Southern District of New York
Press releases recorded for this federal judicial district.
Nine Iranians Charged with Conducting Massive Cyber Theft Campaign on Behalf of the Islamic Revolutionary Guard CorpsRead the Press Release
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.
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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.
Nine Iranians Charged with Conducting Massive Cyber Theft Campaign on Behalf of the Islamic Revolutionary Guard CorpsRead the Press Release
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.
[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.
Two New York City Employees Charged in Manhattan Federal Court with Theft of Government Funds and Wire FraudRead the Press Release
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.
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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.
[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.
Doctor Sentenced to More Than 9 Years in Prison for Selling Fentanyl That Resulted in Manhattan Man’s Overdose DeathRead the Press Release
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.
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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.
Two New York National Guard Soldiers Sentenced to Prison for Fraudulent Recruitment Bonus SchemeRead the Press Release
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.
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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.
Middletown Cocaine and Crack Dealer Sentenced to 10 Years in PrisonRead the Press Release
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.
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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.
NYPD School Safety Agent Sentenced to Prison for Conspiracy to Distribute HeroinRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent in Charge of the New York 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.
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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.
Five Manhattan Doctors Indicted for Accepting Bribes and Kickbacks from A Pharmaceutical Company in Exchange for Prescribing Powerful Fentanyl NarcoticRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing 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.
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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)
[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.
Westchester Hedge Fund Manager Pleads Guilty to Securities FraudRead the Press Release
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.
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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.
Self-Proclaimed “Commissioner” of the Office of the Commissioner, “His Excellency” Brandon Jones, Guilty of All ChargesRead the Press Release
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.
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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.
Leader of Mount Vernon Street Gang Sentenced in White Plains Federal Court to 40 Years in Prison for Racketeering Offenses Including Two Murders of Rival Gang MembersRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JAMEL UPSON, a/k/a “Flynt,” was sentenced today to 40 years in prison for racketeering offenses arising out of his participation in the “Boss Playa Family” or “BPF” street gang based in Mount Vernon, New York, including the murders of two members of a rival gang in 2008. UPSON pled guilty to a Superseding Information on October 5, 2017, before U.S. District Judge Kenneth M. Karas, who imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Jamel Upson lead a gang that posed a grave threat to the people of Mount Vernon. Upson has admitted to personally slaying two rival gang members in the course of gang activities. Jamel Upson’s disturbing indifference to the lives of others has been met with a fittingly stiff prison sentence that will take him off the streets for 40 years.”
According to the Superseding Information, the Indictment, other documents filed in this case, and statements made during court proceedings:
UPSON was the leader of the BPF street gang, a criminal enterprise that operated in the Mount Vernon area from approximately 2007 to 2014. BPF members sought to increase the gang’s power, protect and expand its territory, and enrich its members through an array of criminal activities, including shootings, assaults, larcenies, arson, and the distribution of cocaine and marijuana. In particular, BPF sought to assert its dominance over rival Mount Vernon street gangs, principally the “Goonies” gang, through acts of violence including numerous shootings.
On two occasions in 2008, UPSON murdered a member of the rival Goonies gang. In the early morning hours of August 13, 2008, UPSON shot and killed 19-year-old Shomari Knox, a Goonies member. UPSON, on foot, ambushed a vehicle driven by Knox near Ninth Avenue and Third Street in Mount Vernon. UPSON fired at the vehicle with a handgun, striking Knox in the neck. When first responders arrived at the scene, Knox was dead.
On December 14, 2008, UPSON shot and killed 21-year-old Cory Cabiness, another member of the Goonies. UPSON, on foot and armed with a handgun, ambushed Cabiness near Seventh Avenue and Third Street in Mount Vernon, as Cabiness was walking home from a nightclub in the early morning hours. UPSON shot Cabiness in the head and leg. Cabiness died from the gunshot wounds about two weeks later.
In addition to the murders of Knox and Cabiness, UPSON committed several other shootings targeting members and associates of the rival Goonies gang between 2008 and 2010. UPSON, along with multiple other BPF members, also carried out a theft of jewelry valued at over $40,000 from a mall in Bergen County, New Jersey in January of 2009.
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In addition to the prison term, UPSON, 33, of Mount Vernon, was sentenced to three of supervised release.
To date, five other defendants in this case have been sentenced following guilty pleas to racketeering conspiracy and other offenses arising out of their participation in the BPF gang. Samuel Carlos, 29, of Mount Vernon, was sentenced to three years in prison and three years of supervised release; Tyrone McCallum, 30, of Mount Vernon, was sentenced to 105 months in prison and five years of supervised release; Portland Ramseur, 33, of Mount Vernon, was sentenced to seven years in prison and three years of supervised release; Gorham Valentine, 33, of Mount Vernon, was sentenced to four years in prison and three years of supervised release; and Jason White, 34, of Mount Vernon, was sentenced to 160 months in prison and five years of supervised release.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation and the Mount Vernon Police Department. He also thanked the Westchester County District Attorney’s Office for its participation and support in this case.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney George D. Turner is in charge of the prosecution.
Former Siemens Executive Pleads Guilty to Role in $100 Million Foreign Bribery SchemeRead the Press Release
The former Technical Manager of the Major Projects division of Siemens Business Services GmbH & Co. OGH (SBS), a wholly owned subsidiary of Siemens Aktiengesellschaft (Siemens AG), pleaded guilty today to conspiring to pay tens of millions of dollars in bribes to Argentine government officials to secure, implement and enforce a $1 billion contract to create national identity cards.
Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman of the Southern District of New York and Assistant Director in Charge Andrew W. Vale of the FBI’s Washington, D.C. Field Office made the announcement.
Eberhard Reichert, 78, of Munich, Germany, was employed by Siemens AG from 1964 until 2001. Beginning in approximately 1990, Reichert was the Technical Manager of the Major Projects division of SBS. Reichert pleaded guilty today in the Southern District of New York to one count of conspiring to violate the anti-bribery, internal controls and books and records provisions of the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud. Reichert was arraigned last December on a three-count indictment filed in December 2011 charging him and seven other individuals. He will be sentenced by U.S. District Judge Denise L. Cote of the Southern District of New York, who accepted his plea today.
“Far too often, companies pay bribes as part of their business plan, upsetting what should be a level playing field and harming companies that play by the rules,” said Acting Assistant Attorney General Cronan. “In this case, one of the largest public companies in the world paid staggeringly large bribes to officials at the uppermost levels of the government of Argentina to secure a billion-dollar contract. Eberhard Reichert’s conviction demonstrates the Criminal Division’s commitment to bringing both companies and corrupt individuals to justice, wherever they may reside and regardless of how long they may attempt to avoid arrest.”
“Eberhard Reichert tried to sidestep laws designed to root corruption out of the government contracting process,” said U.S. Attorney Berman. “As he admitted in Manhattan federal court today, Reichert helped to conceal tens of millions of dollars in bribes that were paid to unfairly secure a lucrative contract from the Argentine government. Today’s plea should be a warning to others that our office is committed to bringing corrupt criminals to justice, no matter how long they run from the law.”
In 1998, the government of Argentina awarded to a subsidiary of Siemens AG a contract worth approximately $1 billion to create state-of-the-art national identity cards (the Documento Nacional de Identidad or DNI project). The Argentine government terminated the DNI project in 2001. In connection with his guilty plea, Reichert admitted that he engaged in a decade-long scheme to pay tens of millions of dollars in bribes to Argentine government officials in connection with the DNI project, which was worth more than $1 billion to Siemens. Reichert admitted that he and his co-conspirators concealed the illicit payments through various means, including using shell companies associated with intermediaries to disguise and launder the funds.
Reichert also admitted that he used a $27 million contract between a Siemens entity and a company called MFast Consulting AG that purported to be for consulting services to conceal bribes to Argentine officials.
In 2008, Siemens AG, a German entity, pleaded guilty to violating the books and records provisions of the FCPA; Siemens Argentina pleaded guilty to conspiracy to violate the books and records provisions of the FCPA; and Siemens Bangladesh Limited and Siemens S.A. – Venezuela each pleaded guilty to conspiracy to violate the anti-bribery and books and records provisions of the FCPA. As part of the plea agreements, the Siemens companies paid a total of $450 million in criminal fines. The U.S. Securities and Exchange Commission (SEC) also brought a civil case against Siemens AG alleging that it violated the anti-bribery, books and records and internal controls provisions of the FCPA. In resolving the SEC case, Siemens AG paid $350 million in disgorgement of wrongful profits. The Munich Public Prosecutor’s Office also resolved similar charges with Siemens AG that resulted in a fine of $800 million. In August 2009, following these corporate resolutions with U.S. and German authorities, Siemens AG withdrew its claim to the more than $200 million arbitration award.
The FBI’s International Corruption Squad in Washington, D.C. is investigating the case. The case is being prosecuted by Trial Attorney Michael Culhane Harper of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Niketh Velamoor of the Southern District of New York. The Criminal Division’s Office of International Affairs, the SEC, Croatian authorities and the Munich Public Prosecutor’s Office also provided significant assistance.
The Criminal Division’s Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
Former Siemens Executive Pleads Guilty in Manhattan Federal Court to $100 Million Foreign Bribery SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and John P. Cronan, the Acting Assistant Attorney General of the Justice Department’s Criminal Division, announced that EBERHARD REICHERT, a former executive at Siemens Aktiengesellschaft (“Siemens AG”), pled guilty today in Manhattan federal court to conspiring to pay $100 million in bribes to senior Argentine government officials to secure, implement, and enforce a $1 billion contract between Siemens and the Argentine government to produce national identity cards. He is the second individual defendant to plead guilty in the massive scheme. REICHERT, a citizen of Germany, pled guilty to one count of conspiring to violate the Foreign Corrupt Practices Act’s anti-bribery, internal controls, and books and records provisions, and to commit wire fraud, before U.S. District Judge Denise L. Cote. His guilty plea followed his September arrest in Croatia and subsequent voluntary extradition to the United States in December.
Manhattan U.S. Attorney Geoffrey S. Berman stated: “Eberhard Reichert tried to sidestep laws designed to root corruption out of the government contracting process. As he admitted in Manhattan federal court today, Reichert helped to conceal tens of millions of dollars in bribes that were paid to unfairly secure a lucrative contract from the Argentine government. Today’s plea should be a warning to others that our office is committed to bringing corrupt criminals to justice, no matter how long they run from the law.”
Acting Assistant Attorney General John P. Cronan said: “Far too often, companies pay bribes as part of their business plan, upsetting what should be a level playing field and harming companies that play by the rules. In this case, one of the largest public companies in the world paid staggeringly large bribes to officials at the uppermost levels of the government of Argentina to secure a billion-dollar contract. Eberhard Reichert’s conviction demonstrates the Criminal Division’s commitment to bringing both companies and corrupt individuals to justice, wherever they may reside and regardless of how long they may attempt to avoid arrest.”
According to the Indictment and statements made at today’s plea hearing:
REICHERT was employed by Siemens AGfrom 1964 until 2001. Beginning in approximately 1990, REICHERT was the Technical Manager of the Major Projects division of Siemens Business Services GmbH & Co. OGH (“SBS”), a subsidiary of Siemens AG.
In 1994, the government of Argentina issued a tender for bids to replace an existing system of manually created national identity booklets with state-of-the-art national identity cards (the DNI project). The value of the DNI project was $1 billion. In order to obtain the project, Siemens committed to paying nearly $100 million in bribes to sitting officials of the Argentine government, members of the opposition party, and candidates for office who were likely to come to power during the performance of the project. In 1998, the Argentine government awarded the DNI project to Siemens, and REICHERT was one of the individuals in charge of the project.
REICHERT and his co-conspirators worked to approve and conceal the illicit payments through various means, including by funneling the payments through shell companies associated with bribe recipients to disguise the true purpose for the payments. REICHERT also admitted to approving a $27 million sham contract between a Siemens entity and a company called MFast Consulting AG that was being used as a vehicle to funnel money to Carlos Sergi, REICHERT’s co-defendant, for bribe payments. Several years after leaving the company, SERGI initiated a Swiss arbitration to collect on the contract. REICHERT testified on SERGI’s behalf and, ultimately, REICHERT’s co-conspirators caused Siemens to pay an additional $8.8 million in 2007 to settle the arbitration.
In May 1999, the Argentine government suspended the DNI project, due in part to instability of the local economy and an impending presidential election. When a new government took power in Argentina, and in the hopes of getting the DNI project resumed, members of the conspiracy committed Siemens to paying additional bribes to the incoming officials, and to satisfying existing obligations to officials of the outgoing administration, many of whom remained in influential positions within the government. When the project was terminated in May 2001, members of the conspiracy nevertheless sought to recover the anticipated proceeds of the DNI project by causing Siemens AG to file a fraudulent arbitration claim against the Republic of Argentina in Washington, D.C. Members of the conspiracy also continued the bribe scheme, in part to prevent disclosure of the bribery in the arbitration but also to ensure Siemens’ ability to secure future government contracts in Argentina and elsewhere in the region. In four installments between 2002 and 2007, members of the conspiracy allegedly caused Siemens to pay approximately $28 million in further satisfaction of the obligations.
Siemens’s corrupt procurement of the DNI project was not exposed during the lifespan of the conspiracy, and, in February 2007, the arbitration tribunal in Washington sided with Siemens AG, awarding the company nearly $220 million on its DNI claims, plus interest. The company, however, never claimed the award money, because after Siemens reached corporate resolutions with the U.S. and German authorities, Siemens AG agreed to forego its right to receive the award.
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REICHERT, 78, of Munich, Germany, 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.
Andres Truppel, who was charged in the same indictment, pleaded guilty in 2015 and is yet to be sentenced. Charges against the other individuals named in the indictment – Uriel Sharef, Herbert Steffen, Ulrich Bock, Stephan Signer, Carlos Sergi, and Miguel Czysch – are pending. The charges and allegations against these other individuals are merely accusations, and these defendants are presumed innocent unless and until proven guilty.
On December 15, 2008, Siemens AG and Siemens Argentina entered guilty pleas to criminal violations of the FCPA. As part of the plea agreement, Siemens AG and Siemens Argentina agreed to pay fines of $448.5 million and $500,000, respectively.
Mr. Berman praised the Federal Bureau of Investigation’s New York and Washington D.C. Field Offices for their work on the case.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Niketh Velamoor and Trial Attorney Michael Culhane Harper of the Criminal Division’s Fraud Section are in charge of the prosecution.
Brooklyn Man Pleads Guilty to Producing Child PornographyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID SHALAM pleaded guilty today before U.S. Magistrate Judge Sarah Netburn to a Superseding Information charging him with the production of child pornography. U.S. District Court Judge Alvin K. Hellerstein will impose sentencing.
Manhattan U.S. Attorney Geoffrey S. Berman said: “David Shalam paid a woman to perform sex acts via internet video, eventually further urging her to engage in acts of sexual molestation of her own minor children of six and eight years old. Depraved acts such as this can have profoundly damaging effects on victims, the aftermath often leading to years of suffering psychological torment and anguish. Today’s plea holds David Shalam accountable for these reprehensible acts.”
According to the allegations in the Superseding Information, and the Complaint filed on March 9, 2017:
Between April and December 2015, SHALAM paid a woman in Romania (referred to in the Complaint as “Jane Doe”) to participate in a series of live video chats over Skype, during which SHALAM directed Jane Doe to engage in specific sexually explicit conduct with her minor children, who at the time were approximately six and eight years old. SHALAM referred to Jane Doe’s real time sexual abuse of her children as “shows,” at least one of which SHALAM recorded.
In conjunction with Romanian authorities, the FBI recovered logs of instant messages between SHALAM and Jane Doe over Skype, during which SHALAM and Jane Doe discussed the kinds of sex acts SHALAM wanted to see performed, when the children would be home from school so that the “shows” could take place, and the cost of each “show.” SHALAM wired payments to Jane Doe through a Western Union branch in midtown, Manhattan, a few blocks from the office where SHALAM worked for a retail clothing company.
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SHALAM, 51, of Brooklyn, New York, pled guilty to one count of sexual exploitation of minors, which carries a mandatory minimum sentence of fifteen years in prison, and a maximum sentence of thirty years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the investigative work of the FBI.
This case is being handled by the Office’s General Crimes Unit. Assistant U.S. Attorneys Alison Moe and Mollie Bracewell are in charge of the prosecution.
Social Security Administration Security Guard Pleads Guilty to Creating A False Incident Report Omitting the Fact That the Guard Repeatedly Punched A VisitorRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that EDWIN CABAN, a former Protective Security Officer, pleaded guilty yesterday to creating a false incident report in which CABAN intentionally omitted the fact that CABAN had repeatedly punched a member of the public at a branch of the Social Security Administration (“SSA”), despite knowing that this omission was unlawful. CABAN pled guilty to a Superseding Indictment before U.S. District Court Judge Lorna G. Schofield, who will impose sentencing.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Protective Security Officers are charged with protecting those who enter federal facilities. But, as he admitted in court, Protective Security Officer Edwin Caban repeatedly punched a visitor and then filed a false incident report omitting that fact. Caban betrayed the public trust and violated the law.”
According to the allegations in the Superseding Indictment, to which CABAN pled guilty today as to Count Two, and the related Complaint in which he was originally charged on April 24, 2017:
The SSA has multiple branch offices located throughout New York City, where claimants may request SSA services and make inquiries regarding social security benefits and Social Security cards. One branch office is located at 123 William Street (the “123 William Office”), in Manhattan. The 123 William Office is staffed by two Protective Security Officers, who are employees of a contractor for the Federal Protective Service of the United States Department of Homeland Security. The 123 William Office has several surveillance cameras, which captured the incident.
The Incident
At approximately 12:37 p.m. on June 22, 2016, the victim (“Victim-1”) entered the 123 William Office, wheeling an elderly gentleman in a wheelchair into the reception area. CABAN attempted to move the wheelchair, which Victim-1 asked him not to do. After CABAN stepped away, Victim-1 withdrew a cellphone from his pocket. CABAN then walked back to Victim-1 and repeatedly accused him of taking a picture with his cellphone, which Victim-1 denied.
As recorded by security camera footage obtained from the SSA, CABAN at this point reached out toward Victim-1, and Victim-1 put both of his hands up in the air, with his palms facing CABAN. CABAN then took hold of Victim-1’s waist with both hands, pivoted, turned Victim-1 around, and then pushed Victim-1 backward toward the elevator bank. CABAN continued to push Victim-1 backward, toward a desk adjacent to the opening to the elevator bank, until Victim-1 fell backward over the desk. CABAN then took hold of Victim-1’s arms, and, as Victim-1 struggled to shake free of CABAN’s hold, CABAN took Victim-1 into the elevator bank.
After a brief struggle in the elevator bank, CABAN pushed Victim-1 up against a wall. Placing his left hand at the base of Victim-1’s throat, CABAN pinned Victim-1 against the wall. As Victim-1 stood there, not moving, with his hands up in the air in a gesture of surrender, CABAN punched Victim-1 four times in the chest and ribs. Victim-1 collapsed forward, and CABAN continued to hold on to Victim-1 as Victim-1 remained bent forward, clutching his abdomen.
At this point, CABAN’s partner, another protective security officer (“PSO-1”), arrived in the elevator bank from a back area of the office and approached CABAN and Victim-1. CABAN let go of Victim-1, who remained against the wall, not moving. As PSO-1 stood a few feet away, CABAN punched Victim-1 again in the chest. After several minutes passed, CABAN and PSO-1 escorted Victim-1 out of the elevator bank and back into the main floor area, back toward where the man in the wheelchair was waiting.
As a result of the attack, Victim-1 suffered bodily injuries, including fractured ribs, bruising, and physical pain.
Shortly after the incident, Victim-1 called 911 and two New York City Police Department officers responded. One of these officers (“Officer-1”) entered the 123 William Office and spoke with CABAN about Victim-1’s allegations. CABAN stated to Officer-1 that he put his hands on Victim-1 to remove him from the office, at which point Victim-1 “flopped” onto the desk, knocking things over. CABAN denied touching Victim-1 after that point and denied entering the elevator bank during the incident.
That same afternoon, CABAN placed a telephone call to an FPS reporting center, in which CABAN made an oral report about the incident. CABAN stated that there was “a disruptive client in here that needed to be escorted out;” he did not disclose that he struck Victim-1.
CABAN wrote and submitted a Security Incident Report. In that report, CABAN stated that, as he “attempted to guide [Victim-1] out” of the office, Victim-1 “yelled and jumped onto the security desk flairing [sic] arms and legs knocking equipment around.” CABAN then stated that he placed Victim-1 in an “arm bar” and “took him by the elevator banks,” that Victim-1 “tried to break [his] hold” at which point CABAN “grabbed him under his chin” and “mainta[ined] a hold of his arm.” CABAN stated that PSO-1 then arrived. CABAN reported no other use of force against Victim-1. In particular, nowhere in the report did CABAN state that he struck Victim-1.
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CABAN, 56, of Astoria, New York, pled guilty to one count of filing a false form, which carries a maximum sentence of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the investigative work of the FPS.
This case is being handled by the Office’s Public Corruption and Civil Rights Units. Assistant U.S. Attorneys Alison Moe and Jacob Lillywhite are in charge of the prosecution.
Manhattan U.S. Attorney Announces Arrest of NYPD Officer Charged with Heroin TraffickingRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent-in-Charge of the New York Division of the Drug Enforcement Administration (“DEA”), James P. O’Neill, Police Commissioner of the City of New York (“NYPD”), and George P. Beach II, the Superintendent of the New York State Police (“NYSP”), announced that YESSENIA JIMENEZ, a New York City Police Department Officer, and LUIS SOTO, were arrested and charged yesterday in Manhattan federal court with heroin trafficking and firearms offenses. JIMENEZ and SOTO were presented yesterday before Magistrate Judge Sarah Netburn.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Yessenia Jimenez, a New York City Police Department officer, along with Luis Soto, trafficked heroin in New York City, the city she took an oath to serve and protect, and used her police department service weapon to carry out her illegal activities. Thanks to the outstanding investigative work of the DEA, NYPD, and the New York State Police, Jimenez and Soto have been arrested and can no longer contribute to the opioid epidemic plaguing this city.”
DEA Special Agent-In-Charge James J. Hunt said: “Allegedly, this New York City Police officer and her co-defendant pushed heroin onto the streets at the same time that other law enforcement officers across the nation are fighting an opioid epidemic. I commend the men and women at the New York Drug Enforcement Task Force and Southern District of New York for their tireless efforts in dismantling drug trafficking crews throughout this city and nation.”
Commissioner James P. O’Neill said: “Cops are charged with enforcing the law, not breaking it. Today’s arrest—for serious allegations of trafficking heroin—are troubling.”
Superintendent George P. Beach II said: “The charges brought today against these two individuals are the direct result of the vigilant work done by our law enforcement partners at all levels. These partnerships are key when it comes to shutting down illegal drug trafficking operations, keeping dangerous drugs off of our streets, and stopping the heinous crimes that are associated with these activities. This sends a clear message that such crimes will not be tolerated especially when they are perpetuated by individuals who have been entrusted with enforcing and upholding the law. Such criminals will be prosecuted to the fullest.”
According to the allegations in the Complaint unsealed today in Manhattan federal court[[1]]:
Following a months’ long investigation into heroin trafficking, the DEA identified SOTO as an individual believed to traffic in kilogram quantities of heroin, and to collect narcotics proceeds. The investigation uncovered that SOTO was working with JIMENEZ, an NYPD officer, to carry out his drug trafficking activities. Following extensive surveillance and GPS tracking, the DEA, the NYPD, and the NYSP apprehended JIMENEZ and SOTO in possession of approximately $50,000, which represent proceeds from the sale of narcotics. JIMENEZ, who was not in uniform and was off duty, was carrying her loaded NYPD service firearm in her purse, alongside approximately $25,000 of the drug proceeds. Following the arrest, law enforcement agents obtained a search warrant for the defendants’ apartment and discovered approximately 250 grams of heroin.
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JIMENEZ, 31, of the Bronx, New York, and SOTO, 34, of the Bronx, New York, are each charged with one count of conspiracy to distribute at least 100 grams of heroin, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of five years in prison; one count of possession of at least 100 grams of heroin with intent to distribute, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of five years in prison; and one count of using and carrying a firearm in relation to their heroin trafficking, which carries a maximum sentence of life in prison and a mandatory minimum 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 investigative work of the DEA and NYPD in this investigation. He added that the investigation is continuing.
This case is being handled by the Office’s Narcotics Unit. Assistant U.S. Attorney Thane Rehn is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Dual Iranian-American Citizen Sentenced to 25 Years in Prison for Conspiring and Attempting to Acquire Surface-To-Air Missiles and Other Items for the Government of IranRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that REZA OLANGIAN, a dual citizen of the United States and Iran, was sentenced today to 25 years in federal prison, after being found guilty in November 2016, of conspiring and attempting to send surface-to-air missiles (“SAMs”) and military aircraft parts to the Government of Iran. OLANGIAN was arrested in Estonia on October 10, 2012, pursuant to a U.S. request for his provisional arrest, and he was extradited to the United States on March 26, 2013. OLANGIAN was convicted after a two-week jury trial before U.S. District Judge Loretta A. Preska, who imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Reza Olangian was convicted by a unanimous jury for attempting to assist the Iranian government in brokering deals for missiles capable of destroying aircraft from the ground. Olangian’s actions were in violation of critical international sanctions designed to protect our national security. Today he was sentenced to 25 years for his efforts to support a designated state-sponsor of terror in obtaining deadly military weapons and other items.”
According to the evidence presented during the trial:
In 2008, OLANGIAN worked with Iranian officials to obtain approximately 375 SAMs for use by the Iranian government. Ultimately, that missile deal was unsuccessful.
Beginning in early 2012, OLANGIAN worked to negotiate another, separate missile deal, this time with a confidential source (the “CS”), who was working with the Drug Enforcement Administration (“DEA”) and who purported to be a weapons and aircraft broker. From his base of operations in Tehran, and from approximately May 2012 through October 2012, OLANGIAN arranged for the purchase of “IGLA-S” SAMs and various aircraft components. During covertly recorded meetings in May 2012, and in subsequent recorded conversations and e-mails with the CS, OLANGIAN described in detail his plans for procuring the SAMs and aircraft parts and then smuggling them over land into Iran, from Afghanistan or from another neighboring country. OLANGIAN also expressed his interest in purchasing numerous other types of weapons and military parts for the Iranian government, including the so-called “S-300” missile defense system and Russian-made naval vessels.
OLANGIAN’s 2012 negotiations included his participation in a videoconference with the CS, during which OLANGIAN remotely inspected a missile that the CS presented as a sample of the larger quantity of the SAMs that OLANGIAN sought to purchase. After inspecting the sample missile and inquiring about its specifications, OLANGIAN stated that he would want “at least 200 . . . minimum 200” of such SAMs. In his communications with the CS, OLANGIAN also indicated that he was arranging for a missile expert to inspect and test the SAMs.
At the same time that he was negotiating with the CS, OLANGIAN was also working with other individuals, both inside and outside Iran, to acquire numerous other items for the Iranian government and Iran-based entities. For example, OLANGIAN worked with individuals and entities in China, Russia, and Europe to acquire commercial aircraft for use by Iranian airlines. In one of these commercial aircraft deals, OLANGIAN and his coconspirators planned to purchase aircraft for $80 million and sell them to an Iranian company for $110 million.
During October 2012, OLANGIAN traveled to Estonia in connection with the SAMs deal and in anticipation of later traveling to Russia in connection with one of the aircraft deals. He was arrested in Estonia, and following his arrest, he was interviewed by U.S. law enforcement agents. OLANGIAN stated, among other things, that he had been working with Iranian government officials, that the SAMs he had arranged to purchase were being obtained for the Iranian government, and that the aircraft parts he attempted to acquire were to be used in Iranian military aircraft.
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In addition to today’s sentence, OLANGIAN, 57, was sentenced to 5 years of supervised release.
Mr. Berman praised the outstanding investigative work of the DEA’s Special Operations Division, Bilateral Investigations Unit. Mr. Berman also thanked the DEA’s Copenhagen Country Office, as well as the U.S. Department of Justice’s Office of International Affairs and its National Security Division.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorney Sean S. Buckley is in charge of the prosecution, with assistance from Robert E. Wallace of the National Security Division’s Counterintelligence and Export Control Section.
U.S. Attorney Announces Suit Against the MTA and New York City Transit Authority for Failure to Make A Bronx Subway Station Accessible After A Full RenovationRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that the United States has filed a Complaint-in-Intervention (the “Complaint”) in a lawsuit, Bronx Independent Living Services v. Metropolitan Transit Authority, filed against the Metropolitan Transit Authority (“MTA”) and the New York City Transit Authority (“NYCTA”) to remedy violations of Title II of the Americans with Disabilities Act of 1990 (the “ADA”). The United States’ Complaint alleges that the MTA and NYCTA violated the ADA when they altered the Middletown Road subway station on the number 6 line in the Bronx without insuring that the station was rendered readily accessible to and usable by individuals with disabilities, including individuals who use wheelchairs, to the maximum extent feasible. Due to the failure to comply with the ADA, the Federal Transit Administration (“FTA”) concluded that it would not provide any funding for the cost of the renovation of the Middletown Road station. The Complaint seeks declaratory and injunctive relief requiring MTA and NYCTA to install elevators at the Middletown Road station.
U.S. Attorney Geoffrey S. Berman said: “There is no justification for public entities to ignore the requirements of the ADA 28 years after its passage. The subway system is a vital part of New York City’s transportation system, and when a subway station undergoes a complete renovation, MTA and NYCTA must comply with its obligations to make such stations accessible to the maximum extent feasible.”
The United States’ Complaint alleges that MTA and NYCTA violated the ADA by failing to install an elevator at the Middletown Road subway station serving the Pelham Bay neighborhood in the Bronx, despite spending more than $27 million on renovations of the station. The renovations included replacing floors, walls, ceilings, and stairs leading to the street and platform. Prior to beginning construction, the FTA and the U.S. Department of Transportation corresponded with MTA and NYCTA about their obligation to install an elevator at the station unless the MTA and NYCTA could demonstrate that it was technically infeasible to do so. While that dialogue continued, and after the FTA had informed NYCTA that NYCTA’s analysis of the feasibility of installing an elevator was insufficient, MTA and NYCTA completed the renovation without installing an elevator and sought reimbursement from FTA for the cost of the renovation. FTA ultimately concluded that it would have been technically feasible for MTA and NYCTA to install one or more elevators at the station. As a result of MTA’s and NYCTA’s failure to install an elevator at the Middletown Road station, individuals with mobility impairments, including individuals who use wheelchairs, are unable to access the station.
Mr. Berman thanked the FTA for its assistance with this matter.
This case is being handled by the Office’s Civil Rights Unit. Assistant U.S. Attorneys Lara K. Eshkenazi and Ellen Blain are in charge of the case.
Statement of U.S. Attorney Geoffrey S. Berman on the Conviction of Joseph Percoco, Former Executive Aide and Campaign Manager to N.Y. Governor, and A Co-DefendantRead the Press Release
“Joseph Percoco was found guilty of taking over $300,000 in cash bribes by selling something priceless that was not his to sell – the sacred obligation to honestly and faithfully serve the citizens of New York. As every schoolchild knows, but he corruptly chose to disregard, government officials who sell their influence to select insiders violate the basic tenets of a democracy. We will continue relentlessly to bring to justice those public officials who violate their oaths by engaging in this especially offensive misconduct.”
New Jersey Elementary School Teacher’s Assistant Pleads Guilty to Illegally Distributing OxycodoneRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced that GARY DIMICK, a teacher’s assistant at an elementary school in Fort Lee, New Jersey, pled guilty today before U.S. District Court Judge Deborah A. Batts to distribution and possession with intent to distribute oxycodone.
U.S. Attorney Geoffrey S. Berman said: “Gary Dimick admitted in federal court today that he sold tens of thousands of highly addictive opiates to others over a period of seven years. He now faces serious prison time for his actions.”
HSI Special Agent-in-Charge Angel M. Melendez said: “The addiction to pain killers is a nationwide epidemic and this individual sold more than 25,000 oxycodone tablets over seven years, preying on the vulnerabilities of others. Dimick made his acts more egregious by selling these highly addictive pills on the school grounds where he was employed. It is time that he face the consequences of his actions.”
According to the allegations in the Information and other documents filed in federal court, as well as statements made in the public record:
Oxycodone is a highly addictive, narcotic opioid that may be prescribed by medical professionals to treat severe and chronic pain conditions. Because of its addictive properties, however, users can abuse oxycodone, and prescriptions are in high demand, and have significant cash value to drug dealers. From approximately 2010 to 2017, DIMICK, while employed as a teacher’s assistant at an elementary school in Fort Lee, New Jersey, sold more than 25,000 30-milligram oxycodone tablets for approximately $20 to $30 per tablet. DIMICK made some of his oxycodone sales on the grounds of the elementary school where he is employed.
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DIMICK, 33, of North Bergen, NJ, pled guilty to one count of possession with intent to distribute oxycodone, which carries a maximum sentence of 20 years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding investigative work of HSI and the NYPD.
This case is being prosecuted by the Office’s General Crimes Unit. Assistant U.S. Attorneys Kiersten A. Fletcher and Robert B. Sobelman are in charge of the prosecution.
Joseph Percoco, Former Executive Aide and Campaign Manager to N.Y. Governor, Convicted of Accepting More Than $300,000 in BribesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that JOSEPH PERCOCO, the former Executive Deputy Secretary to the Governor of the State of New York, was convicted of soliciting and accepting more than $315,000 in bribes in return for taking official state action to benefit energy company Competitive Power Ventures (“CPV”) and Syracuse-based real estate developer COR Development (“COR”) after an eight-week trial. STEVEN AIELLO, a COR executive, was also convicted of bribery conspiracy.
U.S. Attorney Geoff Berman said: “Joseph Percoco was found guilty of taking over $300,000 in cash bribes by selling something priceless that was not his to sell – the sacred obligation to honestly and faithfully serve the citizens of New York. As every schoolchild knows, but he corruptly chose to disregard, government officials who sell their influence to select insiders violate the basic tenets of a democracy. We will continue relentlessly to bring to justice those public officials who violate their oaths by engaging in this especially offensive misconduct.”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
PERCOCO, who served as the Executive Deputy Secretary to the Governor between January 2012 and mid-2014, and again in 2015, abused his official position and extensive influence within the Executive Branch of New York State (the “State”) by seeking and accepting bribe payments from executives at companies that were seeking benefits and business from the State, in exchange for PERCOCO’s use of his official authority and influence to benefit those companies.
PERCOCO solicited the bribe payments from executives at two clients of cooperating witness Todd Howe – CPV and COR – both of which had retained Howe as a consultant to help them obtain official State action. In email correspondence between PERCOCO and Howe, PERCOCO and Howe referred to the bribe payments as “ziti,” a reference to a term for money used by the characters in the television show “The Sopranos.”
Bribes from CPV
PERCOCO, Howe, and others conspired for PERCOCO to receive more than $287,000 in bribe payments in exchange for PERCOCO’s official assistance for CPV on an as-needed basis.
State action was critical to CPV’s business. Starting as early as 2010, CPV provided personal benefits to PERCOCO, including expensive meals and a Hamptons fishing trip, in an effort to cultivate access to PERCOCO. In response to CPV’s requests for official State assistance, PERCOCO, who was experiencing financial difficulties at the time, requested that CPV hire his then-unemployed wife. In or around the end of 2012, CPV executive Peter Galbraith Kelly Jr. created a position for PERCOCO’s wife that paid approximately $90,000 per year while requiring PERCOCO’s wife to do little work. In exchange for these payments, PERCOCO agreed to use his official position and influence, and did in fact use his official position and influence, to help CPV with specific State matters as the opportunities arose.
Among other things, PERCOCO agreed to use his official position and influence to assist the CPV’s efforts to obtain (i) a valuable agreement from the State allowing CPV to buy lower-cost emissions credits in New York for a power plant proposed to be built in New Jersey and (ii) a lucrative long-term power purchase agreement with the State guaranteeing a buyer for the power to be produced at a power plant proposed to be built in New York, which was expected to save CPV approximately $100 million in development costs.
CPV’s payments to PERCOCO’s wife were concealed in various ways to hide their true source. For example, monthly payments to PERCOCO and his wife were made through a consultant who worked for CPV in order to disguise the source of the payments. For his part, PERCOCO concealed the criminal scheme by failing to include CPV as the source of payments on his State-mandated financial disclosure forms.
Bribes from AIELLO and the Syracuse Developer
Beginning in early 2014, PERCOCO was also paid bribes totaling approximately $35,000 from COR. These bribe payments were orchestrated by AIELLO, the COR president. AIELLO arranged for the payment of these bribes in exchange for PERCOCO’s official assistance for COR on an as-needed basis.
Specifically, PERCOCO agreed to, and did, take official action for the benefit of COR to (a) reverse an adverse decision by the Empire State Development Corporation, which is the State’s main economic development agency, that would have required COR to enter into a costly labor peace agreement, (b) free up a backlog of more than $14 million in State funds that had already been awarded to COR but were delayed in payment, and (c) secure a substantial pay raise for AIELLO’s son, who worked in the Executive Chamber.
To disguise the nature and source of the bribe payments, COR’s bribes to PERCOCO were funneled through bank accounts and a shell company set up by Howe.
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The jury was deadlocked on the charges against Kelly. Joseph Gerardi, a COR executive, was acquitted of all charges.
PERCOCO is scheduled to be sentenced on June 11, 2018, and AIELLO is scheduled to be sentenced on June 14, 2018. Both defendants will be sentenced by U.S. District Judge Valerie E. Caproni, who presided over the trial.
A chart containing the names, ages, residences, counts of conviction, 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 the judge.
U.S. Attorney Berman praised the work of the Buffalo Field Office of the Federal Bureau of Investigation and New York Office of the Internal Revenue Service-Criminal Investigation, which jointly conducted this investigation with investigators from the U.S. Attorney’s Office. Mr. Berman also thanked the New York State Attorney General’s Office.
This case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Janis Echenberg, Robert Boone, David Zhou, and Matthew Podolsky are in charge of the prosecution; paralegal specialists Sylvia Lee and Aashna Rao provided additional support.
DEFENDANT
AGE
RESIDENCE
CONVICTED
CHARGE(S)
MAXIMUM SENTENCE(S)
JOSEPH PERCOCO
47
South Salem, NY
Conspiracy to Commit Honest Services Fraud, (Count Three and Four)
Solicitation of Bribes and Gratuities,
(Counts Five)
20 years each count
10 years
PETER GALBRAITH KELLY, JR.
53
Canterbury, CT
STEVEN AIELLO
58
Fayetteville, NY
Conspiracy to Commit Honest Services Fraud
20 years
JOSEPH GERARDI
57
Fayetteville, NY
Virginia Man Sentenced to Two Years in Prison for Scheme to Manipulate the Market for Fitbit StockRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ROBERT WALTER MURRAY was sentenced today to 24 months in prison for manipulating the market for the stock of Fitbit, Inc. (“Fitbit”), by filing a sham tender offer with the Securities and Exchange Commission (“SEC”) in November 2016. MURRAY’s sham tender offer resulted in a temporary change in Fitbit’s market capitalization of over $100 million. MURRAY pled guilty on November 7, 2017, before U.S. District Judge Katherine B. Forrest, who imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “Robert Murray manipulated the market in Fitbit stock by making a false filing with the SEC about a tender offer. Hoping to take a quick profit from trading in Fitbit stock options, Murray’s attempt to game the system has instead earned him a federal prison sentence.”
According to allegations in a Complaint and Indictment filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:
On November 8, 2016, MURRAY, falsely purporting to be an officer at a China-based entity called ABM Capital, created an account on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (or “EDGAR”) system. The next day, MURRAY submitted a filing on EDGAR that reported that ABM Capital had offered to purchase Fitbit for approximately $12.50 a share, a significant premium to the price of Fitbit stock at the time. This filing was made public on November 10, 2016, and, when it was, Fitbit’s stock temporarily increased in response to the news. While Fitbit’s stock had closed at approximately $8.55 a share on November 9, 2016, it reached a high of approximately $9.27 per share, with significantly increased trading volume, after MURRAY’s fake tender offer filing was made public. This resulted in a temporary increase of Fitbit’s market capitalization of around $100 million. The tender offer that MURRAY filed, however, was entirely fictitious, and was instead meant only to increase the value of options in Fitbit stock that MURRAY had purchased just days earlier.
MURRAY also took significant steps to hide his connection to the tender offer filing. For example, he created a separate email account to register with the SEC and to file the sham tender offer, and took efforts to disguise his IP address when accessing that account.
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In addition to the prison sentence, MURRAY, 25, of Chesapeake, Virginia, was sentenced to two years of supervised release. The Court further ordered MURRAY to forfeit a sum of $3,914.08.
Mr. Berman praised the exceptional work of the Office’s criminal investigators, and thanked the U.S. Postal Inspection Service and the Securities and Exchange Commission for their assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Robert Allen is in charge of the prosecution.
Former Cocoa Company Executives Plead Guilty in Manhattan Federal Court to Defrauding Lenders of $400 MillionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that PETER G. JOHNSON and PETER B. JOHNSON pled guilty today to defrauding a group of lenders (the “Banks”) by submitting false “borrowing base” reports designed to secure and maintain a $400 million line of credit for their cocoa trading company, Transmar Commodity Group Ltd. (“Transmar” or the “Company”). The defendants each pled guilty before U.S. District Judge Jed S. Rakoff.
U.S. Attorney Geoffrey S. Berman said: “As they admitted today, Peter G. and Peter B. Johnson, executives of a cocoa company that supplied some of the world’s largest chocolate companies, defrauded lenders out of hundreds of millions of dollars by continuously and repeatedly lying about the collateral According to the allegations in the Indictment and other documents filed in federal court, as well as statements made in public court proceedings:
Transmar was a closely held, family-run cocoa commodity trading company. PETER G. JOHNSON was Transmar’s president and chief executive officer. PETER B. JOHNSON, the son of PETER G. JOHNSON, was an officer of Transmar, as well as responsible for the operations of Transmar affiliate Euromar Commodities GMBH (“Euromar”).
From at least 2014 through at least December 2016, Transmar maintained a credit facility from the Banks that varied from approximately $250 million to approximately $400 million. To secure and maintain these hundreds of millions of dollars in credit, PETER G. JOHNSON, PETER B. JOHNSON, and others schemed to misrepresent material information about Transmar’s finances, making it appear that Transmar had far more credit-eligible collateral than it actually had.
The scheme centered on periodic “borrowing base” reports (“BB Reports”) that the Banks required Transmar to submit, sometimes as frequently as weekly, as a condition to continued credit extension. The BB Reports were supposed to accurately reflect and quantify those portions of Transmar’s collateral that qualified for financing under the terms of credit agreements between Transmar and the Banks.
Beginning no later than 2014, Transmar employees, acting with the knowledge and at the direction of PETER G. JOHNSON and PETER B. JOHNSON, manipulated the BB Reports and related documents to give the false impression that Transmar had sufficient eligible collateral to support the amount of credit the Banks were extending. The manipulation involved, among other devices, counting inventory that Transmar had already sold or was otherwise ineligible for inclusion, counting accounts receivable for which Transmar had already received payment, recording fake accounts receivable, and arranging “circle” transactions through which amenable third-party intermediaries agreed to “buy” goods from Transmar with Transmar’s own money, funneled to the third parties through Euromar.
The defendants acknowledged their manipulative devices in internal Transmar correspondence. For example, on or about July 31, 2015, PETER G. JOHNSON sent an email to PETER B. JOHNSON discussing the use of “multiple circles” or “borrowing games” in connection with the BB Reports, and suggesting that Transmar “clean the book of these in due course and before they get questioned and exposed.” On June 14, 2016, PETER B. JOHNSON responded to an email regarding a circle transaction by lamenting, “this is the problem with fake circles and non-existent last minute intermediary deals, there is never a payment to settle them.” PETER B. JOHNSON then suggested that Transmar “reissue the invoices (ie change the date of issuance” because “[t]here isn’t going to be an audit [of the BB Report] for a year and its [sic] causing huge problems to keep writing up fictitious contracts and paperwork.”
Transmar filed for bankruptcy in December 2016. At that time, the Company owed the Banks approximately $360 million.
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PETER G. JOHNSON, 69, of Harding Township, New Jersey, PETER B. JOHNSON, 38, of Morristown, New Jersey, each pled guilty to one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution. That offense carries a maximum prison term of 30 years. 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.
The defendants are scheduled to be sentenced by Judge Rakoff on August 6, 2018.
Mr. Berman praised the outstanding investigative work of the Federal Bureau of Investigation.
This case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorneys Benet J. Kearney and Daniel M. Tracer are in charge of the prosecution.
Bloomingburg Man Pleads Guilty to Child EnticementRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Brian Michael, Special Agent in Charge of the Newark, New Jersey Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), announced that CODY MANN pled guilty to enticing a child to engage in illegal sexual activity. MANN faces a mandatory minimum sentence of 10 years in prison and a maximum term of life in prison. MANN pled guilty today before United States District Judge Nelson S. Román.
According to the Information and other documents filed in the case to which Mann pled, as well as statements made during the plea proceeding:
Between in or about 2014 and in or about 2016, MANN used a cellphone repeatedly to direct the parent of a four-year-old child to engage in illegal sexual activity with the child. MANN further directed the parent to produce and send him images depicting child pornography featuring the child. MANN received the child pornography on his cellphone.
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MANN, 23, of Bloomingburg, New York, pled guilty to one count of enticing a child to engage in illegal sexual activity. MANN faces a mandatory minimum sentence of 10 years in prison and a maximum term of life 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 work of HSI in this investigation.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorney Gillian Grossman is in charge of the prosecution.
Mount Vernon Man Pleads Guilty to String of Livery Cab Armed RobberiesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that ALLANMON MAVUMKAL pled guilty today to four counts of Hobbs Act robbery in connection with a spree in which he threatened livery cab drivers and robbed the drivers of cash, personal items, and their cabs. MAVUMKAL pled guilty today in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As he admitted today, Allanmon Mavumkal terrorized four livery cab drivers with a knife, robbing them of their money and cars. Now Mavumkal is facing significant prison time for his violent acts.”
According to the Complaint, Superseding Indictment, and other statements made in open court:
On September 21, 2017, MAVUMKAL hailed a livery cab in the Bronx, and directed the driver to a particular destination. After arriving at the drop-off location, MAVUMKAL threatened the driver with a large knife, which was captured on video footage from the cab, ordered the driver out of the cab, and then drove away in the cab. The day before, on September 20, 2017, MAVUMKAL robbed three other livery cab drivers in the Bronx and Mt. Vernon in a similar fashion.
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MAVUMKAL, 30, of Mount Vernon, New York, pled guilty to four counts of Hobbs Act robbery, each of 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.
Mr. Berman praised the efforts of the Bureau of Alcohol, Tobacco, Firearms, and Explosives and the New York City Police Department in this case.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Justin V. Rodriguez is in charge of the prosecution.
William McFarland Pleads Guilty in Manhattan Federal Court to Defrauding Investors and A Ticket Vendor of over $26 MillionRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that WILLIAM McFARLAND pled guilty today to one count of wire fraud in connection with a scheme to defraud investors in a company controlled by McFARLAND, Fyre Media Inc. (“Fyre Media”), as well as its subsidiary (“Fyre Festival LLC”), which was formed to hold a music festival called the “Fyre Festival” (the “Festival”) over two weekends in the Bahamas. McFarland also pled guilty to a second count of wire fraud in connection with a scheme to defraud a ticket vendor for the Festival. McFARLAND pled guilty before U.S. District Judge Naomi Reice Buchwald.
U.S. Attorney Geoffrey S. Berman said: “As he admitted today, William McFarland tendered fake documents to induce investors and a ticket vendor to put more than $26 million into his company and the disastrous Fyre Festival. He now awaits sentencing for his admitted swindle.”
According to the complaint and Superseding Information to which McFARLAND pled, as well as statements made in court:
McFARLAND was the founder and chief executive officer of Fyre Media. In 2016, McFARLAND started Fyre Media to build a digital application that would allow individuals organizing commercial events, such as concerts, to bid for artist and celebrity bookings at such events. From at least in or about 2016, up to and including in or about May 2017, McFARLAND conducted a scheme to defraud individuals by inducing them to invest millions of dollars in Fyre Media. Through this scheme, McFARLAND caused losses to at least 80 victim-investors, totaling more than $24 million dollars. McFARLAND orchestrated this scheme through several means and methods.
McFARLAND repeatedly made materially false statements to investors about Fyre Media’s revenue and income, and manipulated Fyre Media’s financial statements and supporting documentation to hide Fyre Media’s true financial condition. McFARLAND represented to investors that Fyre Media had earned millions of dollars of revenue solely from talent bookings; a review of Fyre Media’s records shows that those numbers were significantly overstated. McFARLAND also provided falsified income statements to investors that purported to show that from approximately April 2016 to February 2017, Fyre Media had earned millions of dollars in income from talent bookings. In reality, Fyre Media’s income from talent bookings from approximately May 2016 to April 2017 was only $57,443. In addition, McFARLAND provided falsified documents to investors showing over 2,500 confirmed talent bookings in a single month when, in fact, there were only 60 confirmed talent bookings in the entire year.
McFARLAND repeatedly made misrepresentations to investors designed to overstate Fyre Media’s financial condition and stability. For example, McFARLAND told investors that a reputable venture capital firm (the “VC Firm”) had completed its due diligence process and had decided to invest in Fyre Media. To the contrary, a VC Firm employee communicated to McFARLAND that the VC Firm would not invest in Fyre Media without first completing its due diligence, which the VC Firm had not done due to McFARLAND’s failure to provide many of the requested Fyre Media documents.
In late 2016, McFARLAND established a subsidiary, Fyre Festival LLC, to hold a music festival called the “Fyre Festival” over two weekends in the Bahamas. McFARLAND made repeated misrepresentations to investors with respect to their investments in Fyre Festival LLC. McFARLAND overstated the Festival’s receivables that he used as collateral for numerous investments to cover Festival expenses. McFARLAND also secured numerous investments in Fyre Festival LLC by claiming that investors would have the rights to payouts from Festival event cancellation insurance policies when, in reality, no event cancellation insurance policies had been executed for the Festival. Ultimately, the Festival was canceled and widely deemed to have been a failure.
McFARLAND also repeatedly made materially false statements to investors about his own financial condition. For example, in order to induce several investors to make an investment in Fyre Media, McFARLAND provided an altered stock ownership statement to inflate the number of shares he purportedly owned in a publicly traded company, so that it would appear that McFARLAND could personally guarantee the investment. In addition, despite the fact that McFARLAND’s applications to two banks (“Bank-1” and “Bank-2”) for millions in personal loans had not been approved, McFARLAND misrepresented to investors that the monies from those bank loans could serve as collateral for their investments. On one occasion, McFARLAND sent an investor a snapshot of an email purporting to be from a Bank-1 banker (“Banker-1”) to McFARLAND approving a $3 million dollar loan. Not only had Banker-1 not sent that email, Bank-1 had not approved McFARLAND’s loan application.
McFarland also made materially false statements to certain of Fyre Media’s investors about Magnises, a credit card and private club for millennials that was founded and run by McFARLAND as chief executive officer. McFARLAND told certain of Fyre Media’s investors that he had sold Magnises for approximately $40 million and made a profit of several million dollars personally from the sale, when in reality, McFARLAND had not sold Magnises. McFARLAND also falsely stated to certain of Fyre Media’s investors that specific individuals were the acquirers of Magnises, when in fact, they were not. McFarland also falsely stated to certain of Fyre Media’s investors that a group of acquiring partners were forming a new company to purchase Magnises, when in fact, no such group existed.
In addition, in or about April 2017, McFARLAND defrauded a ticket vendor (“Vendor-1”) by inducing Vendor-1 to pay $2 million for a block of advance tickets for future Festivals over the next three years. McFARLAND also provided Vendor-1 with a fraudulent income statement for Fyre Media that grossly inflated the Company’s revenue and income.
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McFARLAND, 26, of New York, New York, pled guilty to two counts of wire fraud, each of which carries a maximum sentence of 20 years in prison, and consented to a forfeiture order in the amount of $26,040,099.48.
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 Federal Bureau of Investigation’s New York Field Office, and thanked the Securities and Exchange Commission for its assistance.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Kristy J. Greenberg and Dina McLeod are in charge of the prosecution.
Manhattan Man Arrested for Attempting to Hire Hitman to Murder Three Intended VictimsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that JOEL ROSQUETTE, a/k/a “Rick,” was arrested today for attempting to hire a hitman to murder three intended victims. ROSQUETTE was presented today in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Joel Rosquette attempted to hire a hitman to murder two of his neighbors in Manhattan and the owner of a gas station in Staten Island. Now, thanks to the dedicated work of our partners at the FBI, Rosquette’s plan has been foiled, he is in federal custody, and his intended victims are safe.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Rosquette commissioned a hitman to carry out three murders on his behalf. In the end, he was fooled by the merits of his own plan. Today, we foiled this murder-for-hire scheme, sparing three innocent lives a most unfortunate fate.”
According to the allegations in the Complaint filed today in Manhattan federal court[1]:
ROSQUETTE hired an individual he thought was a hitman to murder two of his neighbors in Manhattan. Because ROSQUETTE was short on cash, he arranged for the hitman to murder another person first – the owner of a gas station in Staten Island – and rob the gas station’s safe. ROSQUETTE’s plan was to have the proceeds of the gas station robbery pay for the murder of his two neighbors. What ROSQUETTE did not know was that the person he thought was a hitman was actually an undercover FBI agent. This morning, ROSQUETTE was arrested and his plan to commission three murders was foiled.
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ROSQUETTE, 50, of Manhattan, New York, is charged with three counts of murder-for-hire, each of which carries a maximum sentence of 10 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.
U.S. Attorney Berman praised the outstanding work of the FBI.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorney Adam S. Hobson is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Security Guard at the 9/11 Memorial Pleads Guilty in Manhattan Federal Court to Firearms TraffickingRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York announced that MAQUAN MOORE, a 9/11 Memorial security guard, pled guilty to firearms trafficking in connection with his trafficking of more than 25 firearms from locations outside of New York into Manhattan. MOORE pled guilty today to an Information in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.
U.S. Attorney Geoffrey S. Berman said: “Maquan Moore was in the business of peddling illegal firearms in busy downtown New York. When individuals attempt to bypass the critically important system of licensing for lawful ownership, the result is a less safe society for all of us. One shudders to think the harm these weapons could have caused in the wrong hands.”
According to the Complaint, Information, and other statements made in open court:
Beginning in December 2017, a joint task force of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) and the New York City Police Department (“NYPD”) made multiple undercover purchases of firearms from MOORE, who at the time was working as a security guard at the 9/11 Memorial. These firearms included several assault-style weapons, such as a MAC-10 machine pistol, and various other handguns and rifles. On the evening of February 1, 2018, an undercover officer purchased from MOORE additional firearms, many of which had been brought by MOORE’s co-conspirator, Morris Wilson, from Florida to New York. In connection with MOORE and Wilson’s arrest, the ATF/NYPD Task Force seized 21 additional firearms.
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MOORE, 29, of Manhattan, pled guilty to one count of firearms trafficking, which carries a maximum sentence of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Wilson is charged in a Criminal Complaint with conspiracy to traffic in firearms, firearms trafficking, and interstate transportation and receipt of firearms. The allegations contained in the Criminal Complaint as to Wilson are merely accusations, and he is presumed innocent unless and until proven guilty.
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 Attorneys Jacob Warren and Dominic Gentile are in charge of the prosecution.
Film Producer Found Guilty in Multimillion-Dollar Investment SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DAVID BERGSTEIN, a film producer and entrepreneur, was convicted yesterday of defrauding investors of more than $26 million. BERGSTEIN will be sentenced on June 8, 2018, by U.S. District Judge P. Kevin Castel, who presided over the four-week trial.
Co-defendant Keith Wellner had previously pled guilty and has been cooperating with the Government.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As a unanimous jury swiftly found, David Bergstein defrauded investors out of more than $26 million. He withheld material information, transferred funds without disclosing conflicts of interest, and misappropriated funds for his own use. He now stands convicted of serious federal crimes.”
According to the Indictment and evidence presented at trial:
From 2011 through 2012, BERGSTEIN engaged in a scheme to defraud investors in Weston Capital Asset Management (“WCAM”), a New York-based registered investment adviser, by (i) concealing material information from Weston investors about financial transactions involving their money; (ii) transferring funds from one pool of Weston’s investors to make payments to, provide a security interest for, or otherwise benefit, another pool of Weston’s investors, without the required disclosures to investors concerning conflicts of interest; and (iii) misappropriating a portion of funds transferred from investor accounts for their own and others’ benefit. BERGSTEIN orchestrated this scheme in part through two transactions involving Weston investors’ assets: first, a loan from a Weston fund called the Partners 2 (or “P2”) Fund, and, second, a swap agreement with a Weston fund called the Wimbledon TT Portfolio (the “TT Portfolio”).
The Partners 2 Loan Scheme
In 2010, Weston agreed to a transaction with an entity named Gerova Financial Corporation (“Gerova”), an international reinsurance company, in which Weston sent assets from one of its hedge funds (the Wimbledon Financing Fund, or “WFF”) to Gerova in exchange for restricted shares of Gerova stock. This exchange was intended to replace illiquid hedge fund assets with stock, which could be bought and sold more easily. In 2011, however, Gerova’s stock price plummeted. Weston subsequently sought to unwind the transaction, and Weston’s president was introduced to BERGSTEIN for this purpose. BERGSTEIN and Weston’s principals subsequently formulated the outlines of a structure in which Weston would return its Gerova stock, receive its assets back from Gerova, and place those assets into another entity called Arius Libra Inc. (“Arius Libra”) as part of an investment in a separate business. Certain payments would be made along the way to facilitate the transfers.
In order to complete this transaction, BERGSTEIN and Weston’s principals agreed to loan money from the P2 Fund, another Fund operated and managed by Weston, to Arius Libra. The purpose of this loan (the “P2 Loan”) was purportedly (i) to pay certain debts associated with Gerova, and (ii) to fund Arius Libra’s purported medical billing businesses. BERGSTEIN arranged for the P2 Loan to be secured by certain of the assets of WFF. Thus, in the event the P2 Loan was not repaid, the P2 Fund had the ability to liquidate WFF assets to make P2 investors whole, to the detriment of investors in WFF. In total, approximately $9 million in investor money was disbursed from the P2 Fund pursuant to the P2 Loan.
As BERGSTEIN well knew, however, P2 Fund investors were neither informed of the existence of the P2 Loan nor given any information about Arius Libra. And no disclosures were made to inform either P2 Fund or WFF investors of the conflict of interest arising from the P2 Fund’s security interest in WFF assets, as BERGSTEIN also knew. And although BERGSTEIN had represented to Weston that disbursements made pursuant to the P2 Loan would be used both to pay off Gerova creditors and to fund Arius Libra’s medical billing businesses, in fact, BERGSTEIN misappropriated millions of dollars of P2 Loan proceeds and used them to pay for, among other things, his own personal expenses, including credit card bills and attorney’s fees.
The TT Portfolio Swap Agreement Scheme
In late 2011, BERGSTEIN and Weston’s principals secretly arranged for Weston’s TT Portfolio to enter into a swap agreement with an entity controlled by BERSTEIN known as Swartz IP Services (“Swartz IP”), a transaction that was not disclosed to TT Portfolio investors. As part of this swap agreement, BERGSTEIN arranged for approximately $17.7 million from the TT Portfolio to be transferred to to Swartz IP. In exchange, BERGSTEIN agreed to provide certain investment returns and to meet investor redemption requests. BERGSTEIN induced this transaction by misrepresenting to Weston’s principals that a wealthy investor had capitalized Swartz IP and guaranteed the transaction.
The TT Portfolio transaction was completed without disclosure to investors, even though, for other swap agreements, Weston had amended the TT Portfolio offering memorandum to reflect the particular swap agreement at issue. Of the money that was transferred to Swartz IP, moreover, BERGSTEIN directed that approximately $3 million be transferred to the P2 Fund to pay back part of the P2 Loan. BERGSTEIN thus arranged for money from one set of Weston’s investors (the TT Portfolio investors) to be used to pay back part of a debt owed to another set of Weston’s investors (the P2 Fund investors) – another conflict of interest that was not disclosed to P2 or TT Portfolio investors.
As a further part of the scheme, moreover, BERGSTEIN made false representations about Swartz IP’s assets and ability to meet redemption requests and secretly diverted TT Portfolio investor proceeds to pay BERGSTEIN’s personal expenses, including credit card bills, impressionist artwork, and private jets.
BERGSTEIN also gave a false and misleading investor presentation, made false investment disclosures, and distributed a fake loan note concealing the origin of the P2 Loan in order to attempt to conceal his criminal conduct.
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BERGSTEIN, 55, of Hidden Hills, California, was convicted of the offenses set forth in the chart attached to this release. He was remanded following the return of the jury’s verdict. The statutory maximum sentences are prescribed by Congress and 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, Internal Revenue Service-Criminal Investigation, and the Office’s Criminal Investigators.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore, Robert W. Allen, and Elisha Kobre are in charge of the prosecution.
COUNT
CHARGE
MAXIMUM PENALTIES
1
Conspiracy to Commit Investment Adviser Fraud and Securities Fraud (18 U.S.C. § 371)
Five years in prison and a $250,000 fine or twice the gross gain or loss from the offense
2
Investment Adviser Fraud (15 U.S.C. §§ 80b-6 & 80b-17; 18 U.S.C. § 2)
Five years in prison and a fine of $10,000
3
Investment Adviser Fraud (15 U.S.C. §§ 80b-6 & 80b-17; 18 U.S.C. § 2)
Five years in prison and a fine of $10,000
4
Securities Fraud (15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5; 18 U.S.C. § 2)
20 years in prison and a $5,000,000 fine or twice the gross gain or loss from the offense
5
Securities Fraud (15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5; 18 U.S.C. § 2)
20 years in prison and a $5,000,000 fine or twice the gross gain or loss from the offense
6
Wire Fraud (18 U.S.C. §§ 1343 and 2)
20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense
7
Conspiracy to Commit Wire Fraud (18 U.S.C. § 1349)
20 years in prison and a $250,000 fine or twice the gross gain or loss from the offense
Disbarred Orange County Attorney Convicted of Mail Fraud, Structuring Cash Transactions, Making False Statements to the IRS, Obstructing the IRS, Tax Evasion, Obstruction of Justice, and PerjuryRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced the conviction in White Plains federal court of former Orange County attorney JOSEPH G. SCALI for mail fraud, structuring cash transactions, making false statements to the IRS, obstructing the IRS, tax evasion, obstruction of justice, and perjury. The jury convicted SCALI yesterday on all 10 counts of the Indictment following a four-week trial before Judge Nelson S. Román.
U.S. Attorney Geoffrey S. Berman said: “Joseph Scali, a disbarred attorney, abused the law to commit the serious crimes of which he now stands convicted. Scali stole money from a client’s attorney escrow account, chronically abused the tax laws to obstruct the IRS and hide income, and defrauded a client into paying him legal fees after he had been suspended from practicing law in New York. We thank the IRS and U.S. Postal Inspection Service for their substantial work in helping to secure this conviction.”
According to the Indictment, other court filings, and evidence presented at trial:
From January 2011 through August 2012, SCALI, who represented the seller of land and mineral rights in Pennsylvania, schemed to defraud the prospective purchaser of that property of the $850,000 the latter had given to SCALI to hold in escrow by misappropriating those funds from his Attorney Trust Account. SCALI also engaged in tax evasion for the 2011 and 2012 years by, among other things, deliberately withholding from the IRS his Attorney Trust Account records, which would reveal the funds he had misappropriated.
In addition, between 2006 and November 2013, SCALI corruptly endeavored to obstruct the IRS by (a) providing materially false, incomplete, and misleading information to an IRS Revenue Officer about his filing history and income; (b) commingling client funds and personal funds in his Attorney Trust Account; (c) paying for personal items directly out of his Attorney Trust Account; (d) structuring $32,400 in cash deposits into his Attorney Trust Account. In addition, SCALI failed to timely file U.S. Individual Income Tax Returns, Forms 1040, for the years 2006 through 2012, as well as U.S. Corporate Income Tax Returns, Forms 1120, for his law firm, Joseph G. Scali, P.C., for the years 2007 through 2012, notwithstanding that he was required by law to file a return for each year. SCALI was separately convicted of making false statements to the IRS and structuring cash deposits.
SCALI also committed obstruction of justice and perjury when, in seeking to set aside his disbarment by the United States District Court for the Southern District of New York, he lied under oath to that court about why, in 2013, he had been suspended from practicing law in New York by the Second Department of the Appellate Division of the New York State Supreme Court. SCALI was disbarred by the Appellate Division on July 6, 2016.
In 2014 and 2015, SCALI committed mail fraud by fraudulently undertaking a legal representation of a client for a fee without disclosing his 2013 suspension from the practice of law in New York State.
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SCALI, 68, of West Hartford, Connecticut, is convicted of two counts of mail fraud, which carry a maximum sentence of 20 years in prison; one count of structuring cash transactions, which carries a maximum sentence of five years in prison; two counts of making false statements to the IRS, which carry a maximum sentence of five years in prison; one count of obstructing the IRS, which carries a maximum sentence of three years in prison; two counts of tax evasion, which carry a maximum sentence of five years in prison; one count of obstruction of justice, which carries a maximum sentence of 10 years in prison; and one count of perjury, which carries a maximum sentence of five years in prison.
SCALI is scheduled to be sentenced by Judge Román on June 1, 2018.
The statutory maximum and minimum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the work of the IRS and the U.S. Postal Inspection Service in this investigation. Mr. Berman also thanked the Orange County District Attorney’s Office, the New York State Department of Taxation and Finance, and the New York State Police for their assistance. Mr. Berman also thanked the Counsel for the Grievance Committee for the Ninth Judicial District of New York State, the Counsel for the Committee on Grievances for the U.S. District Court for the Southern District of New York, and the Counsel for the IOLA Fund of New York for their cooperation in the investigation.
This case is being handled out of the White Plains Division. Assistant United States Attorneys Olga Zverovich, Vladislav Vainberg, and Daniel Noble are in charge of the prosecution.
Former NYPD Deputy Chief Pleads Guilty to Illegally Diverting Police ResourcesRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today the guilty plea of MICHAEL HARRINGTON for misapplying police resources while serving in the New York City Police Department (“NYPD”) as, among other things, a Deputy Chief and former Executive Officer for the Chief of Department’s Office. Specifically, HARRINGTON diverted those resources – including dispatching police officers and diverting land, sea, and air vehicles intended for the NYPD’s public service usage – for the personal benefit of Jeremy Reichberg, a private citizen, his friends, and their associates. HARRINGTON pled guilty before U.S. District Judge Gregory H. Woods to misapplication and conversion of property belonging to a program or organization receiving federal funds.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Michael Harrington, a former high-ranking officer in the NYPD, occupied powerful positions within the department, from which he controlled officers and resources meant to keep New York safe. But as he admitted today, Harrington allowed those resources to be used for the benefit of well-connected private citizens. We will continue to work with our law enforcement partners to fight this type of corruption.”
Reichberg and an additional co-defendant, former NYPD Deputy Inspector James Grant, continue to face honest services fraud, bribery, and conspiracy charges related to an alleged scheme in which Reichberg and another individual provided luxurious benefits to high-ranking members of the NYPD, including Grant, so as to be able to call upon those members for police-related assistance for themselves and their associates as opportunities arose. Reichberg and Grant are scheduled to go to trial before Judge Woods on April 30, 2018.
According to the Superseding Information, Indictment, and Complaint filed in this case, and statements made during the plea proceeding:
HARRINGTON was previously an Inspector in Brooklyn North and, beginning around November 2013, the Executive Officer in the NYPD’s Chief of Department’s Office, which is responsible for overseeing all of the Department’s uniformed operations. After November 2014, HARRINGTON was a Deputy Chief assigned to the NYPD’s Housing Bureau. Between 2011 and June 2016, HARRINGTON diverted police resources for the benefit of Reichberg and his associates, including another individual, Jona Rechnitz, who has pled guilty and is now cooperating with the Government. Among other things, HARRINGTON helped Reichberg and his associates get police escorts for non-police purposes, use a helicopter for a flyover at a private event, sent officers to resolve private, civil disputes, and secured the use of a police boat for private boat rides at another private event.
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HARRINGTON, 52, of Staten Island, New York, pled guilty to one count of misapplication concerning a program receiving federal funds. The charge carries a maximum term of 10 years in prison. HARRINGTON is scheduled to be sentenced by Judge Woods on June 11, 2018. The maximum potential penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the investigative work of the Federal Bureau of Investigation and the New York City Police Department, Internal Affairs Division.
This case is being handled by the Office’s Public Corruption Unit. Assistant United States Attorneys Martin S. Bell, Jessica Lonergan, and Kimberly J. Ravener are in charge of the prosecution.
Doctor Pleads Guilty in Manhattan Federal Court to Scheme to Illegally Distribute OxycodoneRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that Dr. EMMANUEL LAMBRAKIS, a state licensed doctor, pled guilty today to writing medically unnecessary prescriptions for oxycodone. LAMBRAKIS pled guilty earlier today before U.S. Magistrate Judge Gabriel W. Gorenstein, and will be sentenced before U.S. District Court Judge William H. Pauley III at a later date.
U.S. Attorney Geoffrey S. Berman said: “Dr. Emmanuel Lambrakis took a solemn oath to ‘first do no harm.’ Instead, as he admitted in federal court today, Lambrakis chose to write prescriptions for unnecessary, addictive, and possibly fatal opiates for his ‘patients.’ Today, this doctor who used his position as cover for what amounted to no more than a common drug dealing operation, faces serious prison time for his actions.”
According to allegations in a Complaint and other documents filed in federal court, as well as statements made in public court proceedings:
Oxycodone is a highly addictive, narcotic opioid that is used to treat severe and chronic pain conditions. Oxycodone prescriptions are in high demand and have significant cash value to drug dealers. In fact, oxycodone tablets can be resold on the street for thousands of dollars. For example, 30-milligram oxycodone tablets have a current street value of approximately $20 to $30 per tablet in New York City, with street prices even higher in other parts of the country. A single prescription for 120 30-milligram tablets of oxycodone can net an illicit distributor $2,400 in cash or more.
From at least approximately January 2011 until December 2016, LAMBRAKIS operated two medical clinics in Queens, New York, where LAMBRAKIS wrote numerous prescriptions for large quantities of oxycodone in exchange for cash payments. LAMBRAKIS typically charged $150 in cash for “patient visits,” and these visits often involved numerous “patients” being seen by LAMBRAKIS at the same time in the same examination room. During these “patient visits,” LAMBRAKIS would perform simple, perfunctory body manipulations (such as rotating the patient’s arm or leg) and engage in little or no conversation with the alleged “patient.” Nonetheless, LAMBRAKIS would then cause the patient to receive a prescription for a large quantity of oxycodone, most often 120 30-milligram tablets or more.
Between January 2011 and the present, LAMBRAKIS wrote thousands of oxycodone prescriptions, resulting in the distribution of more than a million oxycodone tablets, which have a street value in the tens of millions of dollars. On numerous occasions, LAMBRAKIS wrote 30 or more prescriptions for 30-milligram oxycodone pills in a single day. As a result of LAMBRAKIS’s actions, it is estimated that LAMBRAKIS collected more than $2 million in fees from his “patients.”
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LAMBRAKIS, 70, of Manhattan, pled guilty to one count of conspiring to distribute and possess with intent to distribute oxycodone. This offense carries a maximum sentence of 20 years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the DEA’s Tactical Diversion Squad, which is comprises agents and officers from the DEA, the NYPD, the New York State Police, Town of Orangetown Police Department, Rockland County Drug Task Force, Westchester County Police Department, and New York City Department of Investigation. He also acknowledged the assistance of the Department of Health & Human Services, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the New York City Human Resources Administration, and the National Insurance Crime Bureau.
The case is being prosecuted by the Office’s Narcotics Unit. Assistant U.S. Attorneys Kimberly J. Ravener and Jessica K. Fender are in charge of the prosecution.
Operators of Retail Newburgh Heroin Store Sentenced in White Plains Federal CourtRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that VICTOR R. RIVAS was sentenced to seven years in prison for his role in operating a retail heroin-selling organization out of a storefront at 427 Broadway in Newburgh. VICTOR R. RIVAS pled guilty on July 26, 2017, and was sentenced today by U.S. District Court Judge Kenneth M. Karas.
U.S. Attorney Geoffrey S. Berman said: “Victor M. Rivas, together with his sons Julio A. Davila and Victor R. Rivas, and their employees, maintained a shop on a main thoroughfare in Newburgh, within a stone’s throw of a bakery, a church, and a post office, that was open on a daily basis for the sole purpose of selling heroin. The serious sentences these defendants received prove that those who endanger the community through their distribution of illegal drugs will be brought to justice.”
According to the Complaint, the Indictment, other filings in White Plains federal court, evidence at a hearing, and statements made in court proceedings:
In 2016, Victor M. Rivas, with the assistance of Julio A. Davila, VICTOR R. RIVAS, Ronald L. Matias, a/k/a “Ronald Luis,” and Edward Cardona, ran an organization engaged in the distribution of heroin in Newburgh, New York, from a storefront location at 427 Broadway, alternately held out as a barbershop or soccer shop (the “Soccer Shop”). The Soccer Shop was open for more than 12 hours a day, seven days a week, for the sole purpose of selling heroin. Constant foot traffic in and out of the Soccer Shop reflected the volume of heroin the defendants were selling: Over the course of a year, the organization distributed well over three kilograms of heroin out of the Soccer Shop.
The defendants also maintained a nearby storage unit that they used for, among other things, storing the proceeds of their illegal drug distribution activity. Law enforcement seized more than $260,000 in cash from the storage unit on the day the defendants were arrested. Additionally, about $44,000 was seized from VICTOR R. RIVAS and about $5,300 was seized from Davila during the course of the investigation.
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In addition to the prison term, VICTOR R. RIVAS, 29, of Newburgh, was sentenced to five years of supervised release.
Victor M. Rivas, 52, of Newburgh, the leader of the organization, was previously sentenced to 15 years in prison and five years of supervised release; Davila, 28, of Newburgh, was previously sentenced to six-and-a-half years in prison and four years of supervised release; and Matias, 36, of Newburgh, was previously sentenced to five years in prison and four years of supervised release. Cardona, 35, of Newburgh, is expected to be sentenced in April.
Mr. Berman praised the work of the Department of Homeland Security, Homeland Security Investigations, and the New York State Police, and thanked the Drug Enforcement Administration and the City of Newburgh Police Department for their assistance with this investigation.
This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Jacqueline C. Kelly and Allison Nichols are in charge of the prosecution.
Bronx Man Sentenced to 75 Years in Prison for Murder in Front of Bronx Daycare CenterRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that RUBEN PIZZARO, a/k/a “Chulo,” was sentenced to 75 years in prison for murder, participating in a narcotics conspiracy, and firearms charges. PIZZARO was convicted on June 13, 2017, following a one-week jury trial before U.S. District Judge Gregory H. Woods, who also imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “In November of 2015, Ruben Pizzaro murdered a rival drug dealer in broad daylight close to a nearby daycare center. Pizzaro’s actions are another example of the wanton violence that often accompanies the sale of drugs. Ruben Pizzaro will now serve 75 years in federal prison for his brazen crimes.”
According to the Complaint, the Indictment, other filings in Manhattan federal court, evidence at trial, and statements made in court proceedings:
Between August 2015 and January 2016, PIZZARO was a member of a street gang that sold cocaine and crack cocaine in the vicinity of 180th Street and Arthur Avenue in the Bronx, New York. PIZZARO and his crew of drug dealers were in competition with a neighboring drug crew on Hughes Avenue in the Bronx. That competition played out in several violent shootings in late 2015. For example, on at least three occasions in October and November 2015, PIZZARO and his drug crew fired at members of the Hughes Avenue drug crew. Individuals were shot during two of those three incidents, and the third occurred in the vicinity of a Bronx middle school.
On November 24, 2015, PIZZARO shot and killed rival drug dealer David Rivera in broad daylight in front of a daycare center in the vicinity of 175th Street and Crotona Avenue in the Bronx.
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In addition to the prison term, PIZZARO, 26, was sentenced to 4 years of supervised release.
Mr. Berman thanked the Federal Bureau of Investigation and the New York City Police Department for their work on the investigation.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Shawn Crowley, Max Nicholas, and Robert Allen are in charge of the prosecution.
Partner at International Law Firm Sentenced for Insider TradingRead the Press Release
Geoffrey H. Berman, the United States Attorney for the Southern District of New York, announced today that WALTER C. LITTLE, a/k/a “Chet,” a former partner at an international law firm (the “Firm”), was sentenced today to 27 months in prison for conspiring to commit insider trading from at least February 2015 through May 2016. LITTLE pled guilty on November 9, 2017, before U.S. District Judge Katherine Polk Failla, who also imposed today’s sentence.
U.S. Attorney Geoffrey H. Berman said: “Walter Little, a law firm partner with access to sensitive nonpublic client information, selfishly chose to exploit it for personal gain rather than safeguard it. Today’s sentence underscores the seriousness of insider trading, as Little will now serve serious time in prison.”
According to allegations in a Complaint and Indictment filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:
LITTLE began working for the Firm as an associate in 2005 and eventually became a partner. The Firm provided legal services in connection with financial transactions and regulatory issues to a wide variety of clients. Those clients entrusted the Firm with nonpublic information when using its services. Contrary to Firm policies requiring that this information be kept secret and be used only for business purposes, LITTLE improperly accessed sensitive information on the Firm’s servers and used it to make profitable securities trades. LITTLE viewed numerous documents that contained material nonpublic information about, among other things, an anticipated delisting from the NASDAQ stock exchange, unannounced mergers and acquisitions, anticipated earnings releases, and a planned securities offering. All of these events had predictable impacts on the associated stocks’ prices, and, between February 2015 and May 2016, LITTLE made hundreds of thousands of dollars trading stocks and options based on the information contained in these documents.
In addition to trading on the information himself, LITTLE also provided the information to Andrew Berke, his business associate and friend, who also traded on it and made hundreds of thousands of dollars in illegal gains as well. At LITTLE’s request, Berke subsequently kicked back portions of his own profits to LITTLE through the use of fake legal invoices. Berke pled guilty on December 28, 2017, to his role in the scheme and is scheduled to be sentenced on April 17, 2018.
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In addition to the prison sentence, LITTLE, 44, was sentenced to three years of supervised release. The Court further ordered LITTLE to forfeit a sum of $452,998.
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 United States Attorneys Robert Allen and Samson Enzer are in charge of the prosecution.
Hawaii Man Arrested for Decade-Long Scheme to Defraud Banks and Investment FirmsRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that LAWRENCE H. WOLF, a/k/a “Larry,” was arrested yesterday for defrauding banks and financial institutions around the country. WOLF was presented today in the U.S. District Court for the Southern District of Texas, before U.S. Magistrate Judge Dena Hanovice Palermo.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Lawrence Wolf swindled and attempted to swindle banks around the country out of millions of dollars while masquerading as an oil and gas tycoon. Now, thanks to the dedicated work of our partners at the FBI, Wolf’s alleged scheme has finally run dry.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “In lieu of actual collateral, Wolf, as alleged, offered lies in exchange for multimillion-dollar loans and credit opportunities that served to advance his own interests. At the expense of the victim firms, Wolf made lavish purchases with this illicitly obtained money, ultimately owing one firm more than $13 million. Wolf’s arrest brings us one step closer to restoring assets to the victims of this fraud.”
According to the allegations in the Complaint filed yesterday in Manhattan federal court:[1]
LAWRENCE H. WOLF defrauded, and attempted to defraud, financial institutions and an investment firm by engaging in a scheme (the “Oil Scheme”) to solicit multimillion-dollar loans and credit facilities by pledging oil and gas assets as collateral. The assets WOLF typically pledged included interests in eight particular wells drilled into a subsurface oil and gas formation in Natrona and Fremont Counties in Wyoming (the “Wyoming Wells”). Specifically, WOLF would pledge royalty interests in income from the extraction of oil and gas from the Wyoming Wells (the “Wyoming Wells Royalty Interests”).
In truth, however, a family partnership (the “Family Partnership” or “Partnership”), not WOLF, owned the Wyoming Wells Royalty Interests. WOLF did not have any interest in, or have legal association or business affiliation with, the Family Partnership.
In investigating the Oil Scheme, the FBI has identified at least five different banking or investment firms (Victim Firms 1 through 5, collectively, the “Victim Firms”) that WOLF deceived as part of his scheme. In connection with negotiations with the Victim Firms, WOLF repeatedly made false representations about his wealth or assets, and repeatedly transmitted to Victim Firms false and forged documents – ranging from bank account balance statements to tax filings to deed assignments – in furtherance of the Oil Scheme. WOLF sought to avoid detection of the Oil Scheme by obtaining new funds to cover old liabilities. Typically, as one loan approached maturity, WOLF approached another lender, expressed interest in moving his oil and gas business to a new bank, and negotiated another credit facility.
The Oil Scheme succeeded for years. On or about June 5, 2008, WOLF executed a promissory note with Victim Firm-1 establishing an approximately $3.5 million credit facility. On or about March 27, 2014, WOLF executed a promissory note with Victim Firm-2 establishing an approximately $40 million line of credit. On or about July 9, 2014, WOLF executed a credit agreement with Victim Firm-3 establishing an approximately $7 million credit facility. On or about July 31, 2015, WOLF and Victim Firm-3 executed a revised credit agreement expanding the loan facility to $13 million.
In or about October 2016, WOLF attempted to continue the scheme by seeking a loan from Victim Firm-4. After Victim Firm-4 caught WOLF misrepresenting his relationship to the Family Partnership, WOLF tried obtain credit financing from Victim Firm-5, a global investment firm headquartered in New York. When Victim Firm-5 discovered WOLF’s reliance on forged documents, Victim Firm-5 contacted law enforcement.
WOLF utilized fraudulently obtained funds, in part, to spend on lavish personal expenses, including an approximately $63,000 purchase at an art gallery on August 3, 2015, an approximately $66,000 purchase on November 12, 2015, through a “VIP Concierge” service, an approximately $17,500 purchase on December 28, 2015, at Cartier, and numerous purchases of private jet services.
As of February 7, 2018, WOLF owed Victim Firm-3 more than approximately $13 million.
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WOLF, 57, of Hawaii, is charged with one count of wire fraud affecting financial institutions and one count of aggravated identity theft. The wire fraud count carries a maximum penalty of 30 years in prison. The aggravated identity theft count 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 sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding work of the FBI.
The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Andrew Thomas is in charge of the case.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Operator of Bitcoin Investment Platform Charged with Perjury and Obstruction of JusticeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that JON E. MONTROLL, a/k/a “Ukyo” was taken into federal custody today for giving false sworn testimony and false documentation to the staff of the New York Regional Office of the Securities Exchange Commission (“SEC”). The defendant is expected to be presented this afternoon in U.S. District Court for the Northern District of Texas, before U.S. Magistrate Judge Jeffrey L. Cureton.
Manhattan U.S. Attorney Geoffrey S. Berman said: “SEC investigations rely on learning the full and accurate facts concerning financial markets and products. As alleged, the defendant repeatedly lied during sworn testimony and misled SEC staff to avoid taking personal responsibility for the loss of thousands of his customers’ bitcoins. These charges signify that we will use the full force of the federal criminal law to protect the integrity of the SEC’s investigative process.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “As alleged, Montroll committed a serious crime when he lied to the SEC during sworn testimony. In an attempt to cover up the results of a hack that exploited weaknesses in the programming code of his company, he allegedly went to great lengths to prove the balance of bitcoins available to BitFunder users in the WeExchange Wallet was sufficient to cover the money owed to investors. It’s said that honesty is always the best policy – this is yet another case in which this virtue holds true.”
According to the allegations in the Complaint filed today in Manhattan federal court:[1]
JON E. MONTROLL operated two online bitcoin services: WeExchange Australia, Pty. Ltd. (“WeExchange”) and BitFunder.com (“BitFunder”). WeExchange functioned as a bitcoin depository and currency exchange service. BitFunder facilitated the purchase and trading of virtual shares of business entities that listed their virtual shares on the BitFunder platform.
During the summer of 2013, one or more individuals (the “Hackers”) exploited a weakness in the BitFunder programming code to cause BitFunder to credit the Hackers with profits they did not, in fact, earn (the “Exploit”). As a result, the Hackers were able to wrongfully withdraw from WeExchange approximately 6,000 bitcoins, with the majority of those coins being wrongfully withdrawn between July 28, 2013, and July 31, 2013. In today’s value, the wrongfully withdrawn bitcoin were worth more than $60 million. As a result of the Exploit, BitFunder and WeExchange lacked the bitcoins necessary to cover what MONTROLL owed to users.
In November 2013, MONTROLL provided sworn testimony to the SEC’s New York Regional Office in connection with their investigation into the Exploit and BitFunder’s activities. In that testimony, MONTROLL denied that the Exploit had been successful, testifying that, “When [the Hackers] went to withdraw, the system stopped them because the amount was obviously causing issues with the system.” MONTROLL later added that the software issue “was corrected immediately, whenever the system started having the problems, and I caught on to what was happening I’d say within a few hours.”
MONTROLL also produced to the SEC a screenshot purportedly documenting, among other things, the total number of bitcoins available to BitFunder users in the WeExchange Wallet as of October 13, 2013 (the “Balance Statement”). The Balance Statement reflected “6,679.78 BTC” on hand as of that date. In discussing the Balance Statement in his sworn testimony, MONTROLL explained that it represented “the collective pool of funds held for users on BitFunder. The collective pool of BTC held for users on BitFunder – users who transfer bitcoins to BitFunder, this is the total amount that’s being held by BitFunder of those users.”
Contemporaneous digital evidence, including chat logs and transaction data, revealed that the Balance Statement was a misleading fabrication. Three days into the Exploit, MONTROLL had participated in an internet relay chat with another person (“Person-1”) in which he sought help in tracking down “Stolen coins.” When that did not work, MONTROLL transferred some of his own bitcoin holdings into WeExchange to conceal the losses. The Exploit, however, continued. By the time of the Balance Statement, WeExchange actually held thousands of bitcoins less than MONTROLL had asserted through the false Balance Statement.
When confronted with that evidence during subsequent testimony, MONTROLL lied to SEC staff again. While MONTROLL admitted that the Balance Statement was the product of his manual intervention in the WeExchange system, he claimed to have discovered the success of the Exploit only after the SEC had asked him about it during his first day of testimony and to have no knowledge of the chat with Person-1.
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MONTROLL, 37, of Saginaw, Texas, is charged with two counts of perjury and one count of obstruction of justice. The perjury counts each carry a maximum penalty of five years in prison. The obstruction of justice count carries a maximum penalty of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Berman praised the outstanding work of the FBI. He also thanked the SEC, which has filed civil charges against MONTROLL in a separate action.
The prosecution of this case is being overseen by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Andrew Thomas is in charge of the case.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
New York Man Pleads Guilty to Attempting to Provide Material Support to ISIS and Passport FraudRead the Press Release
Sajmir Alimehmeti, aka, Abdul Qawii, 24, of the Bronx, New York, pleaded guilty today to attempting to provide material support to the Islamic State of Iraq and al-Sham (ISIS), a designated foreign terrorist organization, and to committing passport fraud in order to facilitate an act of international terrorism. Alimehmeti pleaded guilty today to a Superseding Indictment in Manhattan federal court before U.S. District Judge Paul A. Engelmayer.
Acting Assistant Attorney General for National Security Edward C. O’Callaghan and U.S. Attorney Geoffrey S. Berman for the Southern District of New York made the announcement.
According to the allegations in the Superseding Indictment and the Complaint filed in this case, statements made during the plea proceeding, and other documents filed in the public record:
In October 2014, Alimehmeti attempted to enter the United Kingdom but was denied entry after U.K. authorities found camouflage clothing and nunchucks in his luggage. About two months later, in December 2014, Alimehmeti was again denied entry into the United Kingdom, this time after U.K. authorities found that his cellphone contained images of ISIS flags. Further forensic examination of the contents of the cellphone and Alimehmeti’s laptop computer showed numerous indicia of Alimehmeti’s support for ISIS, including a photograph of Alimehmeti with an ISIS flag in the background, images of ISIS fighters in the Middle East, a photograph of Alimehmeti making a gesture of support for ISIS, various files relating to jihad and martyrdom, and electronic communications in which Alimehmeti assisted another ISIS supporter in efforts to travel to Syria to join ISIS by providing contact information for an ISIS affiliate who could facilitate the travel.
After returning to the United States, Alimehmeti continued to support ISIS. Among other things, Alimehmeti displayed an ISIS flag in his apartment in the Bronx and, in the course of recorded meetings with undercover law enforcement employees, Alimehmeti played multiple pro-ISIS propaganda videos on his computer and cellphone, including videos of ISIS fighters decapitating prisoners, and also indicated that he was interested in radicalizing other individuals in the Bronx area. Alimehmeti also made repeated purchases of combat knives and other military-type equipment, including masks, handcuffs, a pocket chainsaw, a wire pocket saw and a rucksack designed for tactical combat, which he stockpiled at his apartment in the Bronx.
In October 2015, Alimehmeti applied for a U.S. passport, falsely claiming in the application that his previous passport had been lost. Alimehmeti later told an undercover law enforcement employee that his prior passport – which Alimehmeti showed to the undercover law enforcement officer – had not been lost and, instead, that he was applying for a new passport because he believed the rejection stamps in his existing passport resulting from his attempted entries into the United Kingdom would make it difficult to travel. Alimehmeti further conveyed to undercover law enforcement personnel that he was seeking the new passport, without rejection stamps, to facilitate his travel overseas to join and fight for ISIS.
In May 2016, Alimehmeti attempted to assist an individual who was purportedly traveling from New York to Syria to train and fight with ISIS but who was actually an undercover law enforcement employee (UC). On May 17, 2016, Alimehmeti met with the UC in Manhattan. The UC had purportedly arrived in New York earlier that day on a bus and was en route to John F. Kennedy International Airport (JFK Airport) to take an overseas flight later that night.
Alimehmeti agreed to help the UC with several tasks prior to the UC’s purported travel. Alimehmeti assisted the UC by locating stores so the UC could purchase supplies to use while traveling to, and fighting with, ISIS, including a cellphone, boots, a compass, a bag, and a flashlight, among other items. Alimehmeti also gave the UC advice on which items to purchase and on the use of different kinds of encrypted communications services, including the service that Alimehmeti stated was currently being used by fellow ISIS supporters, whom Alimehmeti referred to as “the brothers.” Alimehmeti also downloaded three encrypted communications applications on the UC’s newly purchased cellphone for use by the UC.
Further, Alimehmeti assisted the UC in traveling from Manhattan to a hotel in Queens, so the UC could purportedly meet with an individual who was preparing travel documents that the UC would use to travel to Syria to join ISIS. Alimehmeti gave the UC a piece of paper with his name and contact information, so the UC could provide that information to the purported document facilitator. Alimehmeti explained that he also wanted to travel to Syria and join ISIS, stating “I’m ready to . . . go with you man . . . you know I would. I’m done with this place.” After leaving the hotel in Queens, Alimehmeti brought the UC to JFK Airport, via public transportation, so the UC could begin the purported journey to ISIS. Within days of seeking to facilitate the UC’s travel to join ISIS, Alimehmeti indicated during a call to his brother in Albania that that he had learned of a new way to obtain a passport for his own travel (referring to the UC’s purported document facilitator), and that a “friend of mine” (referring to the UC) had “just [done] it two days ago.”
Following Alimehmeti’s arrest on the charges in this case in May 2016, the FBI executed a search of Alimehmeti’s Bronx apartment pursuant to a judicially authorized search warrant. The FBI’s search of Alimehmeti’s apartment resulted in the seizure of, among other evidence, the following: (i) a laptop computer and a cellphone belonging to Alimehmeti that contain an array of materials further demonstrating his allegiance to ISIS and terrorist ideology, including images of the ISIS flag, photographs of Alimehmeti with an ISIS flag and making gestures supportive of ISIS, images of ISIS fighters overseas, and propaganda videos promoting and glorifying ISIS, including videos depicting ISIS fighters engaging in combat and beheading prisoners; (ii) a collection of combat knives and other military-type equipment that Alimehmeti had purchased and stored at his apartment, as discussed above; and (iii) an ISIS flag that was displayed on a wall in the apartment.
Alimehmeti faces a maximum sentenced of 20 years in prison for attempting to provide material support or resources to a designated foreign terrorist organization, and a maximum sentence of 25 years in prison for making a false statement in an application for a U.S. passport with the intent to induce the issuance of a passport to facilitate an act of international terrorism. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. Sentencing is scheduled for June 7, before Judge Engelmayer.
Mr. O’Callaghan and Mr. Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD, and the NYPD’s Intelligence Division. Substantial assistance was also provided by the Department of Justice’s Office of International Affairs, the Albania State Police, and the Metropolitan Police Service's Counter Terrorism Command of London, United Kingdom.
Assistant U.S. Attorneys Emil J. Bove III, George D. Turner and Brendan F. Quigley of the Southern District of New York are in charge of the prosecution, with assistance from Trial Attorneys Joseph Attias and Kiersten Korczynski of the National Security Division’s Counterterrorism Section.
New York Attorney Charged with Tax FraudRead the Press Release
An indictment returned by a federal grand jury sitting in Manhattan was unsealed today, charging a New York-licensed attorney and partner at a New York law firm, with conspiring to defraud the United States, corruptly endeavoring to impede the internal revenue laws and tax evasion, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Geoffrey S. Berman for the Southern District of New York.
According to the indictment, Steven M. Etkind, 57, was the head of a New York law firm’s tax, trusts and estates group and a Certified Public Accountant. The indictment alleges that Etkind performed legal work for a successful entrepreneur client, who passed away in 2008, naming Etkind as the co-executor of his $35 million estate.
The indictment further alleges that the client’s will directed the creation of charitable trusts, funded with assets from the client’s estate, for the sole purpose of donating to charitable organizations, including those aimed at assisting Jewish sponsored organizations. Etkind was allegedly named co-trustee of these trusts.
The indictment charges that Etkind and his co-conspirator set up a phony charitable organization and used it to steal more than $3.5 million from these charitable trusts – by first directing donations from the trusts to legitimate Jewish charitable organizations, then redirecting the funds to the phony charity accounts that Etkind and his co-conspirator controlled. Etkind is alleged to have used part of the money he stole to purchase a 6,300 sq. ft. home with a swimming pool, in Southampton, New York, titling it in a nominee name.
The indictment further alleges that to conceal his theft, Etkind filed, and caused to be filed, fraudulent personal, corporate and charitable trust returns with the Internal Revenue Service (IRS) and made several false and misleading statements to the IRS during the course of an audit and examination.
If convicted, Etkind faces a statutory maximum sentence of five years in prison on the conspiracy charge and each of the tax evasion charges, as well as three years in prison for obstructing the internal revenue laws. He also faces a period of supervised release, restitution and monetary penalties. An indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.
Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Berman praised the outstanding efforts by special agents of IRS Criminal Investigation, who conducted the investigation, and Trial Attorneys Jorge Almonte and Jack A. Morgan of the Tax Division, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
New York Attorney Charged with Tax FraudRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Richard E. Zuckerman, Principal Deputy Assistant Attorney General of the Tax Division, and James D. Robnett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation, New York Field Office (“IRS”), announced the arrest of STEVEN M. ETKIND, a New York-licensed attorney and partner at a New York law firm, for conspiring to defraud the United States, corruptly endeavoring to impede the internal revenue laws, and tax evasion.
According to the Indictment unsealed today in Manhattan federal court[1]:
ETKIND was the head of a New York law firm’s tax, trusts, and estates group and a Certified Public Accountant. The indictment alleges that ETKIND performed legal work for a successful entrepreneur client, who died in 2008, naming ETKIND as the co-executor of his $35 million estate.
The client’s will directed the creation of charitable trusts, funded with assets from the client’s estate, for the sole purpose of donating to charitable organizations, including those aimed at assisting Jewish sponsored organizations. ETKIND was named co-trustee of these trusts.
The indictment charges that ETKIND and his co-conspirator set up a phony charitable organization and used it to steal more than $3.5 million from these charitable trusts – by first directing donations from the trusts to legitimate Jewish charitable organizations, then redirecting the funds to the phony charity accounts that ETKIND and his co-conspirator controlled. ETKIND used part of the money he stole to purchase a 6,300-square-foot home with a swimming pool in Southampton, New York, titling it in a nominee name.
To conceal his theft, ETKIND filed, and caused to be filed, fraudulent personal, corporate and charitable trust returns with the IRS and made several false and misleading statements to the IRS during the course of an audit and examination of the phony charity.
If convicted, ETKIND, 57, faces a statutory maximum sentence of five years in prison on the conspiracy charge, five years on each of the tax evasion charges, and three years for obstructing the internal revenue laws. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Mr. Berman and Mr. Zuckerman praised the outstanding efforts by special agents of IRS Criminal Investigation.
Mr. Berman also thanked the U.S. Department of Justice’s Tax Division for their significant assistance in the investigation.
The case is being handled by the Office’s Complex Frauds Unit. Special Assistant United States Attorneys Jorge Almonte and Jack A. Morgan (of the Tax Division) are in charge of the prosecution.
The charges contained in the Indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.
Bronx Man Pleads Guilty in Manhattan Federal Court to Attempting to Provide Material Support to ISIS and Passport Fraud in Furtherance of TerrorismRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Edward C. O’Callaghan, Acting Assistant Attorney General for National Security, announced that SAJMIR ALIMEHMETI, a/k/a “Abdul Qawii,” pled guilty to attempting to provide material support to the Islamic State of Iraq and al-Sham (“ISIS”), and to committing passport fraud in order to facilitate an act of international terrorism. ALIMEHMETI pled guilty today to a Superseding Indictment in Manhattan federal court before U.S. District Judge Paul A. Engelmayer.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As he admitted in court today, Sajmir Alimehmeti took steps to travel overseas to support ISIS’s terror campaign. He also bought military-type weapons and assisted another to get travel documents, equipment, and encryption technology to fight with ISIS in Syria. Thanks to the FBI-NYPD Joint Terrorism Task Force, Alimehmeti now awaits sentencing for his admitted crimes in support of a terrorist organization.”
According to the allegations in the Superseding Indictment and the Complaint filed in this case, statements made during the plea proceeding, and other documents filed in the public record:
In October 2014, ALIMEHMETI attempted to enter the United Kingdom but was denied entry after U.K. authorities found camouflage clothing and nunchucks in his luggage. About two months later, in December 2014, ALIMEHMETI was again denied entry into the United Kingdom, this time after U.K. authorities found that his cellphone contained images of ISIS flags. Further forensic examination of the contents of the cellphone and ALIMEHMETI’s laptop computer showed numerous indicia of ALIMEHMETI’s support for ISIS, including a photograph of ALIMEHMETI with an ISIS flag in the background, images of ISIS fighters in the Middle East, a photograph of ALIMEHMETI making a gesture of support for ISIS, various files relating to jihad and martyrdom, and electronic communications in which ALIMEHMETI assisted another ISIS supporter in efforts to travel to Syria to join ISIS by providing contact information for an ISIS affiliate who could facilitate the travel.
After returning to the United States, ALIMEHMETI continued to support ISIS. Among other things, ALIMEHMETI displayed an ISIS flag in his apartment in the Bronx and, in the course of recorded meetings with undercover law enforcement employees, ALIMEHMETI played multiple pro-ISIS propaganda videos on his computer and cellphone, including videos of ISIS fighters decapitating prisoners, and also indicated that he was interested in radicalizing other individuals in the Bronx area. ALIMEHMETI also made repeated purchases of combat knives and other military-type equipment, including masks, handcuffs, a pocket chainsaw, a wire pocket saw, and a rucksack designed for tactical combat, which he stockpiled at his apartment in the Bronx.
In October 2015, ALIMEHMETI applied for a U.S. passport, falsely claiming in the application that his previous passport had been lost. ALIMEHMETI later told an undercover law enforcement employee that his prior passport – which ALIMEHMETI showed to the undercover law enforcement officer – had not been lost and, instead, that he was applying for a new passport because he believed the rejection stamps in his existing passport resulting from his attempted entries into the United Kingdom would make it difficult to travel. ALIMEHMETI further conveyed to undercover law enforcement personnel that he was seeking the new passport, without rejection stamps, to facilitate his travel overseas to join and fight for ISIS.
In May 2016, ALIMEHMETI attempted to assist an individual who was purportedly traveling from New York to Syria to train and fight with ISIS but who was actually an undercover law enforcement employee (the “UC”). On May 17, 2016, ALIMEHMETI met with the UC in Manhattan. The UC had purportedly arrived in New York earlier that day on a bus and was en route to John F. Kennedy International Airport (“JFK Airport”) to take an overseas flight later that night.
ALIMEHMETI agreed to help the UC with several tasks prior to the UC’s purported travel. ALIMEHMETI assisted the UC by locating stores so the UC could purchase supplies to use while traveling to, and fighting with, ISIS, including a cellphone, boots, a compass, a bag, and a flashlight, among other items. ALIMEHMETI also gave the UC advice on which items to purchase and on the use of different kinds of encrypted communications services, including the service that ALIMEHMETI stated was currently being used by fellow ISIS supporters, whom ALIMEHMETI referred to as “the brothers.” ALIMEHMETI also downloaded three encrypted communications applications on the UC’s newly purchased cellphone for use by the UC.
Further, ALIMEHMETI assisted the UC in traveling from Manhattan to a hotel in Queens, so the UC could purportedly meet with an individual who was preparing travel documents that the UC would use to travel to Syria to join ISIS. ALIMEHMETI gave the UC a piece of paper with his name and contact information, so the UC could provide that information to the purported document facilitator. ALIMEHETI explained that he also wanted to travel to Syria and join ISIS, stating “I’m ready to . . . go with you man . . . you know I would. I’m done with this place.” After leaving the hotel in Queens, ALIMEHETI brought the UC to JFK Airport, via public transportation, so the UC could begin the purported journey to ISIS. Within days of seeking to facilitate the UC’s travel to join ISIS, ALIMEHMETI indicated during a call to his brother in Albania that that he had learned of a new way to obtain a passport for his own travel (referring to the UC’s purported document facilitator), and that a “friend of mine” (referring to the UC) had “just [done] it two days ago.”
Following ALIMEHMETI’s arrest on the charges in this case in May 2016, the FBI executed a search of ALIMEHMETI’s Bronx apartment pursuant to a judicially authorized search warrant. The FBI’s search of ALIMEHMETI’s apartment resulted in the seizure of, among other evidence, the following: (i) a laptop computer and a cellphone belonging to ALIMEHMETI that contain an array of materials further demonstrating his allegiance to ISIS and terrorist ideology, including images of the ISIS flag, photographs of ALIMEHMETI with an ISIS flag and making gestures supportive of ISIS, images of ISIS fighters overseas, and propaganda videos promoting and glorifying ISIS, including videos depicting ISIS fighters engaging in combat and beheading prisoners; (ii) a collection of combat knives and other military-type equipment that ALIMEHMETI had purchased and stored at his apartment, as discussed above; and (iii) an ISIS flag that was displayed on a wall in the apartment.
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ALIMEHMETI, 24, of the Bronx, pled guilty to one count of attempting to provide material support or resources to a designated foreign terrorist organization, namely, ISIS, which carries a maximum sentence of 20 years in prison, and one count of making a false statement in an application for a U.S. passport with the intent to induce the issuance of a passport to facilitate an act of international terrorism, namely, traveling abroad to join, train with, and fight for ISIS, which carries a maximum sentence of 25 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 a judge. Sentencing is scheduled for June 7, 2018, before Judge Engelmayer.
Mr. Berman and Mr. O’Callaghan praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the NYPD, and the NYPD’s Intelligence Division. Mr. Berman also thanked the Counterterrorism Section of the Department of Justice’s National Security Division, the Department of Justice’s Office of International Affairs, the Albania State Police, and the Metropolitan Police Service’s Counter Terrorism Command of London, United Kingdom.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Emil J. Bove III, George D. Turner, and Brendan F. Quigley are in charge of the prosecution, with assistance from Trial Attorneys Joseph Attias and Kiersten Korczynski of the National Security Division’s Counterterrorism Section.
Armed Robber Pleads Guilty to MurderRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced that DWAINE COLLYMORE, a/k/a “Twin,” pled guilty yesterday to murdering Carlos Vargas, and shooting at a second man, during an attempted robbery on April 28, 2016, inside 2466 Marion Avenue in the Bronx, New York. COLLYMORE faces a maximum term of life in prison, and will be sentenced before Chief United States District Judge Colleen McMahon.
U.S. Attorney Geoffrey S. Berman said: “Dwaine Collymore has admitted to murdering Carlos Vargas during a botched robbery. We will continue to work with our law enforcement partners to ensure that murderers are held to account for their crimes.”
According to the Indictment and other documents filed in the case, as well as statements made during the plea proceeding, on April 28, 2016, COLLYMORE and another man attempted to rob the occupants of an apartment located at 2466 Marion Avenue in the Bronx, where Carlos Vargas and others were engaged in selling small quantities of marijuana. The victims resisted, and in the ensuing struggle COLLYMORE stunned Vargas and knocked him to the ground. COLLYMORE then fired a shot at a second victim (“Victim-2”). Victim-2 was not struck, but fell to the ground and played dead. Believing he had already killed Victim-2, COLLYMORE then leaned over Vargas and fired a single shot into Vargas’s head at close range, killing him.
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Mr. Berman praised the outstanding work of the investigators of the United States Attorney’s Office for the Southern District of New York, the New York City Police Department’s 46th Precinct Detective Squad, and the United States Marshals Service.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jared Lenow and Hagan Scotten are in charge of the prosecution.
Manhattan U.S. Attorney Announces Criminal Charges Against U.S. Bancorp for Violations of the Bank Secrecy ActRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced criminal charges against U.S. Bancorp (“USB”) consisting of two felony violations of the Bank Secrecy Act (“BSA”) by its subsidiary, U.S. Bank National Association (the “Bank”), the fifth largest bank in the United States, for willfully failing to have an adequate anti-money laundering program (“AML”) and willfully failing to file a suspicious activity report (“SAR”). The case is assigned to United States District Judge Lewis A. Kaplan.
Mr. Berman also announced an agreement (the “Agreement”) under which USB agreed to accept responsibility for its conduct by stipulating to the accuracy of an extensive Statement of Facts, pay a $528 million penalty, and continue reforms of its BSA/AML compliance program. Assuming USB’s continued compliance with the Agreement, the Government has agreed to defer prosecution for a period of two years, after which time the Government will seek to dismiss the charges. The Agreement is pending review by the Court. The penalty shall be collected through the Bank’s forfeiture to the United States of $453 million in a civil forfeiture action also filed today, with the remaining $75 million satisfied by the Bank’s payment of a civil money penalty assessed by the Office of the Comptroller of the Currency (the “OCC”).
U.S. Attorney Geoffrey S. Berman stated: “U.S. Bank’s AML program was highly inadequate. The Bank operated the program ‘on the cheap’ by restricting headcount and other compliance resources, and then imposed hard caps on the number of transactions subject to AML review in order to create the appearance that the program was operating properly. The Bank also concealed its wrongful approach from the OCC. As a result, U.S Bank failed to detect and investigate large numbers of suspicious transactions. With today’s resolution, the Bank has accepted responsibility for its criminal conduct and committed to completing the reform of its AML program.”
The OCC, the Financial Crimes Enforcement Network (“FinCEN”), and the Board of Governors of the Federal Reserve System (”FRB”) have also reached agreements with the Bank to resolve related regulatory actions. For purposes of its action, which was also filed today, FinCEN is represented by this Office’s Civil Division. FinCEN’s agreement with the Bank requires the Bank to pay an additional $70 million for civil violations of the BSA, and it includes further admissions by the Bank, including that the Bank filed more than 5,000 currency transaction reports with incomplete and inaccurate information, which impeded law enforcement’s ability to identify and track potentially unlawful behavior. FinCEN’s agreement with the Bank is pending review by the Court.
According to the documents filed today in Manhattan federal court:
USB’s Failure to Maintain an Adequate AML Program
From 2009 and continuing until 2014, USB willfully failed to establish, implement, and maintain an adequate AML program. Among other things, USB capped the number of alerts generated by its transaction monitoring systems, basing the number of such alerts on staffing levels and resources, rather than setting thresholds for such alerts that corresponded to a transaction’s level of risk. The Bank deliberately concealed this from the OCC, the Bank’s primary regulator.
USB was well aware that these practices were improper, were resulting in the Bank missing substantial numbers of suspicious transactions, and were placing the Bank at risk of regulatory action. Bank documentation from as early as 2005 acknowledged that alert limits were based on staffing levels and, as a result, a risk item for the bank. For example, in a December 1, 2009,F memo from the Bank’s then AML Officer (the “AMLO”) to the then Chief Compliance Officer (the “CCO), the AMLO explained that while the Bank was experiencing significant increases in SAR volumes, the Bank’s staff was “stretched dangerously thin” and warned that a “regulator could very easily argue that this testing should lead to an increase in the number of queries worked.” The Bank conducted below-threshold testing (“BTT”), which consisted of investigating a limited number of transactions that fell outside alert limits to see if thresholds should be adjusted so that more alerts would be investigated. The Bank’s BTT regularly found that SARs should have been filed on more than 25 percent, and as much as 80 percent, of the tested transactions. Rather than increase resources and lower thresholds to detect such suspicious activity, as repeatedly requested by the responsible AML employees, the Bank instead decided to stop conducting BTT altogether.
An OCC examiner assigned to the Bank repeatedly warned USB officials, including the AMLO, of the impropriety of managing the Bank’s monitoring programs based on the size of its staff and other resources. Knowing that the OCC would find USB’s resource-driven alert limits to be improper, Bank officials, including the CCO, deliberately concealed these practices from the OCC. For example, a Bank employee deliberately excluded references to resource limitations from the minutes of an internal Bank meeting for fear that the OCC would disapprove of the Bank’s practices, and in order to protect himself and his supervisor from adverse consequences. Indeed, the AMLO described USB’s AML program to another senior manager as an effort to use “smoke and mirrors” to “pull the wool over the eyes” of the OCC.
USB also failed to monitor Western Union (“WU”) transactions involving non-customers of the Bank that took place at Bank branches. The Bank processed WU transactions involving non-customers even though they would not be subject to the Bank’s transaction monitoring systems. Even when Bank employees flagged specific non-customer transactions raising AML-related concerns, the transactions went uninvestigated. It was not until July 1, 2014, that the Bank implemented a new policy that prohibited WU transactions by non-customers.
In the course of this investigation, the Bank analyzed the impact of its deficient monitoring practices. For just the six months prior to taking steps to remedy the practices, the Bank’s analysis resulted in the generation of an additional 24,179 alerts and the filing of 2,121 SARs.
USB’s Failure to Timely File Suspicious Activity Reports Relating to Scott Tucker
From October 2011 through November 2013, the Bank willfully failed to timely report suspicious banking activities of Scott Tucker, its longtime customer, despite being on notice that Tucker had been using the Bank to launder proceeds from an illegal and fraudulent payday lending scheme using a series of sham bank accounts opened under the name of companies nominally owned by various Native American tribes (the “Tribal Companies”). From 2008 through 2012, Tucker’s companies extended approximately five million loans to customers across the country, while generating more than $2 billion in revenues and hundreds of millions of dollars in profits. Most of this money flowed through accounts that Tucker maintained at the Bank.
USB employees responsible for servicing Tucker’s ongoing account activity disregarded numerous red flags that Tucker was using the tribes to conceal his ownership of the accounts. For example, Tucker spent large sums of monies from accounts in the names of Tribal Companies on personal items, including tens of millions of dollars on a vacation home in Aspen and on Tucker’s professional Ferrari racing team. USB also received subpoenas from regulators investigating Tucker’s businesses. In September 2011, after news organizations published reports examining Tucker’s history and questionable business practices, the Bank reviewed Tucker’s accounts, and an AML investigator reported to supervisors, among other things, that “it looks as though Mr. Tucker is quite the slippery individual” who “really does hide behind a bunch of shell companies.” Based on its findings, the Bank closed the accounts in the names of the Tribal Companies but failed to file a SAR.
The Bank also left open Tucker’s non-tribal accounts and opened new ones, allowing over $176 million more from his illegal payday business to flow into the Bank. Despite also learning of an April 2012 Federal Trade Commission lawsuit against Tucker and the Tribal Companies, the Bank did not file a SAR regarding Tucker until served with a subpoena by this Office in November 2013.
On October 13, 2017, Tucker was convicted in the United States District Court for the Southern District of New York of various offenses arising from his payday lending scheme. The Government intends to recommend that the amounts forfeited by USB be distributed to victims of Tucker’s scheme, consistent with the applicable Department of Justice regulations, through the ongoing remission process.
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Mr. Berman praised the outstanding investigative work of the Special Agents at the United States Attorney’s Office and thanked the OCC for its assistance with the investigation. Mr. Berman also thanked FinCEN for its partnership with this Office.
The prosecution is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorneys Niketh Velamoor and Jonathan Cohen are in charge of the prosecution. The Office’s Civil Frauds Unit is handling the regulatory action on behalf of FinCEN. Assistant U.S. Attorneys Christopher Harwood and Caleb Hayes-Deats are in charge of the matter.
Long Island Home-School Tutor Charged with EnticementRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the arrest and the filing of federal charges yesterday against JEFFREY WEBER. The Complaint charges that WEBER communicated with an individual he believed to be a 13-year-old girl via email and text messages, and made plans to meet the girl at a diner in Manhattan and then go to her apartment to engage in sexual activity. WEBER was arrested yesterday when he arrived at the designated meeting place to meet the girl, and was presented before United States Magistrate Judge Debra Freeman in Manhattan federal court.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Jeffrey Weber, a home-school tutor who has constant interaction with children, made arrangements through text messaging and emails to meet with what he thought was a 13-year-old girl to engage in sexual activity. Thankfully he was corresponding with an undercover law enforcement officer and not a young girl, but his alleged intentions are no less insidious. This Office, along with our partners at the NYPD, remain committed to keeping child predators off the streets.”
NYPD Commissioner James P. O’Neill said: “The suspect in this case—a 59-year-old Long Island man—is accused of sending sexually-explicit texts and emails to an investigator posing as a 13-year-old girl. But this crime wasn't confined to cyberspace. The man was arrested yesterday at a diner in Manhattan, where his plan was to meet the underage girl and take her elsewhere for sex. I want to thank the members of the Internet Crimes Against Children Task Force, whose expertise identified and put an end to this predator’s activities.”
According to the allegations in the Complaint filed in Manhattan federal court:[1]
Between January 30, 2018, and February 14, 2018, WEBER, using email and text messages, engaged in sexually explicit communications with a law enforcement agent who was acting in an undercover capacity and posing as a 13-year-old girl. During these communications, WEBER discussed various sexual acts he wished to perform on the girl and made a plan to meet the girl at a diner in Manhattan and to then go to the girl’s nearby apartment for the purpose of engaging in sexual activity. On February 14, 2018, Weber was arrested at the diner where he planned to meet the girl. In an email with who he thought was the 13-year-old girl, WEBER said that he was employed as a tutor, working in the homes of at-risk youth.
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WEBER, 59, of the Seaford, New York, is charged with one count of attempted enticement, which carries a maximum sentence of life in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge
Mr. Berman praised the NYPD’s Computer Crime Squad, which is part of the Internet Crimes Against Children (ICAC) Task Force, for their outstanding investigative work.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Daniel Loss is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Bronx Men Charged in Manhattan Federal Court with Explosives ChargesRead the Press Release
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, Police Commissioner of the City of New York, (“NYPD”), announced that CHRISTIAN TORO and TYLER TORO have been charged in U.S. District Court for the Southern District of New York in connection with their stockpiling of explosive materials and manufacture of destructive devices at their residence in the Bronx. Both defendants were presented before U.S. Magistrate Judge Debra Freeman in Manhattan federal court this afternoon and detained.
As alleged in the Complaint[1]:
On or about December 4, 2017, a bomb threat was called into a high school in Harlem, New York (the “School”). Shortly after a student was arrested in connection with that incident, CHRISTIAN TORO, who was a teacher at the School, resigned. After CHRISTIAN TORO’s resignation, TYLER TORO returned to the School a laptop computer (the “Laptop”) that the School had provided to CHRISTIAN TORO for use in connection with his employment. A School employee found, on the Laptop, a copy of a book that provides instructions for, among other things, manufacturing explosive devices.
Law enforcement agents subsequently interviewed multiple students at the School, who indicated that at least two students at the School had visited CHRISTIAN TORO’s residence (the “Residence”), where CHRISTIAN TORO would pay them approximately $50 per hour to break apart fireworks and store the powder that came out of the fireworks in containers.
On February 15, 2018, law enforcement agents conducted a search of the Residence pursuant to a judicially authorized search warrant. In a bedroom identified as shared by CHRISTIAN TORO and TYLER TORO, law enforcement agents recovered, among other items, (i) approximately 20 pounds of iron oxide; (ii) approximately five pounds of aluminum powder; (iii) a substance appearing to be thermite, mixed from iron oxide and aluminum powder; (iv) approximately five pounds of potassium nitrate; (v) a glass jar containing explosive powder; and (vi) a cardboard box containing firecrackers. In addition, law enforcement agents found a handwritten diary labeled with TYLER TORO’s name, which stated, among other things, “WE ARE TWIN TOROS STRIKE US NOW, WE WILL RETURN WITH NANO THERMITE” and “I AM HERE 100%, LIVING, BUYING WEAPONS. WHATEVER WE NEED.” Law enforcement agents also recovered a backpack, identified as belonging to CHRISTIAN TORO, containing an index card with handwriting reading “UNDER THE FULL MOON THE SMALL ONES WILL KNOW TERROR.”
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CHRISTIAN TORO, 27, of the Bronx, New York, is charged in the Complaint with one count of unlawfully manufacturing a destructive device, in violation of 26 U.S.C. §§ 5822, 5861(f), and 5871 and 18 U.S.C. § 2, which carries a maximum sentence of 10 years in prison, and one count of distribution of explosive materials to a minor, in violation of 18 U.S.C. § 842(d)(1), which carries a maximum sentence of 10 years in prison. TYLER TORO, also 27 and of the Bronx, New York, is charged with one count of unlawfully manufacturing a destructive device, in violation of 26 U.S.C. §§ 5822, 5861(f), and 5871 and 18 U.S.C. § 2, which carries a maximum sentence of 10 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Berman praised the outstanding investigative work of the FBI’s New York Joint Terrorism Task Force, which consists principally of agents of the FBI and detectives of the NYPD.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorney Elizabeth Hanft is in charge of the prosecution.
The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Former New Rochelle Schools Director Sentenced for Bribery SchemeRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that JOHN C. GALLAGHER JR., the former head of Buildings and Grounds at the City of New Rochelle School District, was sentenced to 37 months in prison for his role in a scheme to solicit bribes from an outside contractor to channel school district business to the contractor’s company for bribery. GALLAGHER pled guilty on October 10, 2017, before U.S. District Judge Kenneth M. Karas, who imposed today’s sentence.
U.S. Attorney Geoffrey S. Berman said: “John C. Gallagher Jr. was in a position of trust while working for the City of New Rochelle School District. But instead of ensuring that the City’s schools and grounds were safe and sound to educate children, he used his position to demand – and receive – more than $125,000 in kickbacks from a contractor for the school district. Thanks to our law enforcement partners, Gallagher’s scheme is over, and he has been sentenced for his crimes.”
According to the allegations contained in the Indictment, as well as statements made in related court filings and proceedings:
The City School District of New Rochelle, which receives federal benefits significantly in excess of $10,000 each year, has a Buildings and Grounds Department. It is responsible for, among other things, maintenance and repair of facilities used by the School District to educate children. To do certain maintenance and repair work, the School District uses outside contractors.
Among the outside contractors used by the School District are companies with specialties – in, for example, masonry, electrical work, plumbing, and carpentry – sometimes referred to as “bid vendors” or “time and materials” contractors. These contractors bid annually, using set rates, and if awarded contracts, are paid by the School District to handle any projects within the contractors’ specialties that do not exceed a certain threshold cost. (As of 2009, that amount, per New York State law, was $35,000.) A more costly project that exceeds the threshold is offered for bid and awarded to the lowest responsible bidder, unless the project is deemed a health and safety emergency (i.e., a major plumbing leak during the school year), in which case, the time and materials vendor may be asked to do the job, regardless of the cost.
GALLAGHER, the defendant, was the School District’s Director of Environmental Services, overseeing the School District’s buildings and grounds. To fill this position, the School District contracted with a company that provided, among other things, management services (“Company-1”). GALLAGHER, as an employee of Company-1, was thereby made the School District’s Director of Environmental Services, and worked full-time in the School District, as its agent, with authority to act on its behalf. GALLAGHER, as Director of Environmental Services, had influence over which contractors were awarded work by the School District, and over whether, when, and how contractors were assigned work and paid for work.
Mauro Zonzini owned and wholly controlled a construction company in Westchester County (the “Company”). The Company contracted with the School District to do masonry work, and was hired each year by the School District as its time and materials contractor for masonry work.
From 2009 through 2013, GALLAGHER engaged in a corrupt, criminal scheme in which he solicited, demanded, and accepted bribes in the form of cash payments intending to be influenced and rewarded in connection with the School District’s business and transactions with the Company. The bribe payments that GALLAGHER solicited, demanded, and accepted were paid by Zonzini. Routinely, after the School District paid the Company for work performed, GALLAGHER met in person with Zonzini in a parking lot, where Zonzini provided GALLAGHER with a kickback in the amount of 10 percent of the payment the Company had received from the School District. In this way, GALLAGHER received dozens of cash bribe payments from Zonzini, over the course of at least approximately four years, which together amounted to approximately $125,000. GALLAGHER solicited, demanded, and accepted the bribe payments intending to be influenced in and rewarded for the School District’s decisions to award the Company contracts for masonry work, to assign masonry projects to the Company, and to make timely payment to the Company.
To avoid detection of his corrupt scheme, GALLAGHER concealed the cash bribe payments he received from Zonzini. GALLAGHER did so, as he admitted during a secretly recorded conversation, by keeping the payments “in my car or in my trunk.” In some instances he used the cash to make payments directly toward living expenses, without depositing it in his bank account. For example, during the corrupt scheme, GALLAGHER used the bribe money to make credit card payments, car payments, and, as he admitted during the secretly recorded conversation, “I paid for some college.”
* * *
In addition to the prison term, GALLAGHER, 53, of Harrisburg, Pennsylvania, was sentenced to two years of supervised release, ordered to forfeit $125,000, and pay restitution in the same amount.
Zonzini, 52, of South Carolina, pled guilty on May 9, 2017, to one count of bribing a public official, which carries a maximum sentence of 10 years in prison, and one count of tax evasion, which carries a maximum sentence of five years in prison. The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge. Zonzini will be sentenced on February 16, 2018. His case is assigned to U.S. District Judge Nelson S. Román.
Mr. Berman praised the outstanding investigative efforts of the United States Postal Inspection Service, the Internal Revenue Service, Criminal Investigation, and the U.S. Attorney’s Office’s Special Agents. He also thanked the U.S. Department of Education’s Office of Inspector General for its assistance.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Kathryn Martin and Benjamin Allee are in charge of the prosecution.
Manhattan U.S. Attorney Announces Bank Fraud Charges Against NYPD DetectiveRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, Commissioner of the New York City Police Department (“NYPD”), announced today that MICHAEL BONANNO was arrested and charged in Manhattan federal court with bank fraud, conspiracy to commit bank fraud, and aggravated identity theft, in connection with a scheme to use stolen bank account numbers to make payments on BONANNO’s credit card and home mortgage accounts. BONANNO was arrested at his home this morning and will be presented today before Magistrate Judge Debra Freeman.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Michael Bonanno, who was at the time a detective in the NYPD’s Crime Stoppers unit, and his co-conspirator used victims’ bank account numbers in a scheme to steal hundreds of thousands of dollars from New Yorkers. In so doing, Bonanno betrayed the public that he swore to protect. I commend the FBI and the Internal Affairs Bureau of the NYPD for their outstanding work in this investigation.”
FBI Assistant Director William F. Sweeney Jr. said: “Plain and simple, Michael Bonanno allegedly used other people’s money to pay off his debts while simultaneously serving as a police officer, charged with investigating criminal wrongdoing. We don’t allow the general public to get away with these types of crimes, and we won’t allow members of the law enforcement community to get away with them either.”
NYPD Commissioner James P. O’Neill said: “I want to commend the dedicated investigators in the NYPD Internal Affairs Bureau and the FBI as well as the prosecutors in the Southern District whose tireless efforts on this corruption case exposed the criminal activity alleged in this arrest.”
According to the allegations in the Complaints unsealed today in Manhattan federal court: [[1]]
BONANNO is a NYPD detective and was a member of the NYPD Crime Stoppers unit, which receives and investigates anonymous tips about criminal activity from members of the community.
From November 2016 to March 2017, BONANNO and a co-conspirator stole and attempted to steal money from the bank accounts of multiple New York residents by making unauthorized wire transfers from victims’ bank accounts to accounts controlled by BONANNO, and by cashing fraudulent checks written from victims’ accounts into an account controlled by BONANNO.
In total, BONANNO and his co-conspirator attempted approximately $1,457,642 in fraudulent wire transfers from victims’ accounts to BONANNO’s accounts, and deposited approximately $68,900 worth of forged checks into BONANNO’s accounts.
* * *
BONANNO, 44, of Staten Island, New York, has been charged with one count of bank fraud and one count of conspiracy to commit bank fraud, each of which carries a 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 sentencing of the defendant will be determined by the judge.
Mr. Berman praised the investigative work of the FBI and NYPD Internal Affairs Bureau in this investigation.
This case is being handled by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Nicolas Roos and Danielle R. Sassoon are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
Chelsea Bomber Ahmad Khan Rahimi Sentenced to Life in Prison for Executing September 2016 Bombing and Attempted Bombing in New York CityRead the Press Release
Ahmad Khan Rahimi, aka, Ahmad Rahami, 30, of Elizabeth, New Jersey, was sentenced to life in prison for his execution and attempted execution of bombings in New York City on Sept. 17, 2016.
Acting Assistant Attorney General for National Security Edward C. O’Callaghan, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office and Commissioner James P. O’Neill of the NYPD made the announcement.
“Today our legal system delivered on its promise to provide swift and resolute justice to those who would target innocent victims by perpetrating terrorist attacks against our homeland,” said Acting Assistant Attorney General O’Callaghan. “I commend all of the agents, analysts and prosecutors whose commitment and dedication made this result possible.”
“Inspired by ISIS and al Qaeda, Ahmad Khan Rahimi planted and detonated bombs on the streets of Chelsea, and in New Jersey, intending to kill and maim as many innocent people as possible,” said U.S. Attorney Berman. “Less than a year-and-a-half after his attacks, Rahimi has now been tried, convicted, and sentenced to life in prison. Rahimi’s conviction and sentencing are victories for New York City and our nation in the fight against terror.”
“Today’s sentencing assures us that Ahmad Khan Rahimi will spend the rest of his life behind bars. Once again, the lesson learned is clear: if you plot to cause catastrophic damage against this city and our citizens, you will be held accountable,” said Assistant Director Sweeney. “I would like to thank the FBI Joint Terrorism Task Forces here in New York and New Jersey, along with many other law enforcement partners, who moved with speed in this investigation and who work every day to protect Americans from acts of terror. I would also like to express my gratitude to the public who remained engaged throughout this investigation. That partnership and the public's continued cooperation are crucial to ensuring we stay ahead of threats, and enhance law enforcement's response following attacks like this.”
“Rahimi attempted to wreak havoc in the Chelsea neighborhood of New York City. He failed,” said Commissioner O’Neill. “Committing terrorism may seem, from the darkest places of the internet and espoused in propaganda, as a higher calling. It is not. Today’s sentencing — of life in prison — should be the strongest deterrent to future acts of terror. My thanks to the police officers from the 13th precinct, NYPD detectives, investigators on the Joint Terrorism Task Force, and prosecutors here in Manhattan for making today’s sentencing possible.”
Rahimi was convicted on Oct. 16, 2017, following a two-week jury trial before U.S. District Judge Richard M. Berman, who also imposed today’s sentence.
According to the Complaint, the Indictment, other filings in Manhattan federal court, evidence at trial, and statements made in court proceedings:
On Sept. 17, 2016, Rahimi transported two improvised explosive devices from New Jersey to New York, New York. Rahimi placed one of the devices in the vicinity of 135 West 23rd Street in the Chelsea neighborhood of New York, New York (the 23rd Street Bomb) and the other in the vicinity of 131 West 27th Street in the Chelsea neighborhood of New York, New York (the 27th Street Bomb).
At approximately 8:30 p.m., the 23rd Street Bomb – containing a high explosive main charge and thousands of ball bearings – detonated, causing injuries to over 30 people and hundreds of thousands of dollars in property damage across a 650-foot crime scene. The injuries included, among other things, lacerations to the face, abdomen, legs, and arms caused by flying glass; metal shrapnel and fragmentation embedded in skin and bone; and various head injuries. The explosive components appear to have been placed inside a pressure cooker and left near a dumpster. The explosion propelled a more-than-100-pound dumpster – which was introduced as an exhibit at trial – more than 120 feet. The blast shattered windows as far as approximately 400 feet from the blast site and, vertically, more than three stories high.
Shortly after the 23rd Street Bomb detonated, a civilian identified the 27th Street Bomb and promptly called 911, which recorded call was introduced in evidence and played at trial. The 27th Street Bomb, which was rendered safe prior to detonation, consisted of, among other things, a pressure cooker connected with wires to a cellular telephone (likely to function as a timer) and packaged with an explosive main charge, ball bearings, and steel nuts.
Earlier that day, at approximately 9:35 a.m. on Sept. 17, 2016, another improvised explosive device, which had been planted by Rahimi in the early morning hours, detonated in the vicinity of Seaside Park, New Jersey, along the route for the Seaside Semper Five Marine Corps Charity 5K race. The start of the race – which was scheduled to begin at 9:00 a.m. – was delayed. Had the race started on time, the bomb would have detonated as runners were passing by where Rahimi had planted it.
On Sept. 18, 2016, at approximately 8:40 p.m., six additional improvised explosive devices that Rahimi also planted were found inside a backpack located at the entrance to the New Jersey Transit station in Elizabeth, New Jersey. One of these devices detonated as law enforcement used a robot to defuse it.
On September 19, 2016, at approximately 9:30 a.m., Rahimi was arrested by police in Linden, New Jersey. Rahimi fired multiple shots at police, striking and injuring multiple police officers before he was himself shot, subdued, and placed under arrest. In the course of Rahimi’s arrest, a handwritten journal was recovered from Rahimi’s person. Written in the journal were, among other things, mentions of explosive devices (including “The sounds of bombs will be heard in the streets” and “Bombs set off in the streets they plan to run a mile”), and laudatory references to Usama Bin Laden, the former leader of al Qaeda, Anwar al-Awlaki, a former senior leader of al Qaeda in the Arabian Peninsula, Mohammed al-Adnani, a former senior leader of the Islamic State in Iraq and al Sham, and Nidal Hasan, who shot and killed 13 people in Foot Hood, Texas.
* * *
In addition to the prison term, Rahimi was sentenced to five years of supervised release and ordered to pay $562,803 in restitution.
In addition to the charges for which he was sentenced in Manhattan federal court, Rahimi also has been charged in a Complaint in the District of New Jersey with offenses in connection with his alleged efforts to detonate explosives in Seaside Park, New Jersey, and Elizabeth, New Jersey.
Mr. O’Callaghan and Mr. Berman praised the outstanding efforts of the FBI’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department.
Assistant U.S. Attorneys Emil J. Bove III, Andrew J. DeFilippis, and Shawn G. Crowley are in charge of the prosecution, with assistance from Trial Attorney Brian Morgan of the National Security Division’s Counterterrorism Section.
Chelsea Bomber Ahmad Khan Rahimi Sentenced to Life in Prison for Executing September 2016 Bombing and Attempted Bombing in New York CityRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Edward C. O’Callaghan, the Acting Assistant Attorney General for National Security, William F. Sweeney Jr., Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office (“FBI”), and James P. O’Neill, Commissioner of the Police Department for the City of New York (“NYPD”), announced today that AHMAD KHAN RAHIMI, a/k/a “Ahmad Rahami,” was sentenced to life in prison for his execution and attempted execution of bombings in New York City on September 17, 2016. RAHIMI was convicted on October 16, 2017, following a two-week jury trial before U.S. District Judge Richard M. Berman, who also imposed today’s sentence.
Manhattan U.S. Attorney Geoffrey S. Berman said: “Inspired by ISIS and al Qaeda, Ahmad Khan Rahimi planted and detonated bombs on the streets of Chelsea, and in New Jersey, intending to kill and maim as many innocent people as possible. Less than a year-and-a-half after his attacks, Rahimi has now been tried, convicted, and sentenced to life in prison. Rahimi’s conviction and sentencing are victories for New York City and our nation in the fight against terror.”
Acting Assistant Attorney General Edward C. O’Callaghan said: “Today our legal system delivered on its promise to provide swift and resolute justice to those who would target innocent victims by perpetrating terrorist attacks against our homeland. I commend all of the agents, analysts, and prosecutors whose commitment and dedication made this result possible.”
FBI Assistant Director William F. Sweeney Jr. said: “Today’s sentencing assures us that Ahmad Khan Rahimi will spend the rest of his life behind bars. Once again, the lesson learned is clear: if you plot to cause catastrophic damage against this city and our citizens, you will be held accountable. I would like to thank the FBI Joint Terrorism Task Forces here in New York and New Jersey, along with many other law enforcement partners, who moved with speed in this investigation and who work every day to protect Americans from acts of terror. I would also like to express my gratitude to the public who remained engaged throughout this investigation. That partnership and the public's continued cooperation are crucial to ensuring we stay ahead of threats, and enhance law enforcement's response following attacks like this.”
Police Commissioner James P. O’Neill said: “Ahmed Kahn Rahimi placed two ticking bombs in a crowded Manhattan neighborhood on a warm Saturday night. He then walked away. It was the most cowardly of all crimes. His clear intention was to take as many lives as possible. Rahimi had other bombs and likely other plans. I want to thank the NYPD officers who responded that night, the agents and NYPD detectives of the JTTF, the NYPD Intelligence Bureau, Detective Bureau, Bomb Squad, ATF Agents, and the officers of the Linden New Jersey Police Department who all had important contributions in the investigation and arrest. I also want to thank the prosecutors of the US Attorney for the Southern District of New York, the most experienced terrorism prosecutors in the nation for bringing New Yorkers justice.”
According to the Complaint, the Indictment, other filings in Manhattan federal court, evidence at trial, and statements made in court proceedings:
On September 17, 2016, RAHIMI transported two improvised explosive devices from New Jersey to New York, New York. RAHIMI placed one of the devices in the vicinity of 135 West 23rd Street in the Chelsea neighborhood of New York, New York (the “23rd Street Bomb”) and the other in the vicinity of 131 West 27th Street in the Chelsea neighborhood of New York, New York (the “27th Street Bomb”).
At approximately 8:30 p.m., the 23rd Street Bomb – containing a high explosive main charge and thousands of ball bearings – detonated, causing injuries to over 30 people and hundreds of thousands of dollars in property damage across a 650-foot crime scene. The injuries included, among other things, lacerations to the face, abdomen, legs, and arms caused by flying glass; metal shrapnel and fragmentation embedded in skin and bone; and various head injuries. The explosive components appear to have been placed inside a pressure cooker and left near a dumpster. The explosion propelled a more-than-100-pound dumpster – which was introduced as an exhibit at trial – more than 120 feet. The blast shattered windows as far as approximately 400 feet from the blast site and, vertically, more than three stories high.
Shortly after the 23rd Street Bomb detonated, a civilian identified the 27th Street Bomb and promptly called 911, which recorded call was introduced in evidence and played at trial. The 27th Street Bomb, which was rendered safe prior to detonation, consisted of, among other things, a pressure cooker connected with wires to a cellular telephone (likely to function as a timer) and packaged with an explosive main charge, ball bearings, and steel nuts.
Earlier that day, at approximately 9:35 a.m. on September 17, 2016, another improvised explosive device, which had been planted by RAHIMI in the early morning hours, detonated in the vicinity of Seaside Park, New Jersey, along the route for the Seaside Semper Five Marine Corps Charity 5K race. The start of the race – which was scheduled to begin at 9:00 a.m. – was delayed. Had the race started on time, the bomb would have detonated as runners were passing by where RAHIMI had planted it.
On September 18, 2016, at approximately 8:40 p.m., six additional improvised explosive devices that RAHIMI also planted were found inside a backpack located at the entrance to the New Jersey Transit station in Elizabeth, New Jersey. One of these devices detonated as law enforcement used a robot to defuse it.
On September 19, 2016, at approximately 9:30 a.m., RAHIMI was arrested by police in Linden, New Jersey. RAHIMI fired multiple shots at police, striking and injuring multiple police officers before he was himself shot, subdued, and placed under arrest. In the course of RAHIMI’s arrest, a handwritten journal was recovered from RAHIMI’s person. Written in the journal were, among other things, mentions of explosive devices (including “The sounds of bombs will be heard in the streets” and “Bombs set off in the streets they plan to run a mile”), and laudatory references to Usama Bin Laden, the former leader of al Qaeda, Anwar al-Awlaki, a former senior leader of al Qaeda in the Arabian Peninsula, Mohammed al-Adnani, a former senior leader of the Islamic State in Iraq and al Sham, and Nidal Hasan, who shot and killed 13 people in Foot Hood, Texas.
* * *
In addition to the prison term, RAHIMI, 30, was sentenced to five years of supervised release and ordered to pay $562,803 in restitution.
In addition to the charges for which he was sentenced in Manhattan federal court, RAHIMI also has been charged in a Complaint in the District of New Jersey with offenses in connection with his alleged efforts to detonate explosives in Seaside Park, New Jersey, and Elizabeth, New Jersey.
Mr. Berman praised the outstanding efforts of the Federal Bureau of Investigation’s New York Joint Terrorism Task Force, which principally consists of agents from the FBI and detectives from the New York City Police Department, and the 13th Precinct of the NYPD. Mr. Berman also thanked the Counterterrorism Section of the Department of Justice’s National Security Division for its assistance.
The prosecution of this case is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Emil J. Bove III, Andrew J. DeFilippis, and Shawn G. Crowley are in charge of the prosecution, with assistance from Trial Attorney Brian Morgan of the National Security Division’s Counterterrorism Section.
Bronx Man Charged with Possessing and Distributing Child PornographyRead the Press Release
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the arrest today of LANCELOT PAUL LUTCHMAN for possession and distribution of child pornography. LUTCHMAN will be presented before United States Magistrate Judge Debra Freeman in Manhattan.
U.S. Attorney Geoffrey S. Berman said: “As alleged, the defendant possessed and distributed hundreds of files containing child pornography. Trafficking in child pornography fuels demand for such vile images, which means that in a very real sense, every time an image is shared, a child is victimized. Working with partners like the NYPD, our mission is to protect children and prosecute child predators.”
Police Commissioner James P. O’Neill said: “The defendant in this case is a Bronx man who is charged with possessing and distributing child pornography – hundreds and hundreds of video files. I want to thank the investigators and prosecutors on this case for their work to hold those who allegedly victimize and exploit children accountable for their crimes.”
According to the allegations in the Complaint filed in Manhattan federal court:[1]
Between January 31, 2016 and January 21, 2017, LUTCHMAN used a peer-to-peer file sharing network to share approximately 845 unique video files known to contain child pornography. The child pornography included depictions of prepubescent children engaged in sexual activity with other children or adults. On January 26, 2017, law enforcement officers executed a search warrant for LUTCHMAN’s apartment and recovered his laptop computer, which contained numerous files of child pornography. As officers were entering the apartment, LUTCHMAN hid the laptop in his oven.
* * *
LUTCHMAN, 44, of the Bronx, New York, is charged with one count of distribution and receipt of child pornography, which carries a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison, and one count of possession of child pornography, 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.
Mr. Berman praised the New York City Police Department for its outstanding investigative work. Mr. Berman also thanked the Bronx District Attorney’s Office for its invaluable assistance with this matter.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorney Daniel Loss is in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.