Southern District of New York

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment charging PETER KALKANIS, BRYAN DUNCAN, KERRY GORDON, ROBERT LOCUST, and RYAN RAINFORD with conspiracy to commit mail and wire fraud, mail fraud, and wire fraud in connection with a scheme to obtain fraudulent insurance reimbursement and other compensation for fraudulent slip-and-fall accidents.  The Indictment also charges PETER KALKANIS with one count of aggravated identity theft.  The five defendants were arrested earlier this morning and will be presented today before United States Magistrate Stewart D. Aaron in Manhattan federal court.  The case has been assigned to United States District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants employed one of the oldest plays in the fraudster handbook – the fake slip-and-fall routine – to develop a network of ‘fall victims’ to obtain an astonishing $31 million in fraudulent insurance and compensation payouts.  Allegedly, some of the ‘victims’ went as far as having unnecessary surgery to increase the likelihood of a higher settlement.  Today, however, these defendants’ fraud careers are over, and they will be forced to answer for their alleged crimes.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “The intentional misrepresentation of an accidental slip and fall, and the subsequent defrauding of businesses and insurance companies, is a reprehensible crime in and of itself.  But perhaps the most shocking allegation revealed today is the fact that additional incentives were offered for participants to undergo surgery in order to receive payment for their involvement. One thing is for sure – the alleged activity carried out by Kalkanis and his co-conspirators was no accident, and neither are our charges today.”

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

Since 2013, the defendants have been engaged in a widespread fraud scheme through which the defendants defrauded businesses and insurance companies by staging slip-and-fall accidents and filing fraudulent lawsuits arising from those staged slip-and-fall accidents.  The fraud scheme participants recruited individuals to stage slip-and-fall accidents at particular locations throughout New York City and to claim that they injured themselves as a result of their accidents.  The recruited patients were directed to claim that they had injured themselves and to seek medical treatment. 

After the staged slip-and-fall accidents, recruited patients were referred to specific attorneys who would file lawsuits against the owners of the accident sites and/or insurance companies of the owners of the accident sites (the “Victims”).  The lawsuits did not disclose that the recruited patients had deliberately fallen at the accident sites or, in some cases, had not fallen at all.  During the course of the fraud scheme, the defendants, together with others known and unknown, attempted to defraud the Victims of at least $31,791,000.

The recruited patients were also instructed to receive ongoing chiropractic and medical treatment from certain chiropractors and doctors.  The fraud scheme participants advised the recruited patients that if they intended to continue with their lawsuits, they were required to undergo surgery.  As an incentive to getting surgery, the recruited patients were offered a payment after they completed surgery as well as a percentage of any settlement payment from their lawsuit. 

KALKANIS, a former chiropractor, was the organizer and leader of the scheme.  As alleged in the indictment, KALKANIS paid his co-defendants to recruit patients into the scheme and transport the patients to medical and attorney appointments.  KALKANIS also organized the recruited patients’ legal and medical appointments, and assisted in procuring the funding for the recruited patients’ medical treatment and lawsuits.

DUNCAN, GORDON, LOCUST, and RAINFORD helped recruit patients into the fraud scheme, transported patients to medical and legal appointments, identified potential accident sites, and coached recruited patients on faking their injuries. 

*                      *                     *

KALKANIS, 70, Queens, New York, DUNCAN, 30, Queens, New York, GORDON, 34, Queens, New York, LOCUST, 52, Brooklyn, New York, and RAINFORD, 28, Queens, New York, are each charged with one count of conspiracy to commit mail and wire fraud, which carries a maximum sentence of 20 years in prison; one count of mail fraud, which carries a maximum sentence of 20 years in prison; and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  KALKANIS is also charged with one count of aggravated identity theft, which carries a two year mandatory prison sentence.  The maximum potential sentences and minimum sentence in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the FBI and the NYPD.  Mr. Berman also thanked the National Insurance Crime Bureau for their assistance in the investigation. 

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Nicholas Folly, Alexandra Rothman, and Nicholas Chiuchiolo are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), and Richard Conway, Chief of the Port Chester Police Department, announced today the unsealing of an Indictment charging CRISTIAN FERNANDEZ, JOHNNY FERNANDEZ, JESUS GONZALEZ, JUAN HERNANDEZ, JUAN PABLO RENDON-INZUNZA, NICOLE MAISONET, GABRIEL ORTIZ, a/k/a “Bebe,” MARIA ROLON, EDGARDO RUIZ, a/k/a “Roro,” HECTOR SANCHEZ, a/k/a “Tito,” GILBERT TORRES, FABIOLA VEGA, and JOHN VIEIRA, a/k/a “John-John,” with firearms and narcotics offenses.  The defendants have been charged as a result of their membership and participation in a transnational criminal organization that trafficked in firearms and narcotics, including heroin and methamphetamine.  Nine defendants were arrested or taken into federal custody on these charges today in various locations throughout the United States, namely Maryland, Massachusetts, Connecticut, and New York.  ORTIZ, who is in custody on state charges in Rochester, New York, will be transferred to federal custody as soon as possible.  ROLON, GONZALEZ, and INZUNZA have not been arrested to date. 

Six of the defendants – CRISTIAN FERNANDEZ, JOHNNY FERNANDEZ, JUAN HERNANDEZ, GILBERT TORRES, FABIOLA VEGA, and JOHN VIEIRA – were arraigned before United States Magistrate Judge Lisa Margaret Smith this afternoon in White Plains federal court.  Three other defendants –EDGARDO RUIZ, NICOLE MAISONET, and HECTOR SANCHEZ – will be presented today in federal courts in Maryland and Massachusetts. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants operated a nationwide drug distribution network to push heroin and methamphetamine onto U.S. streets.  Thanks to the dedicated work of the FBI and Port Chester Police, these defendants are behind bars and face significant prison time for their alleged crimes.”

FBI Assistant Director William F. Sweeney Jr. said:  “The members of this criminal organization created a spider web of illegal drug sales, moving their drugs from south of the border and crisscrossing the states allegedly attempting covering their tracks.  These are the types of operations contributing to the deadly epidemic of overdoses in our country, indiscriminately killing people of all ages and races.  The FBI Westchester County Safe Streets Task Force and our law enforcement partners have created such a vital working relationship that we are having a significant impact in stopping the flow of illegal drugs at the source.” 

Port Chester Police Chief Richard Conway said:  “I'm very proud our Department’s role in this investigation, which is perhaps the largest scale operation we have ever undertaken. Today’s arrests represent an example to us all of what can be accomplished when agencies work together.”

According to the Indictment[1] unsealed today in White Plains federal court:

From 2017 to 2018, in the Southern District of New York and elsewhere, CRISTIAN FERNANDEZ, JOHNNY FERNANDEZ, JESUS GONZALEZ, JUAN HERNANDEZ, JUAN PABLO RENDON-INZUNZA, NICOLE MAISONET, GABRIEL ORTIZ, MARIA ROLON, EDGARDO RUIZ, HECTOR SANCHEZ, GILBERT TORRES, FABIOLA VEGA, and JOHN VIEIRA participated in a conspiracy to distribute and possess with intent to distribute controlled substances.  The criminal organization trafficked in both heroin and methamphetamine.  As part of the criminal organization, CRISTIAN FERNANDEZ and FABIOLA VEGA possessed firearms in furtherance of their narcotics trafficking and, together with co-defendants HERNANDEZ, RUIZ, and TORRES, participated in a conspiracy to deal in firearms without a license between 2017 and 2018.

*                *                *

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

Mr. Berman praised the outstanding investigative work of the FBI and the Port Chester Police Department.  Mr. Berman also thanked the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Westchester County Police Department, and the Peekskill Police Department for their assistance in this investigation. 

The prosecution is being handled by the Office’s White Plains Division.  Assistant United States Attorneys Olga Zverovich and Sam Adelsberg 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.                                                     

United States v. Cristian Fernandez, et al.

CHARGE

DEFENDANTS

MAXIMUM PENALTIES

Count One

Narcotics Conspiracy

 

CRISTIAN FERNANDEZ

JOHNNY FERNANDEZ

JESUS GONZALEZ

JUAN HERNANDEZ,

JUAN PABLO RENDON-INZUNZA

NICOLE MAISONET

GABRIEL ORTIZ, a/k/a “Bebe”

MARIA ROLON

EDGARDO RUIZ, a/k/a “Roro”

HECTOR SANCHEZ, a/k/a “Tito”

GILBERT TORRES

FABIOLA VEGA

JOHN VIEIRA a/k/a “John-John”

As to defendants CRISTIAN FERNANDEZ, GONZALEZ, INZUNZA, ORTIZ, RUIZ, SANCHEZ, VEGA:

Life in prison with a mandatory minimum of 10 years in prison

 

As to defendants JOHNNY FERNANDEZ, HERNANDEZ, MAISONET, ROLON, TORRES, and VIEIRA:

40 years in prison with a mandatory minimum of five years in prison

 

Count Two

Conspiracy to Deal in Firearms without a License

 

CRISTIAN FERNANDEZ

JUAN HERNANDEZ

EDGARDO RUIZ, a/k/a “Roro” GILBERT TORRES

FABIOLA VEGA

Five years in prison

 

Count Three

Firearms Offense

FABIOLA VEGA

Life in prison with a mandatory minimum of five years in prison

Count Four

Firearms Offense

CRISTIAN FERNANDEZ

 

Life in prison with a mandatory minimum of five years in prison

 

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JOSEPH MANUEL HUNTER, a U.S. citizen and former member of the U.S. Army, and two co-defendants, ADAM SAMIA and CARL DAVID STILLWELL, both U.S. citizens, were convicted by a federal jury today of offenses relating to the February 2012 murder of a woman in the Philippines.  The defendants’ conviction followed a 12-day trial before U.S. District Judge Ronnie Abrams of the Southern District of New York.  Sentencing has been scheduled for HUNTER on September 7, 2018, and for SAMIA and STILLWELL for September 14, 2018, before Judge Abrams. 

U.S. Attorney Geoffrey S. Berman said:  “This horrifying real-life murder-for-hire case included details usually seen in action movies.  Hunter, Samia, and Stillwell conspired to end the lives of people overseas whom they had never met.  Today a unanimous jury convicted them for their craven indifference to human life.  I commend the DEA for bringing this tragic story to a just ending.”

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

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

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

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

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

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

*          *          *

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

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

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

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 of DANIEL JONES and the unsealing of a Complaint charging him with distributing the heroin that resulted in the death of Robert Martin Hill in Manhattan.  The Complaint also alleges that JONES conspired with others to distribute heroin between November 2017 and March 2018 in Manhattan, and that JONES distributed heroin on March 1 and March 6, 2018.  JONES was arrested yesterday afternoon by the NYPD, and was presented today before U.S. Magistrate Judge Stewart D. Aaron in Manhattan federal court. 

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Daniel Jones peddled potentially lethal heroin in the East Village of Manhattan, and a dose he sold to Robert Martin Hill resulted in Hill’s death.  Working with the NYPD we will continue to combat the epidemic of lethal opioids.”

According to the allegations in the Complaint[1]:

On November 18, 2017, Robert Martin Hill, a 54-year-old resident of Manhattan, overdosed in his apartment.  The NYPD began investigating Mr. Hill’s death.  An autopsy conducted following Mr. Hill’s death revealed that he died from a lethal dose of opioids.  Four glassine bags were recovered from Mr. Hill’s pants pocket, which had the word “Gorilla” and a picture of a gorilla stamped in black ink.  The residue in the glassine bags tested positive for heroin.  The NYPD also obtained Mr. Hill’s cellphone.

As detailed in the Complaint, the NYPD was able to trace the last completed call that Mr. Hill made before he overdosed on November 18, 2017, to a cellphone used by JONES.  The NYPD learned that JONES was the superintendent of the building where Mr. Hill resided, and that JONES continued to sell heroin near that building in the East Village.  In March 2018, the NYPD made undercover buys of heroin from JONES on two occasions.  During the second undercover buy, JONES stated that he sold heroin to Mr. Hill, that he knew Mr. Hill recently died, and that he sold Mr. Hill heroin that was packaged in glassines with a gorilla stamp.

*                *                *

JONES, 53, of Manhattan, was charged with distribution and possession with intent to distribute heroin, and with conspiring to distribute heroin.  JONES faces a maximum sentence of life in prison and a mandatory minimum sentence of 20 years in prison based upon his distribution of the heroin that killed Mr. Hill.

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 Michael K. Krouse is in charge of the prosecution.

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

 

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

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

U.S. Attorney Geoffrey S. Berman said:  “As he admitted in court today, Randy Wang took advantage of his position at a major New York-based company to charge millions of dollars’ worth of nonbusiness purchases on the company’s credit card.  He now awaits sentencing for the theft and deceit that victimized his own employer.”

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

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

*                    *                    *

WANG, 34, of Bayside, Queens, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the Court.

Mr. Wang’s sentencing is scheduled for September 5, 2018, at 11:00 a.m.

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the United States has settled a federal Fair Housing Act (“FHA”) lawsuit against GINSBURG DEVELOPMENT COMPANIES (“GINSBURG DEVELOPMENT”), which was filed in September 2016.  Under the settlement, GINSBURG DEVELOPMENT has agreed to make retrofits to two apartment complexes in Haverstraw, New York, the Riverside and the Parkside, which together contain more than 200 rental units, in order to make them more accessible to individuals with disabilities.  GINSBURG DEVELOPMENT also has committed to establish procedures to ensure that its future residential development projects will comply with the accessibility requirements of the FHA.  Additionally, the settlement requires GINSBURG DEVELOPMENT to provide up to $125,000 to compensate aggrieved persons and to pay a civil penalty of $50,000.  The resolution of this lawsuit was approved on April 12, 2018, by U.S. District Judge Nelson S. Román.  Previously, on September 28, 2016, the United States obtained in this lawsuit a court-ordered preliminary injunction on consent that requires GINSBURG DEVELOPMENT to ensure accessibility at four Westchester rental complexes currently under development – Saw Mill Lofts in Hastings-on-Hudson, Harbor Square Crossings in Ossining, and River Tides and 1177 Warburton Avenue in Yonkers. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “The Fair Housing Act’s accessibility provisions protect people with disabilities wherever they live.  Today’s settlement, just one day after the 50th anniversary of the FHA, is part of the Office’s ongoing effort to fulfill the Act’s promise of accessibility throughout the Southern District of New York.  All people, with or without physical limitations, should be able to live with dignity in accessible accommodations.” 

The FHA’s accessible design and construction provisions require new multifamily housing complexes constructed after January 1993 to have basic features accessible to persons with disabilities.  According to the allegations in the complaint and the factual admissions in the settlement stipulation, the Riverside and Parkside apartment complexes, which GINSBURG DEVELOPMENT designed and constructed, have a number of inaccessible features, including excessively high thresholds within individual units, insufficient clear floor spaces in bathrooms and kitchens, and doors in both individual units and common areas that are not wide enough to accommodate people in wheelchairs.    

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

The settlement requires GINSBURG DEVELOPMENT to provide up to $125,000 to compensate aggrieved persons.  Aggrieved persons may be entitled to monetary compensation from the fund created through today’s settlement.  Aggrieved individuals may include those who:

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

Any individual who may be entitled to compensation can file a claim by contacting the Civil Rights Complaint Line at (212) 637-0840, using the Civil Rights Complaint Form available on the United States Attorney’s Office’s website http://www.justice.gov/usao/nys/ civilrights.html, or by sending a written claim to:

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

                        86 Chambers Street, 3rd Floor

                        New York, New York  10007

                        Attention:  Chief, Civil Rights Unit

Finally, the GINSBURG DEVELOPMENT also agrees to pay a civil penalty of $50,000.

Since 2010, the Office has filed nearly 30 lawsuits to enforce the FHA to combat racial, gender, and disability discrimination in housing, including in the areas of design and construction, sexual harassment, and fair lending.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that RENWICK HADDOW has been extradited to the United States from Morocco and is expected to appear in the United States District Court for the Southern District of New York today.  HADDOW was charged by Complaint in June 2017 for engaging in schemes to defraud victims by making material misrepresentations and misappropriating investment funds in companies created by HADDOW called Bitcoin Store Inc. (“Bitcoin Store”) and Bar Works Inc. (“Bar Works”), as well as related entities HADDOW controlled.  In July 2017, HADDOW was arrested in Morocco on the basis of a provisional arrest warrant for participating in these schemes.

According to the allegations in the Complaint[1]:

RENWICK HADDOW is a citizen of the United Kingdom. From November 2014 through June 2017, HADDOW solicited investments in start-up companies he created and controlled, including Bitcoin Store — a purported online platform for purchasing, selling, and storing the digital currency known as “Bitcoin”—and Bar Works, which purports to be a company that adapts former restaurants, bar premises, and other locations into co-working spaces.  When doing so, HADDOW made material misrepresentations about, among other things, the management, operations, and historical performance of those companies.

For example, HADDOW concealed his interest in Bitcoin Store and fabricated the purported “experienced team of leading investment professionals” working at the company.  In connection with Bar Works, HADDOW adopted the alias “Jonathan Black” to further hide his role in the schemes.  HADDOW claimed that “Jonathan Black” had an extensive background in finance and had a role in setting up “Car Share,” a car-sharing app.

HADDOW solicited investments through agent brokers and through his control of InCrowd Equity Inc. (“InCrowd”), which represented itself as a type of crowdfunding portal through which investors could purchase shares of start-ups supposedly vetted by InCrowd.  HADDOW did so without disclosing to investors that he had an ownership interest in both InCrowd, on the one hand, and Bitcoin Store and Bar Works, on the other.  HADDOW also misappropriated without permission funds purportedly invested in Bitcoin Store and Bar Works for his own use and the use of others.

*                      *                      *

RENWICK HADDOW, 49, has been charged with two counts of wire fraud — one relating to the Bitcoin Store scheme and the other relating to the Bar Works scheme.  Each charge carries a maximum sentence of 20 years in prison.

Mr. Berman praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has brought civil actions against the defendant, for its assistance.  Mr. Berman also thanked Moroccan Ministry of Justice, the General Directorate of National Security of Morocco, the U.K. Financial Conduct Authority, the United States Marshals Service, and the Department of Justice’s Office of International Affairs, and noted that the investigation is continuing.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Vladislav Vainberg, Justin V. Rodriguez, Brooke E. Cucinella, and Martin Bell are 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 herein constitute only allegations, and every fact described should be treated as an allegation.

Attorney General Jeff Sessions, 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 Division of the Federal Bureau of Investigation (“FBI”), announced today that the Madoff Victim Fund established by the Department of Justice began its second distribution of $504.2 million in funds forfeited to the United States Government in connection with the Bernard L. Madoff Investment Securities LLC (“BLMIS”) fraud scheme.  These funds will be sent to more than 21,000 victims worldwide, the second of two payments totaling nearly $1.3 billion that the Madoff Victim Fund will return to victims.  More than $4 billion in assets have been recovered as compensation for losses suffered by the collapse of BLMIS, following the largest fraud in history.  Another $5 billion in assets recovered by the U.S. Attorney’s Office are being separately paid to Madoff victims through the BLMIS Customer Fund administered by the Securities Investor Protection Act Trustee.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Bernie Madoff committed history’s largest Ponzi scheme.  This Office prosecuted Madoff himself, and others who helped perpetrate his fraud, and continues to vigorously pursue money recoveries for his victims.  Today’s payment of more than $500 million is this Office’s second installment in a series of distributions that represent our ongoing commitment to find relief for victims of Madoff’s heinous crimes.”

Attorney General Jeff Sessions said: “In one of the most notorious and unconscionable financial crimes in history, Bernie Madoff robbed tens of thousands of individuals, pension plans, charitable organizations and others, all the while funding a lavish personal lifestyle.  Through the use of asset forfeiture, the Department of Justice has recovered over $4 billion of Mr. Madoff’s fraud, and we continue to work to compensate those he defrauded.  Last June, the Department approved more than 39,000 petitions for compensation.  Today, during National Crime Victims’ Rights Week, the Department returns more than a half-billion dollars to nearly 22,000 law-abiding people and organizations. We cannot undo the damage that Bernie Madoff has done, but today’s distribution will provide significant relief to many of the victims of one of the worst frauds of all time.”

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

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

The Madoff Victim Fund is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.  

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

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

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

The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit.  Assistant United States Attorneys Jonathan Cohen, Louis A. Pellegrino, and Niketh Velamoor are in charge of the case.            

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of a complaint charging ELIZABETH ANN PIERCE with wire fraud in connection with a scheme to use forged guaranteed revenue contracts to fraudulently induce investors to invest more than $250 million in a fiber optic cable network in Alaska.  PIERCE surrendered this morning in New York, New York, to FBI agents and will be presented before Magistrate Judge Robert W. Lehrburger this afternoon.

U.S. Attorney Geoffrey S. Berman said:  “To realize her plan to build a fiber optic system that would service Alaska and connect it to the lower 48 states, Elizabeth Ann Pierce allegedly convinced two investment companies that she had secured signed contracts that would supposedly generate hundreds of millions of dollars in guaranteed future revenue from the system.  As it turned out, those sales agreements were worthless because the customers had not signed them.  Instead, as alleged, Pierce had forged counterparty signatures on contract after contract.  As a result of Pierce’s deception, the investment companies were left with a system that is worth far less than Pierce had led them to believe.”

Assistant Director William F. Sweeney said:  “It’s important for stakeholders to maintain a certain level of awareness into how their investments are being managed.  In this case, thanks to a customer who was paying close attention to their invoices and noticed something was up, Pierce’s alleged scheme began to fall apart.  The false agreements she tried to pass off as legitimate didn’t add up.  In the end, her alleged crime was discovered.  Today’s charges highlight our commitment to detecting financial crimes of all kinds, and protecting those victims who invest their hard-earned money with those looking to make an easy profit.”

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

PIERCE was the chief executive officer of a telecommunications company based in Anchorage, Alaska (the “Fiber Optic Company”), that built, operates, and markets a high-speed fiber optic cable system.  The system consists of three segments: a subsea segment that spans the Alaskan Arctic; a terrestrial segment that runs north to south along the Dalton Highway; and a land-based network of pre-existing fibers that connects the subsea and terrestrial segments that the Fiber Optic Company wholly or jointly owns or controls with another telecommunications company.  The Fiber Optic System is connected to the lower 48 states through other existing networks.

Between May 2015, and July 2017, PIERCE engaged in a scheme to induce two investment companies to invest more than $250 million in the Fiber Optic System by providing them with forged broadband capacity sales contracts (the “Fake Revenue Agreements”).  Under the Fake Revenue Agreements, the customers – other telecommunications companies that resell capacity to end users such as businesses and households – appeared to have made binding commitments to purchase specific wholesale quantities of bandwidth from the Fiber Optic Company at specific prices.  The cumulative value of the Fake Revenue Agreements was more than $24 million during the first year of the subsea segment’s operation, approximately $10 million during the first year of the terrestrial segment’s operation, and approximately $1 billion over the life of the Agreements.  In fact, the Fake Revenue Agreements were completely worthless because PIERCE had forged the counterparties’ signatures.

Certain of the Fake Revenue Agreements never existed at all, while others were false versions of genuine revenue agreements that were more favorable to the Fiber Optic Company than the genuine agreements.  For example, under one of the Fake Revenue Agreements, the customer supposedly agreed to buy increasingly more gigabits per second of capacity over a period of 20 years from the Fiber Optic Company.  That contract, if genuine, would have assured the Fiber Optic Company of hundreds of millions of dollars in future revenue.  In reality, negotiations over that deal ended unsuccessfully, and PIERCE never disclosed that fact to the investors.  Under another Fake Revenue Agreement, the customer had purportedly agreed to buy a fixed, predetermined amount of capacity regardless of subsequent market conditions.  In actuality, that customer was not obligated to buy any capacity. 

PIERCE’s scheme began unraveling when a customer disputed invoices that it received from the Fiber Optic Company pursuant to one of the Fake Revenue Agreements.  Shortly thereafter, PIERCE abruptly resigned from the Fiber Optic Company.

*          *         *

PIERCE, age 54, of Anchorage, Alaska, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison.

Mr. Berman praised the investigative work of the FBI.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Sarah Lai is in charge of the prosecution.  The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Patricia Tarasca, the Special Agent-in-Charge of the New York Region for the Federal Deposit Insurance Corporation (“FDIC”) Office of Inspector General, and Ruth M. Mendonca, the Acting Postal Inspector-in-Charge of the Newark Division of the United States Postal Inspection Service (“USPIS”), announced the unsealing today of an indictment charging SECONEY BROWN, ANTOINETTE MITCHELL-BROWN, a/k/a “Antoinette Mitchell-Morgan,” and ANTHONY ATKINSON with conspiracy to commit bank fraud and aggravated identity theft, in connection with a scheme to fraudulently obtain more than $700,000 from clients of a bank in New Jersey (“Bank-1”), at which MITCHELL-BROWN was employed during the scheme.  BROWN, MITCHELL-BROWN, and ATKINSON were arrested today and will be presented later today before U.S. Magistrate Judge Robert W. Lehrburger.  The case has been assigned to U.S. District Judge Gregory H. Woods.

U.S. Attorney Geoffrey S. Berman said:  “Antoinette Mitchell-Brown allegedly stole client information from a bank at which she was employed and, with the help of Seconey Brown and Anthony Atkinson, used that information in an attempt to steal hundreds of thousands of dollars from the very customers Mitchell-Brown was supposed to be serving.  Thanks to the work of the FDIC Office of Inspector General and the USPIS, the defendants’ alleged scheme has now been exposed.”

FDIC Special Agent-in-Charge Patricia Tarasca said:  “This indictment unsealed today holds the three defendants accountable for stealing bank account information from innocent victims and aiming to transfer more than $600,000 for their personal gain.  We are pleased to work with our law enforcement partners to investigate such matters of identity theft, as a way to protect banks from such abuses and the system’s integrity.”

Acting Postal Inspector-in-Charge Ruth M. Mendonca said:  “Through disguise and deceit, these defendants created an elaborate bank fraud scheme to defraud financial institutions and their customers.  The use of the U.S. Mail to facilitate any fraud scheme will never be tolerated by U.S. Postal Inspectors, who will continue to aggressively pursue these types of investigations.”

According to the allegations in the Indictment[1]:

From at least September 2016 until at least December 2016, MITCHELL-BROWN, BROWN, and ATKINSON engaged in a scheme to fraudulently obtain funds from more than 25 accounts at Bank-1, at which MITCHELL-BROWN was then employed.  In furtherance of the scheme, MITCHELL-BROWN stole victims’ bank account information from her employer and used that information to, among other things, write checks for thousands of dollars from victims’ accounts and initiate wire transfers from victims’ accounts to bank accounts controlled by members of the scheme.  BROWN and ATKINSON, among other things, paid members of the scheme or otherwise induced other individuals (some of whom provided unwitting assistance) to cash or deposit the fraudulent checks from MITCHELL-BROWN, and provide the proceeds to BROWN, ATKINSON, or, at BROWN and ATKINSON’s direction, other individuals.  In total, the defendants’ scheme fraudulently obtained more than $77,000 and attempted to obtain at least an additional $660,000.

*                *                *

BROWN, 25, and MITCHELL-BROWN, 41, both of East Orange, New Jersey, and ATKINSON, 22, of the Bronx, New York, are each charged with one count of conspiracy to commit bank fraud, which carries a maximum sentence of 30 years in prison, and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the assigned judge.

Mr. Berman praised the outstanding investigative work of the FDIC Office of Inspector General and the USPIS.  Mr. Berman also thanked United States Immigration and Customs Enforcement’s Homeland Security Investigations and the East Orange Police Department for their assistance in 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.

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Louis A. Pellegrino and Robert B. Sobelman are in charge of the prosecution.

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

 

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

The Department of Justice today announced that on April 12, the Madoff Victim Fund (MVF) began its second distribution of $504 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to over $1.2 billion.  These funds will be sent to over 21,000 victims across the globe. This distribution represents the second in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS.  The MVF has received over 65,000 petitions from victims in 136 countries. 

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

“In one of the most notorious and unconscionable financial crimes in history, Bernie Madoff robbed tens of thousands of individuals, pension plans, charitable organizations and others, all the while funding a lavish personal lifestyle,” said Attorney General Sessions.  “Through the use of asset forfeiture, the Department of Justice has recovered over $4 billion of Mr. Madoff’s fraud, and we continue to work to compensate those he defrauded.  Last June, the Department approved more than 39,000 petitions for compensation.  Today, during National Crime Victims’ Rights Week, the Department returns more than a half-billion dollars to nearly 22,000 law-abiding people and organizations. We cannot undo the damage that Bernie Madoff has done, but today’s distribution will provide significant relief to many of the victims of one of the worst frauds of all time.”

“Bernie Madoff committed history’s largest Ponzi scheme,” said U.S. Attorney Berman.  “This Office prosecuted Madoff himself, and others who helped perpetrate his fraud, and continues to vigorously pursue money recoveries for his victims.  Today’s payment of more than $500 million is this Office’s second installment in a series of distributions that represent our ongoing commitment to find relief for victims of Madoff’s heinous crimes.”

For decades, Bernard L. Madoff used his position as Chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients.  On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle.  On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to 150 years in prison for running the largest fraudulent scheme in history.  Judge Chin ordered Madoff to forfeit $170.799 billion as part of Madoff’s sentence.  

Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower.  An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action.  The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.

The MVF’s payouts would not have been possible without the extraordinary efforts of the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case.  The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions.  Further questions may be directed to the MVF at 866-624-3670 or [email protected]

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ONYEKACHI EMMANUEL OPARA pled guilty today before U.S. District Judge Paul A. Crotty in Manhattan federal court to charges stemming from his participation in fraudulent business email compromise scams that targeted thousands of victims around the world, including the United States.  Collectively, the scams attempted to defraud victims of millions of dollars. 

U.S. Attorney Geoffrey S. Berman said:  “Onyekachi Emmanuel Opara ran a global email scam business that victimized thousands of people out of millions of dollars.  And even though he operated his so-called ‘business’ in a country halfway around the world, our Office’s global reach ensures that he will serve time in the United States for his crimes.”        

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

Between 2014 and 2016, OPARA and co-conspirator David Chukwuneke Adindu participated in Business Email Compromise scams (“BEC scams”) targeting thousands of victims around the world, including in the United States.  As part of the BEC scams, fraudulent emails were sent to employees of various companies, purportedly from their supervisors or from third party vendors, directing that funds be transferred to specified bank accounts.  The fraudulent emails were sent from either email accounts with a domain name that was very similar to the legitimate domain name of the purported sender, or the metadata in the emails had been modified so that the emails appeared as if they were from legitimate email addresses belonging to the purported sender.  After victims complied with the fraudulent wiring instructions, the transferred funds were quickly withdrawn or moved into different bank accounts controlled by members of the scheme.  In total, the BEC scams attempted to defraud millions of dollars from victims.

OPARA and others carried out BEC scams by exchanging information regarding: (1) bank accounts used for receiving funds from victims; (2) email accounts for communicating with victims; (3) scripts for requesting wire transfers from victims; and (4) lists of names and email addresses for contacting and impersonating potential victims.   

*                *                *

OPARA, 29, of Lagos, Nigeria, was arrested in South Africa on the basis of a provisional arrest warrant in December 2016 and was extradited on January 22, 2018.  He pled guilty today to one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.  OPARA is scheduled to be sentenced by Judge Crotty on July 11, 2018, at 11 a.m.

Adindu, 30, of Lagos, Nigeria, pled guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit identity theft, and was sentenced to 41 months in prison on December 14, 2017.

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

Mr. Berman praised the investigative work of the FBI.  Mr. Berman also thanked Oath’s E-Crime Investigations Team, the National Prosecuting Authority for South Africa, the South African Police Service, and noted that the investigation is continuing.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Andrew K. Chan and Daniel M. Loss are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John F. Grasso, the Special Agent-in-Charge of the United States Social Security Administration, Office of the Inspector General, New York Field Division, announced that GERARD SCPARTA, a former New York City Police Department (“NYPD”) officer, SCOTT MARAIO, a former NYPD officer and former New York City Fire Department (“FDNY”) firefighter, and KENNETH RUBERO, a former NYPD detective, were arrested today for separate schemes to fraudulently obtain a total of more than $1 million in disability benefits from the Social Security Administration (“SSA”).  SCPARTA lied to the SSA about his disability, and SCPARTA, MARAIO, and RUBERO each falsely represented to the SSA that they could not work due to disability and failed to report earnings from employment as required.  At the same time SCPARTA, MARAIO, and RUBERO were collecting disability benefits, each of them were working in various positions and earning hundreds of thousands of dollars.  SCPARTA, MARAIO, and RUBERO were arrested earlier today at their residences, and will be presented later today in Manhattan federal court before U.S. Magistrate Judge Robert Lehrburger.

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “As alleged, these three defendants, all former law enforcement officers, told lie after lie to obtain a total of over one million dollars in disability benefits through fraud.  In doing so, they allegedly took money from truly disabled individuals who are dependent on this important source of public support.  Scparta and Maraio also allegedly concealed their employment and income from the Social Security Administration by hiding behind corporate entities purportedly owned by their wives.  I would like to thank the Social Security Administration, Office of the Inspector General, for their work in bringing these alleged schemes to their proper end.”

Special Agent-in-Charge John F. Grasso stated:  “Social Security Disability benefits are an earned benefit, for those who are truly deserving.  It is not a treasure chest to be pilfered by alleged greedy liars and scammers.  Unlike other crimes, when someone allegedly cheats Social Security, they are not just taking from one of us, they are stealing from all of us.  I would like to thank our partners in this investigation, the IRS Criminal Investigation Division, and the NYC Department of Investigation.  If you suspect Social Security fraud, I strongly encourage you to call the Social Security Fraud Hotline at 800-269-0271 or visit oig.ssa.gov/report<http://oig.ssa.gov/report>.”

According to the allegations contained in Complaints unsealed today:

The SSA administers Social Security Disability Insurance (“SSD”), a federal benefits program that provides monthly cash benefits to individuals who have worked in the past and paid into Social Security, but who can no longer engage in any substantial gainful activity due to medical disabilities.  SSD is a disability benefit available only to individuals who have a qualifying disability and are unable to work in any profession.  In order to receive SSD, a beneficiary must certify that he or she is incapable of performing any gainful activity due to disability.  In addition, a beneficiary must report to the SSA all sources of income from work activity and any changes in the beneficiary’s medical condition, which are taken into account in determining whether the beneficiary is entitled to payments and the amount of those payments. 

GERARD SCPARTA

Between in or about 1986 and in or about 1997, SCPARTA worked as a police officer with the NYPD.  In or about 1997, after reportedly sustaining an injury at the age of 32, SCPARTA was referred to an individual (“CC-1”) who helped him fraudulently obtain disability benefits.  Specifically, CC-1 submitted SSD application materials signed by SCPARTA that falsely stated, among other things, that SCPARTA suffered from severe depression and anxiety, could not do anything around his house, and was unable to work in any capacity.  In addition, CC-1 coached SCPARTA to make the same false statements to physicians who examined SCPARTA for the purpose of establishing his disability and submitting reports to the SSA.  Based on these false statements and representations by SCPARTA in documents and reports submitted to the SSA, the SSA approved SCPARTA to receive disability benefits from in or about 1997 onward.

In addition to lying about his disability status and inability to work, SCPARTA falsely claimed on multiple forms submitted to the SSA that he did not work, and failed to report earnings from employment as required.  In fact, from in or about April 2004 up to and including at least in or about December 2017, SCPARTA worked as a security guard and host at a strip club located in Manhattan, New York (the “Strip Club”).  From in or about 1997 up to and including in or about 2017, SCPARTA received a total of over approximately $638,000 in disability benefits for himself, his wife, and his children, during which time SCPARTA earned approximately $1.6 million from his work at the Strip Club.  In order to conceal his income and prevent the SSA from discovering his fraud, SCPARTA arranged for the income from his work in connection with the Strip Club to be paid to a third-party corporate entity purportedly owned by SCPARTA’s wife.

SCOTT MARAIO

From in or about 1985 through in or about 1986, MARAIO worked as an NYPD police officer.  Beginning in or about July 1987, MARAIO began working as a firefighter with the FDNY.  In or about January 2002, at the age of 37, MARAIO stopped working as a firefighter due to a claimed disability, and began receiving disability benefits.  On multiple forms submitted to the SSA, MARAIO falsely claimed he could not work due to problems with his neck and back and failed to report earnings from employment as required.  In fact, from in or about September 2008 through in or about August 2014, MARAIO worked as a security guard at the Strip Club.  In addition, from in or about July 2012 through at least in or about February 2018, MARAIO worked for a staffing company (the “Staffing Company”) in various positions relating to fire safety on construction sites, including as a fire safety manager and fireguard. 

From in or about October 2008 through in or about February 2018, MARAIO received a total of over approximately $364,000 in disability benefits for himself, his wife, and his children, during which time MARAIO earned a total of approximately $450,000 from his employment at the Strip Club and with the Staffing Company.  In order to conceal his income and prevent the SSA from discovering his fraud, MARAIO arranged for the income from his work in connection with the Strip Club and the Staffing Company to be paid to a third-party corporate entity purportedly owned by MARAIO’s wife called Blondie Consultants (“Blondie Consultants”), as well as another company.

KENNETH RUBERO

In or about 1985, RUBERO began working as an NYPD police officer and was subsequently promoted to detective in or about 1991.  In or about December 1997, at the age of 33, RUBERO stopped working with the NYPD due to a claimed disability, and began receiving disability benefits.  On multiple forms submitted to the SSA, RUBERO falsely claimed he could not work due to problems with his knees, neck, and back, and failed to report earnings from employment as required.  In fact, since at least in or about 2008, RUBERO has been an owner and manager of Baychester Payment Center, LLC (“Baychester”), a check cashing and money services business located in the Bronx, New York, and an owner and president of Secure Logistics, Inc., a purported security company located at RUBERO’s residence.  From at least in or about 2008 up to and including at least in or about February 2018, RUBERO received a total of approximately $396,000 in disability benefits for himself and his child, during which time RUBERO had earned a total of over approximately $720,000 from his work with Baychester and Secure Logistics.

*                      *                      *

SCPARTA, 53, of Campbell Hall, New York, MARAIO, 53, of Staten Island, New York, and RUBERO, 53, of White Plains, New York, are each charged with one count of theft of government property, which carries a maximum sentence of 10 years in prison, one count of making false statements, which carries a maximum sentence of five years in prison, and one count of making false statements in connection with Social Security disability benefits, 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 defendants will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the United States Social Security Administration, Office of the Inspector General.  Mr. Berman also thanked the Internal Revenue Service Criminal Investigation Division, the Manhattan District Attorney’s Office, and the New York City Department of Investigation 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.

 

Robert S. Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that HERZEL MEIRI and AMIR MEIRI pled guilty yesterday to conspiracy to commit wire fraud and bank fraud before the U.S. District Judge Edgardo Ramos, in connection with their scheme to fraudulently induce distressed homeowners to sell their homes for little or no consideration to a company they owned and controlled.  The defendants will be sentenced by Judge Ramos on July 27, 2018.

According to allegations in the contained documents filed in federal court, including the Indictment and Complaint:

From 2013 to 2015, HERZEL MEIRI and AMIR MEIRI defrauded distressed homeowners throughout the Bronx, Brooklyn, and Queens.  The MEIRIs and others falsely represented to these homeowners – some of whom were elderly or in poor health – that they could assist them with a loan modification or similar relief from foreclosure that could result in the homeowners saving their homes.  But rather than actually assisting these homeowners, the defendants deceived them into selling their homes for less than the homes’ actual values to Launch Development LLC (“Launch Development”), a for-profit company owned and controlled by the MEIRIs.

Specifically, the MEIRIs’ direction fraudulently induced the homeowners to engage in a type of short sale in which the homeowner would sell the property to Launch Development.  The MEIRIs and their conspirators falsely assured the homeowners that their homes would be returned to them after a short period, and that they could remain in their homes throughout the entire process.  At the closing that followed, homeowners were encouraged to sign fraudulent documents, that unbeknownst to the homeowners transferred the homes Launch Development.  Homeowners often were then forced to vacate their homes, and in many cases had no other place to live. Launch Development resold many of the homes, which were purchased at fraudulently deflated prices, for an enormous profit.     

*          *          *

HERZEL MEIRI, 64, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years in prison and a maximum fine of $1,000,000 or twice the gross gain or loss from the offense.  He also consented to forfeit $6,469,291.41, as well as 31 real properties, four bank accounts, and one escrow account, as proceeds traceable to the offense.

AMIR MEIRI, 35, pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum sentence of 30 years in prison and maximum fine of $1,000,000 or twice the gross gain or loss from the offense.  He also consented to forfeit the same 31 real properties, four bank accounts, and one escrow account, as proceeds traceable to the offense.  

Mr. Khuzami praised the outstanding work of the Federal Bureau of Investigation, the Special Inspector General for the Troubled Asset Relief Program, and the New York State Department of Financial Services for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Andrew Thomas and Sheb Swett are in charge of the case.

Robert S. Khuzami, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced the filing of a Superseding Indictment against defendants JAMES GATTO, a/k/a “Jim,” MERL CODE, and CHRISTIAN DAWKINS in United States v. Gatto, 17 Cr. 686 (LAK).  The Superseding Indictment (“the Indictment”) expands the scope of the charged wire fraud conspiracy to include alleged payments to the families of six student-athletes in connection with those players’ decisions to attend four different NCAA Division I Universities – the University of Louisville, the University of Miami, the University of Kansas, and North Carolina State University – all of which were sponsored by the same major athletic apparel company (“Company-1”).[1]

The investigation remains ongoing.  The FBI strongly encourages anyone with information they believe to be relevant to contact the FBI by calling a special hot line established to receive tips in connection with this investigation: 212-384-2135.

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

 

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[1] As the paragraph above indicates, the entirety of the text of the Superseding Indictment constitute only allegations, and every fact described therein should be treated as an allegation.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that SPYROS PANOS, a former orthopedic surgeon, who was previously convicted of health care fraud, was charged with wire fraud, health care fraud, and aggravated identity theft, in connection with a scheme in which he assumed the identity of a licensed orthopedic surgeon and obtained over $860,000 in payments for reviewing patient files in Workers Compensation cases.  PANOS was arrested this morning at his home in Hopewell Junction, New York, and was presented before U.S. Magistrate Judge Paul E. Davison in White Plains federal court this morning.

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

SPYROS PANOS, the defendant, was an orthopedic surgeon practicing in Dutchess County and residing in Hopewell Junction (the “PANOS Residence”).  In or about August 2013, PANOS surrendered his license to practice medicine, and on or about October 31, 2013, he pled guilty, in United States District Court for the Southern District of New York, to a health care fraud charge (the “Health Care Fraud Charge”).  In or about April 2014, PANOS began serving a 54-month sentence.  On or about September 16, 2016, PANOS was released to a halfway house and then, about a month later, to home confinement.  Since March 2017, he has been serving a two-year term of supervised release. 

In connection with medical treatment relating to Workers’ Compensation claims, a peer review may be conducted when a treating physician requests a variance in treatment.  The doctor performing the peer review is a licensed independent doctor who reviews the patient file but does not examine the patient, and writes a report opining whether the variance is appropriate.  There are companies that supply doctors who conduct such peer reviews.  Prior to being assigned to perform peer reviews, the doctor must establish that he/she has the proper credentials by providing, among other things: the schools from which the doctor earned his/her degrees and other educational credentials, the states in which he/she is licensed to practice medicine, and other pedigree and background information such as birth date and social security number.

In or about December 2013 (which was after PANOS pled guilty on October 31, 2013, and before he surrendered to serve his sentence on April 2, 2014) a company called Excel O LLC (hereafter “Excel O”) was formed.  The registered agent for Excel O is a family member of PANOS and is not a licensed physician (“Family Member-1”).

An orthopedic surgeon purporting to be practicing medicine at “Excel Orthopedics” (the “Excel Doctor”) performed peer reviews for several review companies.  The same credentialing information for the Excel Doctor was submitted to five of the Review Companies (the “Five Review Companies”), and they paid for the Excel Doctor’s peer review services by checks made out to Excel O LLC or Excel Orthopedics.  The Excel Doctor communicated with them using the same email address (the “Email Account”) that is subscribed to by the Excel Doctor and was created on or about September 13, 2013, approximately one month before SPYROS PANOS, the defendant, pled guilty to the Health Care Fraud Charge.  Thereafter, PANOS communicated with at least two of the companies by email and logging on to the companies’ secure servers through an IP address assigned to PANOS’s residence.

On or about December 21, 2013, approximately six months before PANOS surrendered to serve his prison sentence, an account in the name of Excel O was opened at a local credit union (“Excel O Account-1”).  Family Member-1 is the only name associated with the account. Between the time Excel O Account-1 was opened until about three months after PANOS surrendered to serve his sentence for the Health Care Fraud Charge, checks totaling over $239,000, issued by one of the above review companies, as well as a sixth review company, made out to Excel O LLC or Excel Orthopedics, were deposited into Excel O Account-1.  No further checks from peer review companies were deposited into Excel O Account-1.

On or about December 2, 2016, approximately two months after PANOS was released from prison, a second Excel O account was opened at the same credit union (“Excel O Account-2”) and, again, Family Member-1 is the only name associated with the account.  Between in or about December 2016 and in or about October 2017, over $636,500 in checks issued by the Five Review Companies, made out to Excel O LLC or Excel Orthopedics, were deposited into Excel O Account-2.

After the Review Companies’ checks were deposited into these accounts, money was removed through withdrawals of cash or checks that were made out to Family Member-1, drawn on the accounts, and then deposited into a third account (the “Family Account”).  The Family Account is in the name of Family Member-1 and two other members of PANOS’s family, neither of whom is a licensed physician.  From the Family Account, some money was withdrawn and over $100,000 was transferred to bank accounts in Hong Kong.  A member of PANOS’s family deposited Review Company checks into Excel O Account-2, withdrew money from that account, and transferred money into the Family Account.  And, on several occasions in September and October of 2017, PANOS and Family Member-1 went to the credit union and wire transferred money out of the Family Account. 

The doctor whose credentialing information was submitted to the review companies and represented to be the Excel Doctor’s credentials (“Doctor-1”) is a licensed physician who is an orthopedic surgeon employed by a practice in Westchester County, not Excel Orthopedics. Doctor-1 did not submit his/her credentialing information to the review companies referred to above, did not conduct any peer reviews, did not authorize PANOS or anyone else to use his/her credentialing information to conduct peer reviews, and did not receive any of the review company fees for services he/she was falsely represented to have performed.  

*                *                *

PANOS, 49, is charged in three counts.  The first count charges him with wire fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The second count charges him with health care fraud, which carries a maximum sentence of 10 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The third count charges him with aggravated identity theft, which requires a two year prison term to be served consecutive to a sentence imposed for the wire and health care fraud charges.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Berman praised the outstanding investigative work of the U.S. Postal Inspection Service, the Office of the Inspector General of the U.S. Department of Health and Human Services, and the New York Inspector General for their assistance.

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

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Jesse Garcia, Assistant Andean Regional Director of the U.S. Drug Enforcement Administration (“DEA”), announced today that four members and associates of the Revolutionary Armed Forces of Colombia (the “FARC”)—SEUXIS PAUCIS HERNANDEZ-SOLARTE, a/k/a “Jesus Santrich,” MARLON MARIN, ARMANDO GOMEZ, a/k/a “El Doctor,” and FABIO SIMON YOUNES ARBOLEDA—were arrested yesterday in Colombia for conspiring and attempting to import cocaine into the United States.  The United States is seeking the defendants’ extradition from Colombia. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants conspired to ship thousands of kilograms of cocaine from Colombia to the streets of the U.S.  Thanks to the investigative work of the DEA, they are now under arrest and face significant criminal charges.”

Assistant Regional Director Jesse Garcia said:  “This significant enforcement operation demonstrates that there remains within the Government of Colombia willing partners, determined to support the United States and DEA’s counter drug mission in Colombia, who are also willing to pursue justice no matter where the investigations lead.  This investigation was heavily supported by DEA’s Sensitive Investigative Unit (SIU) program and Colombian Attorney General Nestor Humberto Martinez.”

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

From June 2017 up to April 2018, HERNANDEZ-SOLARTE, MARIN, GOMEZ, and YOUNES ARBOLEDA worked together to produce and distribute approximately 10,000 kilograms of cocaine from Colombia to the United States and elsewhere.  During this time, the defendants were members and associates of the FARC.  HERNANDEZ-SOLARTE was a high-ranking member of the FARC leadership and a candidate to be seated in Colombia’s House of Representatives.  During the course of their cocaine trafficking, HERNANDEZ-SOLARTE, MARIN, GOMEZ, and YOUNES ARBOLEDA represented that they had access to laboratories to supply the cocaine and to U.S.-registered airplanes to transport the drugs within and through Colombia.  The defendants also supplied kilograms of cocaine to others as, among other things, a demonstration of their access to ton quantities of cocaine. 

*          *          *

The Indictment charges HERNANDEZ-SOLARTE, 51, MARIN, 39, GOMEZ, 70, and YOUNES ARBOLEDA, 72, all of Colombia, with one count of conspiring to import cocaine into the United States, and two counts of attempting to import cocaine into the United States.  If convicted, the defendants face a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison on each count. 

Mr. Berman praised the outstanding efforts of the DEA’s Sensitive Investigation Unit, Bogota Country Office, and Miami Field Office, as well as the U.S. Department of Justice’s Office of International Affairs.  He also thanked the Criminal Division’s Narcotics and Dangerous Drugs Section Judicial Attaches in Colombia, who provided substantial assistance. 

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

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that a federal jury today found MICHAEL LITTLE guilty of charges that he participated in an 11-year tax fraud scheme in which he advised and helped an American family to defraud the Internal Revenue Service by hiding approximately $14 million in overseas Swiss bank accounts and by other means, failed to file his own personal tax returns, and assisted in the filing of false tax returns.  The three-week-long trial took place before U.S. District Judge P. Kevin Castel, who is scheduled to sentence LITTLE on September 6, 2018.

U.S. Attorney Geoffrey S. Berman stated:  “Michael Little assisted an American family in evading taxes on $14 million in undeclared offshore inheritance money.  Over the course of a decade, he helped the family illegally funnel millions of dollars of that inheritance from Swiss bank accounts into the United States, in order to avoid IRS detection.  Especially at this time of year, this case serves as a reminder that failure to pay one’s fair share of taxes can result in a felony conviction.”           

According to the allegations contained in the Complaint, Indictment, and the evidence presented in Court during the trial:

LITTLE, a British attorney who resides in England and is licensed to practice law in New York, was a business associate of the patriarch of the Seggerman family, an American family residing in the United States.  In August 2001, after the patriarch died, LITTLE and a lawyer from Switzerland (the “Swiss Lawyer”) met with his widow and adult children at a hotel in Manhattan, and advised them that the patriarch had left them approximately $14 million in overseas accounts that had never been declared to U.S. taxing authorities.  LITTLE and the Swiss lawyer also advised the various family members on steps they could take to continue hiding these assets from the IRS.  In particular, LITTLE discussed with the family members various methods by which they could bring the money into the United States from the Swiss accounts while evading detection by the IRS.  Among other means, he advised family members that they could bring money back to the United States in small increments, or “little chunks,” through means such as traveler’s checks, or by disguising money transfers to the United States as being related to the sales of artwork or jewelry.  Various members of the Seggerman family agreed to work together with LITTLE and the Swiss Lawyer to repatriate the offshore funds. 

In accordance with the plan he orchestrated, LITTLE assisted in opening an undeclared Swiss account for the purpose of holding and hiding the widow’s inheritance funds.  LITTLE also enlisted the assistance of a New Jersey accountant to prepare false and fraudulent tax returns and to keep falsified accounting records for a corporate entity in the United States, controlled by the widow and used to receive inheritance funds repatriated from the Swiss account.  Between 2001 and 2010, LITTLE caused over $3 million to be sent surreptitiously from the undeclared Swiss account to the United States corporate entity for the widow’s benefit.  LITTLE also worked with the New Jersey accountant to establish a sham mortgage that allowed another Seggerman family member to access approximately $600,000 of undeclared inheritance funds held in a Swiss account.

In or about 2010, LITTLE became aware of an IRS criminal investigation into the scheme.  In an attempt to cover up his involvement, LITTLE communicated with a tax attorney and the accounting firm that had prepared the widow’s individual tax returns.  LITTLE provided false information to the tax lawyer and the accounting firm about the nature of the transfers from the Swiss account to the United States, claiming that the transfers represented “pure gifts” from a non-U.S. person who had “absolutely no relationship” to the widow.  Based on LITTLE’s misrepresentations, the accounting firm filed inaccurate tax returns for the years 2001 through 2010, which categorized the transfers of over $3 million to the widow as foreign gifts.

LITTLE has been a lawful permanent resident of the United States, also known as a green card holder, since 1972.  As a lawful permanent resident, he had an obligation to file annual tax returns reporting his worldwide income to the IRS.  In or about 2005, LITTLE was admitted to the New York State Bar as an attorney.  Between 2005 and at least late 2008, LITTLE resided full time in New York City, where he worked and earned hundreds of thousands of dollars of income as an attorney representing clients.  During the period of 2001 to 2010, LITTLE also earned other legal fees, along with hundreds of thousands of dollars more in fees for his work on behalf of the Seggerman family.  LITTLE failed to file any tax returns with the IRS between 2005 and 2010.  He further failed to file, for years 2007 through 2010, annual Reports of Foreign Bank and Financial Accounts (“FBARs”) in connection with foreign bank accounts he controlled, which held in excess of $10,000 each year.

*                *                *

LITTLE, 67, who resides in Hampshire, England, was convicted of obstructing and impeding the due administration of the internal revenue laws, failing to file personal income tax returns from 2005 to 2010, willfully failing to file reports of foreign bank and financial accounts, conspiracy to defraud the United States, and aiding and assisting the preparation of false tax returns.  The failure to file personal income tax returns charges each carry a maximum sentence of one year in prison, the obstruction charge and the aiding and assisting the preparation of false tax returns charges each carry a maximum sentence of three years in prison, and the willful failure to file reports of foreign bank and financial accounts and conspiracy charges each carry 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.

Mr. Berman praised the outstanding investigative work of the IRS.  Mr. Berman also thanked the U.S. Department of Homeland Security, Office of Fraud Detection and National Security, United States Citizenship and Immigration Services, New York State Department of Taxation and Finance, and FinCEN for their substantial assistance in the investigation and trial.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Christopher DiMase, Dina McLeod, and Andrew Dember are in charge of the prosecution.

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 KASHAWN LYONS with distributing the fentanyl that resulted in the death of Matthew Azimi, a public school teacher in the Bronx.  The Complaint also alleges that LYONS and a co-defendant, TERRICK WHITAKER, distributed heroin and fentanyl together between February and March 2018 in the Bronx.  LYONS was arrested yesterday by the NYPD, and will be presented later today before U.S. Magistrate Judge Henry B. Pitman in Manhattan federal court.  TERRICK WHITAKER remains at large.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Kashawn Lyons and Terrick Whitaker peddled potentially lethal heroin and fentanyl near the grounds of a Bronx public school.  Additionally, Lyons allegedly sold a dose that was in fact lethal and resulted in the overdose death of a teacher at the school.  Working with the NYPD we will continue to combat the epidemic of lethal opioids that is killing people from all walks of life.”

According to the allegations in the Complaint[1]:

On November 30, 2017, Matthew Azimi, a 36-year-old teacher, was found dead inside a faculty bathroom at a special education public school in the Bronx (the “School”) where Mr. Azimi was a teacher.  The NYPD responded to the School and began investigating Azimi’s death.  An autopsy conducted following Mr. Azimi’s death revealed that he died from a lethal dose of fentanyl.  NYPD officers recovered a syringe and a pink glassine bag with no stamp or other distinctive marking next to Mr. Azimi’s body.  The NYPD also recovered Mr. Azimi’s cellphone.

As detailed in the Complaint, the NYPD was able to trace the last three completed calls that Mr. Azimi made before he overdosed on November 30, 2017, to a cellphone used by LYONS.  Through surveillance, the NYPD learned that LYONS continued to sell heroin and fentanyl in the vicinity of the School.  In February 2018, the NYPD made undercover buys of heroin and fentanyl from LYONS and WHITAKER, who was dealing drugs with LYONS, in close proximity to the School.  The heroin and fentanyl purchased from LYONS and WHTIAKER were packaged in the same unique pink glassine bags as the one found next to Mr. Azimi’s body.

*                *                *

LYONS, 31, of the Bronx, was charged with distribution and possession with intent to distribute heroin and fentanyl, and with conspiring to distribute heroin and fentanyl with WHITAKER.  LYONS faces a maximum sentence of life in prison and a mandatory minimum sentence of 20 years in prison based upon his distribution of the fentanyl that killed Mr. Azimi.

WHITAKER, 31, of the Bronx, was charged with distribution and possession with intent to distribute heroin and fentanyl, and with conspiring to distribute heroin and fentanyl with LYONS, each of which carries a statutory maximum sentence of 20 years in prison. 

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 NYPD in this case. 

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

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that FRANK MERCEDES was sentenced today to life in prison plus 10 years for murder in connection with a drug conspiracy, murder-for-hire, murder-for-hire conspiracy, and use of a firearm resulting in death, in connection with his role in the murder of Richard Diaz, 28, in Manhattan in 1999.  MERCEDES was convicted after a one-week jury trial before U.S. District Judge Richard J. Sullivan, who imposed today’s sentence.

U.S. Geoffrey S. Berman said:  “Frank Mercedes callously ordered the murder of someone who had stolen from his drug business.  As a result of that order, 28-year-old Richard Diaz—an innocent man who had nothing to do with Mercedes’ drug trafficking—was brutally killed in the summer of 1999.  Today’s proceeding is a reminder that this Office will never stop working to obtain justice on behalf of those affected by this type of senseless violence. We hope that today’s sentence, almost 20 years after Mr. Diaz’s death, brings some small measure of peace to Mr. Diaz’s family.”

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

FRANK MERCEDES, a/k/a “Jabao,” ran a significant drug enterprise in Upper Manhattan in the late 1990s.  In the summer of 1999, MERCEDES hired three men, including Jose Luis Gracesqui, a/k/a “Muffler,” to kill one of his drug customers (the “Intended Victim”) after the Intended Victim and a number of his associates stole heroin and money from MERCEDES.

On the night of July 19, 1999, after tracking the Intended Victim for days, Gracesqui and another member of the crew saw the Intended Victim in a car and followed the car through Manhattan.  When the car with the Intended Victim stopped at a red light, Gracesqui approached the passenger’s side window and began shooting.  The shots hit both the Intended Victim and Richard Diaz, who was driving the car.  Mr. Diaz was able to drive a short distance to the Henry Hudson Parkway, until he lost consciousness and died.  The Intended Victim sustained serious injuries, although he survived.  Shortly thereafter, MERCEDES met with Gracesqui and the other members of the hit team to pay them tens of thousands of dollars for committing the murder. 

*               *               *

MERCEDES, 51, from the Dominican Republic, was sentenced to three concurrent life sentences, to be followed by a consecutive term of ten years.

Gracesqui was previously convicted in January 2016 of charges relating to his role in the murder of Richard Diaz, and also is currently serving a life sentence. 

Mr. Berman praised the investigative work of the U.S. Drug Enforcement Administration (DEA) New York Drug Enforcement Task Force, which comprises agents, detectives, and investigators from the DEA, the New York City Police Department, and the New York State Police.  Mr. Berman also thanked the Special Agents of the United States Attorney’s Office for the Southern District of New York.

This case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Rebekah Donaleski, Jessica K. Fender, and Laurie A. Korenbaum are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Ronald G. Gardella, Special Agent-in-Charge of the New York Field Office of the Department of Justice Office of the Inspector General (“DOJ OIG”), announced today the unsealing of a criminal Complaint in Manhattan federal court charging federal correctional officer VICTOR CASADO with taking bribes in exchange for smuggling contraband into the Metropolitan Correctional Center (“MCC”), a Manhattan detention facility that houses federal inmates.  CASADO was arrested this morning and will be presented today before Magistrate Judge Henry B. Pitman.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, correctional officer Victor Casado had a duty to ensure the safety and security of the Metropolitan Correctional Center and federal inmates in his care.  Instead he allegedly abused the trust placed in him by taking bribes to smuggle contraband to federal inmates.  Casado now transitions from Justice Department employee to defendant.”  

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Casado served as a gateway for the introduction of contraband into a federal prison. Not only did his actions violate federal laws and prison protocol, but they posed additional risks for other prison guards who would be responsible for removing these items if found and disciplining those who were in possession. Casado’s alleged crime is a serious offense that will be me with just scrutiny.”

DOJ OIG Special Agent-in-Charge Ronald G. Gardella said:  “The DOJ OIG takes allegations of contraband smuggling into our federal prison system very seriously.  We will continue to vigorously investigate such allegations and work with our law enforcement partners to identify and bring to justice any Justice Department employee involved in a smuggling scheme.”

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

CASADO has been employed as a correctional officer at the MCC since 2012.

On multiple occasions in 2016 and 2017, CASADO smuggled cellphones, alcohol, over-the-counter medications, and food into the MCC in exchange for bribe payments.  These bribes were funneled to CASADO by non-incarcerated relatives or associates of the inmates, either in cash or by wire transfer.  For example, on multiple occasions, CASADO received bribes from an inmate (“Inmate-1”), transferred by one of Inmate-1’s attorneys, totaling more than $45,000 in exchange for smuggling alcohol and cellphones, among other contraband, into the MCC for Inmate-1.  Additionally, CASADO also requested and received thousands of dollars in payments from another inmate (“Inmate-5”), which were delivered to CASADO by Inmate-5’s relatives and a paralegal who worked for him.  Inmate-5 paid CASADO at CASADO’s insistence, ostensibly to fund travel by CASADO to the Dominican Republic.           

*                      *                     *

CASADO, 35, of the Bronx, New York, has been charged in the Complaint with one count of conspiracy to commit bribery and to introduce contraband into prison, which carries a maximum prison term of five years; one count of bribery, which carries a maximum prison term of 15 years; one count of introducing contraband into prison, which carries a maximum prison term of one year; one count of conspiracy to commit honest services wire fraud, which carries a maximum prison term of 20 years; and one count of honest services wire fraud, which carries a maximum prison term of 20 years.  The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the investigative work of the FBI and the DOJ Office of the Inspector General in this investigation.

This case is being handled by the Office’s Public Corruption Unit.  Assistant U.S. Attorneys Jessica Lonergan and Nicolas Roos are in charge of the prosecution.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that STEVEN BROWN pled guilty today to defrauding victims of over $9.5 million by participating in a fraudulent scheme to solicit investments in feature-length films and documentaries based on misrepresentations and fraudulent documents.  BROWN pled guilty before United States Magistrate Judge Henry B. Pitman and is scheduled to be sentenced on July 18, 2018, at 2:00 p.m., before U.S. District Judge Kimba M. Wood. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted today, Steven Brown defrauded investors of millions of dollars by convincing them to invest in Hollywood films and documentaries with false promises and fraudulent documents.  Even after he was arrested, he continued his fraud and induced yet another investor to provide additional money using the same fraudulent tactics.  Now Brown’s scheme has been revealed, and he faces significant time for his scheme.”        

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

From 2009 through 2017, STEVEN BROWN participated in a scheme in which he, along with co-conspirators, solicited investments in the marketing and production of feature-length films and documentaries from investors, including by furnishing them with fraudulent documents and by promising guaranteed returns, which never materialized.

In order to solicit these investments, BROWN and others made material misrepresentations about, among other things, their own investments in the films for which they were soliciting money, as well as investments that they claimed to have received from other investors.  To support their claims, BROWN and his coconspirators at times sent the victims falsified financial records that reflected investments in the films that had never actually been made.  BROWN and his coconspirators also told certain victims that their investments would be guaranteed by a fictitious entity, and provided falsified documents in support of these purported guarantees.  On one occasion, Brown sent an email to a victim attaching what purported to be a current bank statement for an account held by the fictitious entity, as well as an email from an executive at the fictitious entity guaranteeing the victim’s investment.  In fact, neither the account nor the executive actually existed.

BROWN continued to solicit investments in film projects based on misrepresentations even after being arrested on the criminal charges brought in this case.  In 2017, BROWN solicited an investment from a victim of the scheme in a film production and distribution company with which BROWN was purportedly involved by promising the victim a 50 percent return on the investment.  The victim’s funds were never returned and were, in part, used to pay expenses unrelated to any film projects.    

In total, BROWN and his co-conspirators solicited millions of dollars from their victims, allegedly to be used for either marketing or production costs associated with the various films.  In reality, however, the money that was received from these investors was primarily used to fund other projects, to pay back previously defrauded investors, and to pay the personal expenses of BROWN and his co-conspirators, including, among other things, the purchase of a condominium for BROWN.

*                *                *

BROWN, 48, of Los Angeles, California, pled guilty to one count of conspiring to commit wire fraud, which carries a maximum term of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Katherine Reilly, Noah Solowiejczyk, and Ryan Finkel are in charge of the prosecution.

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that NICO BURRELL, a/k/a “Zico Nico,” a leader of a violent street gang in the Bronx called the “Big Money Bosses” (“BMB”) was sentenced yesterday to 150 months in prison on racketeering charges.  BURRELL was sentenced by United States District Judge Alison J. Nathan.

U.S. Attorney Geoffrey S. Berman said: “Burrell played a leadership role in the violent BMB street gang, and himself participated in the gang’s violence and drug dealing.  This violence included a shooting in February 2009 in which Burrell shot a rival gang member and an innocent bystander.  In addition, Burrell was responsible for BMB’s extensive distribution of oxycodone.  Yesterday’s sentence serves as a reminder that, together with our law enforcement partners, we will continue to aggressively prosecute all those who engage in these senseless acts of violence and drug dealing in our communities.”

According to the Indictment and other documents filed in the case, as well as statements made during the public proceedings in this case:

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

BURRELL was a leader of BMB.  On February 11, 2009, he attempted to murder a rival gang member by shooting him in the back.  One of BURRELL’s bullets also struck a woman waiting at a bus stop.  Both victims survived.  BURRELL was also responsible for the distribution of significant quantities of oxycodone by BMB.

BURRELL, 25, was arrested in this case as a result of a multi-year investigation by the New York City Police Department’s Bronx Gang Squad (the “Bronx Gang Squad”), the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Violent Gang Unit (“HSI”), the New York Field Division of the Drug Enforcement Administration (“DEA”), and the Joint Firearms Task Force of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) into gang violence in the Northern Bronx.  On April 27, 2016, Indictment 15 Cr. 95 (AJN) was unsealed, charging 63 members and associates of BMB with racketeering conspiracy, narcotics conspiracy, narcotics distribution, and firearms charges.  One defendant remains in the case, scheduled for trial in May 2018.

*                      *                     *

Mr. Berman praised the outstanding work of NYPD’s Bronx Gang Squad, HSI, DEA, and ATF.  He also thanked the Bronx County District Attorney’s Office, the Department of Investigation, NYCHA Inspector General’s Office, and the New York State Department of Parole for their ongoing support in this investigation.

 

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

Robert Khuzami, the Deputy 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 arrests of, and unsealing of a criminal complaint charging, SOHRAB SHARMA, a/k/a “Sam Sharma,” and ROBERT FARKAS, a/k/a “Bob,” two co-founders of a startup company called Centra Tech, Inc. (“Centra Tech”), with conspiring to commit, and the commission of, securities and wire fraud in connection with a scheme to induce victims to invest more than $25 million in investments through material misrepresentations and omissions. 

SHARMA and FARKAS were arrested Sunday evening in the Southern District of Florida and were presented yesterday in that District.

Manhattan Deputy U.S. Attorney Robert Khuzami said:  “As alleged, Sohrab Sharma and Robert Farkas took advantage of widespread investor interest in the rapidly growing cryptocurrrency market to raise millions of dollars in investments in a startup company based on a false sales pitch.  While the cryptocurrency industry may be a new frontier, it is subject to the same laws against investor fraud as any other type of company.” 

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Sharma and Farkas created a false sense of security for investors of Centra Tech ICO by misrepresenting their product and lying about relationships they had with credible financial institutions. While they’re not backed by physical commodities, trading in virtual currencies is perfectly legal. But, as today’s charges prove, investors must exercise the same degree of due diligence when making an investment in an ICO as they would with any traditional security.” 

According to the allegations in the criminal complaint unsealed in Manhattan federal court[1]:

From July 2017 through March 2018, SHARMA and FARKAS, two co-founders of Centra Tech, began soliciting investors to purchase Centra Tech tokens, a bespoke cryptocurrency that functions as an unregistered security in Centra Tech, through a so-called “initial coin offering” or “ICO.”  As part of this effort, SHARMA and FARKAS, in oral and written offering materials that were disseminated via the internet, represented that Centra Tech had developed a debit card, the “Centra Card,” that allowed users to load the Centra Card with the cryptocurrency of their choice and then use the Centra Card to make purchases at any establishment that accepts Visa or Mastercard.  As part of their sales pitch, SHARMA and FARKAS represented that Centra Tech had formed a partnership with Bancorp to have Bancorp issue Centra Cards licensed by Visa or Mastercard, and that Centra Tech held the requisite financial servicing licenses in 38 states, among other claims.  Based in part on these claims, victims provided more than $25 million in investments for the purchase of Centra Tech tokens. 

The claims that SHARMA and FARKAS made to help secure these investments, however, were false.  In fact, Centra Tech had no relationships with Bancorp, Visa, or Mastercard, and at least seven of those 38 states have no record of any such licenses being issued to Centra Tech. 

In a separate action, the Securities and Exchange Commission (“SEC”) filed civil charges against SHARMA and FARKAS. 

*                      *                      *

SHARMA, 26, and FARKAS, 31, are residents of Florida.  SHARMA and FARKAS are each charged in a four-count criminal complaint 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.  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. Khuzami 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 Negar Tekeei and Samson Enzer is in charge of the prosecution. 

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Ann Calvaresi Barr, Inspector General for the U.S. Agency for International Development (“USAID”), announced today the filing and settlement of a civil fraud complaint against NORWEGIAN PEOPLE’S AID (“NPA”), a non-profit, non-governmental organization headquartered in Norway, that receives funding from USAID.  The settlement resolves claims that NPA violated the False Claims Act (the “FCA”) by providing material support to Iran, Hamas, the Popular Front for the Liberation of Palestine (“PFLP”), and the Democratic Front for the Liberation of Palestine (“DFLP”), contrary to federal funding requirements.  At all times relevant to the lawsuit, Iran was included on the U.S. Department of State’s list of state sponsors of terrorism (the “State Sponsors of Terrorism List”), and Hamas, PFLP, and DFLP were included on the U.S. Office of Foreign Assets Control’s specially designated nationals and blocked persons list (the “SDN List”).  The State Sponsors of Terrorism List includes countries that have repeatedly provided support for acts of international terrorism, and the SDN List includes individuals and entities that support terrorism or otherwise engage in conduct antithetical to U.S. interests. 

On March 30, U.S. District Court Judge Gregory H. Woods approved a settlement agreement that resolves the Government’s claims against NPA.  Under the settlement, NPA is required to pay $2.025 million to the United States (that amount is based on an analysis of NPA’s ability to pay a monetary settlement), and it has revised its internal policies to ensure that it complies with applicable U.S. sanctions laws and the terms of its USAID grants.  In addition, in connection with the settlement, NPA has admitted to and accepted responsibility for its conduct.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “For years, Norwegian People’s Aid obtained grant money from USAID by falsely representing that it had not provided, and would take reasonable steps to ensure that it did not knowingly provide, material support to prohibited parties under U.S. law.  With this settlement, NPA is being made to pay a significant financial penalty for its conduct, and importantly, has admitted to its conduct and agreed to put proper precautions in place to ensure that it does not happen again.”

USAID Inspector General Ann Calvaresi Barr said:  “USAID depends on the integrity of its contractors and grantees to effectively reduce poverty, promote economic growth and democratic values, and deliver aid in crises worldwide.  Making false representations to secure grant funding not only violates U.S. law, it is a serious breach of trust.  And, when false claims hide an organization’s material support to designated terrorist organizations and a state sponsor of terrorism, the violation is all the more severe.  My office makes these cases a top priority and we will continue to investigate them aggressively.”

As alleged in the Government’s complaint and set forth in the parties’ settlement agreement, both of which have been filed in Manhattan federal court:

Since at least 2012, NPA has received monetary grants from USAID to fund various projects and programs.  As a condition of receiving those grants, NPA submitted certifications to USAID each year in which it represented that, “to the best of its current knowledge, it did not provide within the previous ten years, and will take all reasonable steps to ensure that it does not and will not knowingly provide, material support or resources to any individual or entity that commits, attempts to commit, advocates, facilitates, or participates in terrorist acts . . . .”  In these annual certifications, NPA also represented that “[b]efore providing any material support or resources to an individual or entity,” it would (1) “verify that the individual or entity does not appear . . . on the [SDN List],” and (2) “consider all information about that individual or entity . . . that is reasonably available to it or of which it should be aware.”  The annual certifications defined “material support and resources” to include “training [and] expert advice or assistance.” 

Notwithstanding the above-referenced certifications, NPA provided training and expert advice or assistance to Iran, as well as to Hamas, PFLP, and DFLP.  With respect to Iran, from 2001 through 2008, NPA performed mine clearance activities in Iran that were integral to an Iranian oil development project.  Among other things, NPA (1) conducted risk assessments of the areas in Iran where the oil exploration and processing activities were to occur, (2) surveyed those areas for landmines and other unexploded ordnance, (3) trained members of the Iranian Army on how to conduct mine clearance activities, (4) accompanied and advised members of the Iranian Army as they conducted mine clearance activities in the relevant areas, and (5) conducted some mine clearance activities itself. 

With respect to Hamas, PFLP, and DFLP, from 2012 through 2016, NPA provided representatives of those three SDN List entities with training and expert advice or assistance by funding a project called “Youth of Today . . . Leaders of Tomorrow.”  Through this project, young people in the Gaza Strip, aged 15 through 28, who were affiliated with one of the project’s partner political parties – which included Hamas, PFLP, and DFLP – received training aimed at making them more effective participants in the political process.  Such training included programs intended to improve the participants’ ability to organize, debate, negotiate, advocate for their positions, and resolve conflicts.  In addition, through the Youth of Today project, NPA funded numerous workshops attended by young people in the Gaza Strip and senior officials from the partner political parties, including Hamas, PFLP, and DFLP.  Hamas, PFLP, and DFLP used information that they obtained from these workshops to alter their behavior in order to become more attractive to youth and, thereby, benefit from increased youth support. 

Because NPA provided training and expert advice or assistance to Iran (through the above-referenced oil development project), as well as to Hamas, PFLP, and DFLP (through the Youth of Today project), its certifications to USAID that, to the best of its knowledge, it had not provided and would take all reasonable steps to ensure that it did not knowingly provide material support or resources to any prohibited parties were false.  As a result of those false certifications, NPA induced USAID to provide it with grant funding that, but for the false certifications, USAID would not have provided.

As part of the settlement, NPA admitted, acknowledged, and accepted responsibility for its conduct, including that: (1) “NPA’s participation in the [Iranian] oil development project was inconsistent with its Certifications to USAID”; and (2) “[t]he ‘Youth of Today . . . Leaders of Tomorrow’ training programs and workshops were conducted in a manner that was inconsistent with NPA’s Certifications to USAID, in that they were attended by representatives of entities that were prohibited parties under U.S. law, including entities that were identified on the SDN List as prohibited parties.”

In connection with the settlement, NPA has also revised its internal policies to ensure that it complies with applicable U.S. laws and the terms of any grants it receives.  Such revisions include changes to its “Policy on Compliance with USAID Grants and U.S. Economic Sanctions Programs” to provide for additional training of NPA managers and administrative staff on compliance with applicable U.S. laws and grant terms; regular audits by an external auditor of NPA’s compliance with applicable U.S. laws and grant terms; and periodic reviews for purposes of making appropriate updates to relevant NPA internal policies and procedures.  Moreover, upon request by USAID or any other U.S. agency that provides NPA with grants or any other type of funding, NPA shall provide such agency with, among other things, a written report, prepared by the external auditor, of the results of each of the above-referenced audits, and a description of any actions taken by NPA in response to such audits.

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that previously had been filed under seal pursuant to the False Claims Act. 

This is the second case that this Office has pursued successfully against a recipient of USAID grant funds based on allegations that it provided material support to prohibited parties under U.S. law.  In March 2017, the Office resolved a similar case against the American University of Beirut.

*                      *                     * 

Mr. Berman thanked the USAID Office of Inspector General for its investigative efforts and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Christopher B. Harwood is in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH MELI was sentenced today in Manhattan federal court to 78 months in prison by the Honorable Kimba M. Wood.  Between 2015 and 2017, MELI solicited approximately $100 million in investments from 130 investors through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market.  MELI pled guilty before U.S. Magistrate Judge Barbara C. Moses on October 31, 2017.

U.S. Attorney Geoffrey S. Berman said:  “Joseph Meli directed his own version of a Broadway production, where the lead character deceives investors into giving him money that he pockets and spends on himself, or uses to pay off other investors.  Today, however, Meli’s Ponzi scheme is over, and he will serve prison time for his crimes.”

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

From 2015 through January 2017, MELI conducted a scheme to defraud more than 130 investors who invested a total of more than approximately $100 million through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market.  In fact, MELI utilized a substantial portion of the investor funds he obtained for his personal expenses – including payments for a $3 million house in East Hampton, New York, a 2017 Porsche convertible, and expensive watches and jewelry – and to make payments, in a Ponzi-like manner, to previous investors in MELI’s ticket fraud scheme and in an unrelated hedge fund.

In furtherance of the fraudulent scheme, MELI falsely represented to investors that he had entered into written agreements with production companies for popular Broadway shows and with management companies for popular singers and music bands (together, the “Production and Management Companies”) to purchase large blocks of tickets to the shows and performances.  As part of this deception, MELI provided investors with falsified documents purporting to reflect agreements between MELI’s company, Advance Entertainment, LLC, and the Production and Management Companies.  In truth and in fact, MELI had not entered into such agreements and did not have any contractual rights to purchase such tickets from the Production and Management Companies.    

*                      *                      *

In addition to his prison sentence, MELI, 43, of New York, New York, was sentenced to three years of supervised release; ordered to forfeit $104,765,565, representing the amount of proceeds obtained as a result of his fraudulent scheme; and ordered to pay restitution.

Mr. Berman praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DARCY WEDD was sentenced yesterday to 10 years 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 WEDD and his co-conspirators resulted in the theft of over $150 million from consumers throughout the United States.  WEDD was convicted by a jury on December 15, 2017, following a two-week trial, and was sentenced yesterday in Manhattan federal court by the Honorable Katherine B. Forrest. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Darcy Wedd was convicted of engaging in a large-scale auto-subscribing scheme that forced mobile phone users to pay charges for unsolicited and unwanted text messaging services.  The conduct of Wedd and his co-conspirators ultimately netted over $150 million in illegal profits.  Today’s sentence reflects the seriousness of Wedd’s predatory consumer fraud.”

According to the Superseding Indictment filed in Manhattan federal court, the evidence presented at trial, and statements made in connection with WEDD’s sentencing:

WEDD was the chief operating officer, and eventually the chief executive officer, of 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, WEDD 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 essentially 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.  WEDD participated in auto-subscribing through three of those content providers:  Tatto, which was operated by co-conspirator Lin Miao, and CF Enterprises and DigiMobi, which were operated by co-conspirator Eugeni Tsvetnenko, a/k/a “Zhenya.” 

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 was genuinely signing up to receive the services, which was operational by in or about the middle of 2011.  In or about October 2011, Miao met with WEDD and told him, in sum and substance, that Miao wanted to auto-subscribe consumers through Mobile Messenger’s billing platform and needed phone numbers to do so.  WEDD agreed to assist Miao.  WEDD further told Miao, in sum and substance, that co-conspirator Michael Pajaczkowski, who was the Vice President of Compliance and Consumer Protection at Mobile Messenger, would provide phone numbers and assistance to Miao, and that all payments made in connection with the scheme needed to go through Pajaczkowski.  WEDD later received his portion of the payments from Miao through Pajaczkowski.

In or about early 2012, WEDD, Pajaczkowski, and two other co-conspirators, Erdolo Eromo and Fraser Thompson, who were also Mobile Messenger executives, had discussions about how to increase revenue at Mobile Messenger in the wake of the decreasing profitability of premium text messaging services.  Tsvetnenko had been kicked off Mobile Messenger’s aggregation platform in the past due to suspicious subscribing practices, including past incidents of auto-subscribing.  Nevertheless, in early 2012, WEDD, Pajaczkowski, Eromo, and Thompson agreed to allow Tsvetnenko to establish two new content providers, CF Enterprises and DigiMobi, to conduct a scheme to auto-subscribe on Mobile Messenger’s aggregation platform.  WEDD, Pajaczkowski, Eromo, and Thompson also devised a method of receiving and distributing their cut of the proceeds from the auto-subscribing scheme through multiple layers of shell companies, in an effort to conceal the nature and purpose of the money. 

The auto-subscription scheme, through all of the content providers that it involved, affected hundreds of thousands of consumers and generated over $150 million in proceeds, which the co-conspirators apportioned among themselves and used to fund lavish lifestyles of expensive vacations, luxury cars, and gambling.  WEDD, moreover, personally received over $1.7 million in fraud proceeds as a result of his participation in the illegal scheme. 

*                *                *

In addition to the 10-year prison term, WEDD, 40, of New York, New York, was sentenced to three years of supervised release.

To date, eight defendants, Andrew Bachman, Miao, Pajaczkowski, Eromo, Jonathan Murad, Francis Assifuah, Jason Lee, and Christopher Goff have pled guilty in connection with their participation in the fraud.  One additional defendant, Thompson, was convicted by a jury on September 5, 2017, following a three-week trial. 

Mr. Berman praised the investigative work of the Internal Revenue Service-Criminal Investigation Division and the Federal Bureau of Investigation, 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, and Jennifer L. Beidel are in charge of the prosecution.     

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that STEVEN SIMMONS was sentenced today in Manhattan federal court to 37 months in prison by U.S. District Judge Kimba M. Wood.  Between 2013 and January 2017, SIMMONS solicited over $6 million in investments for a hedge fund (the “Hedge Fund”).  SIMMONS, however, misappropriated nearly $2 million of these funds for his own use and that of a co-conspirator.  As SIMMONS well knew, other investor funds solicited by SIMMONS were used by the owner of the Hedge Fund in a Ponzi-like scheme to make payments to prior Hedge Fund investors.  SIMMONS pled guilty before U.S. Magistrate Judge Barbara C. Moses on October 30, 2017.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Steven Simmons lied to investors about how their money would be used and what returns they could expect.  He used investor funds for his own personal use – including the purchase of a house – and provided other investor funds for use in paying back earlier investors.  Now Simmons has been sentenced to more than three years in prison for his crimes.”

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

Between 2013 and January 2017, SIMMONS solicited investments by falsely representing to investors that their funds would be used by the Hedge Fund for legitimate, specified investment purposes, that they would receive specific rates of return, and that their investments would not be placed at risk or commingled with other funds.  In fact, SIMMONS diverted a substantial portion of investor funds for his own use and the use of a co-conspirator, while the remaining funds were used by the Hedge Fund to repay earlier investors who were demanding the return of their money.  

Among other false and misleading statements, SIMMONS told one investor, a single mother of three children whose source of funds was an alimony payment received in a recent divorce (“Victim-1”), that her capital would be invested with the Hedge Fund in securities, her principal investment would be preserved and not commingled with other investor funds, and that she would receive a return of at least 15% on the investment.  Contrary to these representations, SIMMONS stole much of Victim-1’s investment, using $700,000 of that money within two months of Victim-1’s investment to buy a house in Wilton, Connecticut, and wiring $700,000 to the personal account of a co-conspirator.

SIMMONS told another investor, a family investment office (“Victim Entity-2”), that its funds would be placed by the Hedge Fund with a highly successful group of portfolio managers and provided performance information for these portfolio managers.  In truth and in fact, SIMMONS solicited those investment funds from Victim Entity-2 for the purpose of repaying an earlier investor in the Hedge Fund who had demanded the return of its investment.  Much of Victim Entity-2’s funds were, within minutes of their receipt by the Hedge Fund, wired to the earlier investor.  The following day, $50,000 was wired by the Hedge Fund to an account controlled by SIMMONS.  As part of the fraudulent scheme, Simmons also created and provided investors with false monthly statements.

*                      *                      *

In addition to his prison sentence, SIMMONS, 49, of Wilton, Connecticut, was sentenced to three years of supervised release, ordered to forfeit $6,900,000, representing the amount of proceeds obtained as a result of the conspiracy, including the forfeiture of property SIMMONS bought in Wilton, Connecticut with proceeds of the fraud, and ordered to pay restitution to the victims of the offense.   

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that FEI YAN, who works as a post-doctoral associate at a major research university in Cambridge, Massachusetts, was sentenced today in Manhattan federal court to 15 months in prison by U.S. District Judge Katherine B. Forrest.  In 2016, YAN made almost $120,000 in connection with trading in stocks and options of publicly traded companies, based on misappropriated material nonpublic information. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Fei Yan blatantly circumvented the securities laws that are in place to deter people from doing exactly what he did – trading on nonpublic information to give him a leg up over other investors.  Even after searching the internet on ways to get away with his crime, Yan was apprehended for his insider trading, and will now spend time in prison for his crimes.”

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

YAN’s spouse (the “Spouse”) worked at the New York office of an international law firm (the “Law Firm”).  In the summer of 2016, the Law Firm was retained by a mining company (the “Mining Company”) to represent it in negotiations to acquire Stillwater Mining Company, a publicly traded company whose shares are traded on the New York Stock Exchange under the symbol “SWC.”  On August 25, 2016, in connection with the Spouse’s work at the Law Firm, the Spouse learned of the negotiations between the Mining Company and Stillwater Mining and continued to work on the transaction through December 9, 2016, when it was publicly announced for the first time that the Mining Company would be acquiring Stillwater Mining.  While working on the transaction during the fall of 2016, the Spouse had access to material, nonpublic information regarding the potential acquisition.  

The Law Firm required its employees, including the Spouse, to abide by a confidentiality policy, which prohibited disclosure of “information received from and about . . . clients . . . [and] other parties involved in transactions with clients.”  In addition, YAN and the Spouse had a history, pattern, and practice of sharing confidences. 

In early and mid-November 2016, the Spouse billed dozens of hours working on the potential merger between the Mining Company and Stillwater Mining, and YAN and the Spouse were in frequent phone contact.  During this period, YAN conducted Internet searches for “yahoo swc” and “stillwater merger,” even though the Mining Company’s potential acquisition of Stillwater Mining had not yet been publicly announced. 

On November 22, 2016, the Spouse participated in a call at the Law Firm regarding the potential acquisition.  That same day, YAN, using a brokerage account he had previously set up in his mother’s name, bought 71 options to buy Stillwater Mining stock.  The next day, there were two phone calls between YAN and the Spouse.  After these calls, YAN bought an additional 200 options to buy Stillwater Mining stock. 

Negotiations between the Mining Company, represented by the Law Firm, and Stillwater Mining continued to progress, and the Spouse continued to work on the transaction.  On December 1, 2016, after a 78-minute phone call with the Spouse the night before, YAN purchased an additional 100 Stillwater Mining options. 

The following day, YAN conducted multiple Internet searches and research related to mergers and acquisitions, including searches for “process of acquisition” and “company acquisition process.”  Several minutes after conducting these searches, YAN called the Spouse.

YAN and the Spouse also spoke on the phone multiple times on the night of December 5 and the early morning hours of December 6, 2016.  Later on the morning of December 6, 2016, YAN bought an additional 341 options to buy Stillwater Mining stock.  Later that day, YAN conducted internet research related to insider trading.  For example, YAN searched for “how sec detect unusual trade” and accessed at least three articles on financial websites related to insider trading.  YAN also searched for the name of an individual who was charged in this District in May 2016 with insider trading. 

The next day, shortly after speaking with the Spouse on the phone for approximately 30 minutes, YAN conducted an Internet search for “insider trading with international account” and, shortly thereafter, viewed articles entitled “U.S. Insider Trading Enforcement Goes Global” and “Want to Commit Insider Trading? Here’s How Not to Do It.”  The following day, YAN bought an additional 54 options to buy Stillwater Mining stock.

Early on the morning of December 9, 2016, it was publicly announced that the Mining Company would acquire Stillwater Mining for $18 per share.  Beginning at approximately 9:33 a.m. Eastern time, minutes after the open of regular market trading, YAN sold the Stillwater Mining options he had previously purchased, resulting in a profit of approximately $109,420.  Also that day, YAN conducted Internet searches for “insider trading cases,” and “insider trading options.” 

*                *                *

In addition to his prison sentence, YAN, 31, was sentenced to three years of supervised release and ordered to forfeit $119,428.50, representing the amount of proceeds obtained as a result of trading in Stillwater Mining and related relevant conduct involving trades in the Mattress Firm. 

Mr. Berman praised the investigative work of the Federal Bureau of Investigation, and thanked the Securities Exchange Commission, which has filed civil charges in a separate action.  Mr. Berman also thanked the FBI’s Boston Office and the U.S. Attorney’s Office for the District of Massachusetts for their assistance in this investigation. 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the conviction in Manhattan federal court of SALVATORE DELLIGATTI, a/k/a “Fat Sal,” a/k/a “Jay,” for racketeering conspiracy, conspiracy to commit murder in aid of racketeering, attempted murder in aid of racketeering, murder-for-hire conspiracy, participation in an illegal gambling operation, and a firearms offense.  The jury convicted DELLIGATTI yesterday on all six counts of the Indictment following a three-week trial before U.S. District Judge Katherine B. Forrest. 

U.S. Attorney Geoffrey S. Berman said:  “Salvatore Delligatti, in order to increase his standing in the Genovese Family, recruited a group of hitmen to murder an individual.  But Delligatti’s hitmen were caught red-handed by the Nassau County Police Department and the Nassau County District Attorney’s Office before they could carry out their hit.  Delligatti now stands convicted of this foiled murder plot and other crimes he committed with the Genovese Family.  We thank our partners in Nassau County and at the FBI.”

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

From at least in or about 2008 through in or about May 2016, DELLIGATTI was an associate of the Genovese Organized Crime Family of La Cosa Nostra.  During this period, DELLIGATTI conspired with others to participate in and conduct the affairs of the Genovese Family through a pattern of racketeering activity that included a murder conspiracy, an extortion conspiracy, and the operation of an illegal sports betting business.  For example, as part of DELLIGATTI’s participation in the Genovese Family, DELLIGATTI committed the following crimes:     

From in or about May 2014 through in or about June 2014, DELLIGATTI conspired with Robert DeBello, a “made” soldier, and Ryan Ellis, an associate of the Genovese Family, to murder a neighborhood “tough guy” from the Whitestone section of Queens.  DELLIGATTI sought and obtained permission from DeBello to murder the intended victim.  However, instead of carrying out the murder himself, as DeBello had authorized him to do, DELLIGATTI hired a crew of hitmen from the Bronx to ambush and kill the intended victim at his residence.  DELLIGATTI provided the hitmen with a loaded .38 revolver and a get-away vehicle, and offered to pay them several thousand dollars for the murder.  As a result of wiretap surveillance of DELLIGATTI by the Nassau County Police Department and the Nassau County District Attorney’s Office, the crew of hitmen was apprehended in the get-away vehicle just a few blocks from the intended victim’s residence on June 8, 2014.  In their vehicle, law enforcement recovered the loaded revolver, a spray bottle containing a bleach solution, and other materials.

From in or about April 2014 through in or about May 2014, DELLIGATTI and others in the Genovese Family, including DeBello and Ellis, participated in a conspiracy to use threats of violence and economic harm to extort the owners and promoter of a night club located on the rooftop of a hotel in Queens.  

 

From at least in or about 2013 through in or about 2015, DELLIGATTI participated with others in the Genovese Family, including DeBello and Ellis, in a large-scale bookmaking and sports betting operation that took bets from bettors in Manhattan and Queens, among other locations, and made use of an offshore wireroom.  During and in furtherance of this gambling operation, DELLIGATTI and Ellis brought envelopes filled with cash to DeBello, the “made” soldier with whom they were committing these crimes.

*                *                *

DELLIGATTI, 40, was found guilty of conspiring to participate in the Genovese Family through a pattern of racketeering activity, conspiring to murder and attempting to murder Joseph Bonelli in aid of racketeering, conspiring to commit murder-for-hire, possessing a firearm in furtherance of those crimes of violence, and participation in an illegal gambling operation.  DELLIGATTI faces a maximum potential sentence of life in prison.  DELLIGATTI is scheduled to be sentenced by Judge Forrest on August 16, 2018.  

DELLIGATTI’s co-defendants, Robert DeBello and Ryan Ellis, previously pled guilty before Judge Forrest to racketeering conspiracy offenses for their roles in the murder conspiracy, the extortion conspiracy, and the illegal gambling operation that are described above.

Mr. Berman praised the outstanding investigative work of the Nassau County Police Department and the Federal Bureau of Investigation.  He also thanked the Nassau County District Attorney’s Office and the United States Department of State, Diplomatic Security Service, for their assistance with the prosecution.  

The case is being prosecuted by the Office’s Violent and Organized Crime Unit.  Assistant United States Attorneys Samson Enzer, Jordan Estes, and Jason Swergold are in charge of the prosecution. 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EARL SIMMONS, an internationally known recording artist, performer, and actor known professionally as “DMX” and “X,” was sentenced today in Manhattan federal court to one year in prison for tax fraud in connection with evading the payment of income taxes in the period from 2010 through 2016.  In total, during that time period SIMMONS concealed millions of dollars of income from the IRS and avoided paying $1.7 million of tax liabilities.  SIMMONS pled guilty on November 30, 2017, before United States District Judge Jed S. Rakoff, who imposed today’s sentence.

U.S. Attorney Geoffrey S. Berman said:  “Earl Simmons, the recording artist and performer known as DMX, stole from the American taxpayers when he earned millions of dollars but failed to pay any taxes on his income.  Today’s sentence shows that star power does not entitle people to a free pass.  Together with our partners at the IRS, we will vigorously enforce our tax laws to make sure that people pay their fair share.”

According to the Indictment and statements made in open court:

SIMMONS worked as a recording artist, performer, and actor.  Beginning in 1997, SIMMONS released a series of hip-hop albums that sold millions of records.  Many of his albums went platinum and occupied the top positions on musical charts.  During his career, SIMMONS has performed at venues across the United States and around the world, and has acted in motion pictures.

As a result of the income SIMMONS earned from sources including musical recordings and performances, from 2002 through 2005 he incurred federal income tax liabilities of approximately $1.7 million.  Those liabilities went unpaid, and in 2005, the IRS began efforts to collect SIMMONS’s unpaid tax liabilities. 

During the period from 2010 through 2015, SIMMONS earned more than $2.3 million, but SIMMONS did not file personal income tax returns during that time period.  Instead, he orchestrated a scheme to evade payment of his outstanding tax liabilities, largely by maintaining a cash lifestyle, avoiding the use of a personal bank account, and using the bank accounts of nominees, including his business managers, to pay personal expenses.  For example, SIMMONS received hundreds of thousands of dollars of royalty income from his music recordings.  SIMMONS caused that income to be deposited into the bank accounts of his managers, who then disbursed it to him in cash or used it to pay his personal expenses.  SIMMONS also participated in the “Celebrity Couples Therapy” television show in 2011 and 2012 and was paid $125,000 for his participation.  When taxes were withheld from the check for the first installment of that fee by the producer, SIMMONS refused to tape the remainder of the television show until the check was reissued without withholding taxes.

SIMMONS took other steps to conceal his income from the IRS and others, including by filing a false affidavit in U.S. Bankruptcy Court that listed his income as “unknown” for 2011 and 2012, and as $10,000 for 2013.  In fact, SIMMONS received hundreds of thousands of dollars of income in each of those years.

*                      *                     *

In addition to his prison sentence, SIMMONS, 47, of Yonkers, New York, was sentenced to three years of supervised release and ordered to pay $ 2,292,200 in restitution to the IRS.  

Mr. Berman praised the work of the Internal Revenue Service, Criminal Investigation.

This case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorney Richard Cooper is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and Patricia Menges, Director of the U.S. Citizenship and Immigration Services New York Asylum Office, announced that yesterday ANDREEA DUMITRU, a/k/a “Andreea Dumitru Parcalaboiu,” an immigration attorney based in Queens, New York, was charged with asylum fraud and making false statements.  The case has been assigned to U.S. District Court Judge Lewis A. Kaplan.

U.S. Attorney Geoffrey S. Berman said:  “Andreea Dumitru, an immigration attorney, is alleged to have submitted fraudulent forms for over 180 clients, each containing statements and representations she knew to be false.  She now faces prison time for her alleged crimes.”

HSI Special Agent-in-Charge Angel M. Melendez said:  “Dumitru is alleged to have used her trusted position to defraud the government, submitting fraudulent documents to claim asylum.  Her alleged actions took up time and resources while those with valid asylum claims waited in line.  Now, Dumitru will enter a courtroom as a defendant to face the consequences for her alleged actions.”

Director Patricia Menges said:  “U.S. Citizenship and Immigration Services is proud of the hard work of our fraud detection officers that leads to important cases like this one, and ensures that those who try to commit immigration fraud will face justice.  USCIS is also grateful for the outstanding collaboration with ICE-HSI and our other law enforcement partners.”

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

Between 2012 and 2017, DUMITRU participated in a scheme to submit fraudulent I-589 Forms in connection with applications for asylum.  Specifically, DUMITRU submitted over 180 applications in which she knowingly made false statements and representations about, among other things, the applicants’ criminal histories, personal narratives of alleged persecution, and/or locations.  Nevertheless, DUMITRU certified each application as true and correct under penalty of perjury.

*                      *                      *

DUMITRU, 42, of Queens, New York, is charged with one count of asylum fraud, which carries a maximum sentence of 10 years in prison, and one count of making false statements, 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.

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

Mr. Berman praised the outstanding investigative work of HSI and United States Citizenship and Immigration Services, and thanked the Federal Bureau of Investigation for its assistance.

This case is being prosecuted by the Office’s General Crimes Unit.  Assistant U.S. Attorneys Alison G. Moe and Robert B. Sobelman are in charge of the prosecution. 

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Rene Febles, Deputy Inspector General for Investigations for the Federal Housing Finance Agency (“FHFA-OIG”), announced today that the United States has filed a complaint-in-intervention against Rosicki, Rosicki & Associates, P.C. (“ROSICKI”), a foreclosure law firm in New York, and its wholly owned affiliates, Enterprise Process Service, Inc. (“ENTERPRISE”) and Paramount Land, Inc. (“PARAMOUNT”), for engaging in a scheme to generate false and inflated bills for foreclosure-related expenses and causing those expenses to be submitted to and paid for by the Federal National Mortgage Association, known colloquially as Fannie Mae.  The case is assigned to U.S. District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the complaint, for years the Rosicki law firm exploited its relationship with Fannie Mae, a Government-sponsored entity, for its own financial gain by knowingly causing Fannie Mae to pay artificially inflated costs for foreclosure-related services.  This lawsuit demonstrates this Office’s continued commitment to root out fraud in all of its forms.”

FHFA Deputy Inspector General for Investigations Rene Febles said:  “FHFA-OIG recognizes that the best deterrent against fraud is a proactive and visible law enforcement effort.  We are vigilant and remain committed to conducting vigorous investigations and working closely with prosecutors to hold those organizations and persons accountable who waste, steal, or abuse funds in connection with FHFA or any of the entities that it regulates.”         

As alleged in the complaint:

From May 2009 through the present (“Covered Period”), ROSICKI, a law firm based in Plainview, New York, that specializes in mortgage foreclosures, acted as counsel to various mortgage servicing companies, and in that capacity effectuated mortgage foreclosures on Fannie Mae-owned loans.  ENTERPRISE was a service-of-process company wholly owned and controlled by the two founding partners of ROSICKI, and PARAMOUNT was a title search company also wholly owned and controlled by the same ROSICKI partners. 

Throughout the Covered Period, ROSICKI, ENTERPRISE, and PARAMOUNT perpetrated a scheme whereby ROSICKI exclusively engaged ENTERPRISE and PARAMOUNT purportedly to serve process and perform title searches that were required to complete mortgage foreclosures on Fannie Mae-owned loans.  In reality, however, ENTERPRISE and PARAMOUNT engaged third-party vendors to perform the majority of the work, and then applied exponential markups, as much as 750%, to those vendors’ bills for foreclosure-related services, while adding little if any value to the services that the vendors had performed.  ENTERPRISE and PARAMOUNT submitted their marked-up expenses, which significantly exceeded market rates, to ROSICKI.  ROSICKI in turn billed the mortgage servicers for those inflated expenses, which ROSICKI represented were the actual expenses incurred for the foreclosure-related services, with knowledge that the mortgage servicers would submit claims to Fannie Mae for full reimbursement of the expenses.  Defendants’ submission of these fraudulently inflated expenses caused Fannie Mae to pay millions of dollars for falsely inflated foreclosure expenses.   

This matter was initiated by a relator pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3729 et seq.

*                *                *

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

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Cristy Irvin Phillips, Andrew E. Krause, and Lauren A. Lively are in charge of the case.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge for the New York Office of Inspector General of the U.S. Department of Health and Human Services (“HHS-OIG”), announced today a settlement of a civil fraud lawsuit against CenterLight Healthcare, Inc. (“CENTERLIGHT”), for collecting monthly Medicaid payments for 186 adult home residents who frequently did not receive required services while enrolled in CENTERLIGHT’s managed long-term care plan. 

The settlement resolves allegations that CENTERLIGHT submitted false claims to Medicaid to receive these payments.  Under the terms of the settlement approved yesterday by U.S. District Judge Lewis A. Kaplan, CENTERLIGHT must pay a total sum of $10 million, with $4 million going to the United States and the remaining amount going to the State of New York.  In the settlement, CENTERLIGHT admits that the 186 adult home residents did not receive community-based long-term care services during certain months that they were enrolled in CENTERLIGHT’s managed long-term care plan.  “CENTERLIGHT also admits that it failed to timely dis-enroll these adult home residents from its plan and that, as a result, CENTERLIGHT collected Medicaid payments to which it was not entitled.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “CenterLight Healthcare collected millions of dollars in Medicaid payments to provide long-term care services to adult home residents in its managed care plan, but frequently failed to deliver these services.  This Office is committed to holding recipients of government health care funds accountable when they fail to provide the care and services the government pays them to provide.” 

HHS-OIG Special Agent in Charge Scott J. Lampert said:  “CenterLight’s conduct compromised the integrity of the Medicaid program and failed to ensure that quality health care services were provided to those that needed them most.  HHS-OIG is committed to holding providers accountable for their practices.”

CENTERLIGHT administered a managed long-term care plan for Medicaid beneficiaries pursuant to a contract with the New York State Department of Health (the “Contract”).  To be eligible for enrollment into a managed long-term care plan, a Medicaid beneficiary must, among other things, be assessed as needing community-based long-term care services for more than 120 days from the effective date of enrollment.  These services include nursing services in the home, therapies in the home, home health aide services, personal care services in the home, and adult day health care.  In exchange for arranging and providing these services, CENTERLIGHT received monthly payments of approximately $3,600 - $3,800 for each member.  CENTERLIGHT contracted with licensed home care services agencies that were supposed to provide skilled nursing and home health aide services to the hundreds of adult home residents enrolled in CENTERLIGHT’s managed long-term care plan.  

As alleged in the United States’ Complaint filed in Manhattan federal court, CENTERLIGHT did not ensure that these agencies consistently provided required services to adult home residents, and failed to ensure that these vulnerable members’ medical needs were met.  Despite being aware that some of the agencies it hired provided a substandard level of care and did not maintain proper documentation reflecting the services provided, CENTERLIGHT failed to promptly take necessary steps to address these issues.  With respect to the 186 adult home residents who are the subject of the settlement (the “186 Members”), CENTERLIGHT submitted or caused to be submitted claims to Medicaid for payments for months during which no community-based long-term care services were provided to the member.  Indeed, many of the 186 Members did not receive any community-based long-term care services for most of the months during which they were enrolled in CENTERLIGHT’s managed care plan.

As part of the settlement, CenterLight Healthcare admits, acknowledges, and accepts responsibility for the following conduct:

• The 186 Members did not receive required community-based long-term care services during certain months that they were enrolled in CENTERLIGHT’s managed long-term care plan. 

• CENTERLIGHT failed to timely dis-enroll the 186 Members even though they were no longer eligible for its managed long-term care plan and, as a result, CENTERLIGHT received capitation payments to which it was not entitled.

• CENTERLIGHT failed to adequately oversee and monitor the care provided by the home care services agencies to the 186 Members to ensure that these members received the services required by the Contract.

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.  The Government previously intervened in this whistleblower lawsuit and, in January 2016, entered into a $46.7 million settlement with CENTERLIGHT to resolve allegations relating to the use of social adult day care centers to enroll ineligible members in CENTERLIGHT’s managed long-term care plan.  CENTERLIGHT sold its managed long-term care plan in early 2017.

*                *                *

Mr. Berman thanked the Office of the Inspector General for HHS for its assistance.  Mr. Berman also thanked the Medicaid Fraud Control Unit of the New York State Attorney General’s Office for its investigative efforts and work on the case.    

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Jeffrey K. Powell is in charge of the case.  

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JASON NISSEN pled guilty today to defrauding victims of more than $60 million by falsely representing that he was using the victims’ money to further a profitable, multimillion-dollar wholesale ticket business.  NISSEN pled guilty before U.S. District Judge Paul A. Engelmayer, and is scheduled to be sentenced on August 21, 2018.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As he admitted in court today, Jason Nissen’s pitch to investors about access to premium sports and entertainment tickets was a sham.  His investment scheme was really a Ponzi scheme.  Now he awaits sentencing for his admitted swindle.”        

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

Since at least in or about 2010, JASON NISSEN has operated a ticket resale business (the “Ticket Company”) through which NISSEN purchased large quantities of premium tickets for sporting and entertainment events, and then resold such tickets for a profit.

The Ticket Company is a ticket resale business located in Manhattan, New York, of which NISSEN was the chief executive officer and president.  The Ticket Company’s website stated that “[The Ticket Company] is an industry leader in providing VIP access and premium tickets to all concerts, Broadway theatre, red carpet premieres and sporting events worldwide . . . the Ticket Company stocks one of the largest revolving inventories for sports, concerts, and theatre worldwide.”

From at least in or about 2015 to in or about May 2017, NISSEN defrauded multiple investors in ticket deals arranged by the Ticket Company of tens of millions of dollars.  NISSEN represented to these investor victims that he would use their money to purchase bulk quantities of premium tickets to sporting and entertainment events such as the Super Bowl (football), the World Cup (soccer), the U.S. Open (tennis), and “Hamilton” (Broadway musical), and then resell the tickets at a profit.  However, in truth and in fact, NISSEN used the victims’ money in large part to repay other victims and to enrich himself. 

To further perpetuate his fraudulent scheme and to raise additional sums from victims, NISSEN falsified financial documents and inflated accounts receivable ledgers, which NISSEN presented to certain victims as purported proof that their money was being used to purchase premium tickets for resale. 

In total, JASON NISSEN defrauded victims of more than $60 million.     

*                *                *

NISSEN, 45, of Roslyn, New York, pled guilty to one count of wire fraud, which carries a maximum term of 20 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Douglas S. Zolkind and Lara Pomerantz are in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, Special Agent in Charge of the Department of Homeland Security, Homeland Security Investigations (“HSI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced the arrest of STANLEY ROGERS for conspiring to rob a Federal Express truck transporting diamonds from wholesale jewelry centers in the diamond district.  ROGERS was arrested Monday in Brooklyn, New York, and was presented before Magistrate Judge Barbara C. Moses in Manhattan federal court.   

U.S. Attorney Geoffrey S. Berman said:  “As alleged, Stanley Rogers concocted a potentially dangerous scheme to assault a FedEx truck driver with a tranquilizer and then steal the precious gems inside the truck.  Thankfully his alleged scheme was foiled when he attempted to seek the assistance of an undercover police officer.”

Special Agent in Charge Angel M. Melendez, said  “Through our New York City Airport Border Enforcement Security Task Force, HSI and its partners have been able to thwart what could have been a very dangerous situation involving a robbery attempt in broad daylight on the busy streets of this city.  Allegedly looking to make off with diamonds and precious stones, Rogers’s plan to get rich quick put the lives of several people at risk.  We are happy the jewels, and more importantly, the people of New York, remain safe.”

According to the allegations in the Complaint[1]:

ROGERS conspired to rob a Federal Express truck in Manhattan while the truck was transporting diamonds and other precious stones on behalf of various merchants in Manhattan’s diamond district.  ROGERS planned to administer near-lethal dosages of a veterinary tranquilizer to the truck’s operator, and steal the truck and its contents.

ROGERS’s arrest came after he sought the assistance of an undercover NYPD detective to help him kill an associate he believed might reveal the details of the robbery.

*          *          *

ROGERS, 36, of Brooklyn, New York, is charged with one count of conspiracy to commit a Hobbs Act robbery, which carries a maximum sentence of 20 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.   

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

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

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Bethanne M. Dinkins, Special Agent-in-Charge of the U.S. Department of Agriculture, Office of Inspector General (“USDA-OIG”), and Daniel D. Brownell, the Commissioner of the New York City Business Integrity Commission (“BIC”), announced today the unsealing of a complaint charging ROBERT GUILIANO and RODIN DIAZ with wire fraud and conspiracy to commit wire fraud in connection with a scheme to steal more than $900,000 from produce growers, shipping services providers, and others.  GUILIANO and DIAZ were arrested this morning and were presented this afternoon before Magistrate Judge Barbara C. Moses in federal court in Manhattan.  

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Robert Guiliano and Rodin Diaz engaged in a long-term fraud, stealing nearly $1 million in sweet potatoes, peppers, and other goods and services from small farms and businesses located across the United States.  Thanks to the hard work of the BIC, NYPD, and USDA, their scheme has come to an end.”  

USDA-OIG Special Agent-in-Charge Dinkins said:  “The USDA strives to ensure integrity within the produce industry through its administration of the Perishable Agricultural Commodities Act, which protects businesses dealing in fruits and vegetables by establishing and enforcing a code of fair business practices and helping to resolve disputes.  When presented with evidence of extensive fraud being committed against hardworking produce growers by entities not licensed under PACA, we were glad to assist our investigative partners in identifying and holding accountable those responsible.”

Business Integrity Commission Commissioner Daniel D. Brownell said:  “The defendants’ alleged actions undermine the integrity of New York City’s wholesale markets.  The NYC Business Integrity Commission, along with our law enforcement partners, will continue to protect the markets and their participants from those who seek to prey on them through fraudulent schemes such as the one the defendants have been charged with today.”

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

GUILIANO and DIAZ used multiple corporate entities and fictitious names in order to obtain produce and shipping services on credit, for which the defendants did not pay.  To further their scheme, GUILIANO and DIAZ represented that they were independent businessmen operating within the produce industry when, in fact, they were co-conspirators working together to defraud victims of goods and services worth over $900,000. 

*                *                *

GUILIANO, 40, of the Bronx, New York, and DIAZ, 53, of Staten Island, New York, are each charged with one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

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

Mr. Berman praised the outstanding investigative work of the Business Integrity Commission, the New York City Police Department, and the United States Department of Agriculture. 

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Timothy V. Capozzi is in charge of the prosecution.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that PINCUS DAVID CARLEBACH, a bankruptcy attorney, pled guilty today in Manhattan federal court to embezzling funds from a client’s bankruptcy estate.  From January 2016 through February 2016, CARLEBACH, whose client was in bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York, caused the transfer of $30,000 in estate assets to himself for his own use.  CARLEBACH pled guilty before U.S. District Judge Jesse M. Furman to one count of embezzlement from a bankruptcy estate.

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Pincus David Carlebach abused his position as a bankruptcy attorney for his own financial gain.  As he admitted in Manhattan federal court today, Carlebach caused the unlawful transfer of $30,000 from his client’s bankruptcy estate to himself.  Our Office is committed to prosecuting those who misuse positions of trust for their own gain, including attorneys who do so in violation of their professional duties.”       

*                *                *

CARLEBACH, 57, of Brooklyn, New York, faces a maximum sentence of five years in prison and three years of supervised release.  The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. 

Mr. Berman praised the Office of the United States Trustee for the Southern District of New York and the United States Marshals Service for their work on the case. 

The prosecution of this case is being handled by the Office’s General Crimes Unit.  Assistant U.S. Attorney Timothy V. Capozzi is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Angel M. Melendez, Special Agent in Charge of Immigration and Customs Enforcement’s Homeland Security Investigations in New York (“HSI”), announced today the arrest of GUI YOU WU, a/k/a “David, a/k/a “Michael,” YOUMEI CHEN, a/k/a “Ah Mei,” a/k/a “You Mei Chen,” GUIXIA WU, and HONG ZHONG, a/k/a “5023,” a/k/a “023,” stemming from a conspiracy to engage in the interstate trafficking of women, primarily Chinese nationals, for the purposes of prostitution.  GUIXIA WU was arrested in Bronxville, New York, and the other three defendants were arrested in Flushing this morning.  They will be presented today before U.S. Magistrate Judge Paul E. Davison in White Plains federal court.

U.S. Attorney Geoffrey S. Berman said:  “As alleged, these defendants promoted and managed a multi-state prostitution business through an extensive network of operators who worked in different locations to advertise and facilitate prostitution.  These defendants then allegedly raked in millions dollars from their illegal and exploitive activities.”

FBI Assistant Director-in-Charge William F. Sweeney said:  “Prostitution is a serious and harmful offense. And, in some cases prostitution can serve as a gateway for criminals with direct connections to human trafficking, organized crime, and other illegal activities. The migratory nature of these crimes makes it critical for law enforcement entities to work together to tackle this widespread dilemma. We will continue to support our law enforcement partners who play a critical role in combating this type of criminal activity.” 

HSI Special Agent-in-Charge Angel M. Melendez said:  “For years these individuals allegedly used women as a commodity, selling them for sex and transporting the women from hotel to motel and state to state.  For those who choose trafficking of people as a profession, you will be arrested, you will be prosecuted, and you will face the consequences of your actions.”

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

Between about 2013 and 2017, GUI YOU WU was the manager of a business engaged in the interstate trafficking of women, primarily Chinese nationals, for the purposes of prostitution (the “Prostitution Business”).  As part of the Prostitution Business, GUI YOU WU and others transported women for the purposes of prostitution to and from hotels and motels in multiple states, including New York, Connecticut, Delaware, Maryland, Virginia, Colorado, Missouri, and elsewhere, by means of vehicles and through the purchase of airline tickets. 

The Prostitution Business recruited customers through the placement and purchase of advertisements for escort services on classified websites such as Backpage.com.  CHEN, GUIXIA WU, and ZHONG assisted GUI YOU WU in the promotion and management of the Prostitution Business through, among other things, payment for hotels and other business expenses, placement of advertisements, coordination of travel, communication with women working as prostitutes, and the movement and receipt of proceeds from the Prostitution Business. 

GUI YOU WU also employed several individuals, including ZHONG, as telephone operators for the Prostitution Business (the “Operators”).  The Operators placed advertisements to recruit customers for the Prostitution Business and used cellphones to coordinate between the customers and the prostitutes.

*                *                *

GUI YOU WU, 46, of Flushing, CHEN, 51, of Flushing, GUIXIA WU, 49, of Bronxville, and ZHONG, 37, of Flushing, are each charged with one count of conspiring to violate the Mann Act and the Travel Act by conspiring to transport an individual or individuals in interstate commerce with the intent that such persons engage in prostitution, or any sexual activity for which a person can be charged with a criminal offense, and by traveling in interstate commerce or causing someone else to travel in interstate commerce or using or causing to be used the mail and facilities in interstate and foreign commerce, with the intent to promote, manage, establish, carry on, and facilitate unlawful prostitution and promotion of prostitution, which carries a statutory maximum penalty of 10 years in prison.  GUI YOU WU is also charged with violating the Mann Act by knowingly transporting an individual in interstate commerce with the intent that the individual engage in prostitution and sexual activity on or about February 25, 2016, which carries a statutory maximum penalty of 10 years in prison.

The statutory maximum potential 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.

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

Mr. Berman praised the work of the FBI and HSI and thanked the Orange County District Attorney’s Office, the Sullivan County District Attorney’s Office, and the Orange County Sheriff’s Office for their assistance with this investigation.  He added that the investigation is continuing.

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

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

 

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

 

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ashan M. Benedict, the Special Agent-in-Charge of the New York Field Division of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), and James P. O’Neill, the Police Commissioner of the City of New York (“NYPD”), announced the arrest of MARIO POWELL for the armed robbery and shooting of a livery cab driver on March 17, 2018.  POWELL was arrested on Friday, March 23, 2018, by the ATF and the NYPD, and was presented before U.S. Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court on March 24, 2018.  

According to the allegations in the Complaint:[1]

On March 17, 2018, POWELL called a livery cab in the Bronx, and directed the driver to a particular destination.  After arriving at the drop-off location, POWELL threatened the driver with a gun and demanded cash.  The driver handed over $23 in cash.  POWELL exited the cab and then shot the driver seven times. 

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POWELL, 27, of the Bronx, New York, is charged with one count of Hobbs Act robbery, which carries a maximum sentence of 20 years in prison, and one count of discharging a firearm during a Hobbs Act robbery, which carries a mandatory minimum sentence of 10 years in prison and a maximum sentence of life in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

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

This case is being handled by the Office’s General Crimes Unit.  Assistant United States Attorney Mollie Bracewell 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 herein constitute only allegations, and every fact described should be treated as an allegation.

An Indictment charging Gholamreza Rafatnejad, 38; Ehsan Mohammadi, 37; Abdollah Karima, aka Vahid Karima, 39; Mostafa Sadeghi, 28; Seyed Ali Mirkarimi, 34; Mohammed Reza Sabahi, 26; Roozbeh Sabahi, 24; Abuzar Gohari Moqadam, 37; and Sajjad Tahmasebi, 30, all citizens and residents of Iran, was unsealed today.  The defendants were each leaders, contractors, associates, hackers-for-hire or affiliates of the Mabna Institute, an Iran-based company that, since at least 2013, conducted a coordinated campaign of cyber intrusions into computer systems belonging to 144 U.S. universities, 176 universities across 21 foreign countries, 47 domestic and foreign private sector companies, the U.S. Department of Labor, the Federal Energy Regulatory Commission, the State of Hawaii, the State of Indiana, the United Nations, and the United Nations Children’s Fund.  Through the defendants’ activities, the Mabna Institute stole more than 31 terabytes of academic data and intellectual property from universities, and email accounts of employees at private sector companies, government agencies, and non-governmental organizations.  The defendants conducted many of these intrusions on behalf of the Islamic Republic of Iran’s (Iran) Islamic Revolutionary Guard Corps (IRGC), one of several entities within the government of Iran responsible for gathering intelligence, as well as other Iranian government and university clients.  In addition to these criminal charges, today the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated the Mabna Institute and the nine defendants for sanctions for the malicious cyber-enabled activity outlined in the Indictment.

The charges were announced by Deputy Attorney General Rod J. Rosenstein; Assistant Attorney General for National Security John C. Demers; U.S. Attorney Geoffrey S. Berman for the Southern District of New York; FBI Director Christopher A. Wray; Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Division; and Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker.

“These nine Iranian nationals allegedly stole more than 31 terabytes of documents and data from more than 140 American universities, 30 American companies, five American government agencies, and also more than 176 universities in 21 foreign countries,” said Deputy Attorney General Rosenstein.  “For many of these intrusions, the defendants acted at the behest of the Iranian government and, specifically, the Iranian Revolutionary Guard Corps.  The Department of Justice will aggressively investigate and prosecute hostile actors who attempt to profit from America’s ideas by infiltrating our computer systems and stealing intellectual property.  This case is important because it will disrupt the defendants’ hacking operations and deter similar crimes.”

“Today, in one of the largest state-sponsored hacking campaigns ever prosecuted by the Department of Justice, we have unmasked criminals who normally hide behind the ones and zeros of computer code,” said U.S. Attorney Berman.  “As alleged, this massive and brazen cyber-assault on the computer systems of hundreds of universities in 22 countries and dozens of private sector companies and governmental organizations was conducted on behalf of Iran’s Islamic Revolutionary Guard.  The hackers targeted innovations and intellectual property from our country’s greatest minds.  These defendants are now fugitives from American justice, no longer free to travel outside Iran without risk of arrest.  The only way they will see the outside world is through their computer screens, but stripped of their greatest asset – anonymity.”   

“This investigation involved a complex threat in a dynamic landscape, but today’s announcement highlights the commitment of the FBI and our partners to vigorously pursue those that threaten U.S. property and security,” said Director Wray.  “Today, not only are we publicly identifying the foreign hackers who committed these malicious cyber intrusions, but we are also sending a powerful message to their backers, the Government of the Islamic Republic of Iran: your acts do not go unnoticed.  We will protect our innovation, ideas and information, and we will use every tool in our toolbox to expose those who commit these cyber crimes.  Our memory is long; we will hold them accountable under the law, no matter where they attempt to hide.”

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

Background on the Mabna Institute

Gholamreza Rafatnejad and Ehsan Mohammadi, the defendants, founded the Mabna Institute in approximately 2013 to assist Iranian universities and scientific and research organizations in stealing access to non-Iranian scientific resources.  In furtherance of its mission, the Mabna Institute employed, contracted, and affiliated itself with hackers-for-hire and other contract personnel to conduct cyber intrusions to steal academic data, intellectual property, email inboxes and other proprietary data, including Abdollah Karima, aka Vahid Karima, Mostafa Sadeghi, Seyed Ali Mirkarimi, Mohammed Reza Sabahi, Roozbeh Sabahi, Abuzar Gohari Moqadam, and Sajjad Tahmasebi.  The Mabna Institute contracted with both Iranian governmental and private entities to conduct hacking activities on their behalf, and specifically conducted the university spearphishing campaign on behalf of the IRGC.  The Mabna Institute is located at Tehran, Sheikh Bahaii Shomali, Koucheh Dawazdeh Metri Sevom, Plak 14, Vahed 2, Code Posti 1995873351.

University Hacking Campaign

The Mabna Institute, through the activities of the defendants, targeted more than 100,000 accounts of professors around the world.  They successfully compromised approximately 8,000 professor email accounts across 144 U.S.-based universities, and 176 universities located in foreign countries, including Australia, Canada, China, Denmark, Finland, Germany, Ireland, Israel, Italy, Japan, Malaysia, Netherlands, Norway, Poland, Singapore, South Korea, Spain, Sweden, Switzerland, Turkey and the United Kingdom.  The campaign started in approximately 2013, continued through at least December 2017, and broadly targeted all types of academic data and intellectual property from the systems of compromised universities.  Through the course of the conspiracy, U.S.-based universities spent more than approximately $3.4 billion to procure and access such data and intellectual property.

The members of the conspiracy used stolen account credentials to obtain unauthorized access to victim professor accounts, which they used to steal research, and other academic data and documents, including, among other things, academic journals, theses, dissertations, and electronic books.  The defendants targeted data across all fields of research and academic disciplines, including science and technology, engineering, social sciences, medical, and other professional fields.  The defendants stole at least approximately 31.5 terabytes of academic data and intellectual property, which they exfiltrated to servers outside the United States that were under the control of members of the conspiracy.

In addition to stealing academic data and login credentials for the benefit of the Government of Iran, the defendants also sold the stolen data through two websites, Megapaper.ir (Megapaper) and Gigapaper.ir (Gigapaper).  Megapaper was operated by Falinoos Company, a company controlled by Abdollah Karima, aka Vahid Karima, the defendant, and Gigapaper was affiliated with Karima.  Megapaper sold stolen academic resources to customers within Iran, including Iran-based public universities and institutions, and Gigapaper sold a service to customers within Iran whereby purchasing customers could use compromised university professor accounts to directly access the online library systems of particular U.S.-based and foreign universities.

Accompanying Mitigation Efforts

Prior to the unsealing of the Indictment, the FBI provided foreign law enforcement partners with detailed information regarding victims within their jurisdictions, so that victims in foreign countries could be notified and foreign partners could assist in remediation efforts.

Also, in connection with the unsealing of the Indictment, today the FBI provided private sector partners detailed information regarding the vulnerabilities targeted and the intrusion vectors used by the Mabna Institute in their campaign against private sector companies.  This information will assist the public in its network defense and mitigation efforts.

*                *                *

 

Rafatnejad, Mohammadi, Karima, Sadeghi, Mirkarimi, Sabahi, Sabahi, Moqadam and Tahmasebi was each is charged with one count of conspiracy to commit computer intrusions, which carries a maximum sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; two counts of unauthorized access of a computer, each of which carries a maximum sentence of five years in prison; two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the assigned judge.

Mr. Rosenstein and Mr. Berman praised the outstanding investigative work of the FBI, the assistance of the United Kingdom’s National Crime Agency (NCA), and the support of the OFAC.  Assistant U.S. Attorneys Timothy T. Howard, Jonathan Cohen and Richard Cooper are in charge of the prosecution, with assistance provided by Trial Attorneys Heather Alpino and Jason McCullough of the National Security Division’s Counterintelligence and Export Control Section.

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

For the U.S. Department of Treasury’s press release announcing corresponding sanctions click here.

Rod J. Rosenstein, the Deputy Attorney General of the United States, Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), and John C. Demers, Assistant Attorney General for National Security, announced today the unsealing of an indictment charging GHOLAMREZA RAFATNEJAD, EHSAN MOHAMMADI, ABDOLLAH KARIMA, a/k/a “Vahid Karima,” MOSTAFA SADEGHI, SEYED ALI MIRKARIMI, MOHAMMED REZA SABAHI, ROOZBEH SABAHI, ABUZAR GOHARI MOQADAM, and SAJJAD TAHMASEBI.  The defendants were each leaders, contractors, associates, hackers-for-hire, and affiliates of the Mabna Institute, an Iran-based company that was responsible for a coordinated campaign of cyber intrusions that began in at least 2013 into computer systems belonging to 144 U.S.-based universities, 176 universities across 21 foreign countries, 47 domestic and foreign private sector companies, the United States Department of Labor, the Federal Energy Regulatory Commission, the State of Hawaii, the State of Indiana, the United Nations, and the United Nations Children’s Fund.  Through the activities of the defendants, the Mabna Institute conducted these intrusions to steal over 30 terabytes of academic data and intellectual property from universities, and email inboxes from employees of victim private sector companies, government victims, and non-governmental organizations.  The defendants conducted many of these intrusions on behalf of the Islamic Republic of Iran’s (“Iran”) Islamic Revolutionary Guard Corps (“IRGC”), one of several entities within the government of Iran responsible for gathering intelligence, as well as other Iranian government clients.  In addition to these criminal charges, today the Department of Treasury’s Office of Foreign Assets Control (OFAC) designated the Mabna Institute and the nine defendants for sanctions for the malicious cyber-enabled activity outlined in the Indictment.

Deputy Attorney General Rod J. Rosenstein said:  “These nine Iranian nationals allegedly stole more than 31 terabytes of documents and data from more than 140 American universities, 30 American companies, five American government agencies, and also more than 176 universities in 21 foreign countries.  For many of these intrusions, the defendants acted at the behest of the Iranian government and, specifically, the Iranian Revolutionary Guard Corps.  The Department of Justice will aggressively investigate and prosecute hostile actors who attempt to profit from America’s ideas by infiltrating our computer systems and stealing intellectual property.  This case is important because it will disrupt the defendants’ hacking operations and deter similar crimes.”

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Today, in one of the largest state-sponsored hacking campaigns ever prosecuted by the Department of Justice, we have unmasked criminals who normally hide behind the ones and zeros of computer code.  As alleged, this massive and brazen cyber-assault on the computer systems of hundreds of universities in 22 countries, including the United States, and dozens of private sector companies and governmental organizations was conducted on behalf of Iran’s Islamic Revolutionary Guard.  The hackers targeted innovations and intellectual property from our country’s greatest minds.  These defendants are now fugitives from American justice, no longer free to travel outside Iran without risk of arrest.  The only way they will see the outside world is through their computer screens, but stripped of their greatest asset – anonymity.”     

FBI Assistant Director William F. Sweeney Jr. said:  “The numbers alone in this case are staggering, over 300 universities and 47 private sector companies both here in the United States and abroad were targeted to gain unauthorized access to online accounts and steal data.  An estimated 30 terabytes was removed from universities’ accounts since this attack began, which is roughly equivalent of 8 billion double-sided pages of text.  It is hard to quantify the value on the research and information that was taken from victims but it is estimated to be in the billions of dollars. The nine Iranians indicted today now find themselves wanted by the FBI and our partner law enforcement agencies around the globe – and like other cyber criminals they will soon learn their ability to freely move was just limited to the virtual world only.” 

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

Background on the Mabna Institute

GHOLAMREZA RAFATNEJAD and EHSAN MOHAMMADI, the defendants, founded the Mabna Institute in approximately 2013 to assist Iranian universities and scientific and research organizations in stealing access to non-Iranian scientific resources.  In furtherance of its mission, the Mabna Institute employed, contracted, and affiliated itself with hackers-for-hire and other contract personnel to conduct cyber intrusions to steal academic data, intellectual property, email inboxes and other proprietary data, including ABDOLLAH KARIMA, a/k/a “Vahid Karima,” MOSTAFA SADEGHI, SEYED ALI MIRKARIMI, MOHAMMED REZA SABAHI, ROOZBEH SABAHI, ABUZAR GOHARI MOQADAM, and SAJJAD TAHMASEBI.  The Mabna Institute contracted with both Iranian governmental and private entities to conduct hacking activities on their behalf, and specifically conducted the university spearphishing campaign on behalf of the IRGC.  The Mabna Institute is located at Tehran, Sheikh Bahaii Shomali, Koucheh Dawazdeh Metri Sevom, Plak 14, Vahed 2, Code Posti 1995873351.

University Hacking Campaign

The Mabna Institute, through the activities of the defendants, targeted over 100,000 accounts of professors around the world.  They successfully compromised approximately 8,000 professor email accounts across 144 U.S.-based universities, and 176 universities located in foreign countries, including Australia, Canada, China, Denmark, Finland, Germany, Ireland, Israel, Italy, Japan, Malaysia, Netherlands, Norway, Poland, Singapore, South Korea, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.  The campaign started in approximately 2013, and has continued through at least December 2017, and broadly targeted all types of academic data and intellectual property from the systems of compromised universities, including, among other things, academic journals, theses, dissertations, and electronic books.  Through the course of the conspiracy, U.S.-based universities spent over approximately $3.4 billion to procure and access such data and intellectual property.

The hacking campaign against universities was conducted across multiple stages.  First, the defendants conducted online reconnaissance of university professors, including to determine these professors’ research interests and the academic articles they had published.  Second, using the information collected during the reconnaissance phase, the defendants created and sent spearphishing emails to targeted professors, which were personalized and created so as to appear to be sent from a professor at another university.  In general, those spearphishing emails indicated that the purported sender had read an article the victim professor had recently published, and expressed an interest in several other articles, with links to those additional articles included in the spearphishing email.  If the targeted professor clicked on certain links in the email, the professor would be directed to a malicious Internet domain named to appear confusingly similar to the authentic domain of the recipient professor’s university.  The malicious domain contained a webpage designed to appear to be the login webpage for the victim professor’s university.  It was the defendants’ intent that the victim professor would be led to believe that he or she had inadvertently been logged out of his or her university’s computer system, prompting the victim professor for his or her login credentials.  If a professor then entered his or her login credentials, those credentials were then logged and captured by the hackers.

Finally, the members of the conspiracy used stolen account credentials to obtain unauthorized access to victim professor accounts, through which they then exfiltrated intellectual property, research, and other academic data and documents from the systems of compromised universities, including, among other things, academic journals, theses, dissertations, and electronic books.  The defendants targeted data across all fields of research and academic disciplines, including science and technology, engineering, social sciences, medical, and other professional fields.  At least approximately 31.5 terabytes of academic data and intellectual property from compromised universities were stolen and exfiltrated to servers under the control of members of the conspiracy located in countries outside the United States.

In addition to stealing academic data and login credentials for university professors for the benefit of the Government of Iran, the defendants also sold the stolen data through two websites, Megapaper.ir (“Megapaper”) and Gigapaper.ir (“Gigapaper”).  Megapaper was operated by Falinoos Company (“Falinoos”), a company controlled by ABDOLLAH KARIMA, a/k/a “Vahid Karima,” the defendant, and Gigapaper was affiliated with KARIMA.  Megapaper sold stolen academic resources to customers within Iran, including Iran-based public universities and institutions, and Gigapaper sold a service to customers within Iran whereby purchasing customers could use compromised university professor accounts to directly access the online library systems of particular United States-based and foreign universities.

Prior to the unsealing of the Indictment, the FBI provided foreign law enforcement partners with detailed information regarding victims within their jurisdictions, so that victims in foreign countries could be notified and so that foreign partners could assist in remediation efforts.

Private Sector Hacking Victims

In addition to targeting and compromising universities, the Mabna Institute defendants targeted and compromised employee email accounts for at least approximately 36 United States-based private companies, and at least approximately 11 private companies based in Germany, Italy, Switzerland, Sweden, and the United Kingdom, and exfiltrated entire email mailboxes from compromised employees’ accounts.  Among the United States-based private sector victims were three academic publishers, two media and entertainment companies, one law firm, 11 technology companies, five consulting firms, four marketing firms, two banking and/or investment firms, two online car sales companies, one healthcare company, one employee benefits company, one industrial machinery company, one biotechnology company, one food and beverage company, and one stock images company.

In order to compromise accounts of private sector victims, members of the conspiracy used a technique known as “password spraying,” whereby they first collected lists of names and email accounts associated with the intended victim company through open source Internet searches.  Then, they attempted to gain access to those accounts with commonly-used passwords, such as frequently used default passwords, in order to attempt to obtain unauthorized access to as many accounts as possible.  Once they obtained access to the victim accounts, members of the conspiracy, among other things, exfiltrated entire email mailboxes from the victims.  In addition, in many cases, the defendants established automated forwarding rules for compromised accounts that would prospectively forward new outgoing and incoming email messages from the compromised accounts to email accounts controlled by the conspiracy.

U.S. Government and NGO Hacking Victims

In the same time period as the university and private sector hacking campaigns described above, the Mabna Institute also conducted a computer hacking campaign against various governmental and non-governmental organizations within the United States.  During the course of that campaign, employee login credentials were stolen by members of the conspiracy through password spraying.  Among the victims were the following, all based in the United States:  the United States Department of Labor, the Federal Energy Regulatory Commission, the State of Hawaii, the State of Indiana, the State of Indiana Department of Education, the United Nations, and the United Nations Children’s Fund.  As with private sector victims, the defendants targeted for theft email inboxes of employees of these organizations.

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GHOLAMREZA RAFATNEJAD, EHSAN MOHAMMADI, ABDOLLAH KARIMA, a/k/a “Vahid Karima,” MOSTAFA SADEGHI, SEYED ALI MIRKARIMI, MOHAMMED REZA SABAHI, ROOZBEH SABAHI, ABUZAR GOHARI MOQADAM, and SAJJAD TAHMASEBI, the defendants, are citizens and residents of Iran.  Each is charged with one count of conspiracy to commit computer intrusions, which carries a maximum sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; two counts of unauthorized access of a computer, each of which carries a maximum sentence of five years in prison; two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the assigned judge.

Mr. Berman praised the outstanding investigative work of the FBI, the assistance of the United Kingdom’s National Crime Agency (NCA), and the support of the OFAC.  The case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant United States Attorneys Timothy T. Howard, Jonathan Cohen, and Richard Cooper are in charge of the prosecution, with assistance provided by Heather Alpino and Jason McCullough of the National Security Division’s Counterintelligence and Export Control Section.

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

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Mark G. Peters, the Commissioner of the New York City Department of Investigation (“DOI”), announced the arrest of ERIC LUNA, an employee of the New York City Department of Youth and Community Development (“DYCD”), and IGOR GOLDSHTEYN, an employee of the New York City Fire Department (“FDNY”), for the theft of government funds and wire fraud.  GOLDSHTEYN was arrested at his residence in Staten Island, New York, and LUNA was arrested outside the Manhattan headquarters of the DYCD.  Both men were presented today before Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court.   

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Eric Luna and Igor Goldshteyn, New York City employees, betrayed the trust placed in them and abused their powers to make purchases for their respective City agencies.  They allegedly sold over the internet hundreds of mobile phones intended for official use, and pocketed the proceeds of those illegal sales.  Now, thanks to DOI investigators, Luna and Goldshteyn are charged with serious crimes.”

Commissioner Mark G. Peters said:  “Abusing their authority to make purchases for their agencies, these defendants acted in separate schemes to greedily line their own pockets, by stealing hundreds of mobile devices meant for City use and selling them on online marketplaces for hundreds of thousands of dollars in profit, according to the charges. DOI thanks the United States Attorney for the Southern District and Verizon Wireless for their assistance and partnership in this investigation.”

According to the allegations in the Complaints[1]:

In April 2017, DOI investigators discovered that from at least in or about August 2015, hundreds of mobile telecommunications devices purchased by the FDNY and DYCD for use by agency personnel were being improperly diverted by LUNA and GOLDSHTEYN.  Both the FDNY and DYCD receive federal funds – the FDNY through grants from the Department of Homeland Security, and DYCD through grants from the Department of Housing and Urban Development.  LUNA and GOLDSHTEYN offered the devices for sale through third-party vendors over the internet.  The proceeds from the sales of these mobile devices went into LUNA’s and GOLDSHTEYN’s personal checking and online accounts.  

*                *                *

In separate complaints, GOLDSHTEYN, 42, of Staten Island, New York, and LUNA, 35, of Bronx, New York, are each charged with the theft of federal funds, and wire fraud.  The maximum statutory penalty for the theft of federal funds is 10 years in prison, and the maximum statutory penalty for wire fraud is 20 years in prison.  The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.

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

 

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[1] As the introductory phrase signifies, the entirety of the texts 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.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that AVINOAM LUZON was sentenced this afternoon to 110 months in prison for selling fentanyl that resulted in the overdose death of Gabriel Tramiel, 32, of Manhattan, on October 22, 2016.  LUZON was sentenced today by United States District Judge Lewis A. Kaplan.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Today, Avinoam Luzon was sentenced to prison for selling a lethal dose of fentanyl that took the life of Gabriel Tramiel.  He committed this crime as a trained medical doctor and while enrolled as a graduate student in public health at a university in Manhattan.  Luzon’s conduct helped fuel the nation’s most serious health crisis, the opioid abuse epidemic.”

According to the Information and other documents filed in federal court, as well as statements made during LUZON’s plea proceeding and sentencing:

In the early morning hours of October 23, 2016, Gabriel Tramiel was found dead by his wife.  The medical examiner determined the cause of Tramiel’s death to be acute fentanyl intoxication.  The night before, LUZON and Tramiel met at a drug store on the Upper West Side of Manhattan where LUZON sold Tramiel a quantity of fentanyl.  Tramiel then purchased a nasal spray bottle, and the two went to a nearby restaurant where Tramiel used the drugs in the restaurant bathroom.  When Tramiel returned to the table, he was visibly inebriated from the effects of the narcotic.  Shortly thereafter, surveillance video recovered from the apartment building where Tramiel died showed Tramiel inhaling the contents of the nasal spray bottle in the elevator.  Tramiel died a few hours later.  When LUZON learned of Tramiel’s death the following morning, LUZON called Tramiel’s wife and said he “might be responsible” but claimed he had given Tramiel “liquid morphine.”  The contents of the nasal spray bottle used by Tramiel were tested and determined to be fentanyl.  Law enforcement later searched LUZON’s dorm room and recovered over 160 grams of fentanyl and numerous nasal spray bottles. 

In November 2017, LUZON pled guilty before United States Magistrate Judge Debra Freeman.  At his guilty plea, LUZON admitted that he had intentionally and knowingly distributed fentanyl to Tramiel on October 22, 2016.  Tramiel was found dead the next morning.

*                *                *

In addition to the prison term, LUZON, 33, of Mountain View, California, was sentenced to three years of supervised release.

Mr. Berman praised the outstanding work of the New York City Police Department.  Mr. Berman also thanked the New York State Department of Health’s Bureau of Narcotics Enforcement for their assistance with this investigation.

This case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorneys Karin Portlock and Matthew Podolsky are in charge of the case.

Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced today that EVETTE MERCED, a Staff Sergeant in the New York Army National Guard, was sentenced to 36 months in prison, and her husband, DARRYL HARRISON, a Sergeant First Class in the New York Army National Guard, was sentenced to 33 months in prison, for leading a scheme designed to fraudulently obtain recruiting bonuses intended to reward those who legitimately recruited soldiers to the Army National Guard.  MERCED and HARRISON pled guilty on June 16, 2017, before U.S. Magistrate Judge James C. Francis IV to conspiracy to commit theft of government funds and aggravated identity theft.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “While most join the military to serve their country, Evette Merced and Darryl Harrison enriched themselves by fraudulently obtaining recruiting bonuses.  Today, they were sentenced to prison for defrauding the military and American taxpayers.”

According to documents filed in this case and statements made in related court proceedings:

In September 2005, the Army National Guard established a recruiting bonus program, referred to as the Guard Recruiting Assistance Program (G-RAP), administered by a private company, Document and Packaging Broker, Inc. (Docupak).  The G-RAP was designed to offer referral bonus payments to Army National Guard soldiers not otherwise involved in Army National Guard recruitment efforts for civilians the soldiers successfully convinced to serve in the Army National Guard.  A participating soldier, also known as a Recruiting Assistant (“RA”), could receive up to $2,000 in bonus payments for referring another individual to join.  To participate in the program, a soldier was required to establish an online account in his or her name to record the referral and recruitment efforts.  The RA would input the personal identifying information of each recruit into the account.  Based on certain milestones achieved by the referred soldier, a participating soldier could then receive payment through direct deposit into the participating soldier’s designated bank account.  Soldiers who were themselves serving as paid recruiters for the Army National Guard as part of the National Guard’s standard recruitment program were not eligible to participate in the G-RAP or to receive a referral bonus payment, as the G-RAP was intended to be a supplement to the National Guard’s standard recruiting program.   

Beginning in 2007, MERCED and HARRISON abused their positions as members of the Army National Guard then serving as full-time salaried recruiters for the Army National Guard by providing the personal identifying information of potential soldiers to various RAs in exchange for thousands of dollars in kickbacks.  The RAs then used their respective online RA accounts to falsely claim that they were responsible for referring those soldiers to the New York Army National Guard.  After making those false claims, those RAs received referral bonus payments totaling more than $77,000 from the G-RAP, and kicked back a significant portion of those payments to MERCED and HARRISON. 

*              *             *  

In addition to their prison terms, MERCED, 47, and HARRISON, 53, both of Charlotte, North Carolina, were each sentenced to two years of supervised release.  MERCED was also ordered to pay forfeiture in the amount of $28,000 and restitution in the amount of $77,000.  HARRISON was ordered to pay forfeiture in the amount of $10,250 and restitution in the amount of $77,000. 

Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the Army Criminal Investigation Command. 

This case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorney Robert L. Boone is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that COLLYER GOODMAN, a/k/a “West,” was sentenced to 10 years in prison for his role in supplying at least 14 other drug dealers with cocaine and crack cocaine in Middletown, New York.  GOODMAN was convicted after a jury trial in October of conspiracy to distribute cocaine and crack cocaine.  Numerous other members of the conspiracy, including Juan Beniquez, a/k/a “Johnny,” have already been sentenced.  Beniquez was sentenced to 9 years in prison.  U.S. District Court Judge Cathy Seibel imposed the sentences.  Several other members of the conspiracy, including Oscar Boria Jr., and Damon Wheeler, are expected to be sentenced this spring. 

U.S. Attorney Geoffrey S. Berman said:  “Collyer Goodman has persistently sold crack and cocaine in Middletown and elsewhere at great risk to the community.  Today’s sentence shows that drug dealers will neither profit from nor get away with their crimes.”

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

Collyer Goodman supplied packages of redistribution quantities of cocaine to co-conspirators Oscar Boria Jr., Damon Wheeler, and Juan Beniquez, among others.  All of those individuals were drug dealers with their own customers who repackaged the cocaine, in some cases cooked it into crack cocaine, and resold it to mid-level and street-level dealers and to drug users.  Goodman sometimes also sold crack cocaine directly to his customers.

Over the period from 2015 through August 2016, Goodman distributed in excess of five kilograms of cocaine and 28 grams of crack cocaine.

*                *                *

In addition to the prison sentence, GOODMAN was sentenced to five years of supervised release and ordered to forfeit $226,260. 

Mr. Berman praised the work of the Federal Bureau of Investigation Hudson Valley Safe Streets Task Force and the Middletown Police Department.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), 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 that TINA BATISTA, a former school safety agent with the New York City Police Department (“NYPD”), was sentenced today to one year and one day in prison for conspiring to distribute and possess with intent to distribute more than one kilogram of heroin in Manhattan.  BATISTA pled guilty to the Indictment on November 15, 2017.  U.S. District Judge Alison J. Nathan imposed today’s sentence. 

BATISTA’s co-defendants, Lazaro Mallet and Ruben Luciano De Los Santos have also pled guilty to participating in the conspiracy.  On February 23, 2018, De Los Santos was sentenced to two years in prison by Judge Nathan.  Mallet, who is facing a mandatory minimum sentence of 10 years in prison, is scheduled to be sentenced by Judge Nathan on April 27, 2018.   

U.S. Attorney Geoffrey S. Berman said:  “Tina Batista was an NYPD school safety agent entrusted with safeguarding our city’s schools and its students.  But she violated that trust by committing a serious narcotics crime involving a large quantity of heroin and lying to law enforcement about her crimes.  Thanks to the outstanding investigative work of the DEA and the NYPD, Batista will serve time in prison for her crimes.”        

DEA Special Agent in Charge James J. Hunt said:  “Honest men and women in law enforcement work hard to keep our community safe from all perils, drugs included.   And through this investigation, the New York Drug Enforcement Task Force identified a member of law enforcement who put this city at risk by using her shield to facilitate drug trafficking.”         

Superintendent George P. Beach II said,  “Thanks to the hard work and partnership of law enforcement at the federal, state and local level, we have put three people behind bars who were supplying dangerous drugs to our communities. Today’s sentencing involved a school safety agent, who was trusted to keep our children safe, and was also conspiring to distribute heroin. We will continue to aggressively pursue criminals who profit from illegal drugs at the expense of the safety and security of our neighborhoods.”

According to the Complaint, the Indictment, other documents filed in this case:

On December 20, 2016, BATISTA, who was then a school safety agent with the NYPD, drove her boyfriend Mallet and De Los Santos from the Bronx to the vicinity of 115th Street and Fifth Avenue in Manhattan where Mallet had arranged to sell more than a kilogram of heroin to a confidential source working in an undercover capacity with federal law enforcement (the “CS”).  The car that BATISTA drove had a visible NYPD parking permit with the NYPD logo indicating that the vehicle was associated with law enforcement.  BATISTA had obtained the parking permit through her employment with the NYPD.

After the CS entered BATISTA’s vehicle and spoke with Mallet about the heroin in Spanish and in English, Mallet provided the CS with a Gucci shopping bag containing approximately 1.3 kilograms of heroin.  BATISTA, Mallet, and De Los Santos then waited in the area for approximately one hour to receive payment for the heroin until they were arrested.

During an interview that was conducted after BATISTA’s arrest, BATISTA lied multiple times to federal agents, falsely stating, in substance and in part, that she was not aware of any drugs, that the Gucci bag only contained sandals, and that she did not speak Spanish.

BATISTA had also previously conducted unauthorized inquiries in NYPD databases at the request of Mallet using a supervisor’s security code.

After her arrest in this case, BATISTA’s employment with the NYPD was terminated.

*          *         *

In addition to the prison sentence, BATISTA, 37, of the Bronx, was sentenced to two years of supervised release.

Mr. Berman praised the outstanding investigative work of the New York Drug Enforcement Task Force, which comprises agents and officers of the DEA, the NYPD, and the NYSP.    

This case is being handled by the Office’s Narcotics Unit.  Assistant U.S. Attorney Sagar K. Ravi is in charge of the prosecution.

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and 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 today of an Indictment in Manhattan federal court charging five Manhattan doctors, GORDON FREEDMAN, JEFFREY GOLDSTEIN, TODD SCHLIFSTEIN, DIALECTI VOUDOURIS, and ALEXANDRU BURDUCEA, with participating in a scheme to receive bribes and kickbacks in the form of fees for sham educational programs (“Speaker Programs”) from a pharmaceutical company (“Pharma Company-1”) in exchange for prescribing millions of dollars’ worth of a potent fentanyl-based spray manufactured by Pharma Company-1 (the “Fentanyl Spray”), among other offenses.  FREEDMAN, GOLDSTEIN, SCHLIFSTEIN, VOUDOURIS, and BURDUCEA were arrested this morning.  All are expected to be presented before U.S. Magistrate Judge Sarah Netburn in Manhattan this afternoon.

Also unsealed today were the guilty pleas of two former Pharma Company-1 employees, Jonathan Roper and Fernando Serrano, in connection with their participation in the bribery and kickback scheme.  Both Roper and Serrano are cooperating with the Government. 

Manhattan U.S. Attorney Geoffrey S. Berman said:  “These prominent doctors swore a solemn oath to place their patients’ care above all else.  Instead, they engaged in a malignant scheme to prescribe Fentanyl, a dangerous and potentially fatal narcotic 50 to 100 times more potent than morphine, in exchange for bribes in the form of speaker fees. Payments from pharmaceutical companies should not influence how doctors prescribe --- especially when a potent and dangerous drug like Fentanyl is involved.  This scheme to use their patients as an instrument for profit has resulted in the indictment of five physicians.”    

FBI Assistant Director-in-Charge William F. Sweeney Jr. said:  “A substance as powerful as Fentanyl should be prescribed based only on doctors’ own independent medical judgment. In this case, as alleged, a series of doctors were convinced to push aside their ethical obligations and prescribe a drug for profit to patients who turned to them for help. Doctors and medical professionals everywhere should be reminded of the faith and trust placed upon them, and that the health and safety of their patients is not for sale.”

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

The Fentanyl Spray

The Fentanyl Spray, which is manufactured by Pharma Company-1, is a powerful painkiller that is approximately 50 to 100 times more potent than morphine.  The FDA approved the Fentanyl Spray only for the management of breakthrough pain in cancer patients.  Prescriptions of the Fentanyl Spray typically cost thousands of dollars each month, and Medicare and Medicaid, as well as commercial insurers, reimbursed prescriptions written by the defendants.

The Speaker Program Bribery and Kickback Scheme

Pharma Company-1 launched a “Speakers Bureau” in or about August 2012.  While the Speakers Bureau was purportedly aimed at educating other practitioners about the Fentanyl Spray, in reality Pharma Company-1 used its Speakers Bureau to induce the doctors to prescribe large volumes of the Fentanyl Spray by paying them Speaker Program fees. 

Speakers were supposed to conduct a slide presentation for other health care practitioners regarding the Fentanyl Spray at each Speaker Program.  In reality, many of the Speaker Programs led by the defendants were predominantly social affairs where no educational presentation about the Fentanyl Spray occurred.  Attendance sign-in sheets for the Speaker Programs were frequently forged by adding the names and signatures of health care practitioners who had not actually been present.

Freedman’s Participation in the Scheme

FREEDMAN was a doctor certified in pain management and anesthesiology who owned a private pain management office on Manhattan’s Upper East Side.  FREEDMAN, who was also an Associate Clinical Professor at a large hospital in Manhattan (“Hospital-1”), received approximately $308,600 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray. 

In March 2013, a Regional Sales Manager for Pharma Company-1 sent an email to FREEDMAN informing him that he would receive more Speaker Programs in the coming months because Pharma Company-1 wanted prescriptions of the Fentanyl Spray to increase, and urging FREEDMAN to put more patients on the Fentanyl Spray.  FREEDMAN responded, in part, “Got it,” and significantly increased his Fentanyl Spray prescriptions in the following months, during which he received approximately $33,600 in Speaker Program fees. 

In 2014, FREEDMAN’s prescriptions of the Fentanyl Spray rose even further, and he was the fourth-highest prescriber of the Fentanyl Spray nationally in the final quarter of 2014, accounting for approximately $1,132,287 in overall net sales of the Fentanyl Spray in that quarter.  During 2014, FREEDMAN was the highest-paid Pharma Company-1 Speaker in the nation, receiving approximately $143,000. 

GOLDSTEIN’s Participation in the Scheme

GOLDSTEIN was a doctor of osteopathic medicine who owned a private medical office on the Upper East Side.  GOLDSTEIN received approximately $196,000 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray.  After GOLDSTEIN began prescribing a competitor painkiller, Pharma Company-1 pressured him to stop doing so and switch patients to the Fentanyl Spray, which GOLDSTEIN did.

In 2014, GOLDSTEIN was approximately the fifth-highest-paid Pharma Company-1 Speaker nationally. He was the sixth-highest prescriber of the Fentanyl Spray in the last quarter of 2014, accounting for approximately $809,275 in overall net sales of the Fentanyl Spray in that quarter.

SCHLIFSTEIN’s Participation in the Scheme

SCHLIFSTEIN was a doctor certified in physical medicine and rehabilitation who co-owned with GOLDSTEIN a private medical office on the Upper East Side.  SCHLIFSTEIN, who also worked as an attending physiatrist and consulting physician at two other Manhattan hospitals, received approximately $127,100 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray. 

In or about October 2013, SCHLIFSTEIN expressed an interest in becoming a Speaker for Pharma Company-1.  So a senior Pharma Company-1 executive traveled to New York, and took SCHLIFSTEIN, GOLDSTEIN, and others, to a Manhattan strip club where Pharma Company-1 spent approximately $4,100 on a private room, alcoholic drinks, and “lap dances” for SCHLIFSTEIN and GOLDSTEIN.  In the month following that outing and SCHLIFSTEIN’s nomination as a Speaker, SCHLIFSTEIN’s Fentanyl Spray prescriptions increased substantially.    

In late 2014, Pharma Company-1 significantly decreased SCHLIFSTEIN’s Speaker Programs in order to send a message to SCHLIFSTEIN that he would need to prescribe larger volumes of the Fentanyl Spray.  In response, SCHLIFSTEIN repeatedly requested more Speaker Programs.  Pharma Company-1 told SCHLIFSTEIN it would assign him more Speaker Programs only if he prescribed larger volumes of the Fentanyl Spray.  SCHLIFSTEIN’s Fentanyl Spray prescriptions then increased substantially, and Pharma Company-1 rewarded him with more Speaker Programs.

By the end of the second quarter of 2015, SCHLIFSTEIN was approximately the 19th-highest prescriber of the Fentanyl Spray nationally, accounting for approximately $593,373 in net sales in that quarter.

VOUDOURIS’s Participation in the Scheme

VOUDOURIS was a doctor specializing in oncology and hematology who worked at a private medical office on the Upper East Side, and was an Assistant Clinical Professor at Hospital-1.  VOUDOURIS received approximately $119,400 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray. 

In September 2014, VOUDOURIS, who had recently been nominated as a Speaker, had dinner with, among others, several Pharma Company-1 executives, as well as Roper and Serrano.  During the dinner, the Pharma Company-1 Vice-President of Sales told VOUDOURIS that he wanted her to prescribe the Fentanyl Spray to one new patient every day, and that VOUDOURIS would be allocated Speaker Programs if she continued prescribing the Fentanyl Spray.  

In the week that followed the dinner, VOUDOURIS did not prescribe what Pharma Company-1 viewed as an adequate quantity of the Fentanyl Spray.  Roper and Serrano met with VOUDOURIS and told her that Pharma Company-1 expected VOUDOURIS to write more Fentanyl Spray prescriptions.  In the months that followed the dinner and this conversation, VOUDOURIS’s Fentanyl Spray prescriptions rose significantly. 

By the end of the first quarter of 2015, VOUDOURIS was approximately the 10th-highest prescriber of the Fentanyl Spray nationally, accounting for total net sales of the Fentanyl Spray of approximately $581,500 in that quarter.

BURDUCEA’s Participation in the Scheme

BURDUCEA was a doctor certified in pain management and anesthesiology, was an Assistant Professor of anesthesiology at Hospital-1, and practiced at an anesthesiology and pain management office associated with Hospital-1.  BURDUCEA received approximately $68,400 in Speaker Program fees from Pharma Company-1 in exchange for prescribing large volumes of the Fentanyl Spray.  In addition, Pharma Company-1 hired BURDUCEA’s then-girlfriend, now wife (“CC-1”), to work as BURDUCEA’s sales representative and paid her in large part based on the volume of Fentanyl Spray prescribed by her assigned doctors, including BURDUCEA. 

By the end of the end of the second quarter of 2015, BURDUCEA was approximately the 14th-highest prescriber of the Fentanyl Spray nationally, accounting for total net sales of the Fentanyl Spray of approximately $621,345 in that quarter.

*          *          *

A chart containing the names, ages, residences, charges, and maximum penalties for the defendants is attached.  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 a judge.

Mr. Berman praised the investigative work of the FBI, and thanked HHS OIG and the New York City Police Department for their participation in the investigation.

The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorneys Noah Solowiejczyk and David Abramowicz are in charge of the prosecution; paralegal specialist Jake Sidransky provided additional support.

 

Defendant

Age

Hometown

Charges (Potential Maximum Term of Imprisonment)

GORDON FREEDMAN

 

57

Mount Kisco, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), and Honest services fraud conspiracy (20 years)

 

JEFFREY GOLDSTEIN

 

48

New Rochelle, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), Honest services fraud conspiracy (20 years), Aggravated identity theft (2 years mandatory), Wrongful disclosure of individually identifiable health information (1 year)

 

TODD SCHLIFSTEIN

 

49

New York, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), Honest services fraud conspiracy (20 years), Wrongful disclosure of individually identifiable health information (1 year)

DIALECTI VOUDOURIS

47

Long Island City, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), Honest services fraud conspiracy (20 years), Aggravated identity theft (2 years mandatory), Wrongful disclosure of individually identifiable health information (1 year)

ALEXANDRU BURDUCEA

41

Little Neck, NY

Anti-Kickback conspiracy (5 years), Violation of the Anti-Kickback Statute (5 years), Honest services fraud conspiracy (20 years), False statements to federal officers (5 years), Wrongful disclosure of individually identifiable health information (1 year)

 

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that MICHAEL SCRONIC, a former hedge fund manager, pleaded guilty today to securities fraud before U.S. District Judge Cathy Seibel.  SCRONIC admitted as part of his plea that he had defrauded the 45 investors in his Scronic Macro Fund of more than $22 million.

Manhattan U.S. Attorney Geoffrey S. Berman stated:  “Michael Scronic lied about the performance of his investment fund, telling investors that his returns were as high as 13 percent.  But, in fact, his fund was wholly unsuccessful, resulting in millions of dollars in losses.  And what wasn’t lost in the market, Scronic used for his own personal expenses.  Now he faces significant time in prison for his fraud.”

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

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

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

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

*          *         *

SCRONIC, 46, of Manhattan, New York, pleaded guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

SCRONIC is scheduled to be sentenced by Judge Seibel on July 9, 2018, at 11:00 a.m.

Mr. Berman praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission for their assistance in the investigation.

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

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that BRANDON JONES, a/k/a “Brandon McGeer,” a/k/a “Brandon Jones-McGeer,” was convicted on all counts charged in a three-count Indictment of passing fictitious government obligations, wire fraud, and conspiracy to commit wire fraud, following an eight-day jury trial presided over by U.S. District Judge Alison J. Nathan.

Manhattan U.S. Attorney Geoffrey Berman stated:  “As a unanimous jury found today, Brandon Jones went to great lengths to portray himself as a government official.  In doing so, he manipulated businesses to obtain goods and services through fake ‘government’ documents and requests.  Now that Jones has been convicted of his crimes, there will be nothing fictitious about the prison time he faces.” 

According to the evidence introduced at trial:

In early January 2016, the United States Postal Inspection Service undertook an investigation into JONES, the self-proclaimed “Commissioner” of the “Office of the Commissioner, an IGO.”  The “Office of the Commissioner” was an organization JONES created, which purported to be an “Intergovernmental Organization,” and which he claimed was funded by the federal government in doing work with the United Nations.  In his role as the “Commissioner,” JONES obtained hundreds of thousands of dollars in goods and services using fake government purchase orders, government transportation requests, and other government payment documents.  Among many others, JONES defrauded a former Ambassador to the United Nations, who JONES lured into providing consulting services while working to secure funding for a humanitarian aid project that, due to JONES’ fraud, never came to fruition.  JONES also obtained hundreds of thousands of dollars in free hotel stays, airline tickets, and other goods and services.

*                *             *

JONES, 35, of Philadelphia, stands convicted of one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of passing fictitious obligations, which carries a maximum sentence of 25 years in prison.  The three charges each also carry a maximum fine of $250,000, 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 defendant will be determined by the judge.

In March 2015, an investigation undertaken with the United States Secret Service into one of JONES’s employees, an alleged “Deputy Commissioner” of the “Office of the Commissioner, an IGO,” Sandra Zongo, led to Zongo being charged with one count of impersonating an official or employee of the United States government; one count of wire fraud; one count of passing fictitious obligations; and one count of attempted benefits fraud.  Zongo was convicted in January 2017 of all charges after a jury trial before U.S. Senior District Judge Kimba M. Wood.      

Mr. Berman praised the outstanding investigative work of the USPIS.  He added that the investigation is continuing.

The prosecution is being handled by the Office’s General Crimes Unit.  Assistant United States Attorneys Kiersten A. Fletcher, Jessica K. Fender, and Tara M. La Morte are in charge of the prosecution; paralegal specialists Jenny Satinover and Haley Zovickian provided additional support.

The USPIS encourages the public to report any information it has regarding JONES or the Office of the Commissioner at 1-877-876-2455.