapist (Lina Zhitnik) – are scheduled to go to trial before Judge Schofield on November 26, 2018. These three remaining defendants are presumed innocent unless and until proven guilty.
MARINA BURMAN, 55, of Manhattan, pled guilty to health care fraud and conspiracy to commit health care fraud, mail fraud, and wire fraud before Judge Schofield on November 14, 2017. In addition to the prison term, Judge Schofield ordered BURMAN to forfeit six condominium apartments paid for with the proceeds of the healthcare fraud scheme, and to pay restitution of $3,415,363 to Medicaid.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, the Office of the Inspector General of the U.S. Department of Health and Human Services, and the New York State Office of the Medicaid Inspector General (“OMIG”).
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys David Raymond Lewis, Stephen J. Ritchin, and Won S. Shin are in charge of the prosecution.
Arizona Men Charged in Manhattan Federal Court with $23 Million Fraud and Money Laundering Scheme in Connection with Purported Fundraising for Numerous Scam Political Action CommitteesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that WILLIAM TIERNEY, a/k/a “Bill Johnson,” and ROBERT TIERNEY were arrested this morning and charged with wire fraud conspiracy, mail fraud conspiracy, and money laundering conspiracy for their role in a nationwide, multi-year scheme to defraud donors to at least nine political action committees in the amount of more than $23 million. The defendants are expected to be presented this afternoon in the District Court of Arizona.
U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendants secretly operated numerous political action committees, raising small-dollar donations from people who believed their hard-earned money would support the causes described in solicitation calls and mailings. In reality, as alleged, these PACs were political action committees in name only – they engaged in no advocacy campaigns, education efforts, or political operations, and donated less than one percent of the money they raised to candidates for office, all while personally enriching the defendants. Now, these so-called PACs are no longer defrauding donors, and the defendants have been charged with federal crimes.”
FBI Assistant Director William F. Sweeney Jr. said: “The defendants, as alleged, capitalized on the sympathy and activism of those who sought to support awareness of various causes near and dear to their hearts. Instead, virtually none of the money raised was used for its intended purpose, and the so-called political action committees served as nothing more than a front for an extensive personal fundraising campaign. Today's charges detail a scheme lacking in ethical oversight and laden with greed, but it all ends today.”
According to the Complaint[1] unsealed today in Manhattan federal court:
From 2014 up to the present, WILLIAM TIERNEY and ROBERT TIERNEY defrauded tens of thousands of donors to at least nine political action committees that they controlled, operated, and influenced. The defendants founded and directly operated six PACs,[2] and managed, operated, or influenced three additional PACs[3] (“Scam PACs). These nine Scam PACs – which collectively raised more than $23 million between 2014 and 2017, and more than $50 million in the past 10 years – were fraudulent entities, operated solely to enrich the defendants and their co-conspirators.
As alleged, the Scam PACs targeted victims across the country, raising funds on the basis of fraudulent representations that the donations would support voter education regarding, and the political campaigns of those who supported, various causes, including autism awareness, law enforcement, and pro-life causes—including through purported “coast to coast” education and advocacy campaigns, working with local groups and organizations, and “investing every penny . . . in the big races to come.” In truth, virtually all of the money raised was either paid to the scheme participants or used to perpetuate the fraud through additional telemarketing, fundraising, and overhead expenditures. During the relevant time period, less than one percent of all donor money to the Scam PACs was spent on political contributions.
The defendants perpetrated the fraud through various deceptive means and methods. For example, as alleged, the defendants created and utilized a web of shell pass-through entities to conceal and disguise their fraud. Donated funds were transferred to these shell entities, which were given names that suggested activities related to marketing, consulting, and communications efforts, including for issue-specific causes – so that payments to the shell entities would appear to be for legitimate expenditures. In at least one instance, a website was created for one of the shell entities, falsely stating that the entity provided direct marketing and political consulting services to trade associations, candidate campaigns, political action committees, and nonprofit organizations. In fact, these and the other shell entities were created by the defendants and their co-conspirators, had no active operations or employees, were retained by no outside “clients,” and served only to funnel and disguise financial transactions involving money donated to certain Scam PACs.
WILLIAM TIERNEY also allegedly instructed two companies that made telemarketing solicitation calls for certain Scam PACs to create their own shell companies – which he referred to as “Stealth LLCs” – with names that concealed any discernible connection with their parent telemarketing vendors. This prevented the Federal Election Commission (“FEC”), donors, and other members of the public from being able to learn from required FEC disclosure forms that multiple Scam PACs were in fact paying the same telemarketing vendors.
As alleged, the scheme participants also used multiple fraudulent identities. WILLIAM TIERNEY used the fake identity of “Bill Johnson” when meeting and corresponding with officials at certain fundraising call centers, including during meetings at which ROBERT TIERNEY was present. Another fake identity, “Emma Smith,” was used in fundraising solicitations, and was described as a “Volunteer Coordinator” for one of the PACs; in fact, neither Emma Smith nor the position of “Volunteer Coordinator” actually existed. The defendants also undertook efforts to avoid press coverage of the Scam PACs more generally, despite the Scam PACs’ claims in solicitation materials of national advocacy and awareness campaigns.
Donations to the Scam PACs during the relevant period totaled more than $23 million. Approximately $109,000 of those donations were directed to political candidates and more than $3.5 million was paid to the defendants personally.
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WILLIAM TIERNEY, 46, and ROBERT TIERNEY, 40, are each charged with one count of wire fraud conspiracy, which carries a maximum sentence of 20 years in prison; mail fraud conspiracy, which carries a maximum sentence of 20 years in prison; conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison; and conspiracy to engage in monetary transactions in property derived from specified unlawful activity, which carries a maximum sentence of 10 years in prison.
The statutory maximum and mandatory penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.
Mr. Berman praised the investigative work of the Special Agents of the United States Attorney’s Office for the Southern District of New York, and thanked the Federal Bureau of Investigation for its assistance in the investigation.
If you think you are a victim of, or have information about, the scheme alleged in this press release, or if you are a victim of, or have information about, a similar scheme, you are encouraged to contact the FBI at 212-384-2135.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Alex Rossmiller and Alison Moe are in charge of the prosecution.
The charges contained in the Complaint are merely accusations. The defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
[2] Grassroots Awareness PAC, Americans for Law Enforcement PAC, National Campaign PAC, Voter Education PAC, Action Coalition PAC, and Protect Our Future PAC.
[3] Life and Liberty PAC, Republican Majority PAC, and RightMarch.com PAC. These three PACs originally were founded by others.
Turkish Banker Sentenced to 32 Months for Conspiring to Violate U.S. Sanctions Against Iran and Other OffensesRead the Press Release
Mehmet Hakan Atilla, 47, a resident and citizen of Turkey, was sentenced today to 32 months for his participation in a scheme to violate U.S. economic sanctions imposed on the Islamic Republic of Iran involving billions of dollars’ worth of Iranian oil proceeds held at Atilla’s employer (Turkish Bank-1). On Jan. 3, after a five-week jury trial, Atilla was convicted of conspiring with others to use the U.S. financial system to conduct transactions on behalf of the government of Iran and other Iranian entities, which were barred by U.S. sanctions, and to defraud U.S. financial institutions by concealing these transactions’ true nature.
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 after sentencing by U.S. District Judge Richard M. Berman.
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
Beginning in or about 1979, the president, pursuant to the International Emergency Economic Powers Act (IEEPA), has repeatedly found that the actions and policies of the government of Iran constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and has declared a national emergency to deal with the threat. In accordance with these presidential declarations, the United States has instituted a host of economic sanctions against Iran and Iranian entities. This sanctions regime, among other things, prohibits financial transactions involving the United States or U.S. persons that were intended directly or indirectly for the government of Iran or Iranian entities. Other U.S. sanctions in effect during this case’s relevant time period also required foreign financial institutions to restrict the use of Iranian oil proceeds, if those foreign banks wished to continue to do business with the U.S. financial system.
Atilla and others conspired to provide access to restricted oil revenues through international financial networks, including U.S. financial institutions, to the government of Iran, Iranian entities, and entities identified by the Department of the Treasury Office of Foreign Assets Control as Specially Designated Nationals (SDNs). They did so by, among other things, using Turkish Bank-1, at which Atilla served as Deputy General Manager of International Banking, to engage in transactions involving billions of dollars’ worth of petroleum revenues held by the Central Bank of Iran and the National Iranian Oil Company. In particular, they facilitated and protected Turkish Bank-1 customer, international gold trader Reza Zarrab’s, ability to supply currency and gold to, and facilitate international financial transactions for, the Government of Iran, Iranian entities, and SDNs using Turkish Bank-1. Many of those financial transactions involved unwitting U.S. financial institutions, in violation of U.S. sanctions against Iran. The elaborate scheme established by Atilla and others also shielded Turkish Bank-1 from U.S. sanctions.
Atilla in particular lied to and deceived U.S. Treasury officials about Turkish Bank-1’s activities and its purported compliance efforts in order to avoid subjecting the bank to U.S. sanctions. Additionally, Atilla, Zarrab and others conspired to create and use false and fraudulent documents to disguise prohibited transactions for Iran and make those transactions falsely appear as transactions involving food, thus falling within humanitarian exceptions to the sanctions regime. As a result of this scheme, Atilla and his co-conspirators induced U.S. banks unknowingly to process international financial transactions in violation of the IEEPA, and to launder through the U.S. financial system funds promoting the scheme.
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Mr. Berman praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division, and the Department of Justice’s National Security Division’s Counterintelligence and Export Control Section.
Assistant U.S. Attorneys Michael D. Lockard, Sidhardha Kamaraju and David W. Denton Jr. of the Southern District of New York are in charge of the prosecution, with assistance from Deputy Chief Elizabeth Cannon and Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section.
Turkish Banker Mehmet Hakan Atilla Sentenced to 32 Months for Conspiring to Violate U.S. Sanctions Against Iran and Other OffensesRead the Press Release
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 MEHMET HAKAN ATILLA was sentenced today to 32 months in prison for his participation in a scheme to violate U.S. economic sanctions imposed on the Islamic Republic of Iran involving billions of dollars’ worth of Iranian oil proceeds held at ATILLA’s employer (“Turkish Bank-1”). On January 3, 2018, after a five-week jury trial, ATILLA was convicted of conspiring with others to use the U.S. financial system to conduct transactions on behalf of the government of Iran and other Iranian entities, which were barred by U.S. sanctions, and to defraud U.S. financial institutions by concealing these transactions’ true nature. ATILLA was sentenced by United States District Judge Richard M. Berman.
U.S. Attorney Geoffrey S. Berman said: “As a unanimous jury found earlier this year, Mehmet Hakan Atilla helped execute an audacious scheme to circumvent our nation’s Iran sanctions regime by engaging in billions of dollars’ worth of deceptive transactions. Today, following full, fair, and public legal proceedings, Atilla has been sentenced for his crimes.”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
Beginning in or about 1979, the president, pursuant to the International Emergency Economic Powers Act (the “IEEPA”), has repeatedly found that the actions and policies of the government of Iran constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and has declared a national emergency to deal with the threat. In accordance with these presidential declarations, the United States has instituted a host of economic sanctions against Iran and Iranian entities. This sanctions regime, among other things, prohibits financial transactions involving the United States or United States persons that were intended directly or indirectly for the government of Iran or Iranian entities. Other U.S. sanctions in effect during this case’s relevant time period also required foreign financial institutions to restrict the use of Iranian oil proceeds, if those foreign banks wished to continue to do business with the U.S. financial system.
ATILLA and others conspired to provide access to restricted oil revenues through international financial networks, including U.S. financial institutions, to the government of Iran, Iranian entities, and entities identified by the Department of the Treasury Office of Foreign Assets Control as Specially Designated Nationals (SDNs). They did so by, among other things, using Turkish Bank-1, at which ATILLA served as Deputy General Manager of International Banking, to engage in transactions involving billions of dollars’ worth of petroleum revenues held by the Central Bank of Iran and the National Iranian Oil Company. In particular, they facilitated and protected the ability of Turkish Bank-1 customer, international gold trader Reza Zarrab, to supply currency and gold to, and facilitate international financial transactions for, the Government of Iran, Iranian entities, and SDNs using Turkish Bank-1. Many of those financial transactions involved unwitting U.S. financial institutions, in violation of U.S. sanctions against Iran. The elaborate scheme established by ATILLA and others also shielded Turkish Bank-1 from U.S. sanctions.
ATILLA in particular lied to and deceived U.S. Treasury officials about Turkish Bank-1’s activities and its purported compliance efforts in order to avoid subjecting the bank to U.S. sanctions. Additionally, ATILLA, Zarrab, and others conspired to create and use false and fraudulent documents to disguise prohibited transactions for Iran and make those transactions falsely appear as transactions involving food, thus falling within humanitarian exceptions to the sanctions regime. As a result of this scheme, ATILLA and his co-conspirators induced U.S. banks unknowingly to process international financial transactions in violation of the IEEPA, and to launder through the U.S. financial system funds promoting the scheme.
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Mr. Berman praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division, and the Department of Justice, National Security Division, Counterintelligence and Export Control Section.
The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Michael D. Lockard, Sidhardha Kamaraju, and David W. Denton Jr., and Special Assistant United States Attorney Dean Sovolos, are in charge of the prosecution, with assistance from Deputy Chief Elizabeth Cannon and Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section.
Owner of New York Investment Fund Charged with $21 Million Scheme to Defraud InvestorsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced today that BRENT BORLAND, the owner and principal of a New York-based investment fund known as Belize Infrastructure Fund I LLC (“Belize Fund”), was arrested this morning and charged with conspiring to commit, and the commission of, securities and wire fraud in connection with a $21 million investment fraud scheme. BORLAND will be presented later today in Manhattan federal court before United States Magistrate Judge Barbara Moses.
Manhattan U.S. Attorney Berman said: “Brent Borland, owner of Belize Infrastructure Fund, allegedly induced investors to contribute over $21 million into the construction of an airport in Belize by promising a high rate of return, which was secured by real property owned by the fund. In reality, some of the real property investors were told secured the debt did not even exist; and Borland allegedly was using their money for personal expenses, such as luxury automobiles, a beach club membership, and private school tuition for his children. Cases such as this serve as a cautionary tale for investors – always carefully vet your investments – and if something seems too good to be true, it probably is.”
USPIS Inspector-in-Charge Bartlett said: “Brent Borland allegedly lied to investors and inappropriately used their investment funds to finance a life of luxury. Postal Inspectors remind investors, where there is high reward, there is high risk. If an investment offer sounds too good to be true, it’s most likely a scam.”
According to the Complaint unsealed in Manhattan federal court:[1]
From 2014 through March 2018, BORLAND solicited and received approximately $21.9 million through Belize Fund from approximately 40 investors based upon representations that BORLAND would use the investors’ money to construct an airport in Belize. BORLAND promised investors high rates of return on their investments, which he represented were temporary “bridge financing.” BORLAND also represented to investors that their investments would be fully secured by real property in Belize that was unencumbered by any liens or obligations.
In fact, however, BORLAND misappropriated millions of dollars of investors’ funds and used those funds for his own personal benefit. BORLAND diverted at least approximately thirty percent of the investments to pay for a variety of personal expenses, including his mortgage payments, credit card bills, luxury automobiles, a beach club membership, and private school tuition for his children. In contrast to BORLAND’s representations that investors would receive high rates of return within a specified time, all known investors in the scheme lost money. And while BORLAND represented that the investments would be secured by real property, the property purportedly serving as collateral was improperly pledged to multiple investors and, in some cases, did not even exist.
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BORLAND, 48, of Sag Harbor, New York, is charged in a three-count criminal complaint with one count of conspiracy to commit securities fraud and wire fraud, which carries a maximum potential sentence of five years in prison; one count of securities fraud, which carries a maximum potential sentence of 20 years in prison; and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison. The maximum potential sentences in this case 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 investigative work of the USPIS and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action. He added that the investigation is ongoing.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore and Negar Tekeei are in charge of the prosecution.
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 below constitute only allegations, and every fact described should be treated as an allegation.
Former Ceo of Two Investment Advisers Pleads Guilty to Defrauding A Native American Tribe and Various InvestorsRead the Press Release
Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that MICHELLE MORTON pled guilty today to defrauding a Native American tribal entity and various investment advisory clients of tens of millions of dollars in connection with the issuance of bonds by the tribal entity and the subsequent sale of those bonds through fraudulent and deceptive means. MORTON pled guilty to conspiracy to commit securities fraud and a substantive count of investment adviser fraud before U.S. District Judge Ronnie Abrams.
Mr. Khuzami said: “Michelle Morton, CEO of Atlantic Asset Management, purchased tribal bonds for the accounts of her clients knowing they were issued under false pretenses and of little or no value to clients. Today, Morton admitted to shirking her fiduciary responsibility to her financial clients for her own personal gain, and she now faces a serious term of imprisonment.”
According to the allegations contained in the Superseding Indictment filed against MORTON and her co-conspirators and statements made in related court filings and proceedings[1]:
From March 2014 through April 2016, MORTON, along with her co-conspirators Jason Galanis, John Galanis, a/k/a “Yanni,” Hugh Dunkerley, Gary Hirst, Devon Archer, and Bevan Cooney, engaged in a fraudulent scheme to misappropriate the proceeds of bonds issued by the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity (the “Tribal Bonds”), and to use funds in the accounts of 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.
The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by John Galanis. Once the Tribal Bonds were issued, MORTON and Hirst used funds belonging to clients of two related investment advisers, Hughes Capital Management, Inc. (“Hughes”), and Atlantic Asset Management, LLC (“Atlantic”) – where MORTON served as chief executive officer – to purchase the Tribal Bonds, even though MORTON was well aware that material facts about the Tribal Bonds had been withheld from clients in whose accounts they were placed, including the fact that the Tribal Bond purchases fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients and of the Atlantic pooled investment vehicle in which the Tribal Bonds were purchased. In addition, MORTON and her co-defendants failed to apprise clients of Hughes and Atlantic regarding 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.
Hughes and Atlantic clients were provided no prior notice that MORTON caused them to purchase the Tribal Bonds. When these clients learned about the purchase of the Tribal Bonds in their accounts, several of them demanded that the Tribal Bonds be sold. However, because there was no ready secondary market for the Tribal Bonds, no Tribal Bonds have been sold from any Hughes or Atlantic client accounts.
Documents governing the Tribal Bonds specified that an investment manager would invest the proceeds of the Tribal Bonds in investments that would generate annuity payments sufficient to pay interest on the Tribal Bonds and provide funds to the WLCC to be used for tribal economic development purposes. In fact, none of the proceeds of the Tribal Bonds were turned over to the investment manager specified in the closing documents. Instead, significant portions of the proceeds were misappropriated by the defendants for their personal and professional use.
Specifically, the proceeds of the Tribal Bonds were deposited into a bank account in the name of Wealth Assurance Private Client Corporation (“WAPCC”), an entity controlled by Hirst and Dunkerley. Dunkerley transferred more than $38 million from the WAPCC account to an account controlled by Jason Galanis, who then misappropriated more than $8.5 million of the proceeds for his personal use, including for expenses associated with his home, jewelry and clothing purchases, travel and entertainment, and restaurant meals.
In addition, a portion of the misappropriated proceeds were recycled and provided by Jason Galanis to entities affiliated with Archer and Cooney in order to enable Archer and Cooney to purchase subsequent Tribal Bonds issued by the WLCC. 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.
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MICHELLE MORTON, 57, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which also which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense. Sentencing before Judge Abrams has been scheduled for November 30, 2018, at 11:00 a.m.
Jason Galanis, 47, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of conspiracy to commit investment adviser 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. On August 11, 2017, Galanis was sentenced principally to a term of 173 months in prison.
Hugh Dunkerley, 44, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; two counts of securities fraud, each of which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; one count of bankruptcy 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 falsification of records with the intent to obstruct a Government investigation, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense.
Gary Hirst, 65, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; one count of conspiracy to commit investment adviser 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 investment adviser fraud, which also which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
Trial against the remaining defendants is scheduled to begin on May 22, 2018, before Judge Abrams.
Mr. Khuzami praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.
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.
[1] As for the defendants who have not pled guilty (John Galanis, Devon Archer, and Bevan Cooney) the description of the charges set forth herein constitute only allegations.
Former Bank Branch Manager Charged in $5 Million Fraud Involving Two New York Area BanksRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector in Charge of the New York Division of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of a criminal Complaint charging MOSHE BENENFELD, a/k/a “Michael Benenfeld,” with bank fraud, in connection with hundreds of unauthorized transactions BENENFELD conducted in bank customer accounts when employed by two different New York-area banks. BENENFELD is expected to be presented before U.S. Magistrate Judge Barbara C. Moses today.
Manhattan U.S. Attorney Geoffrey Berman said: “As alleged, Moshe Benenfeld betrayed his position of trust as a bank branch manager to steal account holders’ money. Thanks to the Postal Inspection Service, Benenfeld is in custody and facing prosecution for his alleged crime.”
Inspector in Charge Bartlett said: “Mr. Benenfeld exploited the position of trust granted to him by his employer. He stole from family and friends to enrich himself and others. Postal Inspectors encourage customers to keep a watchful eye on their money, no matter who it is entrusted to.”
According to the allegations in the Complaint[1] unsealed today in Manhattan federal court:
Between 2000 and 2016, BENENFELD was the branch manager at a branch of a New York-area bank (“Bank-1”). Beginning in or about 2004 and continuing into 2016, while employed at Bank-1, BENENFELD conducted hundreds of unauthorized transactions involving the accounts of over 20 bank customers, including the accounts of BENENFELD’s relatives. Among other things, BENENFELD made unauthorized draws on, and payments to, customers’ lines of credit; made unauthorized withdrawals from, and deposits to, customers’ deposit accounts; and used customers’ deposit accounts as collateral for other customers’ lines of credit, without authorization. To effect the unauthorized transactions, BENENFELD would, among other things, forge the signatures of bank customers and use a document previously signed by a bank customer to create paperwork that falsely purported to authorize a different transaction. In or about April 2016, after having discovered BENENFELD’s conduct, Bank-1 terminated BENENFELD’s employment. In or about June 2016, BENENFELD was hired by another bank (“Bank-2”). At Bank-2, BENENFELD continued to conduct unauthorized transactions involving customer accounts. As a result of the unauthorized transactions conducted by BENENFELD, Bank-1 sustained losses of over $5 million.
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BENENFELD, 49, of Brooklyn, New York, is charged with one count of bank fraud, which carries a maximum sentence of 30 years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the investigative work of the U.S. Postal Inspection Service’s New York Division.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Dina McLeod is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Bronx Man Convicted of 2010 MurderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSE SANTIAGO-ORTIZ was found guilty of murder, participating in a narcotics conspiracy, and firearms offenses yesterday after a one-week jury trial before the Honorable Lewis A. Kaplan.
U.S. Attorney Geoffrey S. Berman said: “A unanimous jury convicted Jose Santiago-Ortiz of killing Jerry Tide in cold blood. In addition, Santiago-Ortiz was convicted of narcotics conspiracy and firearms offenses. We hope today’s verdict will bring some solace to the victim’s family, while also taking a violent offender off the street.”
According to the allegations contained in the Complaint and the Indictment and the evidence presented in court during the trial:
On September 11, 2010, SANTIAGO-ORTIZ shot and killed Jerry Tide in the vicinity of Jerome Avenue and 182nd Street in the Bronx. Between 2010 and November 2015, SANTIAGO-ORTIZ was the leader of a violent heroin trafficking enterprise that trafficked kilogram quantities of heroin, stamped “Flow,” in the Bronx and to Rutland, Vermont. SANTIAGO-ORTIZ killed Jerry Tide in part to increase SANTIAGO-ORTIZ’s position within the Flow Heroin Enterprise. In addition, in 2015, members of the Flow Heroin Enterprise engaged in several shootings with rival drug dealers in the Bronx.
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SANTIAGO-ORTIZ, 27, of the Bronx, New York, was found guilty of one count of murder in aid of racketeering, which carries a mandatory sentence of life in prison; one count of murder while engaged in a narcotics conspiracy, which carries a mandatory minimum sentence of 20 years in prison and a maximum sentence of life in prison; one count of conspiring to distribute one kilogram and more of heroin, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison; and one count of using firearms in furtherance of a narcotics conspiracy, which carries a mandatory minimum sentence of five 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 a defendant will be determined by the judge.
SANTIAGO-ORTIZ is scheduled to be sentenced on September 18, 2018.
Mr. Berman thanked the FBI’s New York Field Division for their work on the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Shawn Crowley, Lauren Schorr, and George Turner are in charge of the prosecution.
Recidivist Securities Fraudster Edward Durante Sentenced to 18 Years in Prison for Securities Fraud, Money Laundering, and Perjury OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EDWARD DURANTE, a/k/a “Ted Wise,” a/k/a “Efran Eisenberg,” a/k/a “Yulia,” a/k/a “Ed Simmons,” was sentenced today to 216 months in prison for defrauding at least 100 investors of more than $15 million. DURANTE was also sentenced for his perjurious testimony during an SEC deposition. DURANTE pled guilty on August 23, 2016, to conspiracy to commit securities fraud, securities fraud, money laundering, and perjury. DURANTE was sentenced today by United States District Judge Andrew L. Carter Jr.
U.S. Attorney Geoffrey S. Berman said: “The fraud scheme for which Edward Durante was sentenced today began while he was still in prison from a prior securities fraud conviction. Durante returned to what he knew best, lying to investors – many of whom were retirees who lost their life savings – about how their money would be used, and concealing his manipulation of the securities market. Edward Durante is now a twice-sentenced securities fraud felon.”
According to the allegations contained in the Indictment filed against DURANTE and his co-conspirators, and statements made in related court filings and proceedings:
2001 Securities Fraud Conviction
In December 2001, DURANTE was convicted in federal court of conspiracy to commit securities fraud, wire fraud, and money laundering, as well as making false statements in connection with a market manipulation scheme in which the defendant also used the alias “Ed Simmons.” The defendant was sentenced to 121 months in prison and was released in or about 2009, the year he began the current scheme. In connection with that scheme, DURANTE was ordered to pay disgorgement and prejudgment interest totaling over $39 million. DURANTE was also barred from certain activities in connection with the securities industry, including the sale of securities.
Private Placement Securities Fraud Involving VGTL
After being released from prison, between 2009 and in or about March 2015, DURANTE and his co-conspirators fraudulently induced victims to invest in private shares of VGTL by, among other things, concealing from investors that DURANTE controlled the entities selling the shares; that DURANTE was prohibited from any association with the sale of securities; and that DURANTE was previously convicted of crimes related to a similar scheme to defraud. Furthermore, DURANTE and certain of his co-conspirators lied to investors by (a) representing that their investments would be used to fund the operations and growth of VGTL in connection with potential reverse mergers, when in reality no reverse mergers were ever consummated and investor funds were instead used primarily to benefit the defendants personally; and (b) representing that the investors would receive an eight percent dividend on their investments until their private shares could be sold at a promised premium on the public market, when, in reality, no interest payments were ever provided to the investors and many investors never obtained VGTL stock certificates or the ability to sell the stock. In order to fund his illegal scheme, DURANTE used a network of brokers, including co-conspirators Larry Werbel and Abida Khan, investment advisers in Cleveland, Ohio, and Los Angeles, California, respectively, to induce investors to buy shares of VGTL.
Manipulation of the Market for Shares of VGTL
DURANTE also engaged in a scheme to control and manipulate the publicly traded stock of VGTL in order to artificially inflate the stock price and trading volume so as to profit from his own sales of VGTL stock and to further induce investments in private shares of VGTL. To that end, through entities he controlled, DURANTE held a majority of the publicly traded stock of VGTL. DURANTE recruited co-conspirator Christopher Cervino, a broker, to open brokerage accounts associated with DURANTE-controlled entities and investors who were clients of Werbel and Khan, many of whom did not know that brokerage accounts under their names had been opened with Cervino. Werbel and Khan, along with DURANTE, induced their clients to purchase VGTL stock through Cervino – sometimes without the clients’ knowledge or permission – while DURANTE and Cervino ensured that many of these purchases were matched with sales of VGTL stock by DURANTE-controlled accounts. The result of these transactions was that DURANTE and his co-conspirators were effectively taking both sides of a single transaction in VGTL stock in order to artificially control VGTL’s stock price. The efforts of DURANTE and his co-conspirators to artificially inflate the market for VGTL increased the stock price from approximately $.25 per share in April 2012 to as much as $1.90, and dramatically inflated the trading volume, which increased DURANTE’s ability to raise private investments in VGTL. To compensate Cervino for his efforts to control and manipulate the market in VGTL, DURANTE made at least two cash payments to Cervino totaling $35,000. Moreover, DURANTE then laundered proceeds from the scheme to accounts controlled by him and his co-conspirators, concealing the true nature of these transactions by utilizing wire transfers among multiple accounts in the names of other individuals.
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In addition to the 18-year prison term, DURANTE, 64, was sentenced to three years of supervised release and ordered to forfeit $15,404,231.
Abida Khan and Christopher Cervino, each of whom was found guilty after trial of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud, and – with respect to Khan only – aggravated identity theft and investment adviser fraud, were sentenced on January 18, 2018. Khan was sentenced to 53 months in prison; Cervino was sentenced to one year and one day in prison. Larry Werbel, who pled guilty to conspiracy to commit securities fraud and to investment adviser fraud, does not have a final date for sentencing. Walter Reissman, another co-conspirator, pled guilty to conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, wire fraud, and making false statements to federal officers. Co-conspirator Kenneth Wise pled guilty to conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, wire fraud, conspiracy to commit money laundering, and money laundering. Reissman and Wise were sentenced, on February 23, 2018, and March 6, 2018, respectively, to time served.
Mr. Berman praised the work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service, and thanked the Securities and Exchange Commission for its assistance. He added that the investigation is continuing.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Andrea M. Griswold and Rebecca Mermelstein are in charge of the prosecution.
Recidivist Defendant Pleads Guilty to Defrauding A Native American Tribe and Various Investors Through the Fraudulent Issuance and Sale of More Than $60 Million of Tribal BondsRead the Press Release
Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that GARY HIRST pled guilty today to defrauding a Native American tribal entity and various investment advisory clients of tens of millions of dollars in connection with the issuance of bonds by the tribal entity and the subsequent sale of those bonds through fraudulent and deceptive means. HIRST pled guilty to conspiracy to commit securities fraud, securities fraud, investment adviser fraud, and conspiracy to commit investment adviser fraud before U.S. Magistrate Judge Barbara Moses.
Mr. Khuzami said: “Today, Gary Hirst admitted that he and his co-conspirators placed tens of millions of dollars of Native American bonds with clients of an investment advisory firm, without telling those clients about numerous conflicts of interest surrounding the issuance and placement of the bonds. In addition, Hirst and his co-conspirators then misappropriated the bond proceeds, by failing to invest the money as promised and instead using it to finance their other business endeavors and to pay personal expenses. Now, thanks to the dedicated work of the U.S. Postal Inspection Service and the FBI, Hirst will have to answer for his crimes.”
According to the allegations contained in the Superseding Indictment filed against GARY HIRST and his co-conspirators and statements made in related court filings and proceedings[1]:
From March 2014 through April 2016, HIRST, along with his co-conspirators Jason Galanis, John Galanis, a/k/a “Yanni,” Hugh Dunkerley, Michelle Morton, Devon Archer, and Bevan Cooney, engaged in a fraudulent scheme to misappropriate the proceeds of bonds issued by the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity (the “Tribal Bonds”), and to use funds in the accounts of clients of asset management firms controlled by HIRST 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.
The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by John Galanis. Once the Tribal Bonds were issued, HIRST and Morton used funds belonging to clients of two related investment advisers, Hughes Capital Management, Inc. (“Hughes”) – where HIRST served as Chief Investment Officer – and Atlantic Asset Management, LLC (“Atlantic”), to purchase the Tribal Bonds, even though HIRST and Morton were well aware that material facts about the Tribal Bonds had been withheld from clients in whose accounts they were placed, including the fact that the Tribal Bond purchases fell outside of the investment parameters set forth in the investment advisory contracts of certain Hughes clients and of the Atlantic pooled investment vehicle in which the Tribal Bonds were purchased. In addition, HIRST and his co-defendants failed to apprise clients of Hughes and Atlantic regarding 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.
Hughes and Atlantic clients were provided no prior notice that HIRST and Morton caused them to purchase the Tribal Bonds. When these clients learned about the purchase of the Tribal Bonds in their accounts, several of them demanded that the Tribal Bonds be sold. However, because there was no ready secondary market for the Tribal Bonds, no Tribal Bonds have been sold from any Hughes or Atlantic client accounts.
Documents governing the Tribal Bonds specified that an investment manager would invest the proceeds of the Tribal Bonds in investments that would generate annuity payments sufficient to pay interest on the Tribal Bonds and provide funds to the WLCC to be used for tribal economic development purposes. In fact, none of the proceeds of the Tribal Bonds were turned over to the investment manager specified in the closing documents. Instead, significant portions of the proceeds were misappropriated by the defendants for their personal and professional use.
Specifically, the proceeds of the Tribal Bonds were deposited into a bank account in the name of Wealth Assurance Private Client Corporation (“WAPCC”), an entity controlled by HIRST and Dunkerley. Dunkerley transferred more than $38 million from the WAPCC account to an account controlled by Jason Galanis, who then misappropriated more than $8.5 million of the proceeds for his personal use, including for expenses associated with his home, jewelry and clothing purchases, travel and entertainment, and restaurant meals.
In addition, a portion of the misappropriated proceeds were recycled and provided by Jason Galanis to entities affiliated with Archer and Cooney in order to enable Archer and Cooney to purchase subsequent Tribal Bonds issued by the WLCC. 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.
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GARY HIRST, 65, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; one count of conspiracy to commit investment adviser 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 investment adviser fraud, which also 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.
Jason Galanis, 47, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of conspiracy to commit investment adviser 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. On August 11, 2017, Galanis was sentenced principally to a term of 173 months in prison.
Hugh Dunkerley, 44, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; two counts of securities fraud, each of which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; one count of bankruptcy 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 falsification of records with the intent to obstruct a Government investigation, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Trial against the remaining defendants is scheduled to begin on May 22, 2018, before U.S. District Judge Ronnie Abrams.
The guilty plea in this matter is HIRST’s second conviction in this District on charges of securities fraud. On September 28, 2016, HIRST was convicted following a jury trial before U.S. District Judge P. Kevin Castel for several offenses relating to a scheme to manipulate the market for shares of Gerova Financial Group, Ltd. (“Gerova”), a publicly traded company listed on the New York Stock Exchange. In that case, HIRST was sentenced to a term of 78 months in prison.
Mr. Khuzami praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.
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.
[1] As for the defendants who have not pled guilty (John Galanis, Michelle Morton, Devon Archer, and Bevan Cooney) the description of the charges set forth herein constitute only allegations.
Bookkeeper Charged in Manhattan Federal Court with Embezzling over $3.4 Million from Literary Agency and Its ClientsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today that DARIN WEBB was arrested this morning on wire fraud charges stemming from his scheme to defraud a Manhattan-based literary agency (the “Agency”) and its clients of more than $3.4 million. WEBB provided bookkeeping services for the Agency and carried out his scheme by making unauthorized transfers from the Agency’s bank accounts, and then making changes to the Agency’s accounting system to evade detection. WEBB was arrested this morning in Manhattan, and will be presented today before United States Magistrate Judge Barbara C. Moses.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Darin Webb, a bookkeeper for a firm in the book business, cooked the firm’s books to conceal a multimillion-dollar embezzlement. Now he is in custody and facing prosecution.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Darin Webb was responsible for the financial welfare of the agency whose accounts he oversaw, but instead of upholding his fiscal responsibilities, he spent his time swindling more than $3.4 million from his victims. Cooking the books rarely pays off in the long run, as the defendant has learned today.”
According to the Complaint unsealed today in Manhattan federal court[1]:
From in or about 2001 through in or about March 2018, DARIN WEBB, the defendant, was engaged as a bookkeeper for the Agency. From at least January 2011 through March 2018, WEBB used his position as the Agency’s bookkeeper to transfer more than $3.4 million of funds, belonging to the Agency and the Agency’s clients, from the Agency’s bank accounts to bank accounts that WEBB controlled. In order to evade detection of his criminal conduct and carry out his scheme, WEBB made changes to the Agency’s accounting records to disguise the nature of the transfers.
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WEBB, 47, of Manhattan, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.
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.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Founders of Cryptocurrency Company Indicted in Manhattan Federal Court with Scheme to Defraud InvestorsRead the Press Release
Robert Khuzami, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that a grand jury in the Southern District of New York has returned an Indictment charging SOHRAB SHARMA, a/k/a “Sam Sharma,” RAYMOND TRAPANI, a/k/a “Ray,” and ROBERT FARKAS, a/k/a “RJ,” a/k/a “Bob,” the three co-founders of a startup company called Centra Tech, Inc. (“Centra Tech”), that purported to offer cryptocurrency-related financial products, with conspiring to commit, and the commission of, securities and wire fraud in connection with a scheme to induce victims to invest millions of dollars’ worth of digital funds for the purchase of unregistered securities, in the form of digital currency tokens issued by Centra Tech, through material misrepresentations and omissions. SHARMA, TRAPANI, and FARKAS were all arrested last month based on criminal complaints filed by this Office charging them with the same crimes.
Following their arrests, this Office and the Federal Bureau of Investigation (“FBI”) seized 91,000 Ether units, consisting of digital funds raised from victims as part of the charged scheme. This seized digital currency is presently worth more than $60 million. The case has been assigned to United States District Judge Lorna G. Schofield.
Mr. Khuzami said: “As alleged, the defendants conspired to capitalize on investor interest in the burgeoning cryptocurrency market. They allegedly made false claims about their product and about relationships they had with credible financial institutions, even creating a fictitious Centra Tech CEO. Whether traditional or cutting-edge, investment vehicles can’t legally be peddled with falsehoods and lies.”
According to the allegations in the Indictment filed in this case, the criminal complaints previously unsealed in this case, and in other filings and statements at public court proceedings in the case:[1]
After SHARMA and TRAPANI worked together at a luxury car rental company in Florida called “Miami Exotics,” they and FARKAS co-founded a startup company called Centra Tech that claimed to offer cryptocurrency-related financial productions, including a purported debit card, the “Centra Card,” that supposedly allowed users to spend various types of cryptocurrency to make purchases at any establishment that accepts Visa or Mastercard payment cards. In approximately July 2017, SHARMA, TRAPANI, and FARKAS began soliciting investors to purchase unregistered securities, in the form of digital tokens issued by Centra Tech, through a so-called “initial coin offering” or “ICO.” As part of this effort, SHARMA, TRAPANI, and FARKAS, in oral and written offering materials that were disseminated via the internet, represented: (a) that Centra Tech had an experienced executive team with impressive credentials, including a purported CEO named “Michael Edwards” with more than 20 years of banking industry experience and a master’s degree in business administration from Harvard University; (b) that Centra Tech had formed partnerships with Bancorp, Visa, and Mastercard to issue Centra Cards licensed by Visa or Mastercard; and (c) that Centra Tech had money transmitter and other licenses in 38 states, among other claims. Based in part on these claims, victims provided millions of dollars’ worth of digital funds in investments for the purchase of Centra Tech tokens. In or about October 2017, at the end of Centra Tech’s ICO, those digital funds raised from victims were worth more than $25 million. Due to appreciation in the value of those digital funds raised from victims, those digital funds are presently worth more than $60 million.
The representations that SHARMA, TRAPANI, and FARKAS made to help secure these investments, however, were false. In fact, the purported CEO “Michael Edwards” and another supposed member of Centra Tech’s executive team are fictitious people who were fabricated to dupe investors; Centra Tech had no such partnerships with Bancorp, Visa, or Mastercard; and Centra Tech did not have such licenses in a number of those states.
SHARMA, TRAPANI, and FARKAS were well aware of the falsity of such claims. For example, with respect to Centra Tech’s purported partnerships with Bancorp, Visa, and Mastercard, SHARMA engaged in a cellphone text message conversation with TRAPANI on or about July 31, 2017, in which they discussed Centra Tech’s lack of actual partnerships with banks or credit card companies. During that exchange, SHARMA wrote: “Should write down a list of places to call tomorrow,” “For the conbranded [sic] card.” Later in the exchange, SHARMA wrote: “Gotta get it going on the banks today plz.” SHARMA also subsequently wrote: “We just need to get s [sic] banking license,” “Need our direct agreement with visa,” “Or MasterCard,” “That’s the move,” “Cut out the middle man,” “I wish we just knew someone.”
With respect to Centra Tech’s purported CEO “Michael Edwards,” SHARMA text-messaged TRAPANI on or about July 29, 2017, that they “Need to find someone who looks like Michael,” “Team photos,” “He’s real lol,” “Everyone real,” “Except Jessica,” “And Mike.” Similarly, SHARMA later wrote during that same exchange: “Gonna kill both Ceo and her,” “Gonna say they were married and got into an accident.”
Finally, with respect to Centra Tech’s purported money transmitter and other licenses in 38 states, SHARMA had a text message conversation with TRAPANI and FARKAS on or about August 30, 2017, about applying for state licenses that Centra Tech had previously represented it already held in 38 states. For example, SHARMA wrote in one message on or about August 30, 2017, to TRAPANI and FARKAS: “Gotta apply for all licenses,” “Should I even say this.”
On or about May 2, 2018, this Office and the FBI seized, pursuant to a judicially authorized seizure warrant, 91,000 Ether units, consisting of digital funds raised from victims who purchased digital tokens issued by Centra Tech during its ICO based on fraudulent misrepresentations and omissions. The seized funds are presently worth more than $60 million.
In a separate action, the United States Securities and Exchange Commission (the “SEC”) has filed civil charges against SHARMA, TRAPANI, and FARKAS.
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SHARMA, 27, TRAPANI, 27, and FARKAS, 31, are all residents of Florida. All three of them are charged in a four-count Indictment with one count of conspiracy to commit securities fraud, which carries a maximum potential sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum potential sentence of 20 years in prison; one count of securities fraud, which carries a maximum potential sentence of 20 years in prison; and one count of wire fraud, which carries a maximum potential sentence of 20 years in prison. In addition to potential prison sentences, each of these charges also carries potential financial penalties. The maximum potential prison 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. Khuzami praised the work of the FBI and thanked the SEC for its assistance. Mr. Khuzami also thanked the Department of Homeland Security, Homeland Security Investigations (“DHS-HIS”) and the District Attorney’s Office for New York County for their assistance in this case.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Samson Enzer and Negar Tekeei are in charge of the prosecution. Assistant United States Attorney Daniel Tracer is in charge of the forfeiture aspects of the case.
The allegations contained in the charging documents in this case are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaints and the Indictment, and the description of the Complaints and the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Three Charged with Conspiring to Distribute More Than 100 Grams of Carfentanil in the BronxRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, Special Agent in Charge of the U.S. Drug Enforcement Administration’s New York Field Division (“DEA”), 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”), George P. Beach II, the Superintendent of the New York State Police (“NYSP”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the arrests and unsealing of Complaints charging MIGUEL ESCANO, EMANUELLI RIVERA, and PEDRO DISLA ROJAS with conspiring to distribute heroin and more than 100 grams of carfentanil, a controlled substance analogue of fentanyl. ESCANO, RIVERA, and ROJAS were presented yesterday before Magistrate Judge James L. Cott in Manhattan federal court.
U.S. Attorney Geoffrey S. Berman said: “These defendants are alleged to have been engaged in the production and distribution of large quantities of carfentanil. Carfentanil is a potentially lethal drug 100 times more potent than fentanyl. As little as .00002 grams can kill. A substance meant as an elephant tranquilizer should not be hitting the streets as a recreational drug. Thanks to our law enforcement partners for their efforts to stem the tide of lethal opioids.”
DEA Special Agent-In-Charge James J. Hunt said: “This investigation is about more than just arrests and seizures, it is a public health warning. Carfentanil is death, and drug dealers are packaging it for sale on the streets of New York City. Law enforcement is battling the opioid suppliers on the front lines and this drug has the potential to double or triple overdose rates if we don’t get it off the streets quickly and warn users of its extreme danger.”
HSI Special Agent-in-Charge Angel M. Melendez said: “The individuals charged today are alleged to have introduced a drug that is one hundred times more potent than fentanyl to our Bronx neighborhoods. Law enforcement is paying close attention to those who are profiting in this nefarious drug game to ensure that the perpetrators are arrested and face prosecution.”
NYPD Commissioner James P. O’Neill said: “Anyone who continues to peddle this poison on the streets of New York City should be prepared for the full weight of our nation’s best investigators to bear down on them. I commend everyone involved in this case, particularly the members of the New York Drug Enforcement Strike Force, as they have proven again just how effective our law enforcement partnerships really are.”
State Police Superintendent George P. Beach II said: “The work of the New York Drug Enforcement Task Force stopped these dangerous and potentially deadly drugs before they could reach the streets of New York. We have no tolerance for those who allegedly continue to traffic narcotics with no regard to the damage they inflict in our communities, and anyone who does can expect to end up in prison. We will continue to work with our federal and local partners to prevent the flow of these illegal drugs from reaching our neighborhoods.”
According to the allegations in the Complaints[1]:
On three separate occasions between January and March 2018, ESCANO sold an individual acting at the direction of law enforcement a substance containing carfentanil in transactions that involved 50 grams, 70 grams, and 70 grams, respectively. RIVERA assisted with the January 2018 sale. Carfentanil is used as a tranquilizing agent for elephants and other mammals, is 100 times more potent than fentanyl, and can be lethal in doses of as little as 20 micrograms depending on the way it is administered and other factors.
As law enforcement officers prepared to execute a search warrant on a Bronx apartment on May 9, 2018, RIVERA exited the apartment and was arrested. Law enforcement seized approximately 100 grams of suspected narcotics in connection with the arrest of RIVERA, which have not yet been tested because the substance needs to be examined in a laboratory environment in light of the potentially lethal nature of carfentanil. Following the arrest of RIVERA, law enforcement officers searched the apartment and found ROJAS inside. During the search, law enforcement officers seized, among other things, suspected narcotics and materials commonly used in the production and distribution of narcotics, such as respirator masks, grinders, strainers, glassine bags stamped with the names “Sweet Dreams” and “Nasty Boyz,” a wooden press, and a stamp with the words “My Angel.” Law enforcement arrested ROJAS in connection with the search of the apartment.
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RIVERA, 32, of the Bronx, and Rojas, 38, of the Bronx, were each charged with one count of conspiring to distribute carfentanil and heroin, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years.
ESCANO, 30, of the Bronx, was charged with one count of conspiring to distribute carfentanil, which carries a maximum sentence of life in prison and a mandatory minimum sentence of 10 years.
The statutory maximum and minimum sentences are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendants would be determined by the judge.
Mr. Berman praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement – Homeland Security Investigations (HSI), the New York State Police, the Internal Revenue Service Criminal Investigation Division, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, New York National Guard, the Clarkstown Police Department, U.S. Coast Guard, Port Washington Police Department, and New York State Department of Corrections and Community Supervision.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Michael D. Longyear and Nicolas Roos are in charge of the prosecution.
The charges contained in the Complaints are merely accusations and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaints and the description of the Complaints set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Statement of U.S. Attorney Geoffrey S. Berman on the Conviction of Former State Assembly Speaker Sheldon SilverRead the Press Release
Sheldon Silver, the former New York State Assembly Speaker, took an oath to act in the best interests of the people of New York State. As a unanimous jury found, he sold his public office for private greed.
I commend the career prosecutors of our Office’s Public Corruption Unit, whose determination in securing this important conviction fittingly underscores the importance of pursuing cases against corrupt politicians, no matter the difficulty. One of the most worthy endeavors of this Office is combatting public corruption. We will continue to do so with the independence and resolve the Southern District is known for and the citizens of New York so rightly deserve.
Macau Billionaire Sentenced to 48 Months in Prison for Role in Scheme to Bribe United Nations Ambassadors to Build A Multibillion-Dollar Conference CenterRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division announced today that NG LAP SENG, a/k/a “David Ng,” the chairman of a Macau real estate development company, was sentenced today to 48 months in prison for his role in a scheme to bribe United Nations ambassadors to obtain support to build a conference center in Macau that would host, among other events, the annual United Nations Global South-South Development Expo. NG was sentenced by U.S. District Judge Vernon S. Broderick.
NG was convicted on July 27, 2017, after a five-week trial, of two counts of violating the Foreign Corrupt Practices Act, one count of paying bribes and gratuities, one count of money laundering, and two counts of conspiracy.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Billionaire Ng Lap Seng corrupted the highest levels of the United Nations in pursuit of a multibillion-dollar real estate deal in Macau. Ng exploited a center for international diplomacy as an instrument for his greedy intentions. This Office is committed to policing official corruption wherever it may be found.”
Acting Assistant Attorney General John P. Cronan said: “Corruption at any level of government undermines the rule of law and cannot be tolerated. But corruption is especially corrosive when it occurs at an international body like the United Nations. By paying bribes to two U.N. ambassadors to advance his interest in obtaining formal support for the Macau conference center project, Ng Lap Seng tried to manipulate the functions of the United Nations. The sentence handed down today demonstrates that those who engage in corruption will pay a heavy price and serves as a reminder that no one stands above the law.”
According to the evidence presented at trial, NG, the chairman of the Sun Kian Ip Group, conspired with and paid bribes to Francis Lorenzo, a former UN Ambassador from the Dominican Republic, and John W. Ashe, the late former Permanent Representative of Antigua and Barbuda to the UN and the 68th President of the UN General Assembly (“UNGA”). With the assistance of Jeff C. Yin, an accountant and co-conspirator who worked with NG and others and previously pled guilty to conspiring to defraud the United States, NG orchestrated a scheme with the principal objective of obtaining the formal support of the UN for a multibillion-dollar facility that NG hoped to build in Macau using the Sun Kian Ip Group (the “Macau Conference Center”). NG wanted the Macau Conference Center to serve as a location for meetings, discussions, forums, and other events associated with the UN. In particular, he wanted it to serve as the permanent home of the annual “Global South-South Development Expo,” which is run by the UN Office for South-South Cooperation, and is hosted in a different country or city every year.
The trial evidence showed that NG bribed Ambassador Ashe and Ambassador Lorenzo (together, the “Ambassadors”) in exchange for their agreement to use their official positions to advance NG’s interest in obtaining formal UN support for the Macau Conference Center. As the evidence demonstrated at trial, NG paid the Ambassadors in a variety of forms. For example, NG appointed Ambassador Lorenzo as the president of South-South News, a New York-based organization – funded by NG – which described itself as a media platform dedicated to advancing the implementation of the UN’s Millennium Development Goals, a set of philanthropic goals. NG provided bribe payments to Ambassador Lorenzo through South-South News, and by transmitting payments from Macau to a company in the Dominican Republic affiliated with Ambassador Lorenzo’s brother (the “Dominican Company”). Through South-South News, NG also made payments to Ambassador Ashe, including to Ambassador Ashe’s wife, who was paid for a no-show job as a “consultant” to South-South News, and to an account that Ambassador Ashe had established, purportedly to raise money for his role as president of UNGA.
According to the trial evidence, one of the actions that the Ambassadors took in exchange for bribe payments, to advance NG’s objectives, was to submit an official document to the then-UN Secretary-General in support of the Macau Conference Center (the “UN Document”). The UN Document claimed that there was a need to build the Macau Conference Center to support the UN’s global development goals. Ambassador Ashe, aided by Ambassador Lorenzo, initially submitted the UN Document to the UNGA in or about late February 2012. More than a year later, at NG’s behest, the Ambassadors revised the UN Document to refer specifically to NG’s company, the Macau Real Estate Development Company, as a partner in the Macau Conference Center project. The UN Document requested that the Secretary-General circulate the UN Document “as a document of the sixty-sixth session of the General Assembly,” under a specific item of the official UNGA agenda. The Secretary-General followed this request, thereby making the UN Document an official part of the UNGA record.
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In addition to the 48-month prison term, NG, 69, of Macau, China, was sentenced to three years of supervised release. NG was also and ordered to pay a fine of $1 million, to forfeit $1.5 million, and to make restitution to the UN for its legal fees.
Five other defendants have been charged in this matter. Lorenzo and Heidi Hong Piao pled guilty to various charges, including bribery, and are awaiting sentencing. Jeff C. Yin pled guilty to conspiracy to defraud the United States and was sentenced to seven months in prison. Shiwei Yan pled guilty to bribery and was sentenced to 20 months in prison. Co-defendant Ashe died in 2016 and the charges against him were dismissed.
This case was investigated by the FBI and IRS-CI. The Criminal Division’s Office of International Affairs provided significant assistance.
This case is being prosecuted by the Office’s Public Corruption Unit and the Criminal Division’s Fraud Section. Assistant U.S. Attorneys Daniel C. Richenthal, Janis M. Echenberg, and Douglas S. Zolkind, and Trial Attorney David A. Last of the Fraud Section, are in charge of the prosecution.
Former Energy Company Executive Pleads Guilty in Connection with the Bribery Scheme of Former Executive Deputy Secretary to the Governor of New YorkRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that PETER GALBRAITH KELLY JR., a former executive at Competitive Power Ventures (“CPV”), pled guilty to defrauding CPV by misrepresenting that the former Executive Deputy Secretary to the Governor, Joseph Percoco, had obtained state ethics approval for his wife to work at CPV. After an eight-week jury trial, co-defendants Joseph Percoco and Steven Aiello were convicted of charges relating to bribery. The jury was deadlocked on the charges against Kelly. Joseph Gerardi was acquitted of all charges. KELLY pled guilty to one count of conspiracy to commit wire fraud before United States District Judge Valerie E. Caproni.
U.S. Attorney Geoffrey Berman said: “Braith Kelly was involved in a criminal scheme to bribe of one of the most powerful men in New York in exchange for favorable treatment for his energy company. Today he pled guilty for his part in the scheme and now faces time in prison. Corruption in Albany casts a shadow over the many honest public servants who do good work in the administration of government, and deprives the citizens of New York of the honest representation they deserve.”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
KELLY ran monthly payments to Percoco and his wife through a consultant who worked for the Energy Company in order to disguise the source of the payments. KELLY also made sure that Percoco’s wife’s photograph and full name were not included in promotional materials for the Energy Company, and he falsely told his superiors at the Energy Company – on two separate occasions – that Percoco had obtained an ethics opinion from the Governor’s Office approving of Percoco’s wife’s employment with the Energy Company, when in fact no such opinion existed. For his part, Percoco concealed the criminal scheme by failing to include the Energy Company as the source of payments on his State-mandated financial disclosure forms.
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KELLY, 54, of Canterbury, Connecticut, pled guilty to an Information that charges him with one count of Conspiracy to Commit Wire Fraud. It carries a maximum penalty of five years in prison and a fine of the greatest of $250,000, twice the gross pecuniary gain derived from the offense, or twice the gross pecuniary loss to persons other than the defendant resulting from the offense. KELLY is scheduled to be sentenced on September 28, 2018, by Judge Caproni.
Percoco was convicted on March 13, 2018, after an eight-week trial, of soliciting and accepting bribes in return for taking official state action to benefit CPV and Syracuse-based real estate developer COR Development (“COR”). Percoco is scheduled to be sentenced by Judge Caproni on June 11, 2018.
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.
U.S. Attorney Berman praised the work of the Buffalo Field Office of the Federal Bureau of Investigation and New York Office of the Internal Revenue Service-Criminal Investigation, which jointly conducted this investigation with special agents from the U.S. Attorney’s Office. Mr. Berman also thanked the New York State Attorney General’s Office.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Janis Echenberg, Robert Boone, David Zhou, and Matthew Podolsky are in charge of the prosecution.
Chairman of Macau Real Estate Development Company Sentenced to Prison for Role in Scheme to Bribe United Nations Ambassadors to Build A Multi-Billion Dollar Conference CenterRead the Press Release
The chairman of a real estate development company was sentenced today to 48 months in prison and three years of supervised release for his role in a scheme to bribe United Nations ambassadors to obtain support to build a conference center in Macau that would host, among other events, the annual United Nations Global South-South Development Expo.
Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman of the Southern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office and Special Agent in Charge James D. Robnett of the IRS Criminal Investigation’s (IRS-CI) New York Field Office made the announcement.
Ng Lap Seng, aka “David Ng,” 69, of Macau, China, was sentenced by U.S. District Judge Vernon S. Broderick of the Southern District of New York. In addition to his prison sentence, Judge Broderick ordered Ng to pay a $1 million fine and $302, 977 in restitution to the United Nations. He also ordered a forfeiture money judgment of $1.5 million in forfeiture. Ng must report to the U.S. Marshals Service by July 10 to start his prison sentence. Ng was convicted on July 27, 2017, after a five-week trial of two counts of violating the Foreign Corrupt Practices Act, one count of paying bribes and gratuities, one count of money laundering and two counts of conspiracy.
“Corruption at any level of government undermines the rule of law and cannot be tolerated,” said Acting Assistant Attorney General Cronan. “But corruption is especially corrosive when it occurs at an international body like the United Nations. By paying bribes to two U.N. ambassadors to advance his interest in obtaining formal support for the Macau conference center project, Ng Lap Seng tried to manipulate the functions of the United Nations. The sentence handed down today demonstrates that those who engage in corruption will pay a heavy price and serves as a reminder that no one stands above the law.”
“Billionaire Ng Lap Seng corrupted the highest levels of the United Nations in pursuit of a multibillion-dollar real estate deal in Macau,” said U.S. Attorney Berman. “Ng exploited a center for international diplomacy as an instrument for his greedy intentions. This Office is committed to policing official corruption wherever it may be found.”
“Gaining the upper hand in a business venture by engaging in corrupt practices is bribery in its purest form. Today, Ng Lap Seng has learned the price he will have to pay for his actions,” said Assistant Director in Charge Sweeney. “I commend the investigators and prosecutors who continue to work together at home and abroad to vigorously enforce the law within the confines of the Foreign Corrupt Practices Act.”
“No matter if money is funneled through New York corporations or transferred offshore, IRS-CI is always ready to follow the money,” said IRS-CI Special Agent-in-Charge Robnett. “Today’s sentencing shows that IRS-CI is committed to rooting out public corruption by investigating individuals who misuse their positions of public trust for personal financial gain.”
According to the evidence presented at trial, Ng, the chairman of the Sun Kian Ip Group, conspired with and paid bribes to Francis Lorenzo, a former UN Ambassador from the Dominican Republic, and John W. Ashe, the late former Permanent Representative of Antigua and Barbuda to the UN and the 68th President of the UN General Assembly (UNGA). With the assistance of Jeff C. Yin, an accountant and co-conspirator who worked with Ng and others and previously pleaded guilty to conspiring to defraud the United States, Ng orchestrated a scheme with the principal objective of obtaining the formal support of the UN for a multi-billion dollar facility that Ng hoped to build in Macau using the Sun Kian Ip Group (the “Macau Conference Center”). Ng wanted the Macau Conference Center to serve as a location for meetings, discussions, forums, and other events associated with the UN. In particular, he wanted it to serve as the permanent home of the annual “Global South-South Development Expo,” which is run by the UN Office for South-South Cooperation, and is hosted in a different country or city every year.
The trial evidence showed that Ng bribed Ambassador Ashe and Ambassador Lorenzo (together, the “Ambassadors”) in exchange for their agreement to use their official positions to advance Ng’s interest in obtaining formal UN support for the Macau Conference Center. As the evidence demonstrated at trial, Ng paid the Ambassadors in a variety of forms. For example, Ng appointed Ambassador Lorenzo as the President of South-South News, a New York-based organization — funded by Ng — which described itself as a media platform dedicated to advancing the implementation of the UN’s Millennium Development Goals, a set of philanthropic goals. Ng provided bribe payments to Ambassador Lorenzo through South-South News by transmitting payments from Macau to a company in the Dominican Republic affiliated with Ambassador Lorenzo’s brother (the “Dominican Company”). Through South-South News, Ng also made payments to Ambassador Ashe, including to Ambassador Ashe’s wife, who was paid in her capacity as a “consultant” to South-South News, and to an account that Ambassador Ashe had established, purportedly to raise money for his role as President of UNGA.
According to the trial evidence, one of the actions that the Ambassadors took in exchange for bribe payments, to advance Ng’s objectives, was to submit an official document to the then-UN Secretary-General in support of the Macau Conference Center (the “UN Document”). The UN Document claimed that there was a need to build the Macau Conference Center to support the UN’s global development goals. Ambassador Ashe, aided by Ambassador Lorenzo, initially submitted the UN Document to the UNGA in or about late February 2012. More than a year later, at Ng’s behest, the Ambassadors revised the UN Document to refer specifically to Ng’s company, the Macau Real Estate Development Company, as a partner in the Macau Conference Center project. The UN Document requested that the Secretary-General circulate the UN Document “as a document of the 66th session of the General Assembly,” under a specific item of the official UNGA agenda. The Secretary-General followed this request, thereby making the UN Document an official part of the UNGA record.
Five other defendants have been charged in this matter. Lorenzo and Heidi Hong Piao pleaded guilty to various charges, including bribery, and are awaiting sentencing. Jeff C. Yin pleaded guilty to conspiracy to defraud the United States and was sentenced to seven months in prison. Shiwei Yan pleaded guilty to bribery and was sentenced to 20 months in prison. Co-defendant Ashe passed away in 2016 and the charges against him were dismissed.
This case was investigated by the FBI and IRS-CI. The Criminal Division’s Office of International Affairs provided significant assistance. Assistant Chief David A. Last of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Daniel C. Richenthal, Janis M. Echenberg, and Douglas S. Zolkind of the Southern District of New York are prosecuting the case.
The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Manhattan Art Consultant Pleads Guilty to Failing to Disclose Millions in Swiss Bank AccountRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that LACY DOYLE pled guilty today in connection with her maintenance of a secret, undeclared bank account in Switzerland. DOYLE pled guilty before United States District Judge Andrew L. Carter to subscribing to a false tax return.
U.S. Attorney Geoffrey Berman said: “Lacy Doyle has admitted going to great lengths to hide millions of dollars in assets from the IRS in an overseas bank account. Today’s guilty plea demonstrates that those who engage in elaborate and dishonest schemes to avoid paying their fair share of taxes will be caught and held responsible for their actions.”
As alleged in the Indictment and other documents filed in the case, DOYLE, assisted by others – including Beda Singenberger, a Swiss citizen who ran a financial advisory firm – established and maintained undeclared bank accounts in Switzerland and hid those accounts from the IRS. DOYLE used a sham entity to conceal from the IRS her ownership of some of the undeclared accounts and deliberately failed to report to the IRS the accounts and the income generated in the accounts.
In 2003, DOYLE’s father died, and DOYLE was appointed the executor of her father’s estate. At that time, DOYLE and her father jointly held an account at Credit Suisse with a value of approximately $3,700,000. DOYLE then made court filings falsely stating under penalty of perjury that the total value of her father’s estate was under $1 million when, in truth and fact, it was more than four times that amount. Doyle initially held the secret inheritance from her father in an account at Credit Suisse under her own name.
Thereafter, in 2006, DOYLE, with Singenberger’s assistance, opened an undeclared Swiss bank account for the purpose of depositing the secret inheritance from her father. The account was opened in the name of a sham foundation formed under the laws of Lichtenstein to conceal DOYLE’s ownership. As of May 15, 2007, the account held assets valued at approximately $5,056,548.
In 2010, the sham foundation controlled by DOYLE was re-domiciled from Lichtenstein to Panama. As of December 31, 2016, the sham foundation maintained assets of at least approximately $3,028,562.
Singenberger was charged on July 21, 2011, with conspiring with U.S. taxpayers and others to defraud the United States, evade U.S. income taxes, and file false U.S. tax returns. He remains at large.
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DOYLE, 61, who resides in Manhattan, faces a maximum term of three years in prison, and will be sentenced before Judge Carter. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the IRS and also thanked the U.S. Department of Justice’s Tax Division for their assistance.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Katherine C. Reilly and Jared Lenow are in charge of the prosecution.
Daniel Delvalle, Member of Bronx Drug Crew, Sentenced for Murder of Kenya MillerRead the Press Release
Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that DANIEL DELVALLE, a/k/a “BD,” a/k/a “Danny,” 31, was sentenced today by United States District Judge Naomi Reice Buchwald to a term of 156 months in prison for his participation in the murder of Kenya Miller, 26, on June 29, 2010. The sentence imposed by Judge Buchwald will be served consecutively to the 120-month prison term imposed on DELVALLE on June 4, 2014, by United States District Judge William H. Pauley III, for DELVALLE’s participation in a conspiracy to distribute crack cocaine.
United States Attorney Geoffrey S. Berman said: “Daniel Delvalle was responsible for the murder of 26-year-old Kenya Miller. As a result of that horrible and senseless crime, he will spend 23 years in prison. We thank our law enforcement partners for their outstanding efforts, and we will continue to work with them to keep our communities safe.”
According to the Indictment, and other documents filed in the case, as well as statements made during the sentencing proceedings:
Between approximately 2006 and 2012, two rival drug crews based their operations in and around the E. Roberts Moore Houses (the “Moore Houses”) in the vicinity of Cauldwell and Concord Avenues in the Bronx, New York. One such crew was headed by DELVALLE. Members of the DELVALLE crew primarily sold crack cocaine supplied to them by DELVALLE. Members of the DELVALLE crew also possessed and used firearms in order to protect themselves and their drug territory, and they were responsible for a number of drug-related shootings in the area.
On June 29, 2010, Miller was killed by a member of the DELVALLE crew (“CC-1”). Miller’s murder was ordered by DELVALLE, who had been upset with Miller for allegedly assaulting members of the DELVALLE crew. As a result, on the day of the murder, when DELVALLE saw Miller in the vicinity of the Moore Houses, DELVALLE told CC-1, in substance and in part, to retrieve a firearm and to kill Miller. CC-1 followed those instructions: CC-1 retrieved a gun belonging to the DELVALLE crew, followed Miller into an apartment building, and then shot Miller several times in an elevator.
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Mr. Berman praised the work of the New York City Police Department, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, and the Drug Enforcement Administration.
The case is being handled by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Justina Geraci and Matthew Laroche are in charge of the prosecution.
California Man Arrested for Hacking Websites for the Combating Terrorism Center at West Point and the New York City ComptrollerRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, 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 BILLY RIBEIRO ANDERSON, a/k/a “Anderson Albuquerque,” a/k/a “AlfabetoVirtual.” ANDERSON was charged with three separate counts of computer fraud for obtaining unauthorized access to and committing defacements of the websites for the Combating Terrorism Center at the United States Military Academy in West Point, New York (“West Point”), and the Office of the New York City Comptroller (the “NYC Comptroller”). ANDERSON was arrested earlier this morning at his residence in Torrance, California, and will be presented later today in federal court in Los Angeles, California.
U.S. Attorney Geoffrey S. Berman said: “Billy Anderson allegedly used specialized computer skills and knowledge to hack important U.S. military and government websites, as well as over 11,000 other websites around the world. Thanks to the outstanding work of the FBI’s cyber squads, criminals who compromise the integrity of government websites and network infrastructure will continue to be investigated vigorously and prosecuted to the fullest extent of the law.”
Assistant Director-in-Charge William F. Sweeney Jr. said: “Among other possible effects, website defacements can disrupt an organization’s operations and damage its credibility. As alleged, Anderson committed more than 11,000 such acts over several years, impacting a wide spectrum of military, government and business entities. The charges filed against Anderson should serve as a reminder that committing these acts of cyber vandalism will not be tolerated.”
According to the allegations contained in the Complaint[1] unsealed today:
Website defacements are acts of computer intrusion during which a hacker obtains unauthorized access to computers hosting Internet websites and then replaces the publicly available contents of the website with content generated by the hacker, thereby “defacing” the website. Hackers frequently claim responsibility for defacements by listing their online pseudonyms as part of the defaced content.
From in or about 2015 through at least March 13, 2018, ANDERSON took responsibility for obtaining unauthorized access to, and committing more than 11,000 defacements of, various U.S. military, government, and business websites around the world under the online pseudonym “AlfabetoVirtual,” including websites for the Combating Terrorism Center at West Point and the NYC Comptroller.
On or about July 10, 2015, a website owned by the NYC Comptroller was defaced, and ANDERSON, using the online pseudonym “AlfabetoVirtual,” claimed responsibility for the intrusion and defacement. The contents of the NYC Comptroller website were modified to display the text “Hacked by AlfabetoVirtual,” “#FREEPALESTINE” and “#FREEGAZA.” The defacement was performed by exploiting security vulnerabilities associated with the version of a plugin being used on the website.
On or about October 4, 2016, a website for the Combating Terrorism Center at West Point was defaced, and ANDERSON, using the online pseudonym “AlfabetoVirtual,” claimed responsibility for the intrusion and defacement. The content of the Combating Terrorism Center website was modified to display the text “Hacked by AlfabetoVirtual.” The defacement was performed by an unauthorized administrative account that exploited a known cross-site script vulnerability, thereby enabling ANDERSON to bypass access controls and target an internal Combating Terrorism Center website address.
ANDERSON also committed unauthorized intrusions of thousands of web servers located around the world by surreptitiously installing malicious code on victim web servers that provided ANDERSON with administrative rights to the victimized web servers, thereby enabling ANDERSON to commit defacements and otherwise to maintain persistent unauthorized access to the victimized web servers.
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ANDERSON, 41, of Torrance, California, is charged with two counts of computer fraud for causing damage to a protected computer, each of which carries a maximum sentence of 10 years in prison, and one count of computer fraud for unauthorized access to a United States Government computer, which carries a maximum sentence of one year 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 outstanding investigative work of the FBI. Mr. Berman also thanked the Computer Crime Investigative Unit of the United States Army Criminal Investigation Command and the Brazilian Federal Police Cyber Crime Unit for their assistance with the investigation.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorney Sagar K. Ravi is in charge of the prosecution.
The charges contained in the Complaint are merely accusations. The defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Hedge Fund Founder, Portfolio Manager, and Trader Charged in Manhattan Federal Court with Mismarking Securities by Hundreds of Millions of DollarsRead the Press Release
Audrey Strauss, the Attorney for the United States, acting under authority conferred by 28 U.S.C. § 515, 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 ANILESH AHUJA, a/k/a “Neil,” the founder, chief executive officer, and chief investment officer of a New York-based investment firm that managed hedge funds focused on structured credit products (“the Firm”), AMIN MAJIDI, a former partner and portfolio manager at the Firm, and JEREMY SHOR, a former trader at the Firm.
Ms. Strauss said: “Investors rely on a hedge fund’s performance numbers when deciding whom to trust with their capital. To compete with other peer funds, Neil Ahuja, founder of an investment firm, allegedly manipulated the firm’s performance numbers, using fraudulently inflated values for the firm’s securities holdings and lying to investors about how the firm would mark its positions. By allegedly cooking the books, Ahuja and his co-defendants made the fund appear more attractive to would-be investors and dissuaded current investors from withdrawing their investments. We will continue to work with our law enforcement and regulatory partners to ensure that investors are provided accurate information when making important investment decisions.”
FBI Assistant Director William F. Sweeney Jr. said: “The defendants’ alleged practice of intentionally misleading investors and mismarking securities held in the funds they managed allowed them to charge higher fees and hold captive money that would have likely been withdrawn had their clients been aware of the hedge fund’s actual value. Their initial success was based on self-imposed target returns, supported by reverse engineering tactics, but in the end, they missed their mark.”
AHUJA, MAJIDI, and SHOR are charged with participating in a scheme, from in or about 2014 through in or about 2016, to commit securities fraud and wire fraud relating to the mismarking of certain securities held in hedge funds that the Firm managed, thus fraudulently inflating the net asset value (“NAV”) of those funds as reported to investors and potential investors. At its peak, the mismarking across all funds managed by the Firm exceeded $200 million. In addition, Ms. Strauss announced today the unsealing of charges against ASHISH DOLE, a former chief risk officer and trader at the Firm, and FRANK DINUCCI, JR., a former salesman at a broker-dealer. Both DOLE and DINUCCI have pled guilty and are cooperating with the Government.
AHUJA was arrested in New York, New York, this morning. MAJIDI was arrested at his home in Armonk, New York, this morning. SHOR self-surrendered to the authorities in New York, New York, this morning.
AHUJA, MAJIDI, and SHOR will be presented and arraigned later today before United States District Judge Katherine Polk Failla. DOLE’s case is assigned to United States District Judge John G. Koeltl. DINUCCI’s case is assigned to United States District Judge Alvin K. Hellerstein.
In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against AHUJA, MAJIDI, and SHOR.
According to the allegations in the charging documents unsealed today in Manhattan federal court, including the Indictment,[1] and statements made in court proceedings:
The Firm
As alleged in the Indictment, in or about 2008, ANILESH AHUJA, a/k/a “Neil,” co-founded the Firm, where he was the chief executive officer and chief investment officer. The Firm managed hedge funds focused primarily on structured credit products, including residential mortgage backed securities (“RMBS”). Before founding the Firm, AHUJA had been the head of the RMBS group at a prominent global investment bank.
The Firm’s flagship mortgage credit fund (the “Hedge Fund”) was launched in or about October 2009. A segregated ERISA fund held the same positions as the Mortgage Credit Fund. In 2013, the Firm launched a new fund (the “New Issue Fund”) that purchased and securitized pools of mortgages that were not issued or guaranteed by a government agency. At various relevant times between 2008 and 2016, the Firm managed billions of dollars in assets, in excess of $5 billion at the Firm’s peak.
From in or about 2008 through in or about June 2016, AMIN MAJIDI worked at the Firm, first as the chief risk officer and, beginning in or about 2014, as a partner and the portfolio manager for the Hedge Fund. From in or about early 2014 through in or about March 2016, JEREMY SHOR was employed by the Firm as a trader, where he focused on non-agency RMBS – i.e., RMBS securities that were not issued by a government agency.
The Scheme to Mismark Securities
As alleged in the Indictment, from at least in or about 2014 through at least in or about 2016, AHUJA, MAJIDI, SHOR, and others, including DOLE and DINUCCI, participated in a scheme to defraud the Firm’s investors and potential investors in the Hedge Fund and the New Issue Fund by deceptively mismarking each month the value of certain securities held in those funds, and thus fraudulently inflating the NAV of those funds as reported to investors and potential investors. At times, the NAV was overstated by more than $200 million across the funds managed by the Firm.
This benefited the Firm in at least two ways. First, the Firm was able to charge its investors higher management and performance fees. Second, the Firm was able to forestall redemptions by investors who would have requested a return of their funds had they known the Firm’s true performance and operating health.
The mismarking scheme evolved as a result of demands by AHUJA and MAJIDI that the Firm maintain its track record of success and keep pace with the performance of peer funds, regardless of market conditions or the actual performance of the funds. To achieve the goal of posting competitive returns, AHUJA and MAJIDI set an inflated “target” return for the Hedge Fund at the end of each month, which was based in part on the performance of peer funds. As part of the scheme, MAJIDI, frequently in the presence of AHUJA, directed the members of the trading desk, including SHOR, DOLE, and others, that the Firm must meet its “target” performance number for the month. The traders at the Firm were then tasked with “reverse engineering” marks to meet the “targets.”
The Firm mismarked securities using two illicit methods. In the first method, the Firm secured fraudulently inflated price quotes for particular securities from corrupt brokers. AHUJA, MAJIDI, SHOR, and others then relied on these inflated quotes to set correspondingly inflated marks for their bonds. Specifically, AHUJA and MAJIDI were aware that SHOR had access to corrupt brokers – including DINUCCI – and directed SHOR, along with DOLE and others, to use these corrupt brokers to secure the inflated quotations they needed to hit their internal “targets.” While DINUCCI initially resisted some of the inflated marks that SHOR requested that he provide, DINUCCI eventually agreed to parrot back the exact marks SHOR had requested. In exchange for sending these inflated marks, DINUCCI expected that SHOR and the Firm would use DINUCCI and his firm as a broker.
In the second method, AHUJA, MAJIDI, SHOR, and others relied on corrupt brokers to secure “spreads” that could be used to inflate the NAV of the funds to meet the internal “targets.” Specifically, SHOR, DOLE, and others – with the knowledge and approval of AHUJA and MAJIDI – secured and misused “spreads” from corrupt brokers, including DINUCCI. A spread is typically the difference between a bid and an ask for a given security. But SHOR obtained so-called “sector spreads” from DINUCCI for use in mismarking the Firm’s positions. Sector spreads are the difference between the bid and the ask for entire sectors of securities (e.g., non-agency RMBS), not the bid and ask for specific securities. Because a sector spread reflected the difference between the cheapest and most expensive securities within an entire sector, it would be at least as large as (and almost certainly significantly larger than) the spread for a given bond in that sector. Generally, the Firm’s valuation policy required the Firm to mark a position at the “mid,” i.e., between the bid and the ask. The Firm used sector spreads to fraudulently create what it called an “implied mid,” or “imputed mid,” for particular securities. Where a broker supplied the Firm with a bid, the Firm added half of the sector spread to “calculate” the implied mid of a bond. SHOR, DOLE, and MAJIDI internally referred to this use of implied or imputed mids as “the lever” – because it could be used to manipulate the NAV to meet AHUJA’s fraudulent targets.
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AHUJA, 49, of New York, New York, MAJIDI, 52, of Armonk, New York, and SHOR, 46, of New York, New York, are each charged with four counts: one count of conspiracy to commit securities fraud; one count of conspiracy to commit wire fraud; one count of securities fraud; and one count of wire fraud. Count One carries a maximum sentence of five years in prison, and Counts Two through Four each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.
On April 6, 2017, DINUCCI, 35, of New York, New York, pled guilty before Judge Hellerstein to four counts: one count of conspiracy to commit securities fraud and wire fraud; one count of securities fraud; one count of wire fraud; and one count of making false statements. Counts One and Four each carry a maximum sentence of five years in prison, and Counts Two and Three each carry a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.
On November 13, 2017, DOLE, 34, of White Plains, New York, pled guilty before Judge Koeltl to two counts: one count of conspiracy to commit securities fraud and wire fraud; and one count of securities fraud. Count One carries a maximum sentence of five years in prison, and Count Two carries a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the respective judges.
Ms. Strauss 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 United States Attorneys Andrea M. Griswold and Joshua A. Naftalis are in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Five Members of New York Area Drug Trafficking Organization Charged with Diverting and Selling Tens of Thousands of Oxycodone PillsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent in Charge of the New York Division of the Drug Enforcement Administration (“DEA”), James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), and George P. Beach II, the Superintendent of the New York State Police, announced an Indictment charging RICKY RIOS, JEANETTE SANTIAGO, ADRIEL VASQUEZ, CINDY GARCIA, and ULTIMO MONTILLA with a conspiracy to distribute oxycodone pills. The case has been assigned to United States District Judge Paul A. Engelmayer.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, these defendants created a network spanning New York City to Connecticut for the distribution of tens of thousands of highly addictive and dangerous pills, helping to fuel the opioid epidemic plaguing our nation. We are committed, along with our law enforcement partners, to stopping the diversion of prescription opioids.”
DEA Special Agent in Charge James J. Hunt said: “This organization monopolized on opioid addiction by pushing tens of thousands of oxycodone pills throughout the Northeast, allegedly. Every day, more than 100 Americans die from opioid overdoses; both law enforcement and our community members are focused on bringing to justice drug trafficking organizations that exploit addiction for profit.”
NYPD Commissioner James P. O’Neill said: “I commend all the dedicated members of the federal task force who investigated and took down the individuals responsible for diverting and selling these pills on the streets of New York. Cases like this perfectly highlight the value of the NYPD’s law enforcement partnerships at every level of government.”
Superintendent George P. Beach II said: “Oxycodone is a highly addictive medication, and the operators of this trafficking ring profited by illegally diverting tens of thousands of doses for sale on the streets, knowing it would be abused. I thank our federal and local partners for their efforts to put a stop to this illegal trafficking operation.”
As alleged in the underlying Complaints and the Indictment charging the defendants in Manhattan federal court[1]:
The defendants were members of a drug trafficking organization (the “DTO”) that operated in the Bronx, among other places. The defendants and other members and associates of the DTO obtained oxycodone pills from individuals with prescriptions, stored and packaged those pills in an apartment in the Bronx, and then resold them. Between November 2016 and February 2018, the defendants and other members and associates of the DTO were responsible for diverting and selling tens of thousands of oxycodone pills.
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A chart with the names, ages, residences, and maximum penalties for the defendants is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
The Indictment was the result of a long-term investigation by the DEA’s Drug Enforcement Task Force, which comprises agents and officers of the DEA, the New York City Police Department, and the New York State Police. This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Michael K. Krouse is in charge of the prosecution.
The charges contained in the Complaints and the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
DEFENDANT
AGE
RESIDENCE
MAXIMUM PENALTY
RICKY RIOS
49
Seymour, CT
20 years in prison
JEANETTE SANTIAGO
37
Bronx, NY
20 years in prison
ADRIEL VASQUEZ
37
Yonkers, NY
20 years in prison
CINDY GARCIA
40
Yonkers, NY
20 years in prison
ULTIMO MONTILLA
40
Bronx, NY
20 years in prison
[1] As the introductory phrase signifies, the entirety of the text of the Complaints the Indictment and the description of those materials set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Drug Dealer Charged with Causing December 2016 Overdose Death in the BronxRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the arrest and unsealing of a Complaint charging THAYSHIKA TORRES with distributing the heroin and fentanyl that resulted in a non-fatal overdose and a subsequent fatal overdose of Elizabeth Stephens in December 2016. The Complaint also alleges that TORRES distributed heroin between September 2016 and December 2016. TORRES was arrested this morning by the NYPD, and will be presented later today before U.S. Magistrate James L. Cott in Manhattan federal court.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Thayshika Torres sold the heroin that resulted in the non-fatal overdose of Elizabeth Stephens on December 2, 2016. Then, just three weeks later, Torres allegedly sold Stephens a dose of fentanyl that ended her life. Working with the NYPD, we will continue to target anyone who sells these dangerous drugs in New York City, from large-scale international drug traffickers to street-corner dealers.”
NYPD Commissioner James P. O’Neill said: “The NYPD, in close collaboration with all of our law enforcement partners, are relentless in pursuing anyone who illegally sells narcotics and preys on people’s vulnerabilities. It is imperative that we save as many lives as possible while combatting this opioid crisis that knows no boundaries – which touches every aspect of our society, regardless of race, occupation, or economic status.”
According to the allegations in the Complaint[1]:
On December 2, 2016, Elizabeth Stephens, a 39-year-old resident of the Bronx, suffered a non-lethal overdose from heroin inside the apartment building in which TORRES was living. Emergency Medical Services personnel revived Stephens and brought her to the emergency room. Just hours after Stephens’s December 2 overdose, she sent a text message to TORRES asking TORRES to “let people know that stuff is strong.”
On December 23, 2016, Stephens suffered a fatal overdose in the same apartment building. That morning, Stephens placed three phone calls to TORRES between approximately 10:56 a.m. and 11:57 a.m. These were the last outgoing calls placed from Stephens’s phone. Less than an hour after the last call, at approximately 12:49 p.m., a resident of TORRES’s apartment building found Stephens lying outside the elevator in a hallway three floors above TORRES’s apartment. Shortly thereafter, Stephens was pronounced dead at a local hospital. An autopsy revealed that Stephens died from a lethal dose of opioids.
TORRES also sold heroin to undercover officers and confidential informants both before and after Stephens’s overdoses, including on September 2, 2016, October 18, 2017, October 24, 2017, February 22, 2018, and February 27, 2018. Laboratory testing confirmed that the heroin TORRES sold on October 18 and 24, 2017, also contained fentanyl.
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TORRES, 37, of the Bronx, is charged with two counts of distribution and possession with intent to distribute heroin. TORRES faces a maximum sentence of life in prison and a mandatory minimum sentence of 20 years in prison on each count based upon her distribution of the heroin that led to Elizabeth Stephens’s non-fatal overdose on December 2, 2016, and her distribution of the fentanyl that led to Stephens’s fatal overdose on December 23, 2016.
The statutory maximum and minimum sentences are prescribed by Congress and are provided here for information purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Berman praised the outstanding investigative work of the NYPD in this case.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Stephanie Lake 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.
CEO and President of New York Credit Union Charged with Embezzlement and FraudRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that KAM WONG, the chief executive officer and president of the oldest New York credit union (the “Credit Union”), a non-profit financial institution, was charged in Manhattan federal court with fraud, embezzlement, and aggravated identity theft offenses related to defrauding the Credit Union in connection with hundreds of thousands of sham expense reimbursements. WONG was arrested this morning and is scheduled to appear before U.S. Magistrate Judge James L. Cott in Manhattan federal court later today.
U.S. Attorney Geoffrey S. Berman said: “As alleged, the CEO and president of New York’s oldest credit union abused his position of trust as a guardian of municipal, state, and federal workers’ financial accounts to enrich himself. Kam Wong allegedly stole money from the credit union’s earnings that were intended to reward the credit union’s members, not line Wong’s pockets. I want to thank my Office’s Special Agents for their dedicated efforts in this ongoing investigation.”
According to the allegations contained in the Complaint[1] unsealed today in Manhattan federal court and publicly available documents:
KAM WONG, the defendant, is the CEO and president of the Credit Union, a non-profit financial institution headquartered in New York, New York, which is federally insured. The Credit Union is the oldest credit union in New York State and one of the oldest and largest in the country, providing bank services to more than 425,000 members, including municipal, state, and federal workers in New York City. The Credit Union’s earnings are intended to be directed back to its members in the form of more favorable rates and fewer and lower fees for products and services.
From at least 2013 through January 2018, WONG engaged in a long-running multi-faceted scheme to obtain money from the Credit Union to which he was not entitled, and took steps to seek to conceal what he had done. Among other things, WONG allegedly embezzled from and defrauded the Credit Union by submitting sham invoices (the “Sham Invoices”) for dental work never performed on him or paid by him, and, as a result, obtained reimbursement for hundreds of thousands of dollars of such nonexistent dental work, as well as for his alleged personal tax liability for these and other payments or benefits.
In addition to the alleged fraud in connection with dental reimbursements, the ongoing investigation has revealed that WONG obtained numerous other payments from the Credit Union under suspicious or questionable circumstances. These include millions of dollars in cash payments in lieu of a long-term disability insurance policy, as well as millions more for taxes to cover those payments; reimbursement payments for repairs to a luxury vehicle the Credit Union leased to WONG, which repair work was already covered by insurance; cash withdrawals from a Credit Union business credit card for purportedly “testing” the Credit Union’s ATMs; substantial educational, housing, and living expenses for two of WONG’s friend’s relatives, whom the Credit Union hired at his direction to be interns; tens of thousands of dollars in annual cash advances, for which WONG provided no supporting documentation; and payments for 320 days of purportedly unused sick leave, in violation of WONG’s contract and the Credit Union’s policies.
WONG generally deposited the proceeds of his scheme into a Credit Union account, from which, between July 2013 and January 2018, he then withdrew approximately $1.9 million from ATMs, over the course of more than 2,500 transactions, an average of more than one-and-a-half transactions per day. From this account, WONG also spent at least approximately $3.55 million on New York State Lottery tickets.
In or about January 2018, after WONG learned about the investigation, WONG misled federal agents and Credit Union Board members in order to, after the fact, explain and justify some of these payments. On or about February 22, 2018, WONG was placed on leave by the Credit Union’s Board of Directors upon the recommendation of a Special Committee overseeing an internal investigation prompted by this criminal investigation.
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WONG, 62, of Valley Stream, Long Island, is charged with one count of embezzlement from a federally insured credit union, one count of bank fraud, one count of wire fraud, each of which carries a maximum penalty of 30 years in prison, and one count of aggravated identify theft, which carries a mandatory two-year consecutive term in prison.
The maximum potential sentences in these cases are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Berman praised the work of the Special Agents of the United States Attorney’s Office for the Southern District of New York.
The case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Eli J. Mark and Daniel C. Richenthal are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Owner of Bus Repair and Transportation Company Found Guilty in White Plains Federal Court of Fraud, Bribery, and TheftRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that RICHARD BREGA, the former owner of Brega D.O.T. Maintenance Corp. in Rockland County, was found guilty by a federal jury in White Plains of fraud, bribery, and theft of government property. The convictions were for BREGA’s billing the Rockland Board of Cooperative Educational Services (“Rockland BOCES”) for maintenance of school buses that was never performed, and bribery of a Rockland BOCES official. The convictions resulted from a three-week trial before the United States District Judge Kenneth M. Karas. BREGA is scheduled to be sentenced by Judge Karas on October 17, 2018.
U.S. Attorney Geoffrey S. Berman said: “As a unanimous jury found, Richard Brega engaged in fraud, bribery, and theft of government property. The scheme not only defrauded Rockland school districts and the federal government by billing for bus maintenance work that was not performed, but it also put children at risk of riding unsafe buses. Now Brega awaits sentencing for his crimes.”
The evidence at trial showed, among other things, the following:
Rockland BOCES serves eight school districts in Rockland County. Among the services that Rockland BOCES offers to its students – particularly children with special physical, intellectual, and emotional needs – is transportation, for which it has a fleet of buses and other vehicles (hereinafter collectively referred to as “Rockland BOCES buses” and “bus fleet”), some of which are specially equipped for students with physical disabilities. Rockland BOCES receives federal funding each year, often in excess of $1 million.
BREGA owned and controlled vehicle repair and transportation companies in Rockland County, including Brega D.O.T. Maintenance Corp. (“Brega DOT”), a fleet maintenance repair shop. From in or about 2008 or 2009, through in or about 2015, Brega DOT provided vehicle repair service and maintenance for Rockland BOCES bus fleet, including regular preventive maintenance (“Preventive Maintenance”), which is supposed to involve a thorough and detailed inspection and testing of the buses at Brega DOT’s facility, designed to ensure that the buses are defect-free and safe to operate with children aboard. Brega DOT would fix any problems with the buses that it found during Preventative Maintenance inspections before releasing the buses back to Rockland BOCES. Brega DOT also created invoices documenting the work done and provided those invoices to Rockland BOCES for payment. Rockland BOCES’ director of transportation, William Popkave, would then approve the invoice as accurately stating work that was performed on Rockland BOCES buses, and Rockland BOCES would mail payment to Brega DOT.
From in or about 2012 through in or about 2014, BREGA stole money from Rockland BOCES by, among other things, billing Rockland BOCES for Preventative Maintenance inspections that were never performed. To do so, BREGA directed his employees to prepare fraudulent invoices, as well as fraudulent supporting documentation, giving the false appearance that his company had performed regular Preventive Maintenance inspections on certain buses, when in fact those buses were not even brought to Brega DOT and Preventative Maintenance inspections were not performed.
To create the fraudulent invoices, and to obtain payment from Rockland BOCES for work that was never performed, BREGA bribed Popkave – who oversaw upkeep and maintenance of its buses – with tens of thousands of dollars’ worth of free personal vehicle repairs. Popkave sent BREGA lists of buses and their mileages so that BREGA could create fraudulent invoices and supporting documentation, and thereafter approved payment of the fraudulent invoices at Rockland BOCES, even though Popkave and BREGA knew that the buses had not even been to Brega DOT on the days for which Brega DOT billed Rockland BOCES, and had not received Preventative Maintenance inspections.
* * *
BREGA, 50, of Rockland County, was convicted of three counts: (1) mail fraud, which carries a maximum potential penalty of 20 years in prison; (2) bribery concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison; and (3) theft concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison.
Popkave, 62, who currently resides in Florida, pled guilty before Magistrate Judge Judith C. McCarthy on January 24, 2017, to five counts: (1) conspiracy to commit mail fraud, which carries a maximum potential penalty of 20 years in prison; (2) mail fraud, which carries a maximum potential penalty of 20 years in prison; (3) theft concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison; (4) bribery concerning a program receiving federal funds, which carries a maximum potential penalty of 10 years in prison; and (5) obstruction of justice, which carries a maximum potential penalty of 20 years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as the sentencings of the defendants would be determined by the judge. BREGA will be sentenced on October 17, 2018. Popkave will be sentenced at a future date.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation, the Rockland County District Attorney’s Office, and the United States Department of Transportation Office of Inspector General. Mr. Berman also thanked the United States Department of Education, Office of Inspector General, for its assistance.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Michael D. Maimin and Benjamin Allee are in charge of the prosecution.
Manhattan U.S. Attorney Announces Extradition of Four Mexican Nationals for International Sex Trafficking OffensesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Acting Assistant Attorney General John M. Gore of the Civil Rights Division, and Angel M. Melendez, Special Agent in Charge of the New York Field Office of ICE’s Homeland Security Investigations (“HSI”), announced the extradition of EFRAIN GRANADOS-CORONA, a/k/a “Chavito,” a/k/a “Cepillo,” EMILIO ROJAS-ROMERO, ALAN ROMERO-GRANADOS, a/k/a “El Flaco,” and PEDRO ROJAS-ROMERO, who are charged together with RAUL ROMERO-GRANADOS, a/k/a “Chicarcas,” a/k/a “El Negro,” ISAAC LOMELI-RIVERA,” a/k/a “Giro,” JULIO SAINZ-FLORES, a/k/a “Rogelio,” and JUAN ROMERO-GRANADOS, a/k/a “Chegoya,” a/k/a “El Guero,” with sex trafficking offenses in a 23-count Superseding Indictment (the “Indictment”) in the United States District Court for the Southern District of New York. EFRAIN GRANADOS-CORONA and EMILIO ROJAS-ROMERO were extradited to the United States from Mexico on April 26, 2018, and presented before United States Magistrate Judge Stewart D. Aaron on April 27, 2018. ALAN ROMERO-GRANADOS and PEDRO ROJAS-ROMERO were extradited to the United States from Mexico on May 2, 2018, and presented yesterday before United States Magistrate Judge Debra Freeman. This case is assigned to United States District Judge Andrew J. Carter, Jr.
The Indictment, which was returned under seal on September 15, 2016, alleges that the defendants are members of an international sex trafficking organization that exploited and trafficked adult and minor women in Mexico and in the United States from at least 2000 to 2016. Members of the defendants’ sex trafficking organization, which operated largely as a family business, used false promises, physical and sexual violence, and threats to force and coerce adult and minor women to engage in commercial sex for the organization’s profit in both Mexico and the United States.
As part of a coordinated bilateral law enforcement action, six defendants located in Mexico – EFRAIN GRANADOS-CORONA, EMILIO ROJAS-ROMERO, ALAN ROMERO-GRANADOS, PEDRO ROJAS-ROMERO, JULIO SAINZ-FLORES, and JUAN ROMERO-GRANADOS – were arrested in Mexico and taken into custody by Mexican authorities pursuant to provisional arrest warrants requested by the United States in August 2016. As noted, the first four of these defendants were extradited to the United States from Mexico within the past week. The fifth of these defendants, JULIO SAINZ-FLORES, was previously extradited to the United States from Mexico on June 8, 2017, and was presented in Manhattan federal court before Chief United States Magistrate Judge Gabriel W. Gorenstein on June 9, 2017. JUAN ROMERO-GRANADOS remains in Mexico pending extradition proceedings. The two defendants who were arrested in the United States, RAUL ROMERO-GRANADOS and ISAAC LOMELI-RIVERA, were presented in Manhattan federal court on October 27, 2016, before United States Magistrate Judge Kevin Nathaniel Fox.
U.S. Attorney Geoffrey S. Berman said: “Sex trafficking is a heinous crime that violates both the rule of law and the most basic standards of human dignity. These defendants allegedly deprived women and girls of their freedom, and forced them into prostitution against their will. The scope of devastation these defendants allegedy inflicted on countless victims is beyond comprehension. But now they face significant criminal charges in an American court, and will have to answer for their allegedly reprensible actions. Our office is dedicated to combatting this demoralizing crime and helping survivors reclaim their lives.”
Acting Assistant Attorney General John M. Gore of the Civil Rights Division said: “The Civil Rights Division will not tolerate anyone violating an individual’s rights and freedoms through sex trafficking. We will continue to work with our law enforcement partners to vindicate the rights of victims and survivors of sex trafficking by dismantling transnational organized trafficking enterprises and putting an end to these egregious civil rights violations.”
HSI Special Agent in Charge Angel M. Melendez said: “These four individuals were transported more than 2,000 miles from Mexico to be held accountable for the callous criminal actions alleged in this case. Those extradited, along with others, allegedly operated a family business centered on making money from exploiting females they forced into sex slavery. Now these traffickers will face justice where they allegedly made their income, right here in New York. Human Trafficking remains a priority for HSI, whose primary focus is to rescue victims and release them from the grip of their captors.”
As alleged in the Indictment:[1]
EFRAIN GRANADOS-CORONA, RAUL ROMERO-GRANADOS, ISAAC LOMELI-RIVERA, JULIO SAINZ-FLORES, JUAN ROMERO-GRANADOS, ALAN ROMERO-GRANADOS, PEDRO ROJAS-ROMERO, and EMILIO ROJAS-ROMERO, the defendants, are members of an international sex trafficking organization (the “STO”). Many of the members of the STO are related by blood, marriage, and community. For example: EFRAIN GRANADOS-CORONA is the uncle of RAUL ROMERO-GRANADOS, ISAAC LOMELI-RIVERA, JUAN ROMERO-GRANADOS, and ALAN ROMERO-GRANADOS; PEDRO ROJAS-ROMERO and EMILIO ROJAS-ROMERO are brothers; JUAN ROMERO-GRANADOS and ALAN ROMERO-GRANADOS are also brothers; and ISAAC LOMELI-RIVERA is RAUL ROMERO-GRANADOS’s brother-in-law.
Between 2000 and the present, members of the STO (the “Traffickers”) have used false promises, physical and sexual violence, threats of the same, lies, and coercion to force and coerce adult and minor women (the “Victims”) to work in prostitution in both Mexico and the United States.
In most cases, a Trafficker entices a Victim – frequently a minor – in Mexico. The Trafficker then uses multiple means to isolate the Victim from her family. In some cases, the Trafficker uses romantic promises to induce the Victim to leave her family and live with him. In other cases, the Trafficker rapes the Victim, making it difficult for her to return to her family due to the associated stigma of the rape. Once a Victim is separated from her family, the Trafficker frequently monitors her communications, keeps her locked in an apartment, leaves her without food, and engages in physical or sexual violence against the Victim. Traffickers often tell Victims that the Traffickers owe a significant debt and that the Victim must work in prostitution to assist in repaying the debt. Traffickers typically begin forcing the Victims to work in prostitution in Mexico, frequently in a neighborhood of Mexico City known as “La Merced.” Victims are often required to see at least 20 to 40 customers per day. Traffickers monitor the number of clients a Victim sees by surveilling the Victim, communicating with brothel workers, and by counting the number of condoms provided to a Victim. Traffickers typically require the Victims to turn over all of the prostitution proceeds to the Traffickers.
After a Victim has worked in prostitution in Mexico for some time, Traffickers typically arrange for the Victim to be smuggled into the United States. Members of the STO assist one another in making smuggling arrangements. In many cases, multiple Traffickers and multiple Victims are smuggled into the United States together. In other cases, one Trafficker may remain in Mexico while arranging for a Victim to be smuggled together with another Trafficker and other Victims.
Once in the United States, the members of the STO generally maintain their Victims at one of several shared apartments in New York City. Victims living in the same apartment are frequently forbidden to communicate with one another. Once in the United States, Traffickers continue to use physical and sexual violence, threats of the same, lies, and coercion to force the Victims to work in prostitution.
In most cases, the Trafficker or another member of the STO provides a Victim with contact information with which to find work. The Victims typically work weeklong shifts either in a brothel, or in a “delivery service.” In a delivery service, the Victim is delivered to a customer’s home by a “driver.” These brothels and delivery services are located both within New York and in surrounding states, including, but not limited to, Connecticut, Maryland, Virginia, New Jersey, and Delaware.
Generally, each customer pays $30-35 for 15 minutes of sex. Of that, half of the money typically goes to the driver (in the case of a delivery service) or to the brothel. The other $15 goes to the Victim, who is then typically forced to give all of the proceeds to the Trafficker. When a Trafficker is unavailable, a Victim may also give the proceeds to another member of the STO.
The Traffickers then frequently send, or have their Victims send, some of the prostitution proceeds to Traffickers’ family members and associates in Mexico by wire transfer. Such transfers provide financial assistance to the Traffickers’ families and provide financial support to the Traffickers themselves if they return to Mexico.
* * *
Since 2009, the Department of Justice – through the Civil Rights Division’s Human Trafficking Prosecution Unit – and HSI have collaborated with Mexican law enforcement counterparts in a Bilateral Human Trafficking Enforcement Initiative aimed at strengthening high-impact prosecutions under both U.S. and Mexican law. The initiative is aimed at dismantling human trafficking networks operating across the United States-Mexico border, bringing human traffickers to justice, reuniting victims with their children, and restoring the rights and dignity of human trafficking victims held under the trafficking networks’ control. These efforts have resulted in successful prosecutions in both Mexico and the United States, including U.S. federal prosecutions of over 50 defendants in multiple cases in New York, Georgia, Florida, and Texas since 2009, and numerous Mexican federal and state prosecutions of associated sex traffickers. In announcing the extradition, U.S. Attorney Geoffrey S. Berman and Acting Assistant Attorney General John M. Gore of the Civil Rights Division commended U.S. and Mexican law enforcement partners for their shared and continued commitment to coordinated bilateral anti-trafficking efforts.
Mr. Berman also praised the outstanding investigative work of HSI, the work of the Mexican government, and Mexican law enforcement in executing the arrests and preparing for the extradition of the defendants to the United States, and the assistance provided by the New York City Police Department, the State Department, the Civil Rights Division’s Human Trafficking Prosecution Unit, and the Criminal Division’s Office of International Affairs. The Justice Department also acknowledged the non-governmental victim service providers and advocates for their dedicated efforts to restore and improve the lives of survivors of trafficking and their families in connection with this case and others.
* * *
Charts containing the names, ages, residences, charges, mandatory minimum penalties, 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.
The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.
The prosecution is being handled by the Violent and Organized Crime Unit of the U.S. Attorney’s Office for the Southern District of New York. Assistant U.S. Attorneys Kristy J. Greenberg, Jacqueline C. Kelly, Elinor L. Tarlow, and Jane Kim are in charge of the prosecution.
United States v. Efrain Granados-Corona, a/k/a “Chavito,” a/k/a “Cepillo,” et al.,
S2 16 Cr. 324 (ALC)
COUNT / CHARGE
DEFENDANT(S)
MANDATORY MINIMUM PENALTIES
MAXIMUM PENALTIES
Count 1: Conspiracy to Commit Sex Trafficking
18 U.S.C. § 1594
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo,”
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro,”
ISAAC LOMELI-RIVERA,
a/k/a “Giro,”
JULIO SAINZ-FLORES,
a/k/a “Rogelio,”
JUAN ROMERO-GRANADOS,
a/k/a “Chegoya,”
a/k/a “El Guero,” ALAN ROMERO-GRANADOS,
a/k/a “El Flaco,”
PEDRO ROJAS-ROMERO,
EMILIO ROJAS-ROMERO
N/A
Life in prison
Count 2:
Sex Trafficking of a Minor by Force, Fraud, or Coercion18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
15 years in prison
Life in prison
Count 3:
Sex Trafficking of a Minor by Force, Fraud, or Coercion18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2
EFRAIN GRANADOS-CORONA, a/k/a “Chavito,”
a/k/a “Cepillo”
15 years in prison
Life in prison
Count 4:
Sex Trafficking of a Minor by Force, Fraud, or Coercion
18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2
JULIO SAINZ-FLORES,
a/k/a “Rogelio”
15 years in prison
Count 5:
Sex Trafficking of a Minor by Force, Fraud, or Coercion
18 U.S.C. §§ 1591(a), (b)(1), (b)(2), and 2
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo,”
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
15 years in prison
Life in prison
Count 6:
Sex Trafficking by Force, Fraud, and Coercion
18 U.S.C. §§ 1591(a), (b)(1), and 2
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo,”
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro,”
PEDRO ROJAS-ROMERO
15 years in prison
Life in prison
Count 7:
Sex Trafficking by Force, Fraud, and Coercion18 U.S.C. §§ 1591(a), (b)(1), and 2
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
15 years in prison
Life in prison
Count 8:
Sex Trafficking by Force, Fraud, and Coercion18 U.S.C. §§ 1591(a), (b)(1), and 2
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
15 years in prison
Life in prison
Count 9:
Sex Trafficking by Force, Fraud, and Coercion18 U.S.C. §§ 1591(a), (b)(1), and 2
JUAN ROMERO-GRANADOS,
a/k/a “Chegoya,”
a/k/a “El Guero”
15 years in prison
Life in prison
Count 10:
Sex Trafficking by Force, Fraud, and Coercion18 U.S.C. §§ 1591(a), (b)(1), and 2
ALAN ROMERO-GRANADOS,
a/k/a “El Flaco”
15 years in prison
Life in prison
Count 11:
Sex Trafficking by Force, Fraud, and Coercion
18 U.S.C. §§ 1591(a), (b)(1), and 2
EMILIO ROJAS-ROMERO
15 years in prison
Life in prison
Count 12:
Sex Trafficking by Force, Fraud, and Coercion
18 U.S.C. §§ 1591(a), (b)(1), and 2
PEDRO ROJAS-ROMERO,
EMILIO ROJAS-ROMERO
15 years in prison
Life in prison
Count 13:
Transportation of a Minor for Purposes of Prostitution
18 U.S.C. §§ 2423(a) and 2
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo”
10 years in prison
Life in prison
Count 14:
Transportation of a Minor for Purposes of Prostitution
18 U.S.C. §§ 2423(a) and 2
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
10 years in prison
Life in prison
Count 15:
Transportation of a Minor for Purposes of Prostitution
18 U.S.C. §§ 2423(a) and 2
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
10 years in prison
Life in prison
Count 16:
Transportation of a Minor for Purposes of Prostitution
18 U.S.C. §§ 2423(a) and 2
JULIO SAINZ-FLORES,
a/k/a “Rogelio”
10 years in prison
Life in prison
Count 17:
Transportation for Purposes of Prostitution18 U.S.C. §§ 2421 and 2
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo”
N/A
10 years in prison
Count 18:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
N/A
10 years in prison
Count 19:
Transportation for Purposes of Prostitution18 U.S.C. §§ 2421 and 2
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
N/A
10 years in prison
Count 20:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
JUAN ROMERO-GRANADOS,
a/k/a “Chegoya,”
a/k/a “El Guero”
N/A
10 years in prison
Count 21:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
ALAN ROMERO-GRANADOS,
a/k/a “El Flaco”
N/A
10 years in prison
Count 22:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
PEDRO ROJAS-ROMERO
N/A
10 years in prison
Count 23:
Transportation for Purposes of Prostitution
18 U.S.C. §§ 2421 and 2
EMILIO ROJAS-ROMERO
N/A
10 years in prison
DEFENDANT
AGE
RESIDENCE
EFRAIN GRANADOS-CORONA,
a/k/a “Chavito,”
a/k/a “Cepillo”
42
Mexico
RAUL ROMERO-GRANADOS,
a/k/a “Chicarcas,”
a/k/a “El Negro”
34
New York
ISAAC LOMELI-RIVERA,
a/k/a “Giro”
35
New York
JUAN ROMERO-GRANADOS,
a/k/a “Chegoya,”
a/k/a “El Guero”
32
Mexico
JULIO SAINZ-FLORES,
a/k/a “Rogelio”
36
Mexico
ALAN ROMERO-GRANADOS,
a/k/a “El Flaco”
24
Mexico
PEDRO ROJAS-ROMERO
38
Mexico
EMILIO ROJAS-ROMERO
36
Mexico
[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.
Manhattan U.S. Attorney Announces $6.6 Million Settlement Against CityMD for Submitting False Claims to MedicareRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today a settlement of a civil fraud lawsuit against CityMD. This settlement resolves federal claims under the False Claims Act, 31 U.S.C. § 3729 et seq., alleging that CityMD billed Medicare for services rendered by physicians who did not actually perform those services, and billed Medicare for more expensive and complex services than were actually provided to patients. Under the terms of the settlement approved yesterday by U.S. District Judge Katherine Polk Failla, CityMD admitted and accepted responsibility for its conduct and agreed to pay $6,606,251.40 in damages to the United States.
Manhattan U.S. Attorney Geoffrey S. Berman said: “CityMD improperly billed Medicare at significant cost to taxpayers. This settlement holds CityMD accountable both through the significant monetary payment and the detailed admissions made by CityMD.”
CityMD manages and operates approximately 88 Urgent Care centers, located primarily in the New York City metropolitan area. As part of the settlement, CityMD admits, acknowledges, and accepts responsibility for the following conduct:
- CityMD billed Medicare for lengthier and/or more complex services or procedures than the services or procedures it actually provided to patients or that were supported with documentation in the medical records. Had CityMD billed Medicare for the services actually rendered or supported by the documents in the medical records, it would have received a lower rate of reimbursement from the Medicare program.
- Medicare rules generally prohibit medical providers, such as CityMD, from seeking reimbursement from the Medicare program for services rendered by a physician unless that physician is both enrolled with the Medicare program when the services are rendered and has reassigned his or her Medicare benefits to the billing provider (collectively known as being “credentialed” with the Medicare program).
- CityMD is generally prohibited from billing Medicare for services rendered by an uncredentialed physician unless and until he or she is credentialed with the Medicare program.
- CityMD employed a number of physicians who were not credentialed with the Medicare program at the time CityMD billed Medicare for their services.
- CityMD falsely billed Medicare for services rendered by these uncredentialed physicians using the National Provider Identification numbers of other credentialed physicians who did not actually render the services in question.
In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had been filed under seal pursuant to the False Claims Act.
* * *
Mr. Berman noted that CityMD cooperated fully with this investigation.
The case is being handled by the Office’s Civil Division. Assistant U.S. Attorneys Mónica P. Folch and Jacob M. Bergman are in charge of the case.
- CityMD billed Medicare for lengthier and/or more complex services or procedures than the services or procedures it actually provided to patients or that were supported with documentation in the medical records. Had CityMD billed Medicare for the services actually rendered or supported by the documents in the medical records, it would have received a lower rate of reimbursement from the Medicare program.
Four Men Sentenced in Manhattan Federal Court for Their Roles in Two 2016 Bank BurglariesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that four defendants have been sentenced to significant prison terms by United States District Judge Katherine B. Forrest for their participation in two bank burglaries. In April and May 2016, MICHAEL MAZZARA, CHARLES KERRIGAN, and ANTHONY MASCUZZIO, assisted by CHRISTOPHER KERRIGAN, stole more than $20 million in cash, jewelry, collectables, and other valuables from the banks’ vaults and safe deposit boxes.
U.S. Attorney Geoffrey S. Berman said: “By using blow torches to cut through bank roofs, and subsequently into vaults and safe deposit boxes, these defendants deprived hundreds of unsuspecting victims of their valuables, priceless heirlooms, and cherished keepsakes. As a result, the defendants will serve serious prison sentences. We will now be able to reunite many of the stolen items, including religious artifacts, jewelry, baseball cards, and coins, with their rightful owners.”
According to the Complaint and Indictments filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:
In April and May 2016, MAZZARA, CHARLES KERRIGAN, MASCUZZIO, and CHRISTOPHER KERRIGAN formed a crew that burglarized banks in Brooklyn and Queens, New York, by cutting into the banks’ vaults and the safe deposit boxes inside. MAZZARA, CHARLES KERRIGAN, and MASCUZZIO, with the assistance of CHRISTOPHER KERRIGAN, burglarized an HSBC Bank branch located at 4406 13th Avenue in Brooklyn from about April 8 through April 10, 2016, and burglarized a Maspeth Federal Savings Bank branch located at 64-19 Woodhaven Boulevard in Queens, New York, from about May 19 to May 22, 2016. On both occasions, the burglars used acetylene blowtorches to cut into the top of the banks’ vaults from the roof of the building. At the Maspeth Federal Savings Bank branch, they shielded their activities from view by constructing a plywood shed on the roof of the bank. The burglars then entered the vaults from above and took cash belonging to the bank and broke open customers’ safe deposit boxes, stealing the valuables inside. In total, the crew obtained more than $600,000 in cash and more than $20 million in valuables from the safe deposit boxes from both banks. Surveillance footage captured some of the burglars’ activities as they prepared for and executed the burglaries. Financial records and video surveillance also showed MAZZARA and MASCUZZIO purchasing some of the supplies that appear to have been used in the Maspeth burglary.
During the course of the investigation of the burglaries, the Federal Bureau of Investigation (“FBI”) and New York City Police Department (“NYPD”) executed multiple search warrants at locations in Brooklyn, Long Island, and Pennsylvania, and seized items that had been taken from safe deposit boxes during the burglaries. In addition, as part of their plea agreements, MAZZARA and MASCUZZIO returned other items that had been stolen from the safe deposit boxes. In total, more than 200 items that were stolen from safe deposit boxes – including religious artifacts, jewelry, and collectibles – have been recovered as a result of this investigation.
* * *
MAZZARA, 46, of Brooklyn, New York, was sentenced by Judge Forrest on April 13, 2018, to a total term of 135 months in prison.
In addition to the burglaries, CHARLES KERRIGAN, 42, of Brooklyn, New York, pled guilty to one count of witness retaliation while on pre-trial release, in connection with his assault of an individual who he believed had provided information regarding the burglaries to the FBI and NYPD. CHARLES KERRIGAN was sentenced by Judge Forrest on April 11, 2018, to a total term of 200 months in prison.
MASCUZZIO, 38, of Brooklyn, New York, was sentenced by Judge Forrest on May 4, 2018, to a total term of 84 months in prison, and three years of supervised release.
CHRISTOPHER KERRIGAN, 41, of Staten Island, New York, was sentenced by Judge Forrest on March 30, 2018, to a total term of 90 months in prison.
In addition to the prison terms, Judge Forrest also ordered that the defendants forfeit more than $20 million. Judge Forrest has adjourned the entry of an order of restitution to the victims of the burglaries until June 28, 2018, so that a final determination of the victims’ losses can be made.
Mr. Berman praised the outstanding investigative efforts of the FBI and NYPD.
If you believe you were a victim of this crime, and you wish to provide information to law enforcement, receive notice of future developments in the case, or review and/or claim any of the stolen items that were recovered during this investigation, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Benet J. Kearney and David W. Denton Jr. are in charge of the prosecution.
Four Defendants Convicted in Manhattan Federal Court for Stealing Confidential Government Information and Using It to Engage in Illegal TradingRead the Press Release
Robert Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced the conviction of DAVID BLASZCZAK, a political intelligence consultant, CHRISTOPHER WORRALL, a government employee at the Centers for Medicare and Medicaid Services (“CMS”), and THEODORE HUBER and ROBERT OLAN, two partners and analysts at Deerfield Management Company, L.P., a healthcare-focused hedge fund in New York, New York (“Deerfield”). BLASZCZAK, WORRALL, HUBER, and OLAN were convicted yesterday after a four-week trial before United States District Judge Lewis A. Kaplan.
BLASZCZAK, WORRALL, HUBER, and OLAN were charged with participating in a scheme, from in or about 2009 through in or about 2014, to convert United States property, to defraud the United States, and to commit securities fraud and wire fraud for obtaining material nonpublic information from CMS and using it to execute profitable trades at Deerfield.
As part of the scheme, BLASZCZAK was charged with obtaining confidential and nonpublic information from CMS employees, including his friend, CHRISTOPHER WORRALL, who worked at CMS, and who was charged with breaching his duties as a CMS employee by providing confidential information to BLASZCZAK. BLASZCZAK then was alleged to have provided this material nonpublic information in advance of market-moving CMS announcements to employees at Deerfield, including HUBER, OLAN, and Jordan Fogel, who allegedly recommended trades on the basis of the information. Jordan Fogel, a former partner and analyst at Deerfield, previously pled guilty and is cooperating with the Government. As a result of these trades, Deerfield reaped more than $7 million in profits.
BLASZCZAK was also charged in a separate scheme with obtaining confidential and nonpublic CMS information about cuts in CMS’s reimbursement rates for home health providers, and with providing that information to Christopher Plaford, a portfolio manager at Visium Asset Management, L.P., another healthcare-focused hedge fund in New York, New York (“Visium”). Plaford then used BLASZCZAK’s information to execute trades, resulting in approximately $330,000 in profits. Plaford has previously pled guilty to this conduct and is also cooperating with the Government.
Deputy U.S. Attorney Robert Khuzami said: “As a unanimous jury found, these defendants schemed to get highly sensitive and confidential information from CMS, a governmental entity, and feed it to a hedge fund to make illegal profits in the stock market. Trading on confidential nonpublic government information is just as illegal as trading on corporate insider information. Our Office is committed to policing and prosecuting both.”
According to the allegations in the charging documents and statements made in court proceedings:
CMS
CMS, a component of the United States Department of Health and Human Services (“HHS”), administers Medicare and Medicaid, among other things. CMS is also responsible for setting Medicare reimbursement rates for healthcare providers. CMS spends more than $1 trillion annually and pays approximately one-third of the country’s health expenditures. Accordingly, CMS rulemaking decisions, including decisions that affect how much the federal government will pay to reimburse medical providers for services rendered, have a substantial, market-moving impact on publicly traded companies that depend on government healthcare spending.
WORRALL began working at CMS in or about 1999. Beginning in January 2012, WORRALL worked in the Director’s Office for the Center for Medicare (“CM”), which gave WORRALL broad access to CMS’s confidential deliberations about upcoming reimbursement decisions. WORRALL also served as a project manager for a confidential CMS database that contained CMS’s most up-to-date claims data that CMS used to inform its decision-making.
David Blaszczak
At all relevant times, BLASZCZAK served as a consultant at a number of Washington, D.C.-based firms that, in exchange for a fee, provided so-called “political intelligence,” which included analysis about how changes in Government reimbursement rates would affect publicly traded healthcare-related companies. Before becoming a political intelligence consultant, BLASZCZAK worked at CMS, eventually serving as a special assistant to the CMS Administrator. BLASZCZAK met WORRALL while the two worked at CMS.
As a former CMS employee, BLASZCZAK was well aware of CMS’s rules governing the dissemination of nonpublic information.
Deerfield Management Company, L.P.
At all relevant times, Deerfield managed multiple hedge funds specializing in healthcare-related investments. As of 2017, Deerfield had more than $7 billion in assets under management. HUBER, OLAN, and Fogel were partners and analysts at Deerfield, where their job was to analyze investment decisions and recommend potentially profitable trades for Deerfield. Deerfield’s compliance manual prohibited its employees from committing insider trading.
The Scheme to Convert and Use Confidential CMS Information
As alleged in the Indictment, from at least in or about 2009 through in or about 2014, BLASZCZAK, WORRALL, HUBER, OLAN, Fogel, and others participated in a scheme to convert to their own use confidential and material nonpublic information from CMS concerning, among other things, CMS’s internal deliberations regarding coverage and reimbursement decisions.
During this time period, Deerfield retained BLASZCZAK as a consultant who provided political intelligence related to, among other things, the content, likelihood, and timing of CMS reimbursement decisions. As part of the scheme, HUBER, OLAN, and Fogel encouraged BLASZCZAK to obtain confidential and material nonpublic information from CMS insiders. As HUBER, OLAN, and Fogel knew, these CMS insiders included BLASZCZAK’s former colleagues with whom he had close personal relationships, who were prohibited from disclosing such information to CMS outsiders.
BLASZCZAK obtained material nonpublic information from his close friend and former CMS colleague WORRALL. BLASZCZAK and WORRALL were friends since their time working together at CMS. BLASZCZAK also frequently offered to help WORRALL find lucrative private sector employment opportunities, in exchange for WORRALL giving BLASZCZAK confidential government information.
BLASZCZAK conveyed the information obtained from WORRALL to HUBER, OLAN, and Fogel, who – knowing that BLASZCZAK had obtained the information improperly from a CMS insider – used the information to trade. In exchange for being provided with this inside information, HUBER, OLAN, and Fogel caused Deerfield to pay BLASZCZAK more than $800,000 in consulting fees.
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Defendants’ Ages and Residences
Defendant
Residence
Age
David Blaszczak
Isle of Palms, South Carolina
42
Christopher Worrall
Linthicum Heights, Maryland
40
Theodore Huber
Westport, Connecticut
56
Robert Olan
Rumson, New Jersey
47
Mr. Khuzami praised the work of the Federal Bureau of Investigation and U.S. Department of Health and Human Services, Office of the Inspector General, and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Ian McGinley, Joshua A. Naftalis, and Brooke E. Cucinella are in charge of the prosecution.
Three Men Arrested for Scheme to Defraud Elderly Victims in the Sale of Worthless StockRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrests of VLADIMIR ZISKIND, a/k/a “Mike Palmer,” KEITH ORLEAN, a/k/a “Jack Allen,” and KEVIN WEINZOFF, a/k/a “Mike Palmer,” and unsealing of a criminal complaint charging ZISKIND, ORLEAN, and WEINZOFF with conspiracy, securities fraud, and wire fraud in connection with their scheme to target elderly persons to solicit purchases of stock in a series of valueless companies through a variety of lies and misrepresentations. The defendants are expected to be presented this afternoon before U.S. Magistrate Judge Debra Freeman.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendants worked together over several years to trick elderly individuals into investing millions of dollars in worthless stock. The defendants allegedly deceived their victims into handing over their hard-earned money in exchange for nothing but lies and false promises. Today’s arrests demonstrate that this profoundly harmful and cynical alleged conduct will not be tolerated.”
FBI Assistant Director William F. Sweeney Jr. said: “We take all cases of securities fraud seriously, but there are few fraud schemes sleazier than defrauding elderly victims through deceit and manipulation. The defendants allegedly solicited more than $2 million in stock purchases from their more than four dozen victims. While nothing could restore the damage that has already been done, today we begin the process of holding those charged accountable for their actions.”
According to the allegations in the Complaint filed today in Manhattan federal court:[1]
For several years, the defendants operated a fraudulent scheme in which a salesman named “Mike Palmer” would call elderly persons on the phone and offer them what he claimed was a time-sensitive opportunity to buy stock in certain companies. In fact, there was no “Mike Palmer,” and the salesman was actually VLADIMIR ZISKIND or KEVIN WEINZOFF, who were taking turns using the fake alias. The purported time-sensitive investment opportunity was also fabricated by the defendants, as the companies in which they solicited investments were actually companies under their control. In one intercepted phone call conversation, ZISKIND described to KEITH ORLEAN his strategy for a successful investor sales pitch as: “You ram it down their fucking throat.” In another intercepted call between ZISKIND and ORLEAN, upon learning that a particular victim investor died, ZISKIND remarked: “I knew I should have pulled the last $10,000 out of him.”
The most recent version of the defendants’ phony sales pitch included false representations about an impending initial public offering, or “IPO,” for their company, Digital Donations Technologies, Inc. For example, in April 2018, one of the defendants assured a victim investor that “our company is doing great,” that the company had an offer for an IPO valued at approximately $300 million, and that defendant KEITH ORLEAN was considering a private sale of the company for more than $1.5 billion. In truth, however, the defendants knew that the company had little or no actual commercial value and that no such IPO or sale was taking place.
The FBI estimates that since April 2014, the defendants have convinced more than approximately 50 elderly persons to purchase stock in companies controlled by one or more of the defendants based on false representations. The defendants appear to have solicited more than $2 million in stock purchases from victims.
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ZISKIND, 49, of Brooklyn, New York, ORLEAN, 60, of Dix Hills, New York, and WEINZOFF, 53, of Brooklyn, New York, are each charged with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud. The securities fraud, wire fraud, and wire fraud conspiracy 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.
The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Andrew Thomas and Max Nicholas are in charge of the case.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
President of Park Avenue Art Gallery in Manhattan Pleads Guilty to Defrauding Art Dealers and Collectors of Millions of Dollars of ArtworkRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that EZRA CHOWAIKI pled guilty today to defrauding art dealers and collectors out of millions of dollars by entering into fraudulent agreements with these dealers and collectors to buy or sell artwork through his Manhattan art gallery (the “Gallery”), and using these dealers’ and collectors’ funds and artwork for unauthorized purposes, such as to repay other dealers to whom CHOWAIKI had outstanding debts.
U.S. Attorney Geoffrey S. Berman said: “As he admitted today in federal court, Ezra Chowaiki ran a multimillion-dollar fraud on art dealers and collectors around the country. In some instances, Chowaiki sold artwork, purportedly on consignment, without the owners’ authorization. In other instances, he took money from clients purportedly to purchase artwork, and kept the money but purchased no art. This Office is committed to holding the perpetrators of such fraud responsible and returning these valuable works of art to their rightful owners.”
According to the allegations contained in the Information and other documents filed in federal court, as well as statements made in public court proceedings:
Until November 2017, EZRA CHOWAIKI was the president and the minority owner of a private art gallery located on Park Avenue in New York, New York (the “Gallery”). CHOWAIKI founded the Gallery in or about 2004, and since that time, CHOWAIKI has used the Gallery to facilitate the purchase, sale, and consignment of works of fine art, as well as for the hosting of various art exhibitions featuring works of art and sculptures by well-known artists such as Pablo Picasso, Alexander Calder, Marc Chagall, Edgar Degas, and others. CHOWAIKI lost control of the Gallery in or about November 2017 when the Gallery filed for bankruptcy and was taken over by a trustee to oversee its liquidation.
Between at least in or about 2015 and 2017, through the Gallery, CHOWAIKI engaged in a scheme to deceive other dealers and collectors of fine artwork into sending him money or valuable artwork under the false pretenses that CHOWAIKI would engage in legitimate transactions such as the purchase, sale, or consignment of these and other artworks. In truth, however, CHOWAIKI did not, and often could not, conduct the transactions as promised, and instead kept funds and artwork for himself and the Gallery, or sold or consigned them to others both in and outside the United States, without authorization. Through these fraudulent transactions, CHOWAIKI fraudulently transferred over $16 million of artwork.
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CHOWAIKI, 49, of Brooklyn, New York, pled guilty to one count of wire fraud. That offense carries a maximum prison term of 20 years. The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
CHOWAIKI is scheduled to be sentenced on September 12, 2018, at 4:00 p.m.
Mr. Berman praised the outstanding work of the Federal Bureau of Investigation (“FBI”). To date, the FBI has seized millions of dollars of artwork that was fraudulently transferred through CHOWAIKI’s scheme. Any person who believes he or she is a victim of this crime is encouraged to send an email to [email protected].
The case is being prosecuted by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorney Daniel M. Tracer is in charge of the prosecution.
Third Defendant Pleads Guilty to Defrauding Investors of over $7 Million in Fuel Cell Company Investor Fraud SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DANNY PRATTE pled guilty today to defrauding investors in Terminus Energy, Inc., a publicly traded penny stock. PRATTE pled guilty to conspiracy to commit securities fraud before U.S. District Judge Andrew L. Carter Jr.
U.S. Attorney Geoffrey S. Berman said: “Danny Pratte and his co-defendants induced investors to buy a penny stock called Terminus Energy, based on representations that Terminus was producing an alternative energy source. Investors in the markets deserve honest and accurate information about the companies in which they invest. Today’s plea is an example of what happens to those attempting to misrepresent stocks to investors.”
According to the allegations contained in the Indictment filed against PRATTE and his co-conspirators, and statements made in related court filings and proceedings:
From at least February 2008 until at least 2014, PRATTE, along with his co-conspirators George Doumanis and Emanuel Pantelakis, both of whom previously pled guilty, engaged in a scheme to defraud investors in the publicly traded company Terminus Energy, Inc. (“Terminus”), by inducing victims to invest in Terminus stock through material misrepresentations and omissions and by misappropriating investor funds for their own purposes.
Terminus was purportedly producing and marketing a commercially viable “fuel cell” as an alternative energy source. PRATTE, who served as the chief executive officer of Terminus, and his co-conspirators sold shares of Terminus to investors through a private offering. In connection with such sales, PRATTE and his co-conspirators provided investors with private placement memorandums (“PPMs”) that contained materially false and misleading statements. For example, the PPMs falsely stated that (i) Terminus had completed its goal of developing a working fuel cell in mid-2008; (ii) Terminus would use specified investor funds to make payment on third-party development contracts designed to manufacture a working fuel cell; and (iii) Terminus would pay no more than 10 percent in sales commissions. In truth, and as PRATTE and his co-conspirators well knew, (i) there was no working fuel cell; (ii) the third-party contracts had been cancelled after Terminus failed to make payment to the third parties; and (iii) unregistered salespeople were receiving commissions far in excess of 10 percent. The PPMs also failed to accurately disclose the involvement of either Doumanis, who was barred from involvement in penny stocks as a result of a 2003 conviction for conspiracy to commit securities fraud, wire fraud, and mail fraud, or Pantelakis, who had been permanently barred by the Financial Industry Regulatory Authority (“FINRA”) following allegations that he had made fraudulent misrepresentations to customers in connection with the sale of securities. PRATTE and his co-conspirators also caused similar misrepresentations to be made in business plans, executive summaries, and presentations shared with potential investors, as well as in publicly available press releases. Through these false and misleading statements, PRATTE and his co-conspirators fraudulently induced investors to purchase nearly $8 million of Terminus stock.
Rather than use the investor money as promised, PRATTE and his co-conspirators misappropriated the funds for their own use and for use by co-conspirators. PRATTE personally received approximately $1.7 million. In addition, the unregistered salespeople collectively received undisclosed commissions of more than $1.5 million.
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PRATTE, 64, of Columbia, Missouri, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.
The maximum potential penalties in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence for the defendant will be determined by the Court.
PRATTE is scheduled to be sentenced by Judge Carter on September 14, 2018, at 11:00 a.m.
Doumanis and Pantelakis each plead guilty to one count of conspiracy to commit securities fraud and are scheduled to be sentenced by Judge Carter on June 13, 2018.
Mr. Berman praised the work of the Federal Bureau of Investigation 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 Christine Magdo and Samson Enzer are in charge of the prosecution.
Hector Rivera Sentenced to Life in Prison Plus 25 Years for Ordering 2004 Murder of Jeweler in Midtown ManhattanRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that HECTOR RIVERA was sentenced today to life in prison plus 25 years for murder-for-hire, murder-for-hire conspiracy, and use of a firearm resulting in death, in connection with his role in ordering the 2004 murder of Eduard Nektalov, a Manhattan diamond dealer. RIVERA was convicted following a six-day trial in November 2017 before U.S. District Judge Paul A. Engelmayer, who imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Hector Rivera ordered the execution-style murder of Eduard Nektalov, who was brazenly gunned down on a crowded street in midtown Manhattan nearly 14 years ago. Thanks to the extraordinary work of our law enforcement partners, Rivera will now spend the rest of his life in prison.”
According to the allegations in the Indictment and the evidence presented in court during the trial:
RIVERA was the leader of a violent robbery crew that operated in the Diamond District in midtown Manhattan. In 2004, RIVERA commissioned the murder of Eduard Nektalov because of a business dispute between Nektalov and one of RIVERA’s criminal associates. During the evening rush hour on May 20, 2004, a hitman hired by RIVERA followed Nektalov from his jewelry store on West 47th Street. Less than a block from the store, the hitman shot Nektalov once in the head and twice in the back, in the middle of a crowded sidewalk on Sixth Avenue. Nektalov was pronounced dead within 20 minutes of the shooting. RIVERA paid the hitman and another participant a combined total of $30,000 to carry out the murder.
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Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department. He also thanked the Manhattan District Attorney’s Office and the Bronx District Attorney’s Office for their assistance with the prosecution.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Scott Hartman and Jordan Estes are in charge of the prosecution.
Manhattan Man Charged with Murder of 17-Year-OldRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing of an Indictment charging GARY TURNER with the April 24, 2018, murder of Samuel Ozuna, 17, outside the George Washington Carver Houses in New York, New York. TURNER was arrested this morning and was presented before U.S. Magistrate Judge Debra Freeman. TURNER will be arraigned on May 8, 2018, at 2:30 p.m., before U.S. District Judge Jesse M. Furman, to whom the case has been assigned.
U.S. Attorney Geoffrey S. Berman said: “Just a few days ago, as alleged in the indictment, Gary Turner murdered 17-year-old Samuel Ozuna. Thanks to the outstanding efforts of the NYPD, Turner is now in custody and charged with this terrible crime. We will continue our daily work with the NYPD to keep the streets safe and to vigorously investigate and prosecute those who wreak violence upon our community.”
NYPD Commissioner James P. O’Neill said: “Violence will never be tolerated in New York City. I commend all the professionals whose dogged investigative work enabled the NYPD and our law enforcement partners to swiftly identify, apprehend and bring this alleged killer to justice.”
As alleged in the Indictment unsealed today in Manhattan federal court[1]:
On April 24, 2018, GARY TURNER shot and killed Samuel Ozuna in the vicinity of 60 East 104th Street in Manhattan. TURNER killed Ozuna in part to maintain and increase his position in a racketeering enterprise operating in and around the George Washington Carver Houses.
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TURNER is charged with using a firearm to commit murder in aid of racketeering, which carries a maximum sentence of death, or life in prison, and a mandatory minimum term of five years in prison. The statutory maximum penalty is prescribed by Congress and is 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 NYPD.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Lauren Schorr and Jacob Warren are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.