Southern District of New York
Press releases recorded for this federal judicial district.
Sayfullo Saipov Indicted on Terrorism and Murder in Aid of Racketeering Charges in Connection with Lower Manhattan Truck AttackRead the Press Release
Jeff Sessions, the Attorney General of the United States, Joon H. Kim, Acting United States Attorney for the Southern District of New York, Dana J. Boente, Acting Assistant Attorney General for National Security, 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, the Commissioner of the Police Department for the City of New York (“NYPD”), announced that a grand jury in the Southern District of New York has returned a 22-count indictment (the “Indictment”) against SAYFULLO HABIBULLAEVIC SAIPOV in connection with SAIPOV’s alleged terrorist attack in lower Manhattan on October 31, 2017, which killed eight people and injured 12 more. The Indictment charges SAIPOV with eight counts of murder in aid of racketeering, 12 counts of attempted murder in aid of racketeering, one count of providing and attempting to provide material support to the Islamic State of Iraq and al-Sham (“ISIS”), and one count of violence and destruction of a motor vehicle. The case has been assigned to U.S. District Judge Vernon S. Broderick.
SAIPOV was initially arrested on a Complaint and presented before the Honorable Barbara Moses on November 1, 2017. He was ordered detained and has been in federal custody since his arrest.
Attorney General Jeff Sessions said: “As alleged in this indictment, Sayfullo Saipov murdered eight innocent people and injured many more in a calculated act of terrorism in the heart of one of our great cities. People have a right to safety walking down a sidewalk or riding a bike, and we will not change our resolve to confront these threats both at home and abroad. I am especially proud today of the law enforcement officers who acted quickly and courageously to respond and to protect people from further harm. We continue to offer our assistance, our support and our prayers to the victims of this attack and to all the people of New York City.”
Acting U.S. Attorney Joon H. Kim said: “Consumed by hate and a twisted ideology, Sayfullo Saipov allegedly barreled down a pedestrian walkway and bicycle path on a sunny afternoon on the West Side of Manhattan, killing eight innocent people and injuring at least a dozen others. As the scores of videos and images on his cellphone showed, Saipov’s depraved use of a rental truck as a weapon of terror was allegedly in support of the terrorist organization ISIS. As of today, Saipov stands indicted of material support of terrorism, as well as eight counts of murder and 12 counts of attempted murder in aid of racketeering. Like many terrorists before him, Saipov will now face justice in an American court. And like New York City’s response to his alleged attack, we expect that justice in this case will be swift, firm, and resolute.”
FBI Assistant Director William F. Sweeney Jr. said: “When Sayfullo Saipov carried out his brutal attack last month, his intentions were to inflict significant damage, death and injury to innocent victims and terrorize this city. We announce today’s indictment with the understanding that nothing can ever reverse the unfortunate events of that day, or alleviate the pain and sorrow of the victims’ families. Today’s indictment should be a signal though that the rule of law will always prevail and we are dedicated to holding this perpetrator and anyone else who threatens to disrupt our most basic freedoms accountable for their criminal actions.”
As alleged in the Indictment and the Complaint:[1]
Islamic State of Iraq and Al-Sham
ISIS is a foreign terrorist organization based in the Middle East and Africa whose publicly stated purpose is the establishment of an Islamic state or caliphate based in the Middle East and Africa that encompasses all Muslims worldwide. ISIS has pursued the objective of an Islamic state through, among other things, killing and deliberate targeting of civilians, mass executions, persecution of individuals and communities on the basis of their religion, nationality, or ethnicity, kidnapping of civilians, forced displacement of Shia communities and minority groups, killing and maiming of children, rape, and other forms of sexual violence. ISIS has recruited thousands of foreign fighters from across the globe to assist with its efforts to expand its so-called caliphate in Iraq, Syria, and other locations in Africa and the Middle East, and has leveraged technology to spread its violent extremist ideology and for incitement to commit terrorist acts.
ISIS, including its leadership, membership, and associates, constitutes an “enterprise,” as that term is defined in Title 18, United States Code, Section 1959(b)(2) – that is, a group of individuals associated in fact, although not a legal entity, which is engaged in, and the activities of which affect, interstate and foreign commerce. ISIS members and associates make and have made public statements and issued public declarations, which, among other things: (i) proclaimed and acknowledged acts of violence had been committed by ISIS; (ii) threatened future acts of violence if ISIS’s demands were not met; and (iii) were intended to promote and foster the prestige and standing of ISIS. ISIS has specifically distributed propaganda designed to encourage ISIS followers to commit acts of violence using vehicles as weapons.
The October 31, 2017, Truck Attack
On October 31, 2017, at approximately 3:00 p.m., SAIPOV drove a rented flatbed truck (the “Truck”) from New Jersey over the George Washington Bridge into New York City. After SAIPOV entered New York City, he proceeded in the Truck to the West Side Highway and began traveling southbound. Once SAIPOV was in the vicinity of Houston Street in Manhattan, he drove the Truck onto the bike lane and pedestrian walkway of the West Side Highway. SAIPOV then drove down the walkway for several blocks, striking numerous civilians. SAIPOV eventually collided with a school bus, which was carrying occupants in the vicinity of West Street and Chambers Street, at which point the Truck came to a halt.
After SAIPOV collided with the school bus, he exited the driver’s door of the Truck with two objects in his hands that appeared to be firearms. Moments after SAIPOV got out of the Truck, he yelled, in substance and in part, “Allahu Akbar,” which is an Arabic phrase that translates to “God is Great.”
SAIPOV was shot by a law enforcement officer and taken into custody. Law enforcement officers subsequently recovered in the vicinity of the Truck, among other things, a paintball gun, a pellet gun, a stun gun, and three knives. Law enforcement officers also recovered, approximately ten feet from the driver’s door of the Truck, a document that contained, among other things, the Arabic text for “No God but God and Muhammad is his Prophet” and “Islamic Supplication. It will endure.” “It will endure” is commonly used to refer to ISIS. Cellphones recovered from the Truck contained, among other things, videos and images of ISIS propaganda, and internet searches for truck rentals and for Halloween in New York City.
After SAIPOV was taken into custody, he was transferred to Bellevue Hospital, where he made statements to law enforcement officers after waiving his Miranda rights. During that interview, SAIPOV stated, among other things, the following:
- SAIPOV was inspired to carry out the Truck attack by ISIS videos he had watched on his cellular phone.
- Approximately one year ago, SAIPOV began planning an attack in the United States. Approximately two months ago, he decided to use a truck to inflict maximum damage against civilians. On or about October 22, 2017, SAIPOV rented a truck so he could practice making turns in advance of his attack.
- SAIPOV planned to use the Truck to strike pedestrians in the vicinity of the West Side Highway and then proceed to the Brooklyn Bridge to continue to strike pedestrians. SAIPOV wanted to kill as many people as he could. SAIPOV chose October 31, Halloween, for the attack because he believed there would be more civilians on the street for the holiday.
- SAIPOV wanted to display ISIS flags in the front and back of the Truck during the attack, but decided against it because he did not want to draw attention to himself. SAIPOV requested to display ISIS’s flag in his hospital room and stated that he felt good about what he had done.
Eight individuals died from the injuries they sustained as a result of the Truck driving on the walkway and at least 12 additional individuals were injured.
* * *
SAIPOV, 29, of Paterson, New Jersey, was initially arrested by the NYPD on October 31, 2017. A chart containing the charges and maximum penalties against SAIPOV is set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Kim, Attorney General Sessions, and Mr. Boente praised the outstanding investigative efforts of the FBI, the NYPD, and the Department of Homeland Security, Homeland Security Investigations (“HSI”). SAIPOV’s arrest is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI’s Joint Terrorism Task Force – which consists of law enforcement officers of the FBI, NYPD, HSI, and other agencies – and the U.S. Department of Justice’s National Security Division. Mr. Kim also thanked the U.S. Department of Justice’s Organized Crime and Gang Section, Office of Enforcement Operations, and Capital Case Section for their exceptional assistance.
The case is being prosecuted by the Office’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Andrew D. Beaty, Amanda Houle, and Matthew Laroche are in charge of the prosecution, with assistance from Trial Attorney Rebecca Magnone of the National Security Division’s Counterterrorism Section.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
COUNT
CHARGES
MAXIMUM PENALTIES ON EACH COUNT
1-8
Murder in Aid of Racketeering
Life in prison or death
9-20
Attempted Murder in Aid of Racketeering
10 years in prison
21
Providing and Attempting to Provide Material Support to a Designated Foreign Terrorist Organization
Life in prison
[1] As the introductory phrase signifies, the entirety of the texts of the Indictment and the Complaint, and the descriptions of the Indictment and the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
- SAIPOV was inspired to carry out the Truck attack by ISIS videos he had watched on his cellular phone.
Sayfullo Saipov Charged with Terrorism and Murder in Aid of Racketeering in Connection with Lower Manhattan Truck AttackRead the Press Release
Today, a grand jury returned a twenty-two count Indictment against Sayfullo Habibullaevic Saipovm, 29, of Paterson, New Jersey, in connection with Saipov’s alleged terrorist attack in lower Manhattan on Oct. 31, which killed eight people and injured twelve more.
Attorney General Jeff Sessions, Acting Assistant Attorney General for National Security Dana J. Boente, Acting U.S. Attorney Joon H. Kim 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.
The Indictment charges Saipov with eight counts of murder in aid of racketeering, twelve counts of attempted murder in aid of racketeering, one count of providing and attempting to provide material support to the Islamic State of Iraq and al-Sham (ISIS) and one count of violence and destruction of a motor vehicle resulting in death. This case has been assigned to U.S. District Judge Vernon S. Broderick.
Saipov was initially arrested on a Complaint and presented before the Honorable Barbara Moses on Nov. 1. He was ordered detained and has been in federal custody since his arrest.
“As alleged in this indictment, Sayfullo Saipov murdered eight innocent people and injured many more in a calculated act of terrorism in the heart of one of our great cities,” said Attorney General Sessions. “People have a right to safety walking down a sidewalk or riding a bike, and we will not change our resolve to confront these threats both at home and abroad. I am especially proud today of the law enforcement officers who acted quickly and courageously to respond and to protect people from further harm. We continue to offer our assistance, our support and our prayers to the victims of this attack and to all the people of New York City.”
“Consumed by hate and a twisted ideology, Sayfullo Saipov allegedly barreled down a pedestrian walkway and bicycle path on a sunny afternoon on the West Side of Manhattan, killing eight innocent people and injuring at least a dozen others,” said Acting U.S. Attorney Kim. “As the scores of videos and images on his cellphone showed, Saipov’s depraved use of a rental truck as a weapon of terror was allegedly in support of the terrorist organization ISIS. As of today, Saipov stands indicted of material support of terrorism, as well as eight counts of murder and 12 counts of attempted murder in aid of racketeering. Like many terrorists before him, Saipov will now face justice in an American court. And like New York City’s response to his alleged attack, we expect that justice in this case will be swift, firm, and resolute.”
“When Sayfullo Saipov carried out his brutal attack last month, his intentions were to inflict significant damage, death and injury to innocent victims and terrorize this city,” said Assistant Director in Charge Sweeney. “We announce today’s indictment with the understanding that nothing can ever reverse the unfortunate events of that day, or alleviate the pain and sorrow of the victims’ families. Today’s indictment should be a signal though that the rule of law will always prevail and we are dedicated to holding this perpetrator and anyone else who threatens to disrupt our most basic freedoms accountable for their criminal actions.”
As alleged in the Indictment and the Complaint:
Islamic State of Iraq and Al-Sham
ISIS is a foreign terrorist organization based in the Middle East and Africa whose publicly stated purpose is the establishment of an Islamic state or caliphate based in the Middle East and Africa that encompasses all Muslims worldwide. ISIS has pursued its objective through, among other things, indiscriminate killing and deliberate targeting of civilians, mass executions and extrajudicial killings, persecution of individuals and communities on the basis of their religion, nationality, or ethnicity, kidnapping of civilians, forced displacement of Shia communities and minority groups, killing and maiming of children, rape and other forms of sexual violence. ISIS has recruited thousands of foreign fighters from across the globe to assist with its efforts to expand its so-called caliphate in Iraq, Syria and other locations in Africa and the Middle East and has leveraged technology to spread its violent extremist ideology and for incitement to commit terrorist acts around the world.
ISIS, including its leadership, membership and associates, constitutes an “enterprise,” as that term is defined in Title 18, United States Code, Section 1959(b)(2) — that is, a group of individuals associated in fact, although not a legal entity, which is engaged in, and the activities of which affect, interstate and foreign commerce. ISIS members and associates make and have made public statements and issued public declarations, which, among other things: (i) proclaimed and acknowledged acts of violence had been committed by ISIS; (ii) threatened future acts of violence if ISIS’s demands were not met; and (iii) were intended to promote and foster the prestige and standing of ISIS.
ISIS has specifically distributed propaganda designed to encourage ISIS followers to commit acts of violence using vehicles as weapons. For example, the July 2016 issue of Dabiq, ISIS’s then-official magazine, praised the “brother” who answered “the Islamic State’s calls to target nations participating in the Crusader coalition fighting the Caliphate” by “killing more than 80 people and injuring more than 300 others” with a truck in an attack that occurred in Nice, France on or about July 14, 2016. In September 2016, ISIS changed the name of its official magazine from Dabiq to Rumiyah. In November 2016, ISIS released Rumiyah, Issue 3, which has an article titled “Just Terror Tactics,” which again focused on a vehicle attack as a primary attack weapon with a secondary attack using a knife or gun to maximize death and terror.
The Oct. 31, Truck Attack
On Oct. 31, at approximately 3:00 p.m., Saipov drove a rented flatbed truck (the “Truck”) from New Jersey over the George Washington Bridge into New York City. After Saipov entered New York City, he proceeded in the Truck to the West Side Highway and began traveling southbound. Once Saipov was in the vicinity of Houston Street in Manhattan, he drove the Truck onto the bike lane and pedestrian walkway of the West Side Highway. Saipov then drove down the walkway for several blocks, striking numerous civilians. Saipov eventually collided with a school bus, which was carrying occupants in the vicinity of West Street and Chambers Street, at which point the Truck came to a halt.
After Saipov collided with the school bus, he exited the driver’s door of the Truck with two objects in his hands that appeared to be firearms. Moments after Saipov got out of the Truck, he yelled, in substance and in part, “Allahu Akbar,” which is an Arabic phrase that translates to “God is Great.”
Saipov was shot by a law enforcement officer and taken into custody. Law enforcement officers subsequently recovered in the vicinity of the Truck, among other things, a paintball gun, a pellet gun, a stun gun and three knives. Law enforcement officers also recovered, approximately ten feet from the driver’s door of the Truck, a document that contained, among other things, the Arabic text for “No God but God and Muhammad is his Prophet” and “Islamic Supplication. It will endure.” “It will endure” is commonly used to refer to ISIS. Cellphones recovered from the Truck contained, among other things, videos and images of ISIS propaganda and internet searches for truck rentals and for Halloween in New York City.
After Saipov was taken into custody, he was transferred to Bellevue Hospital, where he made statements to law enforcement officers after waiving his Miranda rights. During that interview, Saipov stated, among other things, the following:
- Saipov was inspired to carry out the Truck attack by ISIS videos he had watched on his cellular phone.
- Approximately one year ago, Saipov began planning an attack in the United States. Approximately two months ago, he decided to use a truck to inflict maximum damage against civilians. On or about Oct. 22, Saipov rented a truck so he could practice making turns in advance of his attack.
- Saipov planned to use the Truck to strike pedestrians in the vicinity of the West Side Highway and then proceed to the Brooklyn Bridge to continue to strike pedestrians. Saipov wanted to kill as many people as he could. Saipov chose Oct. 31, Halloween, for the attack because he believed there would be more civilians on the street for the holiday.
- Saipov wanted to display ISIS flags in the front and back of the Truck during the attack, but decided against it because he did not want to draw attention to himself. Saipov requested to display ISIS’s flag in his hospital room and stated that he felt good about what he had done.
Eight individuals died from the injuries they sustained as a result of the Truck driving on the walkway and at least twelve additional individuals were injured.
* * *
Saipov was initially arrested by the NYPD on Oct. 31. The defendant is charged with:
- Counts 1-8: Murder in Aid of Racketeering with a maximum sentence of life imprisonment or death on each count.
- Counts 9-20: Attempted Murder in Aid of Racketeering with a maximum sentence of 10 years’ imprisonment on each count.
- Count 21: Providing and Attempting to Provide Material Support to a Designated Foreign Terrorist Organization Resulting in Death with a maximum sentence of life imprisonment.
- Count 22: Violence and Destruction of Motor Vehicles Resulting in Death with a maximum sentence of life imprisonment or death.
The charges contained in the Indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty. 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.
Attorney General Sessions, Mr. Boente, and Mr. Kim praised the outstanding investigative efforts of the FBI, the NYPD and the Department of Homeland Security Homeland Security Investigations (HSI). Saipov’s arrest is the result of the close cooperative efforts of the U.S. Attorney’s Office for the Southern District of New York, the FBI’s Joint Terrorism Task Force — which consists of law enforcement officers of the FBI, NYPD, HSI and other agencies — and the U.S. Department of Justice’s National Security Division. Attorney General Sessions, Mr. Boente, and Mr. Kim also thanked the U.S. Department of Justice’s Organized Crime and Gang Section, Office of Enforcement Operations and Capital Case Section for their exceptional assistance.
The case is being prosecuted by Assistant U.S. Attorneys Andrew D. Beaty, Amanda Houle and Matthew Laroche of the Southern District of New York, and Trial Attorney Rebecca Magnone of the National Security Division’s Counterterrorism Section.
Press Conference AdvisoryRead the Press Release
There will be a press conference today at 12:30 p.m. to announce charges against Behzad Mesri, an Iranian national, for allegedly hacking into the computer servers of Home Box Office, Inc. (HBO), stealing proprietary data, including information about then-unreleased episodes of the popular television series, “Game of Thrones,” and then allegedly seeking to extort HBO.
WHO:
Joon H. Kim, Acting United States Attorney for the Southern District of New York
William F. Sweeney, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation
WHEN:
Tuesday, November 21, 2017 at12:30 p.m.
WHERE:
U.S. Attorney’s Office, Southern District of New York
1 St. Andrew’s Plaza
New York, NY 10007
LIVESTREAM:
Facebook @USAOSDNY
CONTACT:
James Margolin, Dawn Dearden, Nicholas Biase
(212) 637-2600
Acting Manhattan U.S. Attorney Announces Charges Against Iranian National for Conducting Cyber Attack and $6 Million Extortion Scheme Against HBORead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging BEHZAD MESRI, a/k/a “Skote Vahshat,” for his involvement in a scheme to obtain unauthorized access to the computer systems of Home Box Office, Inc. (“HBO”), steal proprietary data from those systems, and obtain $6 million worth of Bitcoin from HBO through extortion by threatening to disseminate stolen content. Subsequently, MESRI leaked the stolen content on the Internet, including but not limited to confidential information about upcoming episodes of the popular television series, “Game of Thrones,” and video files containing unreleased episodes of other television series created by HBO.
Acting Manhattan U.S. Attorney Joon H. Kim said: “Behzad Mesri, an Iranian national who had previously hacked computer systems for the Iranian military, allegedly infiltrated HBO’s systems, stole proprietary data, including scripts and plot summaries for unaired episodes of Game of Thrones, and then sought to extort HBO of $6 million in Bitcoins. Mesri now stands charged with federal crimes, and although not arrested today, he will forever have to look over his shoulder until he is made to face justice. American ingenuity and creativity is to be cultivated and celebrated -- not hacked, stolen, and held for ransom. For hackers who test our resolve in protecting our intellectual property -- even those hiding behind keyboards in countries far away -- eventually, winter will come.”
FBI Assistant Director William F. Sweeney Jr. said: “In the simplest of terms, he lurked in the alleyways of the Internet, identified the vulnerabilities of his victim, and pickpocketed their information from thousands of miles away. After he had successfully identified their proprietary secrets, he held their future for ransom. Today’s charges show that international cybercriminals are never beyond the reach of U.S. laws. This indictment unsealed today is the product of the countless hours put in by investigators in the FBI’s Cyber Division working alongside our prosecutors at the Southern District of New York U.S. Attorney’s office.”
According to the allegations contained in the Indictment[1] unsealed today in Manhattan federal court:
Background on Behzad Mesri
MESRI is an Iran-based computer hacker who had previously worked on behalf of the Iranian military to conduct computer network attacks that targeted military systems, nuclear software systems, and Israeli infrastructure. At certain times, MESRI has been a member of an Iran-based hacking group called the Turk Black Hat security team and, as a member of that group, conducted hundreds of website defacements using the online hacker pseudonym “Skote Vahshat” against websites in the United States and elsewhere.
Online Reconnaissance and Hack of HBO
Starting in approximately May 2017, MESRI conducted online reconnaissance of HBO’s computer networks and employees. Among other things, MESRI searched for access points to the network where employees and other authorized users could remotely access HBO’s computer systems.
From approximately May 2017 to July 2017, MESRI successfully compromised multiple user accounts belonging to HBO employees and other authorized users, and used those accounts to repeatedly obtain unauthorized access to HBO’s computer servers. Over the course of several months, MESRI used that unauthorized access to steal confidential and proprietary information belonging to HBO, which he then exfiltrated to servers under his control. Through the course of the intrusions into HBO’s systems, MESRI was responsible for stealing confidential and proprietary data belonging to HBO, including, but not limited to: (a) confidential video files containing unaired episodes of original HBO television programs, including episodes of “Barry,” “Ballers,” “Curb Your Enthusiasm,” “Room 104,” and “The Deuce;” (b) scripts and plot summaries for unaired programming, including but not limited to episodes of “Game of Thrones;”(c) confidential cast and crew contact lists; (d) emails belonging to at least one HBO employee; (e) financial documents; and (f) online credentials for HBO social media accounts (collectively, the “Stolen Data”).
Commencement of Extortion Scheme
Between approximately July 23, 2017, and July 29, 2017, MESRI engaged in a scheme to extort HBO by transmitting, or aiding and abetting the transmission of, the following email messages, each of which was sent to multiple HBO executives and employees:
- An email on July 23, 2017, that provided evidence of the hack and claimed, in substance and in part, that the sender had hacked into HBO’s computer systems and had stolen approximately 1.5 terabytes of HBO’s data.
- A second email on July 23, 2017, that claimed, in substance and in part, that the stolen data included full scripts and cast lists for the seventh season of the television series, “Game of Thrones,” and “precious data” for other shows, including shows that were as of that time unaired. The email further stated, in substance and in part, that HBO was a “difficult target” and that infiltration was accomplished through “a complex cyber operation[.]” The email included a threat to release the data publicly unless HBO paid a ransom of $5.5 million worth of Bitcoin. The email concluded with a custom image depicting the “Night King,” an undead character from “Game of Thrones,” and bearing the message, “Good luck to HBO.”
- An email on July 26, 2017, that stated, in substance and in part, that the ransom demand had been increased to $6 million worth of Bitcoin, and included additional threats to destroy data on HBO computer servers.
- An email on July 29, 2017, that included, among other things, information regarding Bitcoin addresses to which HBO should direct ransom payments, and provided a firm deadline of later that same day for HBO to begin making ransom payments if it wanted to prevent the public leak of the Stolen Data.
Release of Stolen Data
Starting on approximately July 30, 2017, and continuing through August 2017, MESRI caused portions of the Stolen Data to be publicly leaked over the Internet on websites that he controlled. Certain of the video materials that MESRI caused to be leaked included a graphic depicting the “Night King” that was superimposed at the bottom of the video. In addition, MESRI undertook efforts to promote the leaks of the Stolen Data on the Internet, including by, among other things, causing emails to be sent to members of the media regarding the leaks, and causing the creation of a Twitter profile to announce the leaks and provide evidence of the hack of HBO’s computer network.
* * *
MESRI, 29, a citizen and resident of Iran, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison; one count of computer hacking, which carries a maximum sentence of five years in prison; three counts of threatening to impair the confidentiality of information, each of which carries a maximum sentence of five years in prison; one count of aggravated identity theft, which carries a mandatory sentence of two years in prison; and one count of interstate transmission of an extortionate communication, which carries a maximum 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 assigned judge.
Mr. Kim praised the outstanding investigative work of the FBI.
The case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Timothy T. Howard, Richard Cooper, and Jonathan Cohen are in charge of the prosecution, with assistance provided by Heather Alpino of the National Security Division’s Counterintelligence and Export Control Section.
The charges contained in the Indictment are merely accusations and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Head of Organization Backed by Chinese Energy Conglomerate, and Former Foreign Minister of Senegal, Charged with Bribing High-Level African OfficialsRead the Press Release
A criminal complaint was unsealed today charging the head of a non-governmental organization based in Hong Kong and Virginia and the former Foreign Minister of Senegal with participating in a multi-year, multimillion-dollar scheme to bribe high-level officials in Chad and Uganda in exchange for business advantages for a Chinese oil and gas company (the “Energy Company”) in violation of the Foreign Corrupt Practices Act (FCPA).
Chi Ping Patrick Ho aka Patrick C.P. Ho, 68, of Hong Kong, China, and Cheikh Gadio, 61, of Senegal, are each charged with conspiring to violate the FCPA, violating the FCPA, conspiring to commit international money laundering, and committing international money laundering. Gadio was arrested in New York on Friday afternoon and presented on Saturday before U.S. Magistrate Judge Kevin Nathaniel Fox. Ho was arrested on Saturday afternoon and was presented today before U.S. Magistrate Judge Andrew J. Peck and ordered detained.
Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Joon H. Kim for the Southern District of New York, Assistant Director-in-Charge William F. Sweeney Jr. of the FBI New York Field Office, Special Agent in Charge James D. Robnett of the Internal Revenue Service Criminal Investigation (IRS-CI) and Special Agent in Charge Angel M. Melendez of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) New York Field Office, made the announcement.
“This alleged scheme involved bribes at the highest levels of the governments of two nations,” said Acting Assistant Attorney General Blanco. “The Criminal Division is committed to investigating and prosecuting corrupt individuals who put at risk a level playing field for corporate competitiveness, regardless of where they live or work. Their bribes and corrupt acts hurt our economy and undermine confidence in the free marketplace.”
“In an international corruption scheme that spanned the globe, Chi Ping Patrick Ho and Cheikh Gadio allegedly conspired to bribe African government officials on behalf of a Chinese energy conglomerate,” said Acting U.S. Attorney Kim. “Wiring almost a million dollars through New York’s banking system in furtherance of their corrupt schemes, the defendants allegedly sought to generate business through bribes paid to the President of Chad and the Ugandan Foreign Minister. As alleged, Ho’s Ugandan scheme was hatched in the halls of the United Nations in New York, when the country’s current Foreign Minister served as the President of the U.N. General Assembly, and then continued unabated upon his return to Uganda. International bribery not only harms legitimate businesses and fair competition, but it also destroys public faith in the integrity of government. And when this type of international corruption and bribery touches our shores and our financial system, as the alleged schemes did, federal criminal charges in an American court may very well be the end result.”
“The scheme described in this case boils down to these subjects allegedly trying to get their hands on the rights to lucrative opportunities in Africa,” said FBI Assistant Director-in-Charge Sweeney. “They were allegedly willing to throw money at the leaders of two countries to bypass the normal course of business, but didn’t realize that using the U.S. banking system would be their undoing. The FBI, our partners in the IRS and the law enforcement community work diligently day after day to protect the integrity of our financial institutions, and stop foreign entities corrupting international commerce.”
“IRS Criminal Investigation operates worldwide and has the expertise to identify bribery schemes such as alleged in the criminal complaint,” said IRS-CI Special Agent in Charge Robnett. “Our special agents are especially skilled at piecing together these financial puzzles, even those that involve such high level participants.”
“These individuals allegedly offered millions of dollars in bribes to foreign officials, disguised as charitable donations, in order to seek business advantages,” said HSI Special Agent in Charge Melendez. “One used his position with a United Nations Council to further this scheme. We will continue to aggressively investigate financial crimes committed by corrupt foreign officials while working collaboratively with our counterparts at the FBI and IRS.”
According to the allegations in the complaint, the defendants engaged in two bribery schemes to pay high-level officials of Chad and Uganda in exchange for business advantages for the Energy Company, a Shanghai-headquartered multibillion-dollar conglomerate that operates internationally in the energy and financial sectors. Defendant Ho was the head of a non-governmental organization based in Hong Kong and Virginia (the “Energy NGO”) that holds “Special Consultative Status” with the United Nations (UN) Economic and Social Council. The Energy NGO is funded by the Energy Company.
The complaint alleges that Ho, with Gadio’s assistance, caused the Energy Company to offer a $2 million bribe to the President of Chad in exchange for securing business advantages for the Energy Company in its efforts to obtain valuable oil rights from the Chadian government. In particular, in exchange for the bribe, the President of Chad provided the Energy Company with, among other things, an exclusive opportunity to obtain particular oil rights in Chad without facing international competition. Gadio, who is the former Foreign Minister of Senegal and who operated an international consulting firm, is alleged to have played an instrumental role in the scheme by, among other things, connecting Ho with the President of Chad and conveying the $2 million bribe offer to the President of Chad. Ho allegedly compensated Gadio by paying him $400,000 via wires transmitted through New York, New York.
It is further alleged that Ho caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by the Minister of Foreign Affairs of Uganda, who had recently completed his term as the President of the UN General Assembly (the “Ugandan Foreign Minister”). Ho also allegedly provided the Ugandan Foreign Minister, as well as the President of Uganda, with gifts and promises of future benefits, including offering to share the profits of a potential joint venture in Uganda involving the Energy Company and businesses owned by the families of the Ugandan Foreign Minister and the President of Uganda. These payments and promises were allegedly made in exchange for assistance from the Ugandan Foreign Minister in obtaining business advantages for the Energy Company, including the potential acquisition of a Ugandan bank.
The charges and allegations in the complaint are merely accusations. All defendants are presumed innocent unless proven guilty in a court of law.
The investigation was jointly conducted by the FBI and IRS-CI and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) and the Criminal Division’s Office of International Affairs provided critical assistance.
This case is being prosecuted by Trial Attorneys David A. Last and Paul A. Hayden of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Douglas S. Zolkind, Thomas McKay, Daniel C. Richenthal and Shane T. Stansbury U.S. Attorney’s Office for the Southern District of New York’s Public Corruption Unit.
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.
Head of Organization Backed by Chinese Energy Conglomerate, and Former Foreign Minister of Senegal, Charged with Bribing High-Level African OfficialsRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Kenneth A. Blanco, Acting Assistant Attorney General of the Criminal Division of the U.S. Department of Justice, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), James D. Robnett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), and Angel M. Melendez, Special Agent in Charge of the New York Field Office of the Department of Homeland Security, Homeland Security Investigations (“HSI”), announced today the unsealing of a Complaint charging CHI PING PATRICK HO, a/k/a “Patrick C.P. Ho,” and CHEIKH GADIO with participating in a multi-year, multimillion-dollar scheme to bribe high-level officials in Chad and Uganda in exchange for business advantages for a Chinese oil and gas company (the “Energy Company”). HO and GADIO were charged with violations of the Foreign Corrupt Practices Act (“FCPA”), international money laundering, and conspiracy to commit both. GADIO was arrested in New York on Friday afternoon and presented on Saturday before U.S. Magistrate Judge Kevin Nathaniel Fox. HO was arrested on Saturday afternoon and was presented today before U.S. Magistrate Judge Andrew J. Peck and ordered detained.
Acting Manhattan U.S. Attorney Joon H. Kim said: “In an international corruption scheme that spanned the globe, Chi Ping Patrick Ho and Cheikh Gadio allegedly conspired to bribe African government officials on behalf of a Chinese energy conglomerate. Wiring almost a million dollars through New York’s banking system in furtherance of their corrupt schemes, the defendants allegedly sought to generate business through bribes paid to the President of Chad and the Ugandan Foreign Minister. As alleged, Ho’s Ugandan scheme was hatched in the halls of the United Nations in New York, when the country’s current Foreign Minister served as the President of the U.N. General Assembly, and then continued unabated upon his return to Uganda. International bribery not only harms legitimate businesses and fair competition, but it also destroys public faith in the integrity of government. And when this type of international corruption and bribery touches our shores and our financial system, as the alleged schemes did, federal criminal charges in an American court may very well be the end result.”
Acting Assistant Attorney General Kenneth A. Blanco said: “This alleged scheme involved bribes at the highest levels of the governments of two nations. The Criminal Division is committed to investigating and prosecuting corrupt individuals who put at risk a level playing field for corporate competitiveness, regardless of where they live or work. Their bribes and corrupt acts hurt our economy and undermine confidence in the free marketplace.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “The scheme described in this case boils down to these subjects allegedly trying to get their hands on the rights to lucrative opportunities in Africa. They were allegedly willing to throw money at the leaders of two countries to bypass the normal course of business, but didn’t realize that using the U.S. banking system would be their undoing. The FBI, our partners in the IRS and the law enforcement community work diligently day after day to protect the integrity of our financial institutions, and stop foreign entities corrupting international commerce.”
IRS-CI Special Agent in Charge James D. Robnett said: “IRS Criminal Investigation operates worldwide and has the expertise to identify bribery schemes such as alleged in the Criminal Complaint. Our Special Agents are especially skilled at piecing together these financial puzzles, even those that involve such high level participants.”
HSI Special Agent in Charge Angel M. Melendez said: “These individuals allegedly offered millions of dollars in bribes to foreign officials, disguised as charitable donations, in order to seek business advantages. One used his position with a United Nations Council to further this scheme. We will continue to aggressively investigate financial crimes committed by corrupt foreign officials while working collaboratively with our counterparts at the FBI and IRS.”
According to the allegations in the Complaint[1] and other statements in the public record:
Overview
This case involves two bribery schemes to pay high-level officials of Chad and Uganda in exchange for business advantages for the Energy Company, a Shanghai-headquartered multibillion-dollar conglomerate that operates internationally in the energy and financial sectors. At the center of both schemes is CHI PING PATRICK HO, a/k/a “Patrick C.P. Ho,” the head of a non-governmental organization based in Hong Kong and Virginia (the “Energy NGO”) that holds “Special Consultative Status” with the United Nations (“UN”) Economic and Social Council. The Energy NGO is funded by the Energy Company.
In the first scheme (the “Chad Scheme”), HO, with GADIO’s assistance, caused the Energy Company to offer a $2 million bribe to the President of Chad in exchange for securing business advantages for the Energy Company in its efforts to obtain valuable oil rights from the Chadian government. In particular, in exchange for the bribe, the President of Chad provided the Energy Company with, among other things, an exclusive opportunity to obtain particular oil rights in Chad without facing international competition. GADIO, who is the former Foreign Minister of Senegal and who operated an international consulting firm, played an instrumental role in the Chad Scheme by, among other things, connecting HO with the President of Chad and conveying the $2 million bribe offer to the President of Chad. HO compensated GADIO by paying him $400,000 via wires transmitted through New York, New York.
In the second scheme (the “Uganda Scheme”), HO caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by the Minister of Foreign Affairs of Uganda, who had recently completed his term as the President of the UN General Assembly (the “Ugandan Foreign Minister”). HO also provided the Ugandan Foreign Minister, as well as the President of Uganda, with gifts and promises of future benefits, including offering to share the profits of a potential joint venture in Uganda involving the Energy Company and businesses owned by the families of the Ugandan Foreign Minister and the President of Uganda. These payments and promises were made in exchange for assistance from the Ugandan Foreign Minister in obtaining business advantages for the Energy Company, including the potential acquisition of a Ugandan bank.
The Chad Scheme
As alleged in the Complaint, the Chad Scheme began in or about October 2014, when HO and GADIO met at the UN in New York, New York. At that time, the Energy Company wanted to expand its oil operations to Chad, and to do so, it wanted to enter into a joint venture with a Chinese government-owned oil and gas company (the “Chinese State Oil Company”) that was already operating in Chad. Earlier that year, the Chinese State Oil Company had been fined $1.2 billion by the government of Chad for environmental violations. HO enlisted GADIO – who had a personal relationship with the President of Chad – to assist the Energy Company in gaining access to the President of Chad, with the initial goal of resolving the dispute between the government of Chad and the Chinese State Oil Company, and the ultimate goal of obtaining oil opportunities for the Energy Company in Chad.
GADIO successfully connected HO and the Energy Company to the President of Chad and to other Chadian officials. HO, acting on GADIO’s advice, then caused the Energy Company to pledge a $2 million bribe to the President of Chad, in what was characterized as a “donation” for charitable causes. GADIO later solicited from HO a $500,000 payment for GADIO’s firm, arguing that he should receive a percentage of the $2 million “gift” from the Energy Company to the President of Chad.
In reality, this “donation” was a bribe intended to influence the award of oil rights in favor of the Energy Company. Following this $2 million pledge to the President of Chad, the Energy Company obtained a business advantage in its negotiations to acquire oil rights in Chad, in particular, by having the exclusive opportunity to purchase particular oil rights without facing international competition. Ultimately, the Energy Company did not complete this acquisition, but instead purchased other oil rights in Chad from a Taiwanese company. In exchange for GADIO’s efforts to facilitate the bribery of the President of Chad, HO caused $400,000 to be paid to GADIO’s firm, via two wires that were transmitted through a bank in New York, New York.
The Uganda Scheme
As alleged in the Complaint, the Uganda Scheme began in or about October 2014, when HO met at the UN in New York, New York with the Ugandan Foreign Minister, who had recently begun his term as the 69th President of the UN General Assembly (“PGA”).[2] HO, purporting to act on behalf of the Energy NGO, met with the Ugandan Foreign Minister and began to cultivate a relationship with him. During the year that the Ugandan Foreign Minister served as PGA, HO and the Ugandan Foreign Minister discussed a “strategic partnership” between Uganda and the Energy Company for various business ventures, to be formed once the Ugandan Foreign Minister completed his term as PGA and returned to Uganda.
In or about February 2016 – after the Ugandan Foreign Minister had resumed his role as Foreign Minister of Uganda, and his in-law had been reelected as the President of Uganda – the Ugandan Foreign Minister solicited a payment from HO, purportedly for a charitable foundation that he wished to launch. HO caused a $500,000 payment to be wired to an account in Uganda designated by the Ugandan Foreign Minister, through a bank in New York, New York. In his communications, HO variously referred to this payment as a “donation” to the reelection campaign of the President of Uganda (who had already been reelected) and as a “donation” to “support” the Ugandan Foreign Minister.
In fact, this payment was a bribe to obtain business advantages for the Energy Company in its efforts to secure contracts and ventures in Uganda’s financial and energy sectors. HO also provided the Ugandan Foreign Minister, as well as the President of Uganda, with promises of future benefits, including proposing to partner with both officials’ family businesses in potential joint ventures. In exchange, the Ugandan Foreign Minister assisted the Energy Company in obtaining business in Uganda, including by facilitating the Energy Company’s interest in potentially acquiring a bank.
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HO, 68, of Hong Kong, China, and GADIO, 61, of Senegal, are each charged with conspiring to violate the FCPA, violating the FCPA, conspiring to commit international money laundering, and committing international money laundering. The maximum penalties for these charges are as follows: five years in prison for conspiring to violate the FCPA; five years in prison for each violation of the FCPA; 20 years in prison for conspiring to commit international money laundering; and 20 years in prison for each charge of committing international money laundering. 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. Kim praised the outstanding work of the FBI and IRS-CI, who jointly conducted this investigation. He also thanked the Department of Homeland Security, Homeland Security Investigations (“HSI”), and the Department of Justice, Criminal Division’s Office of International Affairs, which provided critical assistance. Mr. Kim noted that the investigation is ongoing.
This case is being prosecuted by the Office’s Public Corruption Unit and the Criminal Division’s Fraud Section. Assistant U.S. Attorneys Douglas S. Zolkind, Thomas McKay, Daniel C. Richenthal, and Shane T. Stansbury, and Trial Attorneys David A. Last and Paul A. Hayden of the Fraud Section, 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 below constitute only allegations, and every fact described should be treated as an allegation.
[2] Although the Complaint refers to the “Ugandan Foreign Minister” throughout for clarity, during the year that he served as PGA, he did not simultaneously serve as Foreign Minister of Uganda. Rather, he resumed as Foreign Minister of Uganda shortly after his term as PGA ended.
Defendant Convicted of Ordering 2004 Murder of Jeweler in Midtown ManhattanRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that HECTOR RIVERA was found guilty on Friday of ordering the 2004 murder of Eduard Nektalov, a Manhattan diamond dealer. RIVERA was convicted on all counts following a six-day trial before U.S. District Judge Paul A. Engelmayer.
Acting U.S. Attorney Joon H. Kim said: “Thirteen years ago, Eduard Nektalov was shot to death on a crowded sidewalk in midtown Manhattan. For over a decade, this brazen murder was left unexplained. Now, not only has that mystery been solved, a unanimous jury has convicted Hector Rivera of ordering the execution-style murder of Eduard Nektalov over a business dispute. Rivera now faces a mandatory sentence of life in a federal prison. We hope the verdict brings some measure of closure and comfort to Eduard Nektalov’s family.”
According to the allegations in the Indictment and the evidence presented in court during the trial:
RIVERA was the leader of a violent robbery crew that operated in the diamond district in midtown Manhattan. In 2004, RIVERA commissioned the murder of Eduard Nektalov because of a business dispute between Nektalov and one of RIVERA’s criminal associates. During the evening rush hour on May 20, 2004, a hitman hired by RIVERA followed Nektalov from his jewelry store on West 47th Street. Less than a block from the store, the hitman shot Nektalov once in the head and twice in the back in the middle of a crowded sidewalk on Sixth Avenue. Nektalov was pronounced dead within 20 minutes of the shooting. RIVERA paid the hitman and another participant a combined total of $30,000 to carry out the murder.
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RIVERA, 65, was found guilty of conspiring to commit murder for hire and murder for hire, each of which carries a mandatory minimum sentence of life in prison; and using a firearm to commit murder, which carries a mandatory minimum sentence of five years in prison, which must run consecutively to the sentences imposed on all other counts. RIVERA is scheduled to be sentenced by Judge Engelmayer on April 11, 2018.
Mr. Kim praised the outstanding investigative work of the Federal Bureau of Investigation and the New York City Police Department. He also thanked the District Attorney’s Office for New York County and the District Attorney’s Office for Bronx County for their assistance with the prosecution.
The case is being prosecuted by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Scott Hartman and Jordan Estes are in charge of the prosecution.
Statement of Acting U.S. Attorney Joon H. Kim on the Hung Jury in United States V. Norman Seabrook and Murray HuberfeldRead the Press Release
“Unfortunately, the jury in the trial against Norman Seabrook and Murray Huberfeld was unable to reach a unanimous verdict. We look forward to a retrial where we will present again the powerful proof of how Seabrook allegedly sold his duty to safeguard correction officers’ retirement money to Murray Huberfeld in exchange for cash bribes. Although justice has been delayed, we expect it will ultimately prevail.”
Owners of Miami Export Business Found Guilty of Operating an Unlicensed Money Transmitting Business and International Money LaunderingRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that LUIS DIAZ JR. and LUIS JAVIER DIAZ were found guilty yesterday in Manhattan federal court of operating an unlicensed money transmitting business and international money laundering in connection with their transmission of over $100 million from foreign businesses into and through the United States financial system. DIAZ JR. was additionally convicted of conspiracies to operate an unlicensed money transmitting business and engage in international money laundering. DIAZ JR. and JAVIER DIAZ were convicted following a two-week trial before U.S. District Judge William H. Pauley III.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As a jury has now found, Luis Diaz Jr. and Luis Javier Diaz operated an illegal shadow bank outside the legitimate financial system to move more than $100 million into and through the United States. Financial institutions must serve as the first line of defense against money laundering and financial crime, and this Office is committed to rooting out those who evade these controls and serve as a back channel for dirty money.”
According to the Indictment, other filings in Manhattan federal court, and the evidence presented at trial:
THE ILLEGAL MONEY TRANSMITTING SCHEME
Between at least 2010 and 2016, LUIS DIAZ JR. and LUIS JAVIER DIAZ used Miami Equipment and Export Company (“Miami Equipment”), a company they owned in Doral, Florida, to effect the transmission of at least $100 million from entities outside the United States, mostly located in Venezuela, to bank accounts in the United States and elsewhere, in exchange for a fee. During this time, the Company was not registered with the state of Florida or the Financial Crimes Enforcement Network (FinCEN), a component of the United States Department of the Treasury, as required by both state and federal laws applicable to money transmitting businesses.
Utilizing unlicensed money transmitting businesses like Miami Equipment enables entities and individuals to move money into and through the U.S. financial system while avoiding licensed U.S. financial institutions, which monitor for suspicious activity and report it to U.S. authorities, including through suspicious activity reports, or SARs. Instead, by going through unlicensed entities like Miami Equipment, foreign businesses ensure that suspicious patterns of transmissions will not be detected and reported as potential money laundering activity or other financial crime.
THE DEFENDANTS ILLEGALY TRANSMITTED MONEY
ON BEHALF OF NUMEROUS FOREIGN ENTITIES
Through their unlicensed money transmitting business, LUIS DIAZ JR. and LUIS JAVIER DIAZ enabled a number of foreign businesses to move money into and around the United States. For instance, the defendants used Miami Equipment to transmit over $100 million into the United States on behalf of KCT, a large Venezuelan consortium of construction companies. After they received this money from the Venezuelan Company, the defendants received instructions about where to send the money as well as fake invoices and contracts purporting to set forth a valid business reason for these payments. In this manner, the defendants sent money on behalf of KCT to U.S. and foreign bank accounts of shell companies located around the world, Venezuelan government officials, KCT employees in Venezuela, and others who had no relationship with Miami Equipment. For all of these transmitting activities, the Company received over $1 million in fees from KCT. In addition to KCT, DIAZ JR. and JAVIER DIAZ used Miami Equipment to effect transfers into and around the United States on behalf of other companies, mainly located in Venezuela and other South American countries.
In connection with these transfers, LUIS DIAZ JR. and LUIS JAVIER DIAZ often maintained false invoices purporting to be from the recipients of the funds to make it appear as if the payments were for actual goods or services rendered to Miami Equipment when, in truth, the money was intended for beneficiaries in the United States and abroad with no business relationship to Miami Equipment. The invoices had the effect of insulating the transmissions from scrutiny by providing a pretextual explanation for the many millions of dollars’ worth of payments. Through this conduct, the defendants and Miami Equipment functioned as an unregulated financial institution allowing foreign entities to move funds into and through the U.S. without any scrutiny, including being subject to the filing of SARs that licensed transmitting businesses are required to file.
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DIAZ JR., 75, and JAVIER DIAZ, 50, both of Doral, Florida, were each convicted of one count of operation of an unlicensed money transmitting business and one count of international money laundering, which carry maximum prison sentences of five years in prison and 20 years in prison, respectively. DIAZ JR. was also convicted of conspiracy to operate an unlicensed money transmitting business and conspiracy to commit international money laundering, which carry maximum prison sentences of five years in prison and 20 years in prison, respectively. DIAZ JR. and JAVIER DIAZ are scheduled to be sentenced by Judge Pauley on March 2, 2018, at 3:00 p.m.
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. Kim praised the outstanding investigative work of HSI, DEA, the Englewood, New Jersey, Police Department, and the Border Enforcement Security Task Force.
The case is being prosecuted by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant U.S. Attorneys Edward B. Diskant, Daniel M. Tracer, and Benet J. Kearney are in charge of the prosecution.
Owner of Payday Lending Enterprise Found Guilty by Jury of Orchestrating $220 Million Fraudulent Lending SchemeRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that RICHARD MOSELEY SR. was found guilty today in Manhattan federal court of wire fraud, aggravated identity theft, and violating the Racketeer Influenced Corrupt Organizations Act (“RICO”) and the Truth in Lending Act (“TILA”) for operating a payday lending enterprise that systematically evaded state usury laws in order to charge illegally high interest rates, and for issuing payday loans to consumers who never even sought them. MOSELEY was convicted following a two-and-a-half week trial before U.S. District Judge Edgardo Ramos.
Acting U.S. Attorney Joon H. Kim said: “Richard Moseley Sr.’s predatory loan company exploited more than 600,000 of the most financially vulnerable people in the United States. Charging exorbitant interest, fees, and even signing up some individuals for loans they didn’t authorize, Moseley made it nearly impossible for those already struggling to make ends meet. With today’s conviction, however, Moseley can no longer take advantage of those already on the brink, and he now faces significant time in prison for his predatory ways.”
According to the Indictment, other filings in Manhattan federal court, and the evidence presented at trial:
Between 2004 and September 2014, MOSELEY owned and operated a group of payday lending businesses (the “Hydra Lenders”) that issued and serviced small, short-term, unsecured loans, known as “payday loans,” through the Internet to customers across the United States.
For nearly a decade, MOSELEY systematically exploited more than 620,000 financially struggling working people throughout the United States, many of whom were having trouble paying for basic living expenses. MOSELEY, through the Hydra Lenders, targeted and extended loans to these individuals at illegally high interest rates of more than 700 percent, using deceptive and misleading communications and contracts and in violation of the usury laws of numerous states that were designed to protect residents from such abusive conduct.
In furtherance of the scheme, the Hydra Lenders’ loan agreements materially understated the amount the payday loan would cost and the total of payments that would be taken from borrowers’ bank accounts. The loan agreements suggested, for example, that the borrower would pay $30 in interest for $100 borrowed. In truth and in fact, however, MOSELEY structured the repayment schedule of the loans such that, on the borrower’s payday, the Hydra Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched. As a result, on the borrower’s next payday, the Hydra Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan. Under MOSELEY’s control and oversight, the Hydra Lenders proceeded automatically to withdraw such “finance charges” payday after payday, applying none of the money toward repayment of principal. Indeed, under the terms of the loan agreement, the Hydra Lenders withdrew finance charges from their customers’ accounts unless and until consumers took affirmative action to stop the automatic renewal of the loan.
Through the Hydra Lenders, MOSELEY also extended numerous payday “loans” to victims across the country who did not even want the loans or authorize the issuance of the loans, but instead had merely submitted their personal and bank account information in order to inquire about the possibility of obtaining a payday loan. MOSELEY then automatically withdrew the Hydra Lenders’ usurious “financing fees” directly from the financially struggling victims’ bank accounts on a bi-weekly basis. Although hundreds of victims, over a period of years, lodged complaints that they had never approved or even been aware of the issuance of the loans, the Hydra Lenders, at MOSELEY’s direction, continued to issue loans to consumers without confirming that the consumers in fact wanted the loans that they received or had reviewed and approved the loan terms.
Throughout their existence, the Hydra Lenders were the subject of complaints from customers across the country, numerous state regulators, and consumer protection groups, about the Hydra Lenders’ deceptive and misleading practices in issuing usurious and fraudulent loans. Beginning in approximately 2006, in an attempt to avoid civil and criminal liability for his conduct, and to enable the Hydra Lenders to extend usurious loans contrary to state laws, MOSELEY created the sham appearance that the Hydra Lenders were located overseas. MOSELEY nominally incorporated the Hydra Lenders first in Nevis, and later in New Zealand, and claimed that the Hydra Lenders could not be sued or subject to state enforcement actions because they were beyond the jurisdiction of every state in the United States. In truth and in fact, the entirety of MOSELEY’s lending business, including all bank accounts from which loans were originated, all communications with consumers, and all employees, were located at MOSELEY’s corporate office in Kansas City, Missouri. The Hydra Lenders’ purported “offshore” operation consisted of little more than a service that forwarded mail from addresses in Nevis or New Zealand to the Kansas City, Missouri, office.
In furtherance of the scheme, MOSELEY falsely told his attorneys that the Hydra Lenders maintained physical offices and employees in Nevis and New Zealand and that the decision whether to extend loans to particular consumers was made by employees of the Hydra Lenders in Nevis and New Zealand. As MOSELEY knew, at no time did the Hydra Lenders have any employees involved in the lending business in Nevis or New Zealand, and at all times the decision whether to underwrite loans was made by employees under MOSELEY’s direction in Kansas City, Missouri. To defeat state complaints and inquiries, MOSELEY directed his attorneys at outside law firms to submit correspondence to state Attorneys General that stated – falsely, unbeknownst to MOSELEY’s attorneys – that the Hydra Lenders originated loans “exclusively” from their offices overseas and had no physical presence anywhere in the United States. In reliance on this materially false and misleading correspondence, many state Attorneys General and regulators closed their investigations on the apparent basis that they lacked jurisdiction over the Hydra Lenders and that the Hydra Lenders had no presence or operations in the United States.
From approximately November 2006 through approximately August 2014, the Hydra Lenders generated more than $200 million in revenues. MOSELEY himself made millions of dollars from the scheme, which he spent on, among other things, a vacation home in Mexico, luxury automobiles, and country club membership dues.
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MOSELEY, 73, of Kansas City, Missouri, was convicted of one count of conspiracy to collect unlawful debts in violation of RICO; one count of collecting unlawful debts in violation of RICO; one count of conspiracy to commit wire fraud; and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison. In addition, he was convicted of one count of aggravated identity theft, which carries a maximum sentence of two years in prison, and one count of violating TILA, which carries a maximum sentence of one year in prison. MOSELEY is scheduled to be sentenced by Judge Ramos on April 27, 2018, at 11:00 a.m.
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. Kim praised the outstanding investigative work of the Federal Bureau of Investigation and the Office of the Inspector General for the Board of Governors of the Federal Reserve System. Mr. Kim also thanked the Consumer Financial Protection Bureau, which brought a separate civil action against MOSELEY, for referring the matter and for its assistance.
The case is being prosecuted by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Edward A. Imperatore and David Abramowicz are in charge of the prosecution.
Acting U.S. Attorney Charges Former Westchester Resident with Distributing and Possessing Child PornographyRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Angel M. Melendez, the Special Agent in Charge of Homeland Security Investigations in New York City (“HSI”), announced today the arrest and filing of charges against ANUPAM BISWAS. The Complaint charges that BISWAS distributed child pornography on January 11, 2017, from a computer in Westchester County and possessed child pornography on February 17, 2017. BISWAS was presented today before U.S. Magistrate Judge Judith C. McCarthy in White Plains federal court.
According to the Complaint[1], in or about January 2017, the Westchester County District Attorney’s Office’s High Technology Crime Squad (“HTCS”), using investigative software, downloaded child pornography from an IP address in Westchester, New York. On February 17, 2017, HTCS executed a search warrant of BISWAS’s address in Westchester, New York. BISWAS was present and identified two external hard drives as belonging to him. HTCS seized several digital items, including a Western Digital Hard Drive that was found to contain thousands of images and videos of child pornography.
BISWAS, 46, is charged with one count of distribution of child pornography and one count of possession of child pornography. He faces a mandatory minimum sentence of five years in prison and a maximum sentence of 20 years in prison on each of the two charged counts. 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.
The charges in the Complaint are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Mr. Kim praised the efforts of Homeland Security Investigations, the Westchester County District Attorney’s Office, the Westchester District Attorney’s Office’s High Technology Crime Squad, and the Briarcliff Manor Police Department.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorney Marcia S. Cohen is in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint, and the description of the Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Doctor and Four Executives Plead Guilty in $30 Million Scheme to Defraud Medicare and MedicaidRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that five defendants have pleaded guilty in the past week to participating in a scheme to defraud Medicare and Medicaid through the operation of eight medical clinics and related health care providers in Brooklyn. The defendants pleading guilty are Dr. MUSTAK Y. VAID, medical supply company president MARINA BURMAN, clinic executives ASHER OLEG KATAEV, a/k/a “Oleg Kataev,” and ALLA TSIRLIN, and IVAN VOYCHAK, who helped run two of the fraudulent clinics and a related ambulette company. The defendants were charged with participating in a $30 million health care fraud scheme. As part of the scheme, the defendants or their co-conspirators paid cash kickbacks to elderly patients (the “Paid Patients”) insured by Medicare and/or Medicaid, and then billed Medicare and Medicaid for unnecessary medical services, tests, and supplies.
Acting U.S. Attorney Joon H. Kim said: “These five defendants bilked Medicare and Medicaid out of millions of dollars for unjustified medications, procedures, and supplies. Medicare and Medicaid were established to assist the elderly and economically disadvantaged, not to serve as cash cows for corrupt professionals.”
Five additional defendants remain under indictment in the case, which is scheduled to go to trial before United States District Judge Lorna G. Schofield on April 23, 2018. Those remaining defendants are presumed innocent unless and until proven guilty.
As alleged in the Indictment and in court papers and proceedings in the case: Aleksandr Burman, an individual with no medical license, established eight medical clinics in Brooklyn (the “Related Clinics”), which operated between 2007 and 2013. For each clinic, Aleksandr Burman hired a doctor, one of whom was VAID, as the nominal owner of the clinic, since New York State law requires that such clinics be owned by a medical professional. In fact, however, VAID was hired by Aleksandr Burman simply to pose as the owner of one of the clinics, and to sign medical charts falsely stating that he had examined a number of Paid Patients, and to provide prescriptions and referrals for medically unnecessary supplies.
In pleading guilty, the five defendants have admitted to various specific roles in operating several of the clinics and two related businesses.
VAID, 44, a physician, pled guilty before Magistrate Judge Henry B. Pitman on November 8, 2017 to charges of falsely holding himself out as the owner of one medical clinic, and falsely signing medical documents stating that he had provided medical services that he had not.
BURMAN, 54, is a resident of Manhattan whose former husband, Aleksandr Burman, previously pleaded guilty in a related indictment and was sentenced in May 2017 to 10 years in prison. BURMAN pled guilty before Judge Schofield on November 14, 2017 to charges that, as the registered president and owner of Universal Supply Depot, she fraudulently billed Medicaid more than $3 million for medical equipment, particularly including large amounts of adult diapers, that were in fact not dispensed. BURMAN was also charged with arranging for Paid Patients to exchange their diaper prescriptions for valuable merchandise, such as bed linens, tablecloths, dishes, kitchen appliances, and other housewares.
KATAEV, 49, and TSIRLIN, 47, who are siblings, pled guilty to charges of helping operate two of the fraudulent clinics, where they participated in bribing patients and causing fraudulent bills to be submitted to Medicare and Medicaid. KATAEV pled guilty before Magistrate Judge Barbara C. Moses on November 6, 2017. TSIRLIN pled guilty before Judge Pitman on November 9, 2017.
VOYCHAK, 37, pled guilty before Magistrate Judge Kevin Nathaniel Fox on November 13, 2017 to charges that he helped operate a medical ambulette company that fraudulently billed Medicaid for transportation services that were not medically necessary, and participated a scheme to pay kickbacks to patients at the fraudulent medical clinics.
Each of the defendants pled guilty to Counts One and Two of the indictment. Count One charges the defendants with conspiring to commit health care fraud, mail fraud, and wire fraud; while Count Two charges each defendant with health care fraud. Count One carries a maximum sentence of 20 years in prison, while Count Two carries a maximum penalty of 10 years in prison.
The statutory maximum sentence is prescribed by Congress and provided here for informational purposes only, as the appropriate sentences will be determined by the Judge.
Mr. Kim praised the investigative work of the New York FBI’s Health Care Fraud Task Force and the New York State Office of the Medicaid Inspector General (“OMIG”).
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney David Raymond Lewis is in charge of the prosecution.
Former Partner at International Law Firm Pleads Guilty in Manhattan Federal Court to Insider TradingRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that WALTER C. LITTLE, a/k/a “Chet,” a former partner at an international law firm (the “Firm”), pled guilty yesterday to conspiracy to commit securities fraud. Between February 2015 and May 2016, LITTLE used his position at the Firm to learn nonpublic information about certain of the Firms’ clients, including sensitive information regarding expected mergers and earnings. LITTLE used that information to place securities trades and passed that information to Andrew M. Berke, who allegedly also traded on it. LITTLE and Berke allegedly made approximately $1 million in illegal profits through their trading. LITTLE pled guilty earlier today before the Honorable Katherine Polk Failla. The charges against Berke remain pending.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As he admitted in court today, Walter Little, while a law firm partner, accessed confidential information about firm clients, and then traded on it. He violated the terms of his employment, the canons of his profession, and federal securities laws. Now Walter Little awaits sentencing for his crime.”
According to allegations in a Complaint and Indictment[1] filed in Manhattan federal court, as well as previous court filings and statements made in public court proceedings:
LITTLE began working for the Firm in 2005, eventually becoming a partner. The Firm provided legal services to a wide variety of corporations in connection with financial transactions and regulatory issues, among other things. Clients regularly entrusted the Firm with nonpublic information when using its services, and the Firm consequently enacted policies requiring its employees to respect the confidences of such information. LITTLE, however, failed to abide by the Firm’s internal policies prohibiting the improper use of its clients’ confidential information. Even though he did not perform any billable work for the associated clients, LITTLE used the Firm’s document management system to view numerous documents relating to seven different companies. These documents contained material nonpublic information about, among other things, an anticipated delisting from the NASDAQ stock exchange, clients’ involvement in mergers and acquisitions, clients’ anticipated earnings announcements, and a planned securities offering. All of these events would have predictable impacts on the associated stocks’ prices, and, between February 2015 and May 2016, LITTLE traded stocks and options based on the information contained in these documents, making hundreds of thousands of dollars in profits. In addition to trading on the information himself, LITTLE also provided the information to BERKE, his business associate and friend, who also traded on it and made hundreds of thousands of dollars in illegal gains as well.
LITTLE has agreed to forfeit the illegal profits that he made through his trading as part of his plea agreement with the Government.
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LITTLE pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. LITTLE will be sentenced February 22, 2018, by Judge Failla.
BERKE is charged in the Indictment with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; six counts of securities fraud, each of which carries a maximum penalty of 20 years in prison; and one count of conspiracy to commit wire fraud, which also carries a maximum penalty of 20 years in prison. These charges also have a maximum fine of $5 million, or twice the gross gain or loss from the offense.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
The charges against BERKE are merely accusations and the defendant is presumed innocent unless and until proven guilty.
Mr. Kim praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Robert Allen is in charge of the prosecution.
[1] As the introductory phrase signifies, the entirety of the texts of the Complaint and Indictment, and the descriptions of the Complaint and Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Department of Justice Compensates Victims of Bernard Madoff Fraud Scheme with Funds Recovered Through Asset ForfeitureRead the Press Release
The Department of Justice today announced that on Nov. 9, the Madoff Victim Fund (MVF) began its initial distribution of $772.5 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme. These funds will be sent to 24,631 victims across the globe. This distribution represents the first in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS. The MVF has received over 65,000 petitions from victims in 136 countries.
These payments mark the single largest distribution of forfeited funds in the history of the Department’s victim compensation program.
Deputy Attorney General Rod J. Rosenstein, Acting U.S. Attorney Joon H. Kim for the Southern District of New York and Assistant Director in Charge William F. Sweeney Jr., of the FBI’s New York Field Division made the announcement.
“Thanks to civil asset forfeiture, the Department of Justice is announcing today the record-setting distribution of restitution to victims of Bernard Madoff’s notorious investment fraud scheme,” said Deputy Attorney General Rosenstein. “We have recovered billions of dollars from third parties – not Mr. Madoff – and are now returning that money to tens of thousands of victims. This is the largest restoration of forfeited property in history.”
“Bernie Madoff committed one of history’s largest and most devastating frauds,” said Acting U.S. Attorney Kim. “This Office not only prosecuted Madoff himself and others who helped perpetrate his fraud, but has remained committed to recovering money for his victims. To date, this Office has recovered more than $9 billion for the innocent victims of Madoff’s fraud, and today’s distribution of $770 million, the single largest distribution of forfeited funds in the Department’s history is part of our ongoing commitment to not only prosecute criminals but also find relief for victims.”
“No amount of money in the world could ever reverse the catastrophic effects Madoff’s historic Ponzi scheme had on individuals and businesses alike,” Assistant Director in Charge Sweeney. “But now, nearly a decade after this crime was exposed, it is our hope that victims will finally be able to see the light at the end of a long, dark tunnel.”
For decades, Bernard L. Madoff used his position as Chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients. On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle. On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to 150 years in prison for running the largest fraudulent scheme in history. Judge Chin ordered Madoff to forfeit $170.799 billion as part of Madoff’s sentence.
Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower. An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action. The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.
The MVF’s payouts would not have been possible without the extraordinary efforts of the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case. The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.
More information about MVF and its compensation to victims of BLMIS is available on the MVF website at www.madoffvictimfund.com, such as eligibility criteria, process updates, and frequently asked questions. Further questions may be directed to the MVF at 866-624-3670 or [email protected].
Acting Manhattan U.S. Attorney Announces Initial Distribution of More Than $770 Million to Victims of Madoff Ponzi SchemeRead the Press Release
Rod J. Rosenstein, the Deputy Attorney General, Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), announced today that the Madoff Victim Fund established by the Department of Justice began its initial distribution of $772.5 million in funds forfeited to the United States Government in connection with the Bernard L. Madoff Investment Securities LLC (“BLMIS”) fraud scheme. These funds will be sent to more than 24,000 victims worldwide, the first in a series of payments from the Madoff Victim Fund that will return to victims more than $4 billion in assets recovered as compensation for losses suffered by the collapse of BLMIS, following the largest fraud in history. Another $5 billion in assets recovered by the U.S. Attorney’s Office are being separately paid to Madoff victims through the BLMIS Customer Fund administered by the Securities Investor Protection Act Trustee.
Deputy Attorney General Rod J. Rosenstein said: “Thanks to civil asset forfeiture, the Department of Justice is announcing today the record-setting distribution of restitution to victims of Bernard Madoff’s notorious investment fraud scheme. We have recovered billions of dollars from third parties – not Mr. Madoff – and are now returning that money to tens of thousands of victims. This is the largest restoration of forfeited property in history.”
Acting Manhattan U.S. Attorney Joon H. Kim said: “Bernie Madoff committed one of history’s largest and most devastating frauds. This Office not only prosecuted Madoff himself and others who helped perpetrate his fraud, but has remained committed to recovering money for his victims. To date, this Office has recovered more than $9 billion for the innocent victims of Madoff’s fraud, and today’s distribution of $770 million, the single largest distribution of forfeited funds in the Department’s history, is part of our ongoing commitment to not only prosecute criminals but also find relief for victims.”
FBI Assistant Director William F. Sweeney Jr. said: “No amount of money in the world could ever reverse the catastrophic effects Madoff’s historic Ponzi scheme had on individuals and businesses alike. But now, nearly a decade after this crime was exposed, it is our hope that victims will finally be able to see the light at the end of a long, dark tunnel.”
Since the early 1970s, BERNARD L. MADOFF (“MADOFF”) used his position as Chairman of BLMIS, the investment advisory business he founded, to steal billions from his clients. On March 12, 2009, MADOFF pled guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family, and select members of his inner circle. On June 29, 2009, United States District Judge Denny Chin sentenced MADOFF to 150 years in prison for running the largest fraudulent scheme in history. Judge Chin ordered MADOFF to forfeit $170,799,000,000 as part of MADOFF’s sentence.
The Madoff Victim Fund is funded through recoveries by the U.S. Attorney’s Office in various criminal and civil forfeiture actions, and is overseen by Richard Breeden, the former Chairman of the United States Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.
Of the approximately $4.05 billion that will be made available to victims through the Madoff Victim Fund, approximately $2.2 billion was collected as part of the civil forfeiture recovery from the estate of deceased MADOFF investor Jeffry Picower. An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. for MADOFF-related Bank Secrecy Act violations. Additional funds were collected through criminal and civil forfeiture actions against MADOFF and his co-conspirators, and certain MADOFF investors.
Mr. Kim praised the work of the FBI and the Madoff Victim Fund, and thanked the Money Laundering and Asset Recovery Section of the Department of Justice’s Criminal Division for their assistance.
For more information about the Madoff Victim Fund, compensation to victims of BLMIS, eligibility criteria, and payment information, please visit www.madoffvictimfund.com.
The case is being handled by the Office’s Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Jonathan Cohen, Louis A. Pellegrino, and Niketh Velamoor are in charge of the case.
Former Director of Fixed Income and Head of Portfolio Strategy at the New York State Common Retirement Fund Pleads Guilty in “Pay-For-Play” Bribery SchemeRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that NAVNOOR KANG, the former Director of Fixed Income and Head of Portfolio Strategy at the New York State Common Retirement Fund (“NYSCRF”), pled guilty today before U.S. District Judge J. Paul Oetken for participating in a massive “pay-for-play” bribery scheme involving the NYSCRF, the nation’s third largest public pension fund.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As an investment professional with New York State Common Retirement Fund, Navnoor Kang owed a duty to the public employees whose pension money he oversaw. But in this case of public corruption meets securities fraud, Kang sold himself and his duty to safeguard public retirement money for luxury vacations, jewelry, cash and even drugs. He has now admitted to his crimes and is a convicted felon. ”
According to allegations contained in the Indictment charging KANG and statements made during his plea proceeding:
The NYSCRF
The NYSCRF is a pension fund administered for the benefit of public employees of the State of New York. From January 2014 through February 2016, KANG served as Director of Fixed Income and Head of Portfolio Strategy for the NYSCRF. In that capacity, KANG was responsible for investing more than $53 billion in fixed-income securities and was entrusted with discretion to manage those investments on behalf of the NYSCRF. KANG owed a fiduciary duty to the NYSCRF and its members and beneficiaries, and was required to make investment decisions in their best interests and free of any conflict of interest. New York State law and NYSCRF policies prohibited KANG and other NYSCRF employees from receiving any bribes, gifts, benefits, or consideration of any kind.
The Scheme to Steer NYSCRF Fixed-Income Business in Exchange for Secret Bribes
From 2014 through 2016, KANG and others participated in a scheme to defraud the NYSCRF and its members and beneficiaries, and to deprive the NYSCRF of its intangible right to KANG’s honest services. The scheme involved, among other things, an agreement among KANG, Deborah Kelley, a managing director of institutional fixed income sales at New York-based broker-dealer (“Broker-Dealer-1”), Gregg Shonhorn, a vice president of fixed income sales at a New York-based broker-dealer (“Broker-Dealer-2”), and others to pay KANG bribes – in the form of entertainment, travel, lavish meals, prostitutes, nightclub bottle service, narcotics, tickets to sports games and other events, luxury gifts, and cash payments for strippers and KANG’s personal expenses – in exchange for fixed-income business from the NYSCRF. Such bribes – which totaled more than $100,000 – were strictly forbidden by the NYSCRF, and were paid secretly and without any disclosure to the NYSCRF and its members and beneficiaries concerning the conflicts of interest inherent therein.
In exchange for the bribes paid by Kelley, Schonhorn, and others, KANG used his position as Director of Fixed Income and Head of Portfolio Strategy at the NYSCRF to promote the interests of Kelley, Schonhorn, and their respective brokerage firms. KANG, in exchange for the bribes he received, agreed to steer fixed-income business to Broker-Dealer-1 and Broker-Dealer-2. In fact, KANG steered more than $3 billion in fixed-income business to Broker-Dealer-1 and Broker-Dealer-2, from which Kelley, Schonhorn, and their respective employers earned millions of dollars in commissions from the NYSCRF. In so doing, KANG, with the knowledge and approval of Kelley and Schonhorn, breached his fiduciary duty to make investment decisions in the best interest of the NYSCRF and its members and beneficiaries, and free of conflict, and deprived the NYSCRF of its intangible right to KANG’s honest services.
As the bribes paid by Schonhorn to KANG increased, so too did Broker-Dealer-2’s fixed-income business with the NYSCRF. The value of the NYSCRF’s domestic bond transactions with Broker-Dealer-2 skyrocketed from zero in the fiscal year ending March 31, 2013, to approximately $1.5 million in the fiscal year ending March 31, 2014, to approximately $858 million in the fiscal year ending March 31, 2015, and to approximately $2.378 billion in the fiscal year ending March 31, 2016. Broker-Dealer-2 became the third largest broker-dealer with which the NYSRCF executed domestic bond transactions for the fiscal year ending March 31, 2016, having not even been on the approved list in the fiscal year ending March 31, 2013. As the NYSCRF’s third largest broker-dealer in this asset class, Broker-Dealer-2 brokered approximately eight percent of the total value of the NYSCRF’s domestic bond transactions – a figure greater than that of all but two of the major international banks and brokerage houses on the list. Similarly, the value of NYSCRF’s domestic bond transactions with Broker-Dealer-1 increased from zero in the fiscal year ending March 1, 2014, to approximately $156 million in the fiscal year ending March 1, 2015, and to approximately $179 million in the fiscal year ending March 1, 2016.
KANG’s trades resulted in the payment of millions of dollars in commissions to Broker-Dealer-1 and Broker-Dealer-2, of which Kelley and Schonhorn personally earned approximately 35 to 40 percent.
The Obstruction of Justice
In late 2015, the Securities and Exchange Commission (“SEC”) opened an investigation into the entertainment and benefits that Kelley had provided KANG, and the SEC subpoenaed both KANG and Kelley for their testimony. In advance of their testimony, KANG and Kelley agreed to align their stories and testify falsely before the SEC in order to conceal their scheme. In late 2015 and early 2016, KANG and Kelley each falsely testified under oath before the SEC about expenses Kelley had paid for KANG. Moreover, after a federal grand jury investigation was opened, KANG instructed Schonhorn to testify falsely before the grand jury, and KANG admitted that he had hidden relevant evidence.
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KANG, 37, of Glendale, California, pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison, and one count of conspiracy to commit honest services wire fraud, which carries a maximum sentence of 20 years in prison. KANG is scheduled to be sentenced on February 23, 2018, by Judge Oetken.
Kelley and Schonhorn have each pled guilty for participating in the scheme. Kelley was sentenced by Judge Oetken to three years of probation.
Mr. Kim praised the investigative work of the Federal Bureau of Investigation and noted that the investigation is continuing. He also thanked the SEC, which filed civil charges against Kang, Kelley, and Schonhorn in a separate civil action, and the Office of Inspector General for the Office of the New York State Comptroller.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Edward A. Imperatore and Joshua A. Naftalis are in charge of the prosecution.
Former Chief Financial Officer of American Realty Capital Partners Sentenced for Accounting FraudRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that BRIAN BLOCK, the former chief financial officer of the publicly traded real estate investment trust (“REIT”) formerly known as American Realty Capital Partners (“ARCP”), was sentenced to 18 months in prison for inflating a key metric used to evaluate the financial performance of publicly traded REITS in ARCP’s filings with the U.S. Securities and Exchange Commission (the “SEC”). BLOCK was convicted by a jury in June, following a three-week trial before U.S. District Judge J. Paul Oetken, who imposed today’s sentence.[1]
Acting Manhattan U.S. Joon H. Kim said: “Block, the CFO of a major REIT, deliberately cooked the books to mislead investors and the SEC. Investors in our securities markets must be able to trust that corporate officers will not lie about the financial health of a publicly traded company. And corporate officers who do lie face time in a federal prison, as Brian Block has learned.”
According to allegations contained in the Indictment, and evidence presented during the trial in Manhattan federal court:
In 2014, ARCP was a publicly traded REIT headquartered in Manhattan, New York. ARCP’s securities traded under the symbol “ARCP” on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) exchange.
ARCP, like many REITs, measured its financial performance through metrics besides, or in addition to, traditional measurements of company performance calculated using Generally Accepted Accounting Principles (“GAAP”). ARCP calculated and reported to the investing public a non-GAAP measure called adjusted funds from operations, or AFFO, which was designed to more accurately reflect ARCP’s cash flow and financial performance by presenting ARCP’s income before consideration of non-cash depreciation and amortization expense and by excluding certain one-time charges and expenses. REITs such as ARCP commonly reported their AFFO figures, including AFFO per share, to the investing public and in filings with the SEC. ARCP also provided forward-looking guidance to the investing public regarding their anticipated AFFO performance in upcoming time periods.
Prior to the filing of ARCP’s Form 10-Q setting forth ARCP’s financial statements for the second quarter of 2014 (the “Second Quarter 10-Q”), BRIAN BLOCK, along with Lisa McAlister and others, came to understand that the method used by ARCP to calculate AFFO in the first quarter of 2014 and in certain previous quarters was erroneously inflated. Another employee of ARCP (“CC-1”) had brought this methodological error to the attention of BLOCK, McAlister, and others shortly before the filing of ARCP’s first quarter 2014 10-Q (the “First Quarter 10-Q”), but no corrective change was made to the First Quarter 10-Q while the issue was under review. Following the filing of the First Quarter 10-Q, CC-1 concluded, and advised BLOCK, McAlister, and others, that the reported AFFO per share calculation for the first quarter of 2014 was overstated by approximately $0.03 per share. Instead of $0.26 per share, which was publicly reported by ARCP to its shareholders and the investing public, and which placed ARCP on track to meet its full-year AFFO per-share guidance, the correct AFFO for the first quarter of 2014 was $0.23 per share.
Despite his knowledge of a material error in ARCP’s previous filings with the SEC, BLOCK took no steps to advise the Audit Committee of ARCP’s Board of Directors, or ARCP’s outside auditors, of the error in the First Quarter 10-Q. Moreover, BLOCK, McAlister, and CC-1 then knowingly facilitated the use of the same materially misleading calculations in ARCP’s Second Quarter 10-Q. For example, on July 24, 2014, a draft of ARCP’s Second Quarter 10-Q was circulated to members of ARCP’s Audit Committee. The draft included an AFFO calculation for the six-month period ending June 30, 2014, that incorporated AFFO figures from the first quarter of 2014 that BLOCK, McAlister, and CC-1 knew to be erroneously inflated.
On July 28, 2014, BLOCK met with McAlister and CC-1 in his office in Manhattan for the purpose of finalizing the financial figures that were to be included in ARCP’s Second Quarter 10-Q. Utilization of a proper method to calculate ARCP’s second quarter 2014 AFFO would have exposed that the reported AFFO and AFFO per share figures from the first quarter were inflated. Accordingly, during the meeting, BLOCK, McAlister, and CC-1 inserted into a spreadsheet BLOCK was using to calculate AFFO and AFFO per share for the first and second quarters of 2014 and for the first six months of 2014 (“YTD 2014”) figures that fraudulently inflated the AFFO and AFFO per share calculations that were to be included in the Second Quarter 10-Q and the related ARCP press release. The fraudulent numbers BLOCK, McAlister, and CC-1 used to inflate the AFFO and AFFO per share figures had no basis in fact, were without documentary support, and did not tie to ARCP’s general ledger accounting system, as BLOCK knew and understood at the time. The fraudulent numbers included in the spreadsheet prepared by BLOCK were then incorporated into ARCP’s Second Quarter 10-Q, which was filed with the SEC the following day. As a result of the manipulative efforts of BLOCK, McAlister, and CC-1, ARCP’s SEC filings included AFFO and AFFO per share figures for the second quarter of 2014 and for the first six months of 2014 that were fraudulently inflated.
The Second Quarter 10-Q was signed by, among others, BLOCK. Additionally, on a certification accompanying the 10-Q, BLOCK falsely certified, among other things, that the Second Quarter 10-Q did not contain any materially untrue statements or material omissions. He further falsely certified that he had disclosed to ARCP’s auditors and the audit committee of its board of directors: “Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.” In a second certification accompanying the 10-Q, BLOCK falsely certified that: “The quarterly report on Form 10-Q of the Company, which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.”
With regard to YTD 2014 specifically, the fraud resulted in an intended overstatement of AFFO by approximately $13 million and an intended overstatement of AFFO per share by approximately $0.03, or approximately 5 percent of total AFFO per share. By reporting AFFO per share of $0.24 in the second quarter, after having reported AFFO per share of $0.26 in the first quarter, BLOCK and his co-conspirators misled ARCP’s shareholders and the investing public by falsely representing that ARCP’s AFFO per share for the first six months of 2014 was consistent with analysts’ expectations and on track to meet ARCP’s guidance for AFFO per share for calendar year 2014, when in fact, they were not.
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In addition to the prison term, BLOCK, 45, of Hatfield, Pennsylvania, was sentenced to three years of supervised release, and a $100,000 fine. Restitution will be determined at a future date.
Mr. Kim praised the investigative work of the Federal Bureau of Investigation and also thanked the SEC.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian Blais, Edward Imperatore, and Daniel Tehrani are in charge of the prosecution.
[1] BLOCK’s co-defendant, ARCP’s former chief accounting officer Lisa McAlister, pled guilty to securities fraud and related charges on June 29, 2016, and has yet to be sentenced.
Virginia Man Pleads Guilty in Manhattan Federal Court to $100 Million Market Manipulation Scheme Involving Fitbit StockRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that ROBERT WALTER MURRAY pled guilty today in Manhattan federal court to securities fraud. In November 2016, MURRAY conducted a scheme to manipulate the market for the stock of Fitbit, Inc. (“Fitbit”) by filing a sham tender offer with the Securities and Exchange Commission (“SEC”). The sham tender offer falsely reported that another entity had made a bid to purchase all outstanding Fitbit stock at a significant premium to the then-existing market price. As a result, the price of Fitbit stock temporarily but significantly increased in price, allowing MURRAY to sell for a profit options that he had previously purchased. MURRAY’s sham tender offer, moreover, resulted in a temporary inflation in Fitbit’s market capitalization of over $100 million.
Acting U.S. Attorney Joon H. Kim said: “As Robert Murray admitted today, he manipulated the market in Fitbit stock by making a false filing with the SEC about a tender offer. After manipulating Fitbit's stock price and temporarily inflating its market capitalization by over $100 million, Murray sought to take a quick profit from trading in Fitbit stock. Murray’s ill-advised and criminal attempt to game the system has ended in a federal securities fraud conviction.”
According to the allegations in the Complaint and Indictment filed in Manhattan federal court, 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 the false tender offer filing was made public. MURRAY’s filing, however, was entirely fictitious, and was instead meant only to increase the value of options in Fitbit stock that he had purchased just before filing the sham tender offer.
MURRAY, moreover, took significant steps to hide his connection to the tender offer filing. He created a separate email account to register with the SEC and to file the sham tender offer, taking care to disguise his actual IP address when accessing it.
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MURRAY, 24, of Chesapeake, Virginia, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million. In addition, pursuant to a plea agreement with the Government, MURRAY agreed to forfeit proceeds of the offense. MURRAY is scheduled to be sentenced by Judge Katherine B. Forrest on March 9, 2018.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Kim praised the exceptional work of the Office’s criminal investigators, and thanked the United States 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.
Chairman of Purported Hedge Fund Sentenced for Conspiring to Commit Securities and Wire FraudRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that NICHOLAS MITSAKOS was sentenced today to 30 months in prison on charges of conspiring to commit securities fraud and wire fraud in connection with his operation of a purported hedge fund called Matrix Capital. MITSAKOS pled guilty on May 25, 2017, and was sentenced by the Honorable Denny Chin, a judge on the United States Court of Appeals for the Second Circuit who was sitting by designation in the Southern District of New York.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As he previously admitted in pleading guilty, Nicholas Mitsakos spun a fake tale to investors about his miraculous track record of trading in the securities markets. Mitsakos lured investors by claiming returns of over 66 percent for one year, never disclosing that his portfolio was an entirely ‘hypothetical’ one and that in fact, he had never entered into any real trades.”
According to the Complaint, Indictment, and statements made during court proceedings:
In or about October 2013, MITSAKOS created a purported hedge fund called Matrix Capital (“Matrix”), which claimed to be a long-short fund with a long track record of success. In order to raise money for his fund, MITSAKOS sent marketing materials to numerous potential investors claiming that Matrix had achieved outsized returns that exceeded major indices like the S&P 500. One newsletter sent to potential investors, for example, claimed that Matrix had achieved returns of approximately 25% in 2012, 66% in 2013, 20% in 2014, and 49% between January and October of 2015. MITSAKOS also led potential investors to believe that these returns were based on actual securities trades by Matrix, and that Matrix had tens of millions in assets under management (“AUM”).
MITSAKOS’s representations regarding Matrix’s performance and AUM were false. In fact, Matrix had no track record in actually purchasing and selling securities, and, indeed, had no meaningful assets at all until receiving funds from a victim in September 2015. Instead, the purported performance results provided to potential investors were premised on how a hypothetical portfolio would have performed had Matrix actually acquired certain securities. No such trading actually took place and Matrix never actually owned any of the securities in the hypothetical portfolio that MITSAKOS maintained. Even in regard to Matrix’s hypothetical investment portfolio, MITSAKOS retroactively manipulated the investments in that portfolio from time to time in order to improve dramatically its hypothetical performance.
Based in part on these and other misrepresentations, Matrix received approximately $2 million from an investor in September 2015. However, MITSAKOS used only a portion of that amount – about $1.2 million – to actually buy and sell securities. Of the remaining amount, MITSAKOS spent hundreds of thousands of dollars on business expenses and personal expenses like car payments, credit cards, and his own rent. MITSAKOS’s trading of the $1.2 million that he did invest, moreover, resulted in significant losses.
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In addition to the prison sentence, MITSAKOS, 57, was sentenced to two years of supervised release. The Court further ordered MITSAKOS to forfeit a sum of $861,163.62 and to pay restitution to victims of his offense.
Mr. Kim praised the exceptional work of the Office’s criminal investigators, 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 Brendan Quigley are in charge of the prosecution.
Two Defendants Convicted at Trial in Connection with Fatal 2012 Home Invasion RobberyRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that GIBRON LOPEZ and JUDIE OLIVERA were convicted in Manhattan federal court yesterday of Hobbs Act robbery and Hobbs Act robbery conspiracy charges stemming from their commission of a May 2012 home invasion robbery of victim Miles Klein, which resulted in Klein’s death. LOPEZ and OLIVERA were convicted after a one-and-a-half week trial before U.S. District Judge Katherine Polk Failla.
According to the Indictment, other filings in Manhattan federal court, and the evidence admitted at trial:
In May 2012, OLIVERA, who had a preexisting relationship with Klein, set up a home invasion robbery, which targeted Klein’s drugs and drug proceeds. OLIVERA recruited LOPEZ and another man to commit the robbery. On May 15, 2012, OLIVERA gained access to Klein’s apartment in the Bronx, and LOPEZ and the other man, armed with a wrench and a rubber mallet, respectively, followed her there. LOPEZ and the other man struggled with Klein at the door, striking him in the head repeatedly with the wrench and the mallet, binding his eyes and mouth with duct tape, and gagging him. During the assault, OLIVERA stole a safe containing cash, among other items, from Klein’s apartment. LOPEZ and the other man then dragged Klein’s body to the bathroom, where they left him. They discarded the murder weapons and their bloody clothes in a sewer, and later split the proceeds of the robbery. Police responded to the scene on May 16, 2012, after receiving a 911 call from concerned family members. Klein was ultimately pronounced dead as a result of blunt force trauma to his head and obstruction of his airway.
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LOPEZ, 37 and OLIVERA, 39, both of the Bronx, were each convicted of one count of Hobbs Act robbery, which carries a maximum sentence of 20 years in prison, and one count of Hobbs Act robbery conspiracy, which carries a maximum sentence of 20 years in prison.
The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Kim praised the outstanding investigative work of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”), the Strategic Pattern Armed Robbery Technical Apprehension (“SPARTA”) Task Force, and the New York City Police Department (“NYPD”).
The prosecution of this case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Gina M. Castellano, Christopher J. DiMase, and Justina L. Geraci are in charge of the prosecution.
Former Chief Financial Officer of Osiris Therapeutics, Inc., Pleads Guilty to Lying to AuditorsRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), announced that PHILIP JACOBY, the former chief financial officer of Osiris Therapeutics, Inc. (“Osiris”), a developer and producer of regenerative medicine products, was charged by criminal information (the “Information”) and pled guilty today to lying to Osiris’s auditors in connection with the auditors’ review of Osiris’s 2014 10-K and Third Quarter 2015 10-Q filings. JACOBY pled guilty before U.S. District Judge Denise Cote.
Acting Manhattan U.S. Attorney Joon H. Kim said: “Philip Jacoby, the former CFO of a pharmaceutical company, admitted today to lying to auditors conducting an examination of the financial well-being of his company. Jacoby fabricated documents, made false statements, and asked others to backdate critical transactions in furtherance of his scheme to mislead auditors. For his criminal conduct, which ultimately misled those looking to invest in his publicly traded company, Jacoby faces time in federal prison.”
Inspector-in-Charge Philip R. Bartlett said: “In a misguided effort to avoid a restatement of Osiris’s fourth quarter revenue numbers, Philip Jacoby lied about the conversion of $1.1 million dollars of consignment inventory to a final sale. He wasn’t so clever when he left a paper trail of evidence Postal Inspectors followed right back to him.”
According to allegations contained in the Information and statements made in public Court proceedings:
Osiris, headquartered in Columbia, Maryland, is a publicly traded company specializing in the research, development, and marketing of regenerative medicine products. Osiris sold its products either through its direct sales force, or, more typically, through numerous distributors. Osiris’s securities traded under the symbol “OSIR” on the NASDAQ stock exchange.
From in or about 2008 up to and including in or about September 2015, JACOBY held the position of chief financial officer (“CFO”) of Osiris. From in or about September 2015 through in or about January 2016, JACOBY held the position of principal accounting officer. During the period that JACOBY was the CFO of Osiris, he signed Osiris’s quarterly and yearly financial reports. These reports were required to be filed with the United States Securities and Exchange Commission (“SEC”) and provided the investing public with information regarding Osiris’s financial performance.
Although Osiris was initially a research and development company, by at least in or about 2014, Osiris’s management was focused on the company’s “top line,” or gross revenue growth. Osiris was especially focused on being able to demonstrate quarter-over-quarter revenue growth, that is, reporting revenue for each quarter that was greater than the previous quarter’s. For example, a former CEO of Osiris (the “CEO”) regularly prepared internal presentations emphasizing the company’s historical quarter-over-quarter revenue growth and emphasizing the need to achieve future growth. Similarly, in public earnings calls run by the CEO and in its earnings press releases, Osiris touted its revenue performance and quarter-over-quarter revenue growth.
Improper Accounting at Osiris With Respect to Distributor-1
Between approximately 2010 and approximately 2015, Distributor-1 was a distributor for Osiris’s Ovation product, among other products. Distributor-1 was owned in its entirety by a sole principal (“Owner-1”).
In or about September 2013, the Food and Drug Administration (“FDA”) informed Osiris that Ovation failed to meet certain regulatory requirements and thus required pre-marketing approval from the FDA, which Ovation did not have. Thereafter, Osiris agreed with the FDA that it would not sell Ovation after December 31, 2014.
In order to maintain access to Ovation following December 31, 2014, Distributor-1 agreed to take possession of a significant quantity of Ovation prior to December 31, 2014, and by December 2014 was in possession of approximately $1.8 million worth of Ovation. Because Distributor-1 lacked the ability to pay for such a large purchase, the Ovation was shipped to Distributor-1 on consignment. Because the product was on consignment, under governing accounting rules Osiris could not properly recognize revenue until Distributor-1 had sold the product to an end user or Distributor-1 otherwise agreed to purchase the product.
In or about December 2014, JACOBY requested that Owner-1 convert some or all of the consigned inventory to inventory owned by Distributor-1 by December 31, 2014. To the extent other revenue recognition criteria were satisfied, completion of the actual sale of the inventory to Distributor-1 by December 31, 2014, would have allowed Osiris to recognize revenue for that product in 2014 and reference that revenue in the 2014 10-K it would subsequently file.
Notwithstanding internal pressure to make sales, however, JACOBY and Owner-1 did not reach a final agreement regarding the conversion of the consigned inventory until at least in or about January 2015. Despite the fact that no agreement was reached in 2014, Osiris, at the direction of JACOBY, booked approximately $1.1 million in revenue related to the conversion of consignment product in the fourth quarter of 2014 (the “Distributor-1 Transaction”).
Jacoby Conveys False Information to Auditors After Improper Accounting Is Questioned
In or about October 2015, the Company’s auditors (the “Auditors”), in connection with an inspection by the Public Company Accounting Oversight Board (the “PCAOB”), requested additional documentation and information supporting Osiris’s recognition of revenue in December 2014 relating to the Distributor-1 Transaction. In an effort to deceive the Auditors and the PCAOB, JACOBY provided or caused to be provided false, inaccurate, and misleading information to the Auditors.
For example, in or about October 2015, JACOBY and others prepared a memorandum from Osiris to its Auditors attempting to justify the recognition of $1.1 million of revenue from the Distributor-1 Transaction in the fourth quarter of 2014. In the memorandum, JACOBY falsely represented that on December 31, 2014, JACOBY had “discussed the sale terms with [Owner-1] via a conference call, and [Owner-1] agreed to purchase 933 units of Ovation for $1,072,950.” As JACOBY well knew, no telephone call had taken place on December 31, 2014.
Similarly, on or about November 5, 2015, JACOBY created a letter, backdated to December 29, 2014, purporting to memorialize an agreement between Osiris and Distributor-1 (the “Backdated Letter”). That same day, JACOBY used his personal email account to send the Backdated Letter by email to Owner-1 stating:
“attached is something that I think you should find and send to me in an email saying you had this in your file from late last year, and just came across it – and that it does memorialize our several phone conversations . . . . . Call me if necessary, but write a wonderfully warm and convincing email, please – send it to my Osiris email.”
Owner-1 complied and sent the Backdated Letter to Jacoby’s Osiris email account. JACOBY then forwarded Owner-1’s email containing the fraudulent Backdated Letter to the CEO and the then-CFO of Osiris, who forwarded the document to the Auditors.
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PHILIP JACOBY, 65, pled guilty to one count of making fraudulent statements to Osiris’s auditors, which carries a maximum sentence of 20 years in prison. The defendant also faces a maximum fine of $5 million. Sentencing before Judge Cote has been scheduled for February 2, 2018, at 11:00 a.m.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
Mr. Kim praised the investigative work of the United States Postal Inspection Service and also thanked the SEC, which filed a parallel civil case today.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Rebecca Mermelstein, Brendan F. Quigley, and Daniel B. Tehrani are in charge of the prosecution.
Doctor and Nurse Practitioner Among Three Defendants Charged in Manhattan Federal Court for Oxycodone and Fentanyl Diversion SchemeRead the Press Release
Joon H. Kim, the Acting 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”), James P. O’Neill, the Commissioner of the Police Department for the City of New York (“NYPD”), and Mark G. Peters, the Commissioner of the New York City Department of Investigation (“DOI”), today announced the arrests of ERNESTO LOPEZ, a New York-licensed doctor who wrote thousands of medically unnecessary prescriptions for oxycodone and fentanyl patches over an approximately three-year period, SHARON WASHINGTON-BHAMRE, a pediatric nurse practitioner who also wrote medically unnecessary prescriptions for oxycodone, and AUDRA BAKER, an employee at one of LOPEZ’s medical offices who helped facilitate the diversion scheme. All three defendants are charged with conspiracy to distribute controlled substances and were arrested earlier this morning. The defendants will be presented in Manhattan federal court before U.S. Magistrate Judge Barbara C. Moses later today.
Acting U.S. Attorney Joon H. Kim stated: “As alleged, these defendants acted like drug dealers in lab coats, directly contributing to the glut of highly-addictive opioids flooding the streets of New York City and its surrounding communities. Our office will continue to investigate and prosecute all those who abuse their medical licenses to enrich themselves.”
DEA Special Agent in Charge James J. Hunt stated: “At the same time that cartels are pushing fentanyl on opioid users, this investigation identified a rogue doctor following suit. With offices strategically located in Nassau County, Manhattan, and Queens, Dr. Lopez allegedly wrote unnecessary prescriptions for oxycodone and fentanyl worth millions of dollars on the street. I commend our law enforcement partners for their collaboration and hard work on this investigation.”
DOI Commissioner Mark G. Peters said: “This doctor and his co-defendants in the medical profession disregarded their duty to aid the sick and infirmed, deciding instead to heed personal profit in return for pushing dangerous opioids, according to the charges. DOI is proud to work with our federal and local law enforcement partners on this significant investigation to expose and stop a pill mill advancing the perilous opioid crisis.”
The following allegations are based on the Complaints[1] and other documents filed in Manhattan federal court:
Oxycodone and fentanyl are highly addictive, narcotic opioids that are used to treat severe and chronic pain conditions. Oxycodone prescriptions are in high demand and have significant cash value to drug dealers, who sell them on the street for large amounts of money. 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. Thus, a single prescription for 120 30-milligram tablets of oxycodone can net an illicit distributor $2,400 in cash or more. Fentanyl patches are also commonly abused and sold for cash on the street by drug dealers. Because it is much more potent than heroin, fentanyl frequently results in overdoses that can lead to respiratory depression and death.
From 2015 until October 2017, LOPEZ operated medical clinics located in Manhattan, New York; Jackson Heights, New York; and Franklin Square, New York, where LOPEZ wrote thousands of prescriptions for large quantities of oxycodone and fentanyl patches in exchange for cash payments. BAKER assisted LOPEZ in operating two of his medical offices. LOPEZ typically charged $200 to $300 in cash for “patient visits,” where LOPEZ performed no meaningful physical examination of patients. Instead, a typical “patient visit” consisted primarily of recording a patient’s vital signs and sometimes involved the brief movement of a patient’s limbs. LOPEZ then prescribed large quantities of oxycodone, most frequently 120 30-milligram tablets, and fentanyl patches. Between January 2015 and the present, LOPEZ wrote more than 8,000 oxycodone prescriptions, resulting in an estimated $2 million in fees to LOPEZ. BAKER assisted LOPEZ in the diversion of oxycodone and fentanyl. For example, BAKER steered at least one patient to a particular individual (“CC-1”), so that CC-1 could purchase that individual’s oxycodone prescriptions and resell the drugs on the street.
From December 2015 until October 2017, WASHINGTON-BHAMRE, a pediatric nurse practitioner, wrote scores of medically unnecessary oxycodone prescriptions. During this time, WASHINGTON-BHAMRE wrote oxycodone prescriptions in the names of individuals provided to her by CC-1 without performing any examination of the purported patients.
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LOPEZ, 74, of Flushing, New York, BAKER, 49, of Manhattan, New York, and WASHINGTON-BHAMRE, 52, of Rochelle Park, New Jersey, are each charged with one count of conspiring to distribute and possess with intent to distribute a controlled substance, 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 defendants will be determined by the judge.
Mr. Kim praised the outstanding investigative work of the DEA’s New York Tactical Diversion Squad, which comprises agents and officers from the U.S. Drug Enforcement Administration, the New York City Police Department, the New York State Police, New York State Division of Financial Services and New York City Department of Investigation. Mr. Kim also thanked the Department of Health and Human Services, the New York State Office of the Medicaid Inspector General, the New York City Human Resources Administration, the Nassau County Police Department and Asset Forfeiture Unit, the Nassau County District Attorney’s Office, the New York County District Attorney’s Office, and the New York State Department of Financial Services for their work on the investigation.
Parts of this case were conducted under the auspices of the Organized Crime Drug Enforcement Task Force (OCDETF), a partnership between federal, state, and local law enforcement agencies. The principal mission of the OCDETF program is to identify, disrupt, and dismantle the most serious drug trafficking, weapons trafficking, and money laundering organizations and those primarily responsible for the nation’s illegal drug supply.
This matter is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Elizabeth Hanft and Michael McGinnis are in charge of the prosecution.
The charges contained in the Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaints, and the description of the Complaints set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
- Complaint in U.S. v. Sayfullo Saipov
Manhattan U.S. Attorney Announces Federal Charges Against Mamadou Ndao and Diabel Samb for String of Gunpoint Robberies of Cellphone Stores in Westchester County and Orange County, New YorkRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), Anthony A. Scarpino Jr., the Westchester County District Attorney, and Christopher T. McNerney, Chief of the Greenburgh Police Department (“GPD”), announced the arrest of MAMADOU NDAO and DIABEL SAMB on charges of conspiracy to commit Hobbs Act robbery, Hobbs Act robbery, and a firearms offense.
Acting U.S. Attorney Joon H. Kim said: “As alleged, Ndao and Samb endangered the lives of customers and store employees in a series of armed robberies. Thanks to our law enforcement partners, the defendants are now in custody and will face justice in federal court.”
FBI Assistant Director William F. Sweeney Jr. said: “Hard-working people go to work every day to earn a living, and abide by the laws of our country. The subjects in this case allegedly chose to skip being hard-working and law abiding, and demanded money from stores at gunpoint, putting both customers and employees in harm’s way. The FBI Westchester County Safe Streets Task Force pursues criminals each and every day who choose what they may believe is an easier way of life, but now face years in federal prison.”
Westchester County District Attorney Anthony A. Scarpino Jr. said: “Due to the efforts of our dedicated partners in law enforcement, these perpetrators have been delivered into the Criminal Justice System where they belong. We remain committed to reducing all types of crime, particularly those involving criminals who would resort to terrorizing retail store employees by robbing them at gunpoint. These arrests are a testament to our resolve and continued successful relationship with our partners in law enforcement at all levels.”
Greenburgh Police Chief Christopher T. McNerney said: “This successful investigation is the direct result of an outstanding cooperative effort by all of the agencies involved. The arrests of these violent individuals and pending federal prosecution sends a message to the residents of Westchester and beyond that we are committed to using all resources available to fight crime and prosecute offenders to the fullest extent of the law.”
According to the allegations contained in the Complaint[1] charging NDAO and SAMB:
On October 24, 2017, NDAO and SAMB committed a gunpoint robbery of a Verizon store located in Scarsdale, New York. SAMB entered the store carrying a firearm. He displayed the gun to two store employees and directed them to open a safe in the back room of the store. NDAO subsequently entered the store carrying a suitcase, which SAMB and NDAO filled with cellphones and other electronic devices. Following the robbery, SAMB and NDAO fled in a vehicle that had been parked outside the store. Law enforcement intercepted SAMB and NDAO in Mount Vernon, New York, where they were ultimately apprehended by the Greenburgh Police Department. Law enforcement recovered clothing worn by SAMB and NDAO during at least two of these robberies in the vehicle the defendants had used to flee the scene. Numerous stolen cellphones and other electronic devices were recovered from the suitcase NDAO had carried into the Scarsdale Verizon store.
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NDAO, 24, of New York, New York, and SAMB, 32, of New York, New York, are each charged with one count of Hobbs Act robbery, which carries a maximum sentence of 20 years in prison; one count of conspiracy to commit Hobbs Act robbery, which carries a maximum sentence of 20 years in prison; and one count of using a firearm during and in relation to a crime of violence, which carries a maximum sentence of life in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.
NDAO and SAMB were arrested by the GPD on October 24, 2017, and are expected to be presented tomorrow in White Plains federal court before United States Magistrate Judge Paul E. Davison.
Mr. Kim praised the outstanding investigative work of the Westchester County Department of Public Safety and the Real Time Crime Center, the Mount Pleasant Police Department, the Yonkers Police Department, the Tarrytown Police Department, the Town of Newburgh Police Department, the Pelham Police Department, the Greenburgh Police Department, and the FBI’s Westchester County Safe Streets Task Force, which comprises agents and task force officers from the FBI, the U.S. Probation Office, the Westchester County Department of Public Safety, the Westchester County District Attorney’s Office, the New York City Police Department, the City of Yonkers Police Department, the City of Yonkers Police Department, the Peekskill Police Department, and the Mount Vernon Police Department. Mr. Kim thanked the Westchester County District Attorney’s Office for its significant contributions to the investigation and for its assistance in the arrest and apprehension of the defendants.
The case is being prosecuted by the Office’s White Plains Division. Assistant United States Attorneys Christopher J. Clore and Gillian Grossman 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 below constitute only allegations, and every fact described should be treated as an allegation.
Manhattan Man Pleads Guilty to Participating in Multimillion-Dollar Securities Fraud SchemeRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that JOSEPH MELI pled guilty today in Manhattan federal court to securities fraud. Between 2015 and January 2017, MELI conducted a scheme to defraud more than approximately 130 investors who invested a total of more than approximately $95 million through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market. MELI pled guilty earlier today before U.S. Magistrate Judge Barbara Moses.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As he admitted in court today, Joseph Meli created his own theatrical production – a fictitious business that purported to have access to blocks of tickets to Broadway shows and other events. In fact, Meli was deceiving investors into giving him money that he pocketed to fund his own extravagant lifestyle. Now he awaits sentencing for running a Ponzi scheme.”
According to allegations in the superseding Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:
From at least in or about 2015 through in or about January 2017, MELI conducted a scheme to defraud more than approximately 130 investors who invested a total of more than approximately $95 million through false representations that MELI would use investor funds to purchase tickets to various live events for resale at a profit on the secondary market. In fact, MELI utilized a substantial portion of the investor funds he obtained for MELI’s personal expenses – including payments for a $3 million house in East Hampton, New York, a 2017 Porsche convertible, and expensive watches and jewelry – and to make payments, in a Ponzi-like manner, to previous investors in MELI’s ticket fraud scheme and in unrelated hedge fund.
In furtherance of the fraudulent scheme, MELI falsely represented to investors that he had entered into written agreements with production companies for popular Broadway shows and with management companies for popular singers and music bands (together, the “Production and Management Companies”) to purchase large blocks of tickets to the shows and performances. In truth and in fact, MELI had not entered into such agreements and did not have any contractual rights to purchase such tickets from the Production and Management Companies.
In furtherance of the scheme, moreover, MELI provided investors with falsified documents purporting to reflect agreements between MELI’s company, Advance Entertainment, LLC (“Advance”), and the Production and Management Companies, in which the Production and Management Companies agreed to sell Advance large blocks of tickets to the shows or performances. In truth and in fact, the Production and Management Companies had not entered into agreements to sell tickets to MELI or Advance. These fake agreements listed, as authorized representatives entering into the agreements on behalf of the Production and Management Companies, the names of individuals within those organizations, and furthermore contained fraudulent signatures of these individuals.
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MELI, 43, of New York, New York, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000. In addition, pursuant to a plea agreement with the Government, MELI agreed to forfeit proceeds of the offense and to pay restitution to the victims of the offense. MELI is scheduled to be sentenced by Judge Kimba M. Wood on January 31, 2018.
The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Kim praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Elisha J. Kobre and Brendan F. Quigley are in charge of the prosecution.
Leader of Violent Drug Crew Sentenced to 30 Years for 2016 MurderRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that RASHOD LEWIS was sentenced by U.S. District Judge Kimba M. Wood to 360 months in prison in connection with his use of a firearm in the murder of Nelson Dubon on January 21, 2016. LEWIS previously pled guilty before U.S. Magistrate Judge Gabriel W. Gorenstein to one count of discharging a firearm in furtherance of narcotics trafficking. LEWIS murdered Dubon in the course of a robbery on Webster Avenue in the South Bronx, which Lewis and other members of the violent street crew “YNR” committed as part of that crew’s drug business.
Acting Manhattan U.S. Attorney Joon H. Kim said: “Rashod Lewis, a leader of a violent drug trafficking and robbery crew, shot and killed Nelson Dubon after Dubon tried to assist other victims of Lewis’ robbery. Yesterday Lewis received the lengthy prison term his vicious crime deserves.”
According to the charging documents filed in the case, as well as statements made during the sentencing proceeding and earlier court appearances:
Since at least 2012, a group of young men and women living in the vicinity of 188th Street and Webster Avenue, and referring to itself as “YNR,” engaged in a conspiracy to distribute crack cocaine and heroin. LEWIS was a leader of YNR and personally participated in multiple drug-related armed robberies. Those incidents included an armed robbery of a narcotics dealer and others located inside a billiards club on January 21, 2016, during which Lewis and his codefendant Kenneth Rudge shot and killed Nelson Dubon. On that date, Lewis and four other members of YNR entered an after-hours club located near Park Avenue and 187th Street. There, the crew threatened and assaulted a narcotics dealer before turning on the patrons of the club. Lewis and others brandished handguns, while another YNR member beat patrons with a pool cue. Dubon, who attempted to assist other victims of the robbery, was shot first by Lewis and then by Rudge, and later succumbed to his wounds.
Rudge is scheduled to be sentenced by Judge Wood on January 25, 2018.
In furtherance of this violent drug crew’s activities, LEWIS stored multiple firearms, including a Mac-11 subcompact machine gun, in an apartment on Webster Avenue. LEWIS also supplied and directed numerous underlings, including minors, in the sale of heroin and crack cocaine on Webster Avenue.
In addition to the prison term, LEWIS, 26, of the Bronx, New York, was sentenced to five years of supervised release.
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Mr. Kim praised the outstanding work of the NYPD and ATF for their investigative efforts and ongoing support and assistance with the case.
The prosecution of this case is being overseen by the Office’s Violent and Organized Crime Unit. Assistant U.S. Attorneys Andrew C. Adams and Sarah Krissoff are in charge of the case.
Former Chief Financial Officer of Manhattan-Based Real Estate Management Company Sentenced to 63 Months in Prison for FraudRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that LOUIS LITVIN, the former chief financial officer of United Realty Management (“URM”), was sentenced today by U.S. District Judge Naomi Reice Buchwald to 63 months in prison for his role in a fraudulent scheme to steal more than $1 million from URM.
Acting Manhattan U.S. Attorney Joon H. Kim said: “Louis Litvin, the former chief financial officer of the real estate management company URM, abused his position and substantial control he had over URM’s books, to help orchestrate a million-dollar fraud against the very company he was supposed to be serving. Today, this corporate executive was held accountable for his criminal greed.”
According to the Complaint, Information, and statements made on the record at sentencing:
From 1996 to 2011, LITVIN was the CFO for URM, and also a part-owner of URM. Unbeknownst to his co-owners, LITVIN conspired with co-defendants Melissa Chan (a former URM bookkeeper) and Chitakra Ramudit (a former Capital One branch manager who handled URM’s banking relationship) to steal more than $1 million from URM through fraudulent wire transfers, cashier’s checks, and unauthorized transfers and deposits.
LITVIN also took steps to cover up the fraud. For example, after he was fired from URM, he filed for bankruptcy. In connection with the bankruptcy proceeding, he lied in his sworn deposition, and he coached Chan to lie in her deposition, by providing her with a cover story to explain money she received from him. The cover-up of the fraud continued for years after LITVIN was fired in October 2011, until it finally came to light when URM retained forensic auditors to review the accounts that LITVIN oversaw.
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In addition to his term of incarceration, LITVIN, 64, of West Palm Beach, Florida, was sentenced to five years of supervised release, and forfeiture and restitution in amounts to be determined.
LITVIN’s co-defendant Melissa Chan pled guilty to conspiracy to commit bank fraud on October 24, 2017, and is scheduled to be sentenced by Judge Buchwald on March 14, 2018. LTIVIN’s co-defendant Chitakra Ramudit is charged in Information S2 17 Cr. 445 (NRB) with conspiracy to commit bank fraud, bank fraud, and conspiracy to commit money laundering. The allegations in the Information as to Ramudit are merely accusations, and she is presumed innocent unless and until proven guilty.
Mr. Kim praised the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Eli J. Mark and Jacob Warren are in charge of the prosecution.
Former Chairman and CEO of Federal Credit Union and Computer Programmer for Unlawful Bitcoin Exchange Sentenced in Manhattan Federal CourtRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that TREVON GROSS and YURI LEBEDEV were sentenced by U.S. District Judge Alison J. Nathan to prison in connection with a bribery scheme to take over control of a federal credit union and a related fraud scheme to operate Coin.mx, an illegal Bitcoin exchange. On March 17, 2017, GROSS and LEBEDEV were convicted following a jury trial on all counts with which they were charged in the controlling indictment. On October 20, Judge Nathan sentenced LEBEDEV to 16 months in prison. Earlier today, Judge Nathan sentenced GROSS to 60 months in prison.
Acting U.S. Attorney Joon H. Kim said: “Yuri Lebedev and others at Coin.mx, an unlawful Bitcoin exchange, tricked banks into processing millions of dollars in transactions by hiding the nature of their business. When the banks caught on to their scheme, Lebedev and others bribed Trevon Gross in order to gain control of a credit union to process those transactions, undermining the credit union’s safety and solvency in the process. Despite elaborate efforts by the defendants to hide their schemes, their brazen crimes were exposed at trial. Gross and Lebedev’s criminal schemes have now landed them in federal prison.”
According to the Superseding Indictment on which GROSS and LEBEDEV were convicted, evidence admitted at trial, and statements made during the sentencing proceedings:
The Unlawful Bitcoin Exchange
Between 2013 and July 2015, LEBEDEV helped operate Coin.mx, an unlawful internet-based Bitcoin exchange, along with Anthony Murgio, the founder of Coin.mx. LEBEDEV, Murgio, and their co-conspirators engaged in substantial efforts to evade detection of their unlawful Bitcoin exchange by operating through a phony front company called “Collectables Club.” Coin.mx used the “Collectables Club” to open financial accounts in order to trick financial institutions into believing the unlawful Bitcoin exchange was simply a members-only association of individuals who discussed, bought, and sold collectible items and memorabilia. LEBEDEV and his co-conspirators deceived financial institutions by deliberately misidentifying and miscoding Coin.mx customers’ credit and debit card transactions, in violation of bank and credit card company rules and regulations. Through the illegal Coin.mx scheme, LEBEDEV and his co-conspirators caused more than $10 million in Bitcoin-related transactions to be processed illegally through financial institutions.
The Credit Union Bribery Scheme
In 2014, in an effort further to evade scrutiny from financial institutions about the nature of the business engaged in by Coin.mx, LEBEDEV, Murgio, and their co-conspirators gained control of HOPE Federal Credit Union (“HOPE FCU”), a low-income designated federal credit union in Lakewood, New Jersey, for which GROSS served as Chairman and CEO. After making more than $150,000 in illegal bribes at GROSS’s direction to bank accounts in the name of a church where GROSS served as the pastor, LEBEDEV, Murgio, and their co-conspirators took control of HOPE FCU. With GROSS’s assistance, Murgio installed LEBEDEV and various co-conspirators on HOPE FCU’s Board of Directors and transferred Coin.mx’s banking operations to HOPE FCU. GROSS also ceded operational control of the credit union to the board members installed by Murgio, including LEBEDEV. Thereafter, GROSS, LEBEDEV, and others worked to run tens of millions of dollars of ACH (Automated Clearing House) transactions through the credit union without adequate capital or anti-money laundering controls, thus putting HOPE FCU’s financial condition at substantial risk.
GROSS, LEBEDEV, Murgio, and their co-conspirators also obstructed an examination of HOPE FCU by the National Credit Union Administration (“NCUA”) and made false statements to the NCUA in order to perpetuate LEBEDEV and Murgio’s control of the credit union. These included deliberately failing to disclose the bribe payments; misrepresenting the location of Coin.mx-affiliated businesses, including the “Collectables Club,” so as to claim that they were eligible to be members of the credit union and to serve as Board members; and manipulating the accounting at HOPE FCU so as to hide its true financial condition and the fact that it was processing tens of millions of dollars of ACH transactions without adequate controls. HOPE FCU was operated as a captive bank by MURGIO and his co-conspirators until the end of 2014. In October 2015, the NCUA placed HOPE FCU into conservatorship and subsequently liquidation.
On March 17, 2017, GROSS and LEBEDEV were convicted after a four-week jury trial of conspiring to make corrupt payments to an officer of a financial institution, to receive corrupt payments by an officer of a financial institution, to obstruct an NCUA examination of a financial institution, and to make false statements to the NCUA. GROSS was also convicted of the receipt of corrupt payments by an officer of a financial institution. LEBEDEV was also convicted of making corrupt payments to an officer of a financial institution, wire fraud, bank fraud, and conspiring to commit wire fraud and bank fraud. In imposing today’s sentence, Judge Nathan found that GROSS committed perjury when he testified under oath at trial.
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In addition to the prison sentences, GROSS, 47, of Jackson, New Jersey, and LEBEDEV, 39, of St. Johns, Florida, were each sentenced to three years of supervised release and ordered to pay fines of $12,000 and $10,000, respectively. In addition, GROSS and LEBEDEV were ordered to forfeit the proceeds of their crimes and to pay restitution, jointly and severally with Murgio, to the NCUA.
All four of LEBEDEV and GROSS’s co-defendants have been convicted and have been sentenced or are awaiting sentence by Judge Nathan.
Anthony R. Murgio pled guilty on January 9, 2017, to conspiring to operate an unlicensed money transmitting business, conspiring to commit wire fraud and bank fraud, and conspiring to obstruct an examination of HOPE FCU by the NCUA in furtherance of the illegal Coin.mx scheme. On June 27, 2017, Murgio was sentenced to 66 months in prison, three years of supervised release, and a $12,000 fine.
Michael J. Murgio pled guilty on October 27, 2016, to conspiring to obstruct an NCUA examination of a financial institution, and was sentenced on January 27, 2017, to one year of probation and a $12,000 fine.
Jose M. Freundt pled guilty on October 13, 2016, to operating an unlicensed money transmitting business, conspiring to operate an unlicensed money transmitting business, making corrupt payments to an officer of a financial institution, conspiring to make corrupt payments to an officer of a financial institution, wire fraud, and conspiring to commit wire fraud. Freundt is scheduled to be sentenced on December 18, 2017.
Ricardo Hill pled guilty on January 17, 2017, to operating an unlicensed money transmitting business; conspiring to operate an unlicensed money transmitting business; making corrupt payments to an officer of a financial institution; conspiring to make corrupt payments to an officer of a financial institution, to receive corrupt payments by an officer of a financial institution, to obstruct an NCUA examination of a financial institution, and to make false statements to the NCUA; wire fraud; bank fraud; and conspiring to commit wire fraud and bank fraud. Hill is scheduled to be sentenced on December 18, 2017.
Mr. Kim praised the outstanding investigative work of the Federal Bureau of Investigation and the United States Secret Service. He also thanked the NCUA for its assistance with the investigation and prosecution.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Eun Young Choi, Daniel S. Noble, and Won S. Shin are in charge of the prosecution.
Connecticut Man Pleads Guilty to Participating in Multimillion-Dollar Ponzi SchemeRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that STEVEN SIMMONS pled guilty in Manhattan federal court today to conspiring to commit securities fraud and wire fraud. Between 2013 and January 2017, SIMMONS solicited more than $6 million in investments for a hedge fund (the “Hedge Fund”). SIMMONS, however, misappropriated some of these funds for his own use and knew that the Hedge Fund used the remainder of the funds to pay back prior investors, as part of a Ponzi-like scheme. SIMMONS pled guilty earlier today before U.S. Magistrate Judge Barbara Moses.
Acting Manhattan U.S. Attorney Joon H. Kim said: “Steven Simmons engaged in one of the oldest frauds in the book: using investor funds to pay back earlier investors, all while skimming funds off the top for his own personal use. When investors demanded the returns promised to them, they learned that the entire investment was just a scam. Now Simmons, who admitted his guilt in court today, will answer for his crimes.”
According to allegations in the superseding Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:
Between 2013 and January 2017, SIMMONS solicited investments by falsely representing to investors that their funds would be used by the Hedge Fund for legitimate, specified investment purposes, that they would receive specific rates of return, and that their investments would not be placed at risk or commingled with other funds. In fact, SIMMONS failed to invest the investor monies as promised, but, instead, diverted investor funds for his own use and also, together with others, used the money in a Ponzi-like fashion to fund the repayment of earlier investors in the Hedge Fund whose redemption requests could not be forestalled.
Among other false and misleading statements, SIMMONS told one investor (“Victim Entity-1”) that its funds would be placed by the Hedge Fund with a highly successful group of portfolio managers and provided performance information for these portfolio managers. In truth and in fact, SIMMONS solicited those investment funds from Victim Entity-1 for the purpose of repaying an earlier investor in the Hedge Fund which had demanded the return of its investment. Most of Victim Entity-1’s funds were, within minutes of their receipt by the Hedge Fund, wired to the earlier investor. The following day, $50,000 was wired by the Hedge Fund to an account controlled by SIMMONS. In a later consensually recorded conversation with a cooperating witness (the “CW”), SIMMONS expressed concern that Victim Entity-1 would contact the portfolio managers with whom it believed its funds were invested and learn that “there’s no . . . money.” As part of the fraudulent scheme, Simmons also created and provided investors with false monthly statements.
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SIMMONS, 48, of Wilton, Connecticut, pled guilty to one count of conspiracy to commit securities fraud and wire fraud. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. In addition, pursuant to a plea agreement with the Government, SIMMONS agreed to forfeit $6,900,000.
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. SIMMONS will be sentenced at a date set by the Court.
Mr. Kim praised the work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Elisha J. Kobre and Brendan F. Quigley are in charge of the prosecution.
Cambridge, Massachusetts, Man Pleads Guilty in Manhattan Federal Court to Insider TradingRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that FEI YAN, who works as a post-doctoral associate at a major research university in Cambridge, Massachusetts, pled guilty in Manhattan federal court to insider trading. In December 2016, YAN made approximately $110,000 in connection with trading in options to buy the stock of Stillwater Mining Company, based on misappropriated material nonpublic information. YAN pled guilty earlier today before U.S. District Judge Katherine B. Forrest.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As he admitted in Manhattan federal court today, Fei Yan made options trades based on inside information to net over $100,000 in illegal profits. Yan got the information from his spouse, whose position at an international law firm gave her access to confidential mergers and acquisitions secrets. Now Yan awaits sentencing before a federal judge for his crimes.”
According to the Indictment filed in Manhattan federal court, previous court filings, and statements made in public court proceedings:
YAN’s spouse (“Spouse-1”) worked at the New York office of an international law firm (the “Law Firm”). In the summer of 2016, the Law Firm was retained by a mining company (the “Mining Company”) to represent it in negotiations to acquire Stillwater Mining Company (“Stillwater Mining”), a publicly traded company whose shares are traded on the New York Stock Exchange under the symbol “SWC.” On or about August 25, 2016, in connection with Spouse-1’s work at the Law Firm, Spouse-1 learned of the negotiations between the Mining Company and Stillwater Mining and continued to work on the transaction through December 9, 2016, when it was publicly announced for the first time that the Mining Company would be acquiring Stillwater Mining. While working on the transaction during the fall of 2016, Spouse-1 had access to material, non-public information regarding the potential acquisition.
The Law Firm required its employees, including Spouse-1, to abide by a confidentiality policy, which prohibited disclosure of “information received from and about . . . clients . . . [and] other parties involved in transactions with clients.” YAN and Spouse-1 had a history, pattern, and practice of sharing confidences.
In early and mid-November 2016, Spouse-1 billed dozens of hours working on the potential merger between the Mining Company and Stillwater Mining, and YAN and Spouse-1 were in frequent phone contact. During this period, YAN conducted Internet searches for “yahoo swc” and “stillwater merger,” even though the Mining Company’s potential acquisition of Stillwater Mining had not yet been publicly announced.
On November 22, 2016, Spouse-1 participated in a call at the Law Firm regarding the potential acquisition. That same day, YAN, using a brokerage account he had previously set up in his mother’s name, bought 71 options to buy Stillwater Mining stock. The next day, there were two phone calls between a phone used by YAN and a phone used by Spouse-1. After these calls, YAN bought an additional 200 options to buy Stillwater Mining stock.
Negotiations between the Mining Company, represented by the Law Firm, and Stillwater Mining continued to progress, and Spouse-1 continued to work on the transaction. On December 1, 2016, after a 78-minute phone call with Sposue-1 the night before, YAN purchased an additional 100 Stillwater Mining options.
The following day, YAN conducted multiple Internet searches and research related to mergers and acquisitions, including searches for “process of acquisition” and “company acquisition process.” Several minutes after conducting these searches, YAN called Spouse-1.
YAN and Spouse-1 also spoke on the phone multiple times on the night of December 5 and the early morning hours of December 6. Later on the morning of December 6, YAN bought an additional 341 options to buy Stillwater Mining stock. Later that day, YAN conducted internet research related to insider trading. For example, YAN searched for “how sec detect unusual trade” and accessed at least three articles on financial websites related to insider trading. YAN also searched for the name of an individual who was charged in this District in May 2016 with insider trading.
The next day, shortly after speaking with Spouse-1 on the phone for approximately 30 minutes, YAN conducted an Internet search for “insider trading with international account” and, shortly thereafter, viewed articles entitled “U.S. Insider Trading Enforcement Goes Global” and “Want to Commit Insider Trading? Here’s How Not to Do It.” The following day, YAN bought an additional 54 options to buy Stillwater Mining stock.
Early on the morning of December 9, 2016, it was publicly announced that the Mining Company would acquire Stillwater Mining for $18 per share. Beginning at approximately 9:33 a.m. Eastern time, minutes after the open of regular market trading. YAN sold the Stillwater Mining options he had previously purchased, resulting in a profit of approximately $109,420. Also that day, YAN conducted Internet searches for “insider trading cases,” and “insider trading options.”
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YAN pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. In addition, pursuant to a plea agreement with the Government, YAN agreed to forfeit $119,428.50, representing the amount of proceeds obtained as a result of trading in Stillwater Mining and related relevant conduct.
The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
YAN is scheduled to be sentenced by Judge Forrest on March 2, 2018, at 3:00 p.m.
Mr. Kim praised the investigative work of the Federal Bureau of Investigation (“FBI”) and thanked the SEC, which has filed civil charges in a separate action. Mr. Kim also thanked the FBI’s Boston Office and the U.S. Attorney’s Office for the District of Massachusetts for their assistance in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Brendan F. Quigley is in charge of the prosecution.
Acting Manhattan U.S. Attorney and FBI Assistant Director Announce Insider Trading Charges Against Managing Director of Private Equity FundRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Danny Kennedy, the Acting Assistant Director-in-Charge of the Los Angeles Field Office of the Federal Bureau of Investigation (“FBI”), announced the indictment today of BENJAMIN CHOW, a/k/a “Ben Chow Zhou Bin,” a/k/a “Benjamin Bin Chow,” a/k/a “Bin Zhou,” for conspiracy to commit securities fraud and securities fraud in connection with a $5 million insider trading scheme relating to the securities of Lattice Semiconductor Corporation (“Lattice”). The case is assigned to U.S. District Judge Gregory H. Woods.
Acting U.S. Attorney Joon H. Kim said: “As alleged, Benjamin Chow tipped his friend about a potential acquisition of Lattice Semiconductor Corporation by private equity firms he managed, including one based in China. Chow’s illegal tips resulted in multimillion-dollar profits for his friend and business associate. This type of alleged illegal tipping is not only illegal, but erodes public confidence in our markets. Protecting the integrity of our financial markets remains a top priority of this Office.”
FBI Assistant Director-in-Charge Danny Kennedy said: “Mr. Chow misused his position of trust to undermine the integrity of the market. The FBI and our partners are committed to fairness in the marketplace by holding accountable those who threaten legitimate exchanges by trading on proprietary knowledge.”
According to the allegations in the Indictment filed in Manhattan federal court:[1]
From approximately March to November 2016, CHOW provided a friend and business associate (“CC-1”) with material nonpublic information relating to a potential merger between Lattice and private equity firms managed by CHOW, one based in Beijing, China (“Firm-1”) and one based in Palo Alto, California (“Firm-2”). CC-1 in turn used such information to make millions of dollars in profitable securities trades through accounts opened in the names of family members and associates of CC-1.
Specifically, as Managing Director of Firm-1 and later Managing Partner of Firm-2, CHOW obtained material nonpublic information regarding potential merger agreements between Lattice and Firm-1, and later, Firm-2. Information concerning the potential merger agreements was subject, among other things, to nondisclosure agreements executed between Lattice and Firm-1, and subsequently between Lattice and Firm-2.
In violation of these agreements, and in breach of his duties, CHOW provided CC-1 with material nonpublic information regarding the potential mergers between Lattice and Firm-1 and Lattice and Firm-2, through in-person meetings, voice messages, and text exchanges. On multiple occasions, CC-1 made profitable trades in Lattice shortly after receiving the material nonpublic information from CHOW, yielding a total of at least approximately $5 million in profits for CC-1.
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CHOW, 46, of Los Angeles, California, is charged with one count of conspiring to commit securities fraud, which carries a maximum prison sentence of five years in prison, and 13 counts of securities fraud, which carry maximum sentences of between 20 and 25 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Kim praised the exceptional work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorneys Amanda Kramer and Elisha Kobre are in charge of the prosecution.
The allegations contained in the Indictment and 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 Indictment – and the description of the Indictment set forth herein – constitute only allegations, and every fact described should be treated as an allegation.
White Plains Accountant Sentenced to 22 Months in Prison for $23 Million Tax Fraud SchemeRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that JOSEPH CERVONE was sentenced to 22 months in prison on tax fraud charges. CERVONE plead guilty on March 29, 2017, to one count of endeavoring to obstruct and impede the due administration of the internal revenue laws and one count of subscribing to false tax returns before U.S. District Judge Nelson S. Román, who imposed today’s sentence.
According to the Information previously filed in White Plains federal court and court proceedings:
From 2009 through 2012, CERVONE, a certified public accountant with an office in White Plains, obstructed and impeded the IRS by filing false tax returns claiming more than $23 million of energy and coal credits on behalf of his clients in order to obtain tax refunds. In addition, CERVONE also filed false tax returns for the tax years 2010 and 2011 that failed to report income relating to personal expenses paid on behalf of CERVONE from funds obtained as a result of his clients’ false tax returns.
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In addition to the prison term, CERVONE, 64, of White Plains, New York, was sentenced to one year of supervised release and a $15,000 fine.
Mr. Kim praised the outstanding efforts of the Internal Revenue Service - Criminal Investigation. He also thanked U.S. Department of Justice’s Tax Division for its significant assistance in the investigation
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorney John P. Collins Jr. is in charge of the prosecution.
SDNY Personnel Among Those Honored at 65th Annual Attorney General AwardsRead the Press Release
Attorney General Jeff Sessions recognized 202 Department of Justice employees – including seven from the Office of the United States Attorney for the Southern District of New York (“SDNY”) who received the Department’s highest award for employee service – for their distinguished public service today at the 65nd Annual Attorney General’s Awards Ceremony. This annual ceremony recognizes individuals for their outstanding service and dedication to carrying out the missions of the Department of Justice.
Attorney General Jeff Sessions said: “Every single day, the 115,000 men and women of the Department of Justice work to protect our national security against terrorist threats, defend the civil rights of all Americans, reduce violent crime in our communities, stop deadly drug dealers and their organizations, and strengthen the rule of law. This work benefits every American, and each Department of Justice employee plays a role that helps us accomplish our objectives. Today, we take a moment to recognize those who have distinguished themselves by exemplary service to the Department. Each one of these men and women – through their dedication and commitment – has made a difference. Meeting with them and their families today, I am more confident than ever that the Department – and the safety of the American people – are in good hands.”
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that the Attorney General’s Award for Exceptional Service, the Department’s highest award for employee service, was presented to SDNY Assistant U.S. Attorneys Nola B. Heller, Sarah R. Krissoff, Matthew J. Laroche, Michael D. Maimin, Rachel Maimin, and Micah W.J. Smith, and paralegal specialist Darci Brady. This team, along with fellow award recipients ATF Special Agents Kenneth G. Crotty and Andrew J. Daher, DEA Special Agents William D. Melodick and Moises Walters, HSI Special Agent Paul H. Pasuco, and NYPD Detectives Pedro Alfonso, Paul Jeselson, and John Urena, investigated, arrested, and prosecuted more than 100 members of the violent Bronx-based Trinitarios gang. These RICO cases resulted in clearance of numerous murders and other acts of extreme violence through guilty pleas or convictions at trial. The Trinitarios cases had a direct impact on the homicide rate in the Bronx, which has declined to record-low levels in the aftermath of the initial takedown and subsequent investigation and prosecution.
Acting Manhattan U.S. Attorney Joon H. Kim said: “Our Office serves no higher mission than helping to keep the citizens of our city safe, including from gang and gun violence. That is why we are extremely proud of those in our Office and with our law enforcement partners who received today the Attorney General’s Award for Exceptional Service, the Department's highest honor for employee service. These fine women and men were honored for their work in investigating and prosecuting the vicious and violent Trinitarios gang, including prosecutions that dismantled its leadership and took over a hundred violent gang members off the streets. Their commitment has helped make Bronx safer and has had a positive impact on the lives of New Yorkers.”
Nineteen other individuals outside the department were also honored for their work. The department will also present one posthumous award to Deputy Commander Patrick T. Carothers of the U.S. Marshals Service for exceptional heroism in the line of duty during a fugitive apprehension in Georgia last November in which Deputy Commander Carothers was mortally wounded.
Drug Dealer Charged in Manhattan Federal Court for Selling Heroin and Counterfeit Oxycodone over the InternetRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, James J. Hunt, the Special Agent-in-Charge of the New York Field Office of the Drug Enforcement Administration (“DEA”), Philip R. Bartlett, Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), James P. O’Neill, the Police Commissioner of the City of New York (“NYPD”), George P. Beach II, the Superintendent of the New York State Police (“NYSP”), and Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), announced today the arrest of CRISTIAN RODRIGUEZ, who distributed through the U.S. mail heroin, oxycodone and other prescription drugs that were illegally sold over the Internet and on “dark web” marketplaces. When RODRIGUEZ was arrested yesterday, the DEA and USPIS seized approximately 32 kilograms of prescription drugs that were in his apartment. The defendant was presented yesterday before U.S. Magistrate Judge Ronald L. Ellis in Manhattan federal court.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As alleged, Cristian Rodriguez used the anonymity of the internet to peddle massive quantities of addictive pain killers without valid prescriptions. Hiding behind computers, Rodriguez and his co-conspirators allegedly sold and shipped multiple kilograms of highly addictive prescription drugs and potentially lethal opioids. Thanks to the outstanding work of our law enforcement partners, Rodriguez has been arrested and his dangerous business has been taken offline.”
DEA Special Agent-in-Charge James J. Hunt said: “Anonymity is a drug trafficker’s friend and law enforcement’s foe. Yesterday’s street corner dealer has been replaced by the dark web that enables criminal activity and drug addiction. Online illicit marketplaces challenge law enforcement, but this investigation demonstrates how joint efforts can lead to the arrest of an alleged major drug distributor based in New York City.”
USPIS Inspector-in-Charge Philip R. Bartlett said: “The opioid crisis has become a national emergency impacting the lives of so many unsuspecting families. Postal Inspectors, along with their law enforcement partners, are determined to put a stop to the distribution of illegal narcotics, safeguarding the American public.”
NYPD Commissioner James P. O’Neill said: “This defendant attempted to use the anonymity of the internet to peddle heroin, counterfeit oxycodone, and other prescription drugs to those battling serious addiction. Those who profit on at the expense of others’ well-being will be investigated and prosecuted, aggressively. Today’s arrest is the latest example of our continued commitment.”
NYSP Superintendent George P. Beach II said: “This arrest is another example of how dedicated police work and strong law enforcement partnerships are succeeding in keeping dangerous narcotics from infiltrating our neighborhoods. Criminals who illegally sell counterfeit prescription drugs are putting our communities as risk. These pharmaceuticals, when not taken under the supervision of a doctor, can be highly addictive and destroy lives. I commend the hard work of the Strike Force and all of our law enforcement partners as they fight to keep drugs off our streets and work to prevent prescription drug abuse.”
HSI Special Agent-in-Charge Angel Melendez said: “These multi-agency task forces are essential in the fight against the illegal proliferation of potentially deadly and highly-addictive prescription drugs. The arrest of the defendant and the significant seizures announced today ensure that these drugs will never make it into our communities to do untold harm.”
According to the allegations in the Complaint and statements made in Manhattan federal court:[[1]]
Since at least May 2016, RODRIGUEZ and his co-conspirators anonymously sold and distributed controlled substances over the Internet via online marketplaces and “dark web” sites. RODRIGUEZ shipped various prescription drugs, including counterfeit oxycodone, which was actually made of heroin and other substances, to individuals across the United States. RODRIGUEZ maintained a stockpile of these drugs in his apartment in the Bronx, New York. A search of RODRIGUEZ’s residence at the time of his arrest uncovered, among other things, approximately 32 kilograms of prescription drugs, shipping supplies, drug paraphernalia, money transfer records, and electronics typically used in the operation of online narcotics distribution schemes.
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RODRIGUEZ, 43, of the Dominican Republic, was charged with one count of distributing and possessing with intent to distribute heroin and 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. Kim praised the outstanding investigative work of the U.S. Postal Inspection Service and the DEA’s New York Organized Crime Drug Enforcement Strike Force. The Strike Force comprises agents and officers of the DEA, the New York City Police Department, Homeland Security Investigations, the New York State Police, the U.S. Internal Revenue Service Criminal Investigative Division, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Secret Service, the U.S. Marshals Service, the New York National Guard, the Clarkstown Police Department, the U.S. Coast Guard, the Port Washington Police Department, and the New York State Department of Corrections and Community Supervision. The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (“HIDTA”), which is a federally funded crime fighting initiative and part of the Organized Crime Drug Enforcement Task Force (“OCDTEF”) program.
In an effort to help prevent prescription drug abuse and theft, the DEA and its local law enforcement, community, and tribal partners are offering the public its 14th opportunity in seven years to rid their homes of potentially dangerous expired, unused, and unwanted prescription drugs. This Saturday, October 28, 2017, from 10:00 a.m. to 2:00 p.m., individuals can take pills and other solid forms of medication to one of almost 5,000 collection sites manned by more than 4,000 partners nationwide. Individuals can find nearby collection sites at www.DEATakeBack.com. The service is free and anonymous, no questions asked.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorney Nicolas Roos 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 descriptions of the Complaint set forth below constitute only allegations, and every fact described should be treated as an allegation.
Two Brothers from Yorktown Heights Plead Guilty in Connection with Heist of over $1 Million Worth of Computers Bound for Public High School StudentsRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that ANTON SALJANIN and GJON SALJANIN pled guilty this week before U.S. Magistrate Judge Lisa Margaret Smith to charges associated with participating in a scheme to steal, transport, and sell a shipment of approximately 1,200 computers, valued at over $1 million, that were bound for two public high schools in New Jersey. All four defendants charged in the scheme have pled guilty. ANTON SALJANIN and GJON SALJANIN are scheduled to be sentenced by U.S. District Judge Kenneth M. Karas in February 2018.
According to the Complaint and Superseding Indictment filed in White Plains federal court, as well as materials submitted in connection with the plea proceedings:
On or about January 15, 2014, ANTON SALJANIN, a driver for a shipping company, drove a truck from Yorktown Heights, New York, to a technology company located in Massachusetts to pick up a shipment of approximately 1,200 computers. ANTON SALJANIN brought his brother, GJON SALJANIN, with him. The computers were being shipped to two public high schools located in New Jersey, and were valued at over $1 million.
The next morning, ANTON SALJANIN reported to the Yorktown Police Department that the truck had been stolen from a parking lot located in Yorktown Heights. Later that day, ANTON SALJANIN reported to Yorktown Police that he had been driving around looking for the truck when he happened to spot it from the highway in a parking lot in Danbury, Connecticut. The truck would not have been visible in the Danbury parking lot to a driver passing by on the highway. Furthermore, historical cell site data for ANTON SALJANIN’s cellphone contradicts his claims about the route he took to look for the truck.
Yorktown Police detectives examined the truck and found that a window had been broken. The detectives found broken glass on the scene in the Danbury parking lot but found no broken glass on the scene in the Yorktown Heights parking lot, suggesting that the window had been broken at the Danbury parking lot rather than at the Yorktown Heights parking lot.
During interviews with the Yorktown Police, ANTON SALJANIN and GJON SALJANIN both falsely claimed that on the night of January 15, 2014, they drove directly from a convenience store outside of Yorktown Heights to the Yorktown Heights parking lot. Security camera footage from various locations in Yorktown Heights shows that a truck matching the description of the truck driven by the SALJANIN brothers departed from their claimed route, and instead traveled in the direction of the residence of Ujka Vulaj, a long-time friend of ANTON SALJANIN. The video surveillance footage also shows that the duration of the detour corresponds to the approximate length of time it would have taken to drive to Vulaj’s residence, unload the computers from the truck, and return to the route to the Yorktown Heights parking lot.
From in or about January 2014 through at least in or about April 2014, Vulaj sold the stolen computers, some with the help of a co-worker, Carlos Caceres. They sold the computers, which had a retail value of approximately $1,000, for far below the market price. Vulaj and Caceres charged approximately $500 to $800 in cash for each computer, and handed over each computer in plain brown cardboard packaging.
* * *
ANTON SALJANIN, 45, of Yorktown Heights, New York, pled guilty on October 18, 2017, to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property, which carries a maximum sentence of five years in prison; and one count of theft from an interstate shipment, which carries a maximum sentence of ten years in prison. He is scheduled to be sentenced on February 6, 2018.
GJON SALJANIN, 42, of Yorktown Heights, New York, pled guilty on October 16, 2017, to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property, which carries a maximum sentence of five years in prison. He is scheduled to be sentenced on February 2, 2018.
The SALJANINs’ co-defendants have been convicted and sentenced. Vulaj, 56, of Yorktown Heights, New York, pled guilty on June 17, 2016, to one count of conspiracy to commit theft from an interstate shipment, interstate transportation of stolen property, and receipt, possession, and sale of stolen property, and was sentenced by Judge Karas on May 12, 2017, to 12 months and one day in prison and two years of supervised released (including 6 months of home confinement). Judge Karas also ordered Vulaj to forfeit $889,424.15 in ill-gotten gains and to pay $889,424.15 in restitution.
Caceres, 39, of the Bronx, New York, pled guilty on July 21, 2016, to one count of conspiracy to commit receipt, possession, and sale of stolen property, and was sentenced by Judge Karas on January 6, 2017, to 27 months in prison and three years of supervised released. Judge Karas also ordered Caceres to forfeit $331,188 in ill-gotten gains and to pay $331,188 in restitution.
Mr. Kim praised the outstanding investigative work of the Federal Bureau of Investigation, the Yorktown Police Department, the Westchester County Police Department, and the New York City Police Department. He also thanked the Bronx County District Attorney’s Office for its assistance.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Won S. Shin, Benjamin Allee, and Scott Hartman are in charge of the prosecution.
Eight Members and Associates of the Mount Vernon Goonies Street Gang Charged in Federal Court with Racketeering, Narcotics, and Firearms OffensesRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Anthony A. Scarpino Jr., Westchester County District Attorney, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Division of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an Indictment charging MARKEL OVERTON, a/k/a “Kellz,” THOMAS BLANTON, a/k/a “LT,” MARQUIS COLLIER, a/k/a “Keise,” KADEEM DINHAM, a/k/a “Polo,” DONNIE DIXON, a/k/a “Scooter,” RAHEEM JONES, a/k/a “Rah Trigger,” a/k/a “Trigga,” JAMAAL SINCLAIR, a/k/a “Diggz,” and NOEL SMITH, a/k/a “Georgie,” with various crimes relating to racketeering, narcotics, and firearms offenses. The defendants have been charged as a result of their membership in the “Goonies” street gang that operated in the City of Mount Vernon, New York. OVERTON was arrested on these charges yesterday. COLLIER and DIXON were arrested on these charges today. DINHAM, who was already in custody on state charges, was transferred to federal custody today; BLANTON, SINCLAIR, and SMITH, who were also already in custody on state charges, will be transferred to federal custody as soon as possible; and JONES was already in federal custody on related charges. The defendants will be arraigned before United States Magistrate Judge Lisa M. Smith this afternoon in White Plains federal court.
Acting U.S. Attorney Joon H. Kim said: “As alleged, the eight members and associates of a violent Mount Vernon street gang charged today engaged in attempted murder, drug dealing and firearms offenses. One of our most important missions, as federal prosecutors, is to investigate and prosecute street gangs that threaten our communities through violence and narcotics trafficking, as the Goonies allegedly did in Mount Vernon.”
Westchester County District Attorney Anthony A. Scarpino Jr. said: “This gang was allegedly engaged in serious criminal activity that included shooting incidents, armed robberies, gun possession and narcotics distribution. We are pleased that this is now coming to an end. I want to thank our partners at the United States Attorney’s Office for the Southern District and the New York office of the FBI for their unstinting dedication and determination that led to this indictment and today’s arrests.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, the motives of this gang were sinister and criminal, using violence and illegal drugs to intimidate the community. The FBI Westchester County Safe Streets Task Force works diligently with our law enforcement partners every day to stop these gangs, and keep them from negatively impacting communities.”
According to the Indictment[1] unsealed today in White Plains federal court:
From 2007 to 2017, in the Southern District of New York and elsewhere, OVERTON, BLANTON, DINHAM, DIXON, JONES, SINCLAIR, and SMITH were members or associates of a racketeering enterprise known as the “Goonies.” In order to fund the enterprise, protect and expand its interests, and promote its standing, members and associates of the Goonies committed, conspired, attempted, and threatened to commit acts of violence, including attempted murder and robbery; they conspired to distribute and possess with the intent to distribute narcotics; and they obtained, possessed, and used firearms, including by brandishing and firing them. BLANTON, COLLIER, DINHAM, DIXON, and JONES also conspired with one another, and certain other members of the Goonies, to distribute and possess with the intent to distribute crack cocaine and marijuana.
* * *
The maximum potential sentences in this case are prescribed by Congress and are provided in the attached table for informational purposes only, as any sentencings of the defendants will be determined by a judge.
Mr. Kim thanked the Westchester County District Attorney’s Office and praised the outstanding investigative work of the FBI’s Westchester County Safe Streets Task Force, which comprises agents and detectives from the Yonkers Police Department, Westchester County District Attorney’s Office, Westchester County Police Department, Peekskill Police Department, Mount Vernon Police Department, New York City Police Department, and U.S. Probation.
The prosecution is being handled by the Office’s White Plains Division. Assistant United States Attorneys Anden F. Chow, Christopher J. Clore, Sarah Krissoff, Olga Zverovich, and Special Assistant United States Attorneys John O’Rourke and Lauren Abinanti are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
United States v. Markel Overton, et al.
CHARGE
DEFENDANTS
MAXIMUM PENALTIES
Count One
Racketeering Conspiracy
MARKEL OVERTON
a/k/a “Kellz”
THOMAS BLANTON
a/k/a “LT”
MARQUIS COLLIER
a/k/a “Keise”
KADEEM DINHAM
a/k/a “Polo”
DONNIE DIXON
a/k/a “Scooter”
RAHEEM JONES
a/k/a “Rah Trigger”
a/k/a “Trigga”
JAMAAL SINCLAIR
a/k/a “Diggz”
NOEL SMITH
a/k/a “Georgie”
20 years in prison
Count Two
Firearms Offense
MARKEL OVERTON
THOMAS BLANTON
MARQUIS COLLIER
KADEEM DINHAM
DONNIE DIXON
RAHEEM JONES
JAMAAL SINCLAIR
Life in prison with a mandatory minimum of 10 years in prison
Count Three
Firearms Offense
NOEL SMITH
Life in prison with a mandatory minimum of 7 years in prison
Count Four
Narcotics Conspiracy
THOMAS BLANTON
MARQUIS COLLIER
KADEEM DINHAM
DONNIE DIXON
RAHEEM JONES
Life in prison with a mandatory minimum of 10 years in prison
DEFENDANT
AGE
MARKEL OVERTON
27
THOMAS BLANTON
24
MARQUIS COLLIER
33
KADEEM DINHAM
25
DONNIE DIXON
28
RAHEEM JONES
28
JAMAAL SINCLAIR
29
NOEL SMITH
24
[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.
10 Members of Bronx Drug Trafficking Organization Charged with Distributing Thousands of Pounds of Marijuana Worth over $22 MillionRead the Press Release
Joon H. Kim, the Acting 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 D. Robnett, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), Angel M. Melendez, the Special Agent in Charge of the New York Field Office of Immigration and Customs Enforcement’s Homeland Security Investigations (“HSI”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced today the unsealing of an Indictment charging HALLIL TABAR, ASMIN HERNANDEZ, JOHN MUNOZ-GARCIA, JAIRO CIENFUEGOS, WILLIAM BAEZ, HENRY RODRIGUEZ, DANNY HANNAH, JR., KEVIN UMEJEI, and STARLY HERNANDEZ with conspiracy to distribute marijuana, and a Complaint charging LORNE VICTORIA with conspiracy to distribute marijuana and use of a firearm in furtherance of drug trafficking. Nine of the defendants were arrested yesterday and presented before United States Magistrate Judge Sarah Netburn in Manhattan federal court, and STARLY HERNANDEZ was arrested this morning and will be presented before Judge Netburn later today.
Acting Manhattan U.S. Attorney Joon H. Kim said: “As alleged, these defendants conspired to ship millions of dollars’ worth of drugs across the country for eventual sale in New York City. Searches of apartments where the defendants allegedly resided uncovered guns and ammunition, multiple kilograms of cocaine, hundreds of pounds of marijuana, and thousands of dollars in cash. Drug trafficking organizations endanger public safety, and today’s multi-agency effort has successfully halted another such alleged organization.”
DEA Special Agent-in-Charge James J. Hunt said: “Yesterday’s arrests were part of ‘Operation Green Giant’, a Strike Force investigation targeting an organization allegedly reaping millions off the sale of marijuana in New York City. The alleged operation traversed the country with $22 million worth of marijuana sent to our city and the profit laundered back to California. I commend the good work of the Strike Force, Southern District of New York and our law enforcement partners on these arrests and dismantlement.”
As alleged in the Indictment and Complaint unsealed yesterday and today in Manhattan federal court[1]:
The defendants are members of a Bronx-based large-scale drug trafficking organization (the “DTO”) that shipped hundreds of boxes containing thousands of pounds of marijuana from California to various locations in New York. Between at least March 2016 and the present, the DTO trafficked in over 6,600 pounds of marijuana worth approximately $22 million, which was sent to residences and businesses in Manhattan, the Bronx, and New Rochelle. After the drugs were shipped to New York, the defendants transferred multiple boxes of marijuana per week to several stash houses from which the DTO members further distributed the drugs to customers and dealers.
In connection with yesterday’s arrests, law enforcement agents executed search warrants at 12 locations in the Bronx, including apartments occupied by several of the defendants. During the execution of those search warrants, agents recovered, among other items, three handguns, one sawed-off shotgun, ammunition, multiple kilograms of cocaine, hundreds of pounds of marijuana, and thousands of dollars in cash. DEA agents previously seized over $230,000 in cash from TABAR on October 14, 2017, at San Francisco International Airport.
* * *
Charts setting forth the names, ages, charges, residences, and maximum penalties for the defendants are set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants will be determined by the judge.
Mr. Kim praised the outstanding investigative work of the DEA’s New York Organized Crime Drug Enforcement Strike Force, which comprises agents and officers of the DEA, the NYPD, HSI, the New York State Police, IRS-CI, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), U.S. Secret Service, the U.S. Marshals Service, New York National Guard, the Clarkstown Police Department, U.S. Coast Guard, Port Washington Police Department, and New York State Department of Corrections and Community Supervision. The Strike Force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area (HIDTA), which is a federally funded crime fighting initiative and part of the Organized Crime Drug Enforcement Task Force (“OCDTEF”) program.
This case is being handled by the Office’s Narcotics Unit. Assistant United States Attorneys Catherine Geddes and Nicholas Folly are in charge of the prosecution.
The charges contained in the Indictment and Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
###
United States v. Hallil Tabar et al. &
United States v. Lorne Victoria
CHARGE
DEFENDANTS
MAX. PENALTIES
Conspiracy to Distribute Narcotics
21 U.S.C. §§ 846 and 841(b)(1)(A)
HALLIL TABAR,
JAIRO CIENFUEGOS,
WILLIAM BAEZ,
HENRY RODRIGUEZ,
DANNY HANNAH, JR.,
STARLY HERNANDEZ,
and
LORNE VICTORIA
Life in prison with a mandatory minimum of 10 years in prison
Conspiracy to Distribute Narcotics
21 U.S.C. §§ 846 and 841(b)(1)(B)
ASMIN HERNANDEZ,
JOHN MUNOZ-GARCIA,
and
KEVIN UMEJEI
Life in prison with a mandatory minimum of 5 years in prison
Use of Firearms in Furtherance of Narcotics Trafficking
18 U.S.C. § 924(c)(1)(A)
LORNE VICTORIA
Life in prison with a mandatory minimum of 5 years in prison
DEFENDANT
AGE
RESIDENCE
HALLIL TABAR
29
BRONX
ASMIN HERNANDEZ
27
BRONX
JOHN MUNOZ-GARCIA
30
BRONX
JAIRO CIENFUEGOS
27
BRONX
WILLIAM BAEZ
31
BRONX
HENRY RODRIGUEZ
41
BRONX
DANNY HANNAH, JR.
48
BRONX
KEVIN UMEJEI
25
BRONX
STARLY HERNANDEZ
30
CALIFORNIA
LORNE VICTORIA
37
BRONX
[1] As the introductory phrase signifies, the entirety of the text of the Indictment and Complaint, and the description of the Indictment and Complaint set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Three New Jersey Men Charged in Manhattan Federal Court in Telemarketing Fraud Scheme Targeting the ElderlyRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced the unsealing of a Superseding Indictment charging CHRISTOPHER WILSON, a/k/a “Eric Fields,” JACK KAVNER, a/k/a “Bob Wiley,” a/k/a “Phil Powers,” and DANIEL QUIRK, a/k/a “Lou Epstein,” a/k/a “Bill Huckabee,” a/k/a “Josh Newman,” with conspiring to commit wire fraud and money laundering. WILSON also is charged with destruction, alteration, or falsification of records in a federal investigation. WILSON, KAVNER, and QUIRK were arrested this morning and will be presented and arraigned this afternoon before U.S. District Judge Sidney H. Stein in Manhattan federal court.
Acting Manhattan U.S. Attorney Joon H. Kim said: “These three defendants, together with their previously charged co-defendants, allegedly targeted the elderly in a callous telemarketing scheme. They allegedly lured their victims into making ‘investments’ in businesses, then just stole their money. Together with HSI and the NYPD, we will continue to investigate and prosecute all those who target victims who are vulnerable because of their age.”
According to the allegations in the Superseding Indictment[1], a Complaint filed against co-defendants, and other statements in the public record:
Beginning in at least October 2013 through at least September 2016, WILSON, KAVNER, and QUIRK operated telemarketing companies (the “Telemarketing Companies”) that engaged in a fraudulent scheme (the “Telemarketing Scheme”), by which they promised to earn victims’ (the “Victims”) money in exchange for particular Victims making an initial cash “investment” in business development, website design, grant applications, or tax preparation services. Many Victims, the majority of whom are over 70 years old, “invested” thousands of dollars with the Telemarketing Companies, but did not earn any of the promised returns. When Victims of the Telemarketing Scheme sought refunds, or fought credit card charges, the Telemarketing Companies provided explanations and documentation to the credit card companies falsely representing that the Victims had received the promised services.
WILSON, KAVNER, and QUIRK participated in the Telemarketing Scheme by, among other things, operating the interrelated Telemarketing Companies as set forth in the below chart:
Telemarketing Company
Defendants
Olive Branch Marketing
CTO Consulting
CHRISTOPHER WILSON, a/k/a “Eric Fields”
Carlyle Management Group
Vanguard Business Solutions
JACK KAVNER, a/k/a “Bob Wiley,” a/k/a “Phil Powers”
DANIEL QUIRK, a/k/a “Lou Epstein,” a/k/a “Bill Huckabee,” a/k/a “Josh Newman”
Six other individuals were previously indicted in this case, which is scheduled for trial on April 16, 2018.
* * *
WILSON, 32, of Teaneck, New Jersey, KAVNER, 31, of West New York, New Jersey, and QUIRK, 33, of Little Ferry, New Jersey, are each charged with one count of conspiring to commit wire fraud and one count of conspiring to commit money laundering, each of which carries a maximum sentence of 20 years in prison. WILSON also is charged with one count of destruction, alteration, or falsification of records in a federal investigation, which carries a maximum sentence of 20 years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Kim praised the outstanding investigative work of HSI and the NYPD. He added that the investigation is ongoing.
The prosecution is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Kiersten A. Fletcher and Robert B. Sobelman are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
If you have any information regarding WILSON, KAVNER, QUIRK, or victims of the Telemarketing Companies, please report it by phone at (917) 480-7167 or by email at [email protected].
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment, and the description of the Superseding Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
Statement of Acting U.S. Attorney Joon H. Kim on the Conviction of Ahmad Khan Rahimi on Terrorism ChargesRead the Press Release
“On September 17, 2016, Ahmad Khan Rahimi attacked our country and our way of life. Inspired by ISIS and al Qaeda, Rahimi planted and detonated bombs on the streets of Chelsea, in the heart of Manhattan, and in New Jersey, hoping to kill and maim as many innocent people as possible. Rahimi’s crimes of hate have been met with swift and resolute justice. Just over a year after his attacks, and following a fair and open trial, Rahimi now stands convicted of his crimes of terror by a unanimous jury of New Yorkers. As a result, he now faces a mandatory sentence of life in prison. Today’s verdict is a victory for New York City, a victory for America in its fight against terror, and a victory for all who believe in the cause of justice.”
Manhattan U.S. Attorney Announces Charges Against Former U.S. Soldier for Conspiring to Kidnap and Murder as Part of A Murder-For-Hire Scheme OverseasRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Ray Donavan, Special Agent in Charge of the Special Operations Division of the United States Drug Enforcement Administration (“DEA”), today announced that a grand jury had returned a Superseding Indictment, which charged JOSEPH MANUEL HUNTER, a U.S. citizen and former member of the U.S. Army, and two co-defendants with offenses relating to the February 2012 murder of a woman in the Philippines. HUNTER’s co-defendants, ADAM SAMIA and CARL DAVID STILLWELL, were previously arrested in North Carolina in July 2015 and are scheduled to start trial on the offenses charged in the Superseding Indictment on April 2, 2018. HUNTER is expected to arrive in the Southern District of New York on October 25, 2017. The case has been assigned to the Honorable Ronnie Abrams.
According to the allegations in the Superseding Indictment against HUNTER, SAMIA, and STILLWELL returned today[1]:
HUNTER served from 1983 to 2004 in the United States Army, where he attained the rank of sergeant first class. While in the Army, HUNTER led air-assault and airborne infantry squads; served as a sniper instructor; and trained soldiers in marksmanship and tactics as a senior drill sergeant. Since leaving the Army in 2004, HUNTER has arranged for the murders of multiple people in exchange for money, among other completed acts of violence undertaken for pay.
SAMIA is a self-described “Personal Protection/Security Industry” professional. According to SAMIA’s résumé, he has worked as an “Independent Contractor” for clients in the Philippines, China, Papua New Guinea, the Democratic Republic of the Congo, and the Republic of the Congo; and has training in tactics and weapons, including handguns, shotguns, rifles, sniper rifles, and machineguns. According to STILLWELL’s résumé, he has training and experience in the field of information technology and has worked at a firm in North Carolina that provides firearms training.
In 2011 and 2012, HUNTER, SAMIA, and STILLWELL agreed to commit murders-for-hire in overseas locations in exchange for monthly salaries and bonus payments for each victim. In early 2012, SAMIA and STILLWELL traveled from North Carolina to the Philippines, where HUNTER provided them with, among other things, information about their intended victims and firearms to use to commit the murders.
In January and February 2012, SAMIA and STILLWELL surveilled their intended victims in the Philippines as they formulated their plans for the murders. On February 12, 2012, SAMIA and STILLWELL killed one of their intended victims – a Filipino woman – in the Philippines by shooting her multiple times in the face (“Victim-1”). After killing Victim-1, SAMIA and STILLWELL disposed of her body on a pile of garbage. HUNTER paid SAMIA and STILLWELL $35,000 each for completing the murder, and SAMIA and STILLWELL sent thousands of dollars from the payments they received to the United States using, among other methods, structured wire transfers in amounts under $10,000.
In late February and early March 2012, SAMIA and STILLWELL returned from the Philippines to North Carolina, where they continued to reside until their arrests.
* * *
HUNTER, 52, of Owensboro, Kentucky, SAMIA, 43, of Roxboro, North Carolina, and STILLWELL, 49, of Roxboro, North Carolina, have each been charged with one count of conspiring to commit murder-for-hire and one count of committing murder-for-hire, each of which carries a maximum sentence of life in prison and mandatory minimum sentence of life in prison; one count of conspiring to murder and kidnap in a foreign country and one count of using and carrying a firearm during and in relation to a crime of violence, each of which carries a maximum sentence of life in prison. SAMIA and STILLWELL are also each charged with conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison.
The charges against the defendants were the result of the close cooperative efforts of the United States Attorney’s Office for the Southern District of New York; DEA’s Special Operations Division, Bilateral Investigations Unit; DEA’s Atlanta Field Division, Raleigh Resident Office; the Durham Police Department; the Raleigh Police Department; the Harnett County Sherriff’s Office; the Wake County Sherriff’s Office; the Person County Sherriff’s Office; the Cary Police Department; the North Carolina State Bureau of Investigations; and the Customs and Border Protection’s National Targeting Center. Mr. Kim also thanked the United States Attorney’s Office for the Middle District of North Carolina for its support and assistance.
This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Rebekah Donaleski, Patrick Egan, and Emil J. Bove III are in charge of the prosecution.
The charges contained in the Superseding Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Superseding Indictment and the description of the Superseding Indictment set forth below constitute only allegations, and every fact described should be treated as an allegation.
Chelsea Bomber Ahmad Khan Rahimi Convicted for Executing September 2016 Bombing in New York CityRead the Press Release
A jury returned a guilty verdict today against Ahmad Khan Rahimi, aka, “Ahmad Rahami,” 29, of Elizabeth, New Jersey, in Manhattan federal court on all eight counts of the Indictment, which charged him with offenses related to his execution and attempted execution of bombings in New York City on Sept. 17, 2016. Rahimi, who faces mandatory sentence of life in prison, is scheduled to be sentenced on Jan. 18, 2018.
Acting Assistant Attorney General for National Security Dana J. Boente, Acting U.S. Attorney Joon H. Kim for the Southern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Office and Commissioner James P. O’Neill of the NYPD made the announcement. U.S. District Judge Richard M. Berman presided over the two-week trial.
“Ahmad Khan Rahimi constructed bombs with high explosives and shrapnel to inflict maximum damage to innocent victims in multiple locations,” said Acting Assistant Attorney General Boente. “The defendant's bombs caused injuries to numerous people. Thanks to outstanding investigative work, the defendant was identified and arrested before he could do any more harm. This verdict is an important step in holding him accountable for his crimes. Pursuing those who seek to conduct attacks on our homeland will remain the highest priority of the National Security Division. I would like to commend all of the agents, analysts and prosecutors who made this result possible.”
“On September 17, 2016, Ahmad Khan Rahimi attacked our country and our way of life,” said Acting U.S. Attorney Kim. “Inspired by ISIS and al Qaeda, Rahimi planted and detonated bombs on the streets of Chelsea, in the heart of Manhattan, and in New Jersey, hoping to kill and maim as many innocent people as possible. Rahimi’s crimes of hate have been met with swift and resolute justice. Just over a year after his attacks, and following a fair and open trial, Rahimi now stands convicted of his crimes of terror by a unanimous jury of New Yorkers. As a result, he now faces a mandatory sentence of life in prison. Today’s verdict is a victory for New York City, a victory for America in its fight against terror, and a victory for all who believe in the cause of justice.”
“It’s no secret New York City remains a desirable target for those who wish to disrupt our way of life,” said Assistant Director in Charge Sweeney Jr. “Last September, Rahimi set out to harm innocent people who were simply living their lives one Saturday evening. He underestimated the resilience of New Yorkers as well as the resolution of the FBI’s Joint Terrorism Task Force to see justice served. Today and always, along with our partners, we remain committed to putting terrorists and would-be terrorists behind bars. While the threat posed by Rahimi has been mitigated, I can’t overstate the critical role the public continues to play in combating the threats we face. As we welcome this victory today, I ask everyone to remain engaged, stay aware, and immediately report suspicious activity to the authorities.”
“Ahmed Rahimi deliberately placed two bombs on the streets of Chelsea in the dark of night with the intention of maiming and killing innocent New Yorkers enjoying a September Saturday night,” Commissioner O’Neill. “The fact that victims were not killed when one bomb exploded and another failed to detonate is miraculous. Mr. Rahimi was following to the hateful propaganda of al-Qaida and ISIS that calls for the killing of Americans. The combined efforts of the FBI, NYPD, the New York State Police and the Linden New Jersey Police Department led to the capture of Mr. Rahimi within 50 hours of the bombing. The investigation, as well as this conviction is an example of the work of the nation’s best counterterrorism team. I want to commend the detectives, agents and police officers, the prosecutors of the United States Attorney’s Office for the Southern District of New York, and the members of the jury for bringing Ahmed Rahimi to justice. Today’s verdict is the most forceful deterrent for anyone considering waging terror in our City. We will investigate; we will find those responsible; and justice will prevail.”
As set forth in the Complaint, Indictment and the evidence presented at trial:
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 (the “23rd Street Bomb”) and the other in the vicinity of 131 West 27th Street in the Chelsea neighborhood of New York (the “27th Street Bomb”).
At approximately 8:30 p.m., the 23rd Street Bomb – containing a high explosive main charge – detonated, causing injuries to over 30 people and multimillion-dollar 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-one-hundred-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, the 27th Street Bomb was identified by a civilian who 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. One of these devices detonated as law enforcement used a robot to defuse it.
On Sept. 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.
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Rahimi was convicted of one count of using a weapon of mass destruction, which carries a maximum sentence of life in prison; one count of attempting to use a weapon of mass destruction, which carries a maximum sentence of life in prison; one count of bombing a place of public use, which carries a maximum sentence of life in prison; one count of destroying property by means of fire or explosive, which carries a maximum sentence of 20 years in prison; one count of attempting to destroy property by means of fire or explosive, which carries a maximum sentence of 20 years in prison; one count of interstate transportation and receipt of explosives, which carries a maximum sentence of 20 years in prison; and two counts of using of a destructive device in furtherance of a crime of violence, namely, the use and attempted use of weapons of mass destruction, each of which individually carries a mandatory minimum consecutive sentence of 30 years in prison, a potential maximum sentence of life in prison, and, by virtue of his convictions on both counts, a mandatory sentence of life in prison.
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.
In addition to the charges of which he was convicted in Manhattan federal court, Rahimi also has been charged in the District of New Jersey in a Complaint with offenses in connection with his alleged efforts to detonate explosives in Seaside Park and Elizabeth.
Mr. Boente and Mr. Kim 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. Mr. Kim also thanked the Counterterrorism Section of the Department of Justice’s National Security Division for its assistance.
Assistant U.S. Attorneys Emil J. Bove III, Andrew J. DeFilippis and Shawn G. Crowley of the Southern District of New York are prosecuting this case with assistance from Trial Attorney Brian Morgan of the National Security Division’s Counterterrorism Section.
Chelsea Bomber Ahmad Khan Rahimi Convicted in Manhattan Federal Court for Executing September 2016 Bombing in New York CityRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Dana J. Boente, Acting Assistant Attorney General for National Security, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and James P. O’Neill, the Police Commissioner of the City of New York (“NYPD”), announced that a jury returned a guilty verdict today against AHMAD KHAN RAHIMI, a/k/a “Ahmad Rahami,” in Manhattan federal court on all eight counts of the Indictment, which charged him with offenses related to his execution and attempted execution of bombings in New York City on September 17, 2016. RAHIMI, who faces a mandatory sentence of life in prison, is scheduled to be sentenced on January 18, 2018, by U.S. District Judge Richard M. Berman, who presided over the two-week trial.
Acting Manhattan U.S. Attorney Joon H. Kim said: “On September 17, 2016, Ahmad Khan Rahimi attacked our country and our way of life. Inspired by ISIS and al Qaeda, Rahimi planted and detonated bombs on the streets of Chelsea, in the heart of Manhattan, and in New Jersey, hoping to kill and maim as many innocent people as possible. Rahimi’s crimes of hate have been met with swift and resolute justice. Just over a year after his attacks, and following a fair and open trial, Rahimi now stands convicted of his crimes of terror by a unanimous jury of New Yorkers. As a result, he now faces a mandatory sentence of life in prison. Today’s verdict is a victory for New York City, a victory for America in its fight against terror, and a victory for all who believe in the cause of justice.”
Acting Assistant Attorney General Dana J. Boente said: “Ahmad Khan Rahimi constructed bombs with high explosives and shrapnel to inflict maximum damage to innocent victims in multiple locations. The defendant’s bombs caused injuries to numerous people. Thanks to outstanding investigative work, the defendant was identified and arrested before he could do any more harm. This verdict is an important step in holding him accountable for his crimes. Pursuing those who seek to conduct attacks on our homeland will remain the highest priority of the National Security Division. I would like to commend all of the agents, detectives, analysts and prosecutors who made this result possible.”
FBI Assistant Director William F. Sweeney Jr. said: “It’s no secret New York City remains a desirable target for those who wish to disrupt our way of life. Last September, Rahimi set out to harm innocent people who were simply living their lives one Saturday evening. He underestimated the resilience of New Yorkers as well as the resolution of the FBI’s Joint Terrorism Task Force to see justice served. Today and always, along with our partners, we remain committed to putting terrorists and would-be terrorists behind bars. While the threat posed by Rahimi has been mitigated, I can’t overstate the critical role the public continues to play in combating the threats we face. As we welcome this victory today, I ask everyone to remain engaged, stay aware, and immediately report suspicious activity to the authorities.”
NYPD Commissioner James P. O’Neill said: “Ahmed Rahimi deliberately placed two bombs on the streets of Chelsea in the dark of night with the intention of maiming and killing innocent New Yorkers enjoying a September Saturday night. The fact that victims were not killed when one bomb exploded and another failed to detonate is miraculous. Mr. Rahimi was following to the hateful propaganda of al-Qaida and ISIS that calls for the killing of Americans. The combined efforts of the FBI, NYPD, the New York State Police and the Linden New Jersey Police Department led to the capture of Mr. Rahimi within 50 hours of the bombing. The investigation, as well as this conviction is an example of the work of the nation’s best counterterrorism team. I want to commend the detectives, agents and police officers, the prosecutors of the United States Attorney’s Office for the Southern District of New York, and the members of the jury for bringing Ahmed Rahimi to justice. Today’s verdict is the most forceful deterrent for anyone considering waging terror in our City. We will investigate; we will find those responsible; and justice will prevail.”
As set forth in the Complaint, Indictment, and the evidence presented at trial:
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 – detonated, causing injuries to over 30 people and multimillion-dollar 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-one-hundred-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, the 27th Street Bomb was identified by a civilian who 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.
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RAHIMI, 29, of Elizabeth, New Jersey, was convicted of one count of using a weapon of mass destruction, which carries a maximum sentence of life in prison; one count of attempting to use a weapon of mass destruction, which carries a maximum sentence of life in prison; one count of bombing a place of public use, which carries a maximum sentence of life in prison; one count of destroying property by means of fire or explosive, which carries a maximum sentence of 20 years in prison; one count of attempting to destroy property by means of fire or explosive, which carries a maximum sentence of 20 years in prison; one count of interstate transportation and receipt of explosives, which carries a maximum sentence of 20 years in prison; and two counts of using of a destructive device in furtherance of a crime of violence, namely, the use and attempted use of weapons of mass destruction, each of which individually carries a mandatory minimum consecutive sentence of 30 years in prison, a potential maximum sentence of life in prison, and, by virtue of his convictions on both counts, a mandatory sentence of life in prison.
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.
In addition to the charges of which he was convicted in Manhattan federal court, RAHIMI also has been charged in the District of New Jersey in a Complaint with offenses in connection with his alleged efforts to detonate explosives in Seaside Park, New Jersey, and Elizabeth, New Jersey.
Mr. Kim and Mr. Boente 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. Mr. Kim 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.
Statement of Acting U.S. Attorney Joon H. Kim on the Convictions of Scott Tucker and Timothy Muir for Unlawful Payday Lending EnterpriseRead the Press Release
Acting Manhattan U.S. Attorney Joon H. Kim stated: “As a unanimous jury found today, Scott Tucker and Timothy Muir targeted and exploited millions of struggling, everyday Americans by charging them illegally high interest rates on payday loans, as much as 700 percent. Tucker and Muir sought to get away with their crimes by claiming that this $3.5 billion business was actually owned and operated by Native American tribes. But that was a lie. The jury saw through Tucker and Muir’s lies and saw their business for what it was – an illegal and predatory scheme to take callous advantage of vulnerable workers living from paycheck to paycheck.”
Scott Tucker and Timothy Muir Convicted at Trial for $3.5 Billion Unlawful Internet Payday Lending EnterpriseRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced today that SCOTT TUCKER and TIMOTHY MUIR were convicted after a five-week jury trial on all fourteen counts against them, for operating a nationwide internet payday lending enterprise that systematically evaded state laws in order to charge illegal interest rates as high as 1000% on loans.
Acting Manhattan U.S. Attorney Joon H. Kim stated: “As a unanimous jury found today, Scott Tucker and Timothy Muir targeted and exploited millions of struggling, everyday Americans by charging them illegally high interest rates on payday loans, as much as 700 percent. Tucker and Muir sought to get away with their crimes by claiming that this $3.5 billion business was actually owned and operated by Native American tribes. But that was a lie. The jury saw through Tucker and Muir’s lies and saw their business for what it was – an illegal and predatory scheme to take callous advantage of vulnerable workers living from paycheck to paycheck.”
According to the allegations contained in the Superseding Indictment, and evidence presented at trial:
The Racketeering Influenced Corrupt Organizations (“RICO”) Crimes
From at least 1997 until 2013, TUCKER engaged in the business of making small, short-term, high-interest, unsecured loans, commonly referred to as “payday loans,” through the Internet. TUCKER’s lending enterprise, which had up to 1,500 employees based in Overland Park, Kansas, did business as Ameriloan, f/k/a Cash Advance; OneClickCash, f/k/a Preferred Cash Loans; United Cash Loans; US FastCash; 500 FastCash; Advantage Cash Services; and Star Cash Processing (the “Tucker Payday Lenders”). TUCKER, working with MUIR, the general counsel for TUCKER’s payday lending businesses since 2006, routinely charged interest rates of 600% or 700%, and sometimes higher than 1,000%. These loans were issued to more than 4.5 million working people in all fifty states, including more than 250,000 people in New York, many of whom were struggling to pay basic living expenses. Many of these loans were issued in states, including New York, with laws that expressly forbid lending at the exorbitant interest rates TUCKER charged. Evidence at trial established that TUCKER and MUIR were fully aware of the illegal nature of the loans charged and in fact prepared scripts to be used by call center employees to deal with complaints by customers that their loans were illegal.
Fraudulent Loan Disclosures
The Truth-in-Lending Act (“TILA”) is a federal statute intended to ensure that credit terms are disclosed to consumers in a clear and meaningful way, both to protect customers against inaccurate and unfair credit practices, and to enable them to compare credit terms readily and knowledgeably. Among other things, TILA and its implementing regulations require lenders, including payday lenders like the Tucker Payday Lenders, to accurately, clearly, and conspicuously disclose, before any credit is extended, the finance charge, the annual percentage rate, and the total of payments that reflect the legal obligation between the parties to the loan.
The Tucker Payday Lenders purported to inform prospective borrowers, in clear and simple terms, as required by TILA, of the cost of the loan (the “TILA Box”). For example, for a loan of $500, the TILA Box provided that the “finance charge – meaning the “dollar amount the credit will cost you” – would be $150, and that the “total of payments” would be $650. Thus, in substance, the TILA Box stated that a $500 loan to the customer would cost $650 to repay. While the amounts set forth in the Tucker Payday Lenders’ TILA Box varied according to the terms of particular customers’ loans, they reflected, in substance, that the borrower would pay $30 in interest for every $100 borrowed.
In fact, through at least 2012, TUCKER and MUIR structured the repayment schedule of the loans such that, on the borrower’s payday, the Tucker Payday Lenders automatically withdrew the entire interest payment due on the loan, but left the principal balance untouched so that, on the borrower’s next payday, the Tucker Payday Lenders could again automatically withdraw an amount equaling the entire interest payment due (and already paid) on the loan. With TUCKER and MUIR’s approval, the Tucker Payday Lenders proceeded automatically to withdraw such “finance charges” payday after payday (typically every two weeks), applying none of the money toward repayment of principal, until at least the fifth payday, when they began to withdraw an additional $50 per payday to apply to the principal balance of the loan. Even then, the Tucker Payday Lenders continued to assess and automatically withdraw the entire interest payment calculated on the remaining principal balance until the entire principal amount was repaid. Accordingly, as TUCKER and MUIR well knew, the Tucker Payday Lenders’ TILA box materially understated the amount the loan would cost, including the total of payments that would be taken from the borrower’s bank account. Specifically, for a customer who borrowed $500, contrary to the TILA Box disclosure stating that the total payment by the borrower would be $650, in fact, and as TUCKER and MUIR well knew, the finance charge was $1,425, for a total payment of $1,925 by the borrower.
The Sham Tribal Ownership of the Business
In response to complaints that the Tucker Payday Lenders were extending abusive loans in violation of their usury laws, several states began to investigate the Tucker Payday Lenders. To thwart these state actions, TUCKER devised a scheme to claim that his lending businesses were protected by sovereign immunity, a legal doctrine that, among other things, generally prevents states from enforcing their laws against Native American tribes. Beginning in 2003, TUCKER entered into agreements with several Native American tribes (the “Tribes”), including the Santee Sioux Tribe of Nebraska, the Miami Tribe of Oklahoma, and the Modoc Tribe of Oklahoma. The purpose of these agreements was to cause the Tribes to claim they owned and operated parts of TUCKER’s payday lending enterprise, so that when states sought to enforce laws prohibiting TUCKER’s loans, TUCKER’s lending businesses would claim to be protected by sovereign immunity. In return, the Tribes received payments from TUCKER, typically one percent of the revenues from the portion of TUCKER’s payday lending business that the Tribes purported to own.
In order to create the illusion that the Tribes owned and controlled TUCKER’s payday lending business, TUCKER and MUIR engaged in a series of lies and deceptions. Among other things:
- MUIR and other counsel for TUCKER prepared false factual declarations from tribal representatives that were submitted to state courts, falsely claiming, among other things, that tribal corporations substantively owned, controlled, and managed the portions of TUCKER’s business targeted by state enforcement actions.
- TUCKER opened bank accounts to operate and receive the profits of the payday lending enterprise, which were nominally held by tribally owned corporations, but which were, in fact, owned and controlled by TUCKER. TUCKER received over $380 million from these accounts on lavish personal expenses, some of which was spent on a fleet of Ferraris and Porsches, the expenses of a professional auto racing team, a private jet, a luxury home in Aspen, Colorado, and his personal taxes.
- Employees of TUCKER making payday loans over the phone told borrowers, using scripts directed and approved by TUCKER and MUIR, that they were operating in Oklahoma and Nebraska, where the Tribes were located, when in fact they were operating at TUCKER’s corporate headquarters in Kansas in order to deceive borrowers into believing that they were dealing with Native American tribes.
These deceptions succeeded for a time, and several state courts dismissed enforcement actions against TUCKER’s payday lending businesses based on claims that they were protected by sovereign immunity. In reality, the Tribes neither owned nor operated any part of TUCKER’s payday lending business. The Tribes made no payment to TUCKER to acquire the portions of the business they purported to own. TUCKER continued to operate his lending business from a corporate headquarters in Kansas, and TUCKER continued to reap the profits of the payday lending businesses, which generated over $3.5 billion in revenue from just 2008 to June 2013 – in substantial part by charging struggling borrowers high interest rates expressly forbidden by state laws.
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TUCKER, 55, and MUIR, 46, were convicted in all 14 counts in the Indictment, including one count of conspiring to commit racketeering through the collection of unlawful debt, three counts of participating in a racketeering enterprise through the collection of unlawful debt, one count of conspiring to commit wire fraud, one count of wire fraud, one count of conspiring to commit money laundering, two counts of money laundering, and five counts of violating TILA.
Mr. Kim praised the outstanding investigative work of the St. Louis Field Office of the IRS-CI. Mr. Kim also thanked the Criminal Investigators at the United States Attorney’s Office, the Federal Bureau of Investigation, and the Federal Trade Commission for their assistance with the case.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to:
http://www.usdoj.gov/usao/nys/victimwitness.html.
The prosecution is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Niketh Velamoor, Hagan Scotten, and Sagar Ravi are in charge of the prosecution.
Founder and Ceo of Wright Time Capital Group Pleads Guilty to Commodities FraudRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that MICHAEL S. WRIGHT pled guilty today before U.S. District Judge Paul A. Engelmayer to commodities fraud in connection with WRIGHT’s operation of an investment fund, Wright Time Capital Group (“WTCG”). WRIGHT induced victims to invest in his fund by misrepresenting the historical trading performance of WTCG, and, after obtaining investor funds, misappropriated a large portion of them for his personal use and benefit. Additionally, after losing most of the funds he actually invested in unsuccessful forex trades, WRIGHT hid those losses from investors by issuing fake account statements and began operating WTCG as a Ponzi scheme, obtaining funds from new investors and using those funds to make payments to earlier investors who were demanding the return of their investments.
Acting U.S. Attorney Joon H. Kim said: “Michael Wright used WTCG as his personal piggy bank, issuing fraudulent account statements that covered up the losses WTCG incurred, and ultimately operating WTCG as a Ponzi scheme. Thanks to the dedicated work of the FBI, Wright will now be held to account for his fraudulent scheme.”
According to the Complaint, the Indictment, and other statements made in open court:
WRIGHT started WTCG in January 2011, and ultimately obtained more than $400,000 in investments from victims (the “Victims”). In his pitch to potential investors, WRIGHT misrepresented WTCG’s investment performance, falsely claiming that he had achieved double-digit gains through forex trading in WTCG’s first six months of existence. In fact, from the outset of WTCG, WRIGHT earned little to no money through his forex trading, and WRIGHT repeatedly falsified account statements to the Victims. Additionally, after obtaining Victim funds, WRIGHT did initially purchase some forex trades on their behalf, but then began to steal their money, using investor funds to pay for personal expenses, including hotel stays, travel, and tattoos.
Eventually, WRIGHT operated WTCG as a Ponzi scheme, soliciting funds from new investors in order to use their funds to make payments to other Victims who were demanding the return of their investments.
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WRIGHT, 30, of Rockville Centre, New York, pled guilty to one count of commodities fraud, 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.
WRIGHT is scheduled to be sentenced by Judge Engelmayer on January 25, 2018, at 10:00 a.m.
Mr. Kim praised the efforts of the FBI in this investigation.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Jacob Warren is in charge of the prosecution.
Manhattan U.S. Attorney Announces Charges Against Massachusetts Businessman for Money Laundering, Financial Support for Manhattan BrothelRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, Charles Brandeis, the Special Agent in Charge of the New York Field Office of the U.S. Department of State's Diplomatic Security Service (“DSS”), and Philip Bartlett, the Inspector in Charge of the New York Division of the United States Postal Inspection Service (“USPIS”), announced charges today against a Massachusetts businessman, DAVID STASIOR, for providing financing and financial advice to an illegal brothel operating in Manhattan, and conspiring with the brothel owner to use the proceeds from the brothel to promote the brothel’s activities. STASIOR was arrested by agents from DSS, the USPIS, and the U.S. Attorney’s Office for the Southern District of New York this morning and will be presented in federal court in Massachusetts later today.
This case arises from a multiple-year-long investigation in which 17 additional individuals have previously been charged with conspiracy to commit money laundering and conspiracy to violate the Travel Act. The previously charged individuals have included the owners of a network of at least 10 brothels in Manhattan, and individuals who provided advertising services for these brothels. These brothels were independently owned but worked cooperatively, and employed prostitutes who typically came to the United States from South Korea pursuant to fraudulently obtained visas or visa waivers. STASIOR allegedly provided financing for one of these brothels, whose owner was previously charged and pled guilty to money laundering conspiracy.
Acting U.S. Attorney Joon H. Kim stated: “For years, the defendant allegedly helped launder the proceeds of an illegal brothel operation in Manhattan, providing start-up money, ongoing financial advice, and record-keeping services. As alleged, the defendant financially supported and profited from this business that exploited vulnerable women and laundered money.”
Special Agent in Charge Charles Brandeis stated: “DSS continues to disrupt and dismantle transnational criminal organizations seeking to profit from the entry and illicit activities of vulnerable foreign nationals. This investigation demonstrates the global reach of the Diplomatic Security Service.”
Inspector in Charge Philip R. Bartlett stated: “This arrest represents the continued effort of law enforcement to put a stop to illegal activity wherever it is found. Many claim prostitution is the oldest profession in the world. The anonymity of the internet was used to hide the identity of its operators, keeping law enforcement in the dark. As in this case, what is done in the dark will always be revealed in the light.”
According to the Complaint[1]:
Since 2012, DSS, USPIS, and the U.S. Attorney’s Office for the Southern District of New York have been investigating a group of brothels (the “Brothels”) operating in and around New York. Each of the Brothels was independently owned and operated, but the owners of the Brothels worked cooperatively through, among other things, the sharing of approved customer lists and information. STASIOR started out as a customer of the Brothels. In 2013, he provided a co-conspirator (“CC-1”)[2] with financing to open a brothel (the “Brothel”), while requiring the co-conspirator to make periodic payments from the Brothel’s proceeds in return for his investment.
The Brothel used a website to advertise the women prostituted in the Brothel, as well as an online aggregator of advertisements to advertise the Brothel. The management of online advertising and payment for this advertising was coordinated by the defendant and CC-1, among others. STASIOR sent multiple emails to CC-1 in which he provided business advice to the Brothel, including advice on how to use online advertising for the Brothel to increase the Brothel’s profits. STASIOR’s emails included spreadsheets that listed him as a “Partner” in the business and itemized the Brothel’s prostitution revenues and the various expenses involved in running the Brothel, including the cost of advertising. In these emails, STASIOR also itemized the payments made to him out of the Brothel’s proceeds, and stated that he was concerned about the Brothel’s profitability to ensure that CC-1 would be able to “pay back” the “debt” that had been incurred by his investment in the Brothel.
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STASIOR, 53, of Concord, Massachusetts, is charged with one count of conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and one count of conspiracy to violate the Travel Act, which carries a maximum sentence of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
If you believe you were a victim of this crime, including a victim entitled to restitution, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact the Victim/Witness Unit at the United States Attorney’s Office for the Southern District of New York, at (866) 874-8900. For additional information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html
Mr. Kim praised the outstanding efforts of DSS, USPIS, and the criminal investigators working in the United States Attorney’s Office for the Southern District of New York. He added that the investigation is ongoing.
This case is being handled by the Office’s General Crimes Unit. Assistant United States Attorneys Danielle R. Sassoon and Thane Rehn are in charge of the prosecution.
The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
[2] CC-1 has been separately charged in the Southern District of New York with money laundering conspiracy and Travel Act conspiracy, and has pleaded guilty to money laundering conspiracy.
Manhattan Tax Attorney Sentenced to Two Years in Prison for Participation in Multimillion-Dollar Tax Evasion Scheme and Lying to the IRSRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that HAROLD LEVINE, a Manhattan tax attorney, was sentenced today by U.S. District Judge Jed S. Rakoff to 24 months in prison for tax evasion and obstruction of the Internal Revenue Service (“IRS”), stemming from his scheme to siphon millions of dollars of tax shelter fee income from the law firm at which he worked and failing to report the diverted fees as income. LEVINE’s scheme also involved making false statements to IRS auditors, and urging a witness to provide false testimony to the same IRS auditors who were investigating LEVINE’s receipt of the fees.
Acting U.S. Attorney Joon H. Kim said: “Harold Levine stole first from his law firm partners and then from American taxpayers by filing tax returns that left out millions of dollars of income. As if tax evasion by a tax attorney were not bad enough, Levine tried to get out of it by lying to the IRS during an audit and urging a witness to give false testimony. Levine’s jail sentence should serve as a reminder that everyone – including tax lawyers – must be truthful in reporting their income, and deal honestly with, the tax authorities.”
According to the Indictment, LEVINE’s guilty plea, and statements made during the plea proceedings and other court proceedings:
Between 2004 and 2012, LEVINE, a tax attorney and former head of the tax department at a major Manhattan Law Firm (the “Law Firm”), schemed with co-defendant Ronald Katz, a certified public accountant, to obstruct and impede the due administration of the Internal Revenue laws by evading income taxes on millions of dollars of fee income generated from tax shelter and related transactions that LEVINE worked on while a partner of the Law Firm. Specifically, LEVINE failed to report approximately $3 million in income to the IRS on his personal tax returns during the period 2005-2011. Most of the fee income LEVINE failed to report was routed by him through a limited liability company LEVINE controlled, which was nominally owned by a family member.
As part of the scheme, for example, LEVINE caused tax shelter fees paid by a Law Firm client to be routed from the Law Firm’s escrow account to a partnership entity he co-owned with Katz and thereafter used those fees – totaling approximately $500,000 – to purchase a home in Levittown, on Long Island. LEVINE caused the home to be purchased as a residence for a Law Firm employee (the “Law Firm Employee”) with whom he then enjoyed a close personal relationship. Although LEVINE allowed the Law Firm Employee to reside in the Levittown house for over five years without paying rent, LEVINE and Katz prepared tax returns for the entity through which the home was purchased that claimed false deductions as a rental property.
In February 2013, LEVINE was questioned by IRS agents concerning his involvement in certain tax shelter transactions and the fees received by LEVINE from those transactions. During that questioning, LEVINE falsely told the IRS that the Law Firm Employee paid him $1,000 per month in rent while living in the Levittown home. In addition, when the Law Firm Employee was contacted by the IRS and summoned to appear for testimony, LEVINE urged the employee to falsely tell the IRS that she had paid $1,000 per month in rent to LEVINE.
* * *
In imposing sentence today, Judge Rakoff said, “There was no one in the world who knew better that he was committing a crime than Harold Levine.”
In addition to the 24-month prison sentence, LEVINE, 59, of New York, New York, was sentenced to three years of supervised release, and ordered to pay restitution to the IRS in an amount to be determined at a hearing on November 13, 2017.
Co-defendant Ronald Katz, who also pled guilty in June 2017, is scheduled to be sentenced on November 13, 2017.
Mr. Kim thanked the IRS for its assistance in this investigation and praised the outstanding investigative work of both IRS-CI and IRS Civil – Large Business & International.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Special Assistant United States Attorney Stanley J. Okula and Assistant United States Attorney Daniel S. Noble are in charge of the prosecution.
Leader of “2Fly” Street Gang Sentenced to over 16 Years in Prison on Racketeering and Firearms ChargesRead the Press Release
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that LAQUAN PARRISH, a/k/a “MadDog,” a/k/a “Quanzaa,” a leader of a violent street gang in the Bronx called the “2Fly YGz” (“2Fly”), was sentenced today to 195 months in prison on racketeering and firearms charges. PARRISH was sentenced by United States District Judge Lewis A. Kaplan.
Acting U.S. Attorney Joon H. Kim said: “Laquan Parrish led the violent 2Fly street gang, and participated in the gang’s violence. In August 2012, Parrish and other 2Fly members opened gunfire at a group of rival gang members sitting in a playground. By good fortune, no one was killed, but a bullet struck one rival gang member in the chest and another in the leg, and a 14-year-old girl was wounded in the crossfire. Today’s sentence holds Parrish accountable for this senseless violence.”
According to the Indictment and other documents filed in the case, as well as statements made during the public proceedings in this case:
PARRISH was a leader of 2Fly, a subset of the “Young Gunnaz,” or “YGz” street gang, which operates throughout New York City. 2Fly is based in the Bronx, within and around the Eastchester Gardens public housing development (“ECG”) and in an area called the “Valley” or the “V,” which is in the vicinity of Gun Hill Road. ECG is a rectangular complex of residential buildings bordered by Burke, Adee, Yates, and Bouck Avenues, in the middle of which is a playground. The gang war between 2Fly and rival street gangs has led to an enormous amount of fatal and non-fatal violence between 2007 and 2016 in the Northern Bronx, including shootings, stabbings, slashings, beatings, and robberies. Members and associates of 2Fly controlled the narcotics trade at ECG, which took place in the open air at the playground and in apartments at ECG. 2Fly primarily sold marijuana and crack cocaine, but also sold powder cocaine and prescription pills, such as oxycodone. 2Fly members and associates stored guns at the playground or in nearby apartments or cars in order to protect the narcotics business and for protection against rival gangs.
In addition to leading 2Fly, PARRISH personally participated in a number of acts of violence with the Gang, including a shootout with rival gang members on August 7, 2012, in a public park in the Bronx. Three victims were shot, including a 14-year-old girl caught in the crossfire.
* * *
PARRISH, 27, of the Bronx, New York, was arrested in this case as a result of a multi-year investigation by the New York City Police Department’s Bronx Gang Squad (the “Bronx Gang Squad”), the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Violent Gang Unit (“HSI”), the New York Field Division of the Drug Enforcement Administration (“DEA”), and the Joint Firearms Task Force of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) into gang violence in the Northern Bronx. On April 27, 2016, the Indictment captioned United States v. Laquan Parrish et al., 16 Cr. 212 (LAK) was unsealed, charging 57 members and associates of 2Fly with racketeering conspiracy, narcotics conspiracy, narcotics distribution, and/or firearms charges. To date, 54 of these defendants have pled guilty.
Mr. Kim praised the outstanding work of NYPD’s Bronx Gang Squad, HSI, DEA, and ATF. He also thanked the Bronx County District Attorney’s Office, the Department of Investigation, NYCHA Inspector General’s Office, and the New York State Department of Parole for their ongoing support in this investigation.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Rachel Maimin, Micah W.J. Smith, Hagan Scotten, Jessica Feinstein, and Drew Skinner are in charge of the prosecution.
Acting Manhattan U.S. Attorney and FBI Assistant Director Announce Securities and Wire Fraud Charges Against Founders of Purported Snack BusinessRead the Press Release
Joon H. Kim, the Acting 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 arrest and unsealing of a complaint charging LISA BERSHAN, BARRY SCHWARTZ, and JOEL MARGULIES with securities fraud, wire fraud, and conspiracy to commit those offenses in connection with a scheme to defraud investors in a company variously called The Awake Company and Starship Snacks (“Starship”).
BERSHAN and SCHWARTZ were presented earlier today in federal court in Atlanta, and MARGULIES was presented earlier today in federal court in Tennessee.
In a separate action, the SEC filed civil charges against BERSHAN, SCHWARTZ, and MARGULIES.
Acting U.S. Attorney Joon H. Kim said: “As alleged, while promising a sure thing, in the form of guaranteed returns, the defendants were actually selling nothing but lies. Instead of using investors’ money to grow the business, they allegedly spent it on plastic surgeries, jewelry, and cars. Thanks to the terrific investigative work of the FBI, the defendants will now have to answer in court for their lies.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Bershan, Schwartz, and Margulies allegedly led investors to believe their company was on a guaranteed path to success. To further support their claim, as charged today, they promised to buy back any shares that didn’t appreciate within a year, including a supplemental interest payment of five percent. Samples of chocolate intended to represent the caffeinated snack they had supposedly developed were provided to some for good measure, but the chocolate was void of its key ingredient. In the end the numbers didn’t add up as this sweet deal turned sour.”
According to the allegations in the Complaint unsealed in Manhattan federal court:[1]
As alleged, BERSHAN, SCHWARTZ, and MARGULIES created Starship with the stated goal of marketing and selling a caffeinated chocolate snack. BERSHAN, SCHWARTZ, and MARGULIES subsequently raised over $2 million from investors by telling them that their investments in Starship would be personally guaranteed against any losses; that Starship was on the verge of a lucrative acquisition by another entity, Monster Beverage Corp. (“Monster”); and that Starship’s signature product had been developed successfully. All of these representations were false and misleading. Starship had no ability to honor the guarantees that it and BERSHAN made to investors. It was never in talks with Monster to be acquired. And it had never developed or engaged a third party to develop its caffeinated snack. After receiving investor monies, moreover, BERSHAN, SCHWARTZ, and MARGULIES used those funds to maintain their own extravagant lifestyles, spending hundreds of thousands of dollars on things like luxury clothing, plastic surgery, interior decorating, and luxury housing in New York City.
Beginning in August 2015, BERSHAN, MARGULIES, and SCHWARTZ began soliciting investments in Starship. In order to assure investors that their investments in Starship would be safe, BERSHAN sent investors images of herself in what appeared to be a mansion with subject lines like, “Just a glimpse – my parents sure as hell didn’t leave me this.” BERSHAN and MARGULIES also signed investment documents providing that “[t]he Company and Lisa Bershan, its founder, have committed to repurchase” investors’ shares at the price that they had paid for them if they had not appreciated within a year, and further guaranteeing that “Lisa Bershan . . . [would] add an interest payment of 5%” in such an event. These guarantees were not made in good faith, as neither BERSHAN nor Starship had any significant assets or ability to honor the guarantees they were making. To the contrary, BERSHAN had unpaid tax liabilities and multiple outstanding civil judgments (and did not actually own the mansion that, as discussed above, she implicitly held out to investors as her own).
In addition to making bogus guarantees, BERSHAN, SCHWARTZ, and MARGULIES also told investors that Starship was in discussions to be acquired by Monster, and that this transaction would take place through a one-to-one exchange of Starship stock for Monster stock. In October 2015, for example, MARGULIES sent an email to multiple investors that sought additional investments and expressly stated, “[t]he deal as I am certain you have heard is done thanks in no small part to the extraordinary talents and skills of our CEO, Lisa Bershan. If you are not aware of the deal, it is a one to one --- share for share exchange of [Starship] for Monster after a six month holding period of [Starship] shares.” Given that Monster’s stock was, at the time, trading at many multiples of the $3 per share that Starship’s investors initially paid at the time, this purported transaction would result in tremendous gains for Starship investors. But there was no basis for the claim that the “deal . . . [was] done.” Starship was never acquired by Monster or any other entity, and, indeed, was never in negotiations with Monster.
Finally, BERSHAN, SCWHARTZ, and MARGULIES misrepresented the nature and progress of Starship’s purported business to investors. BERSHAN, SCHWARTZ, and MARGULIES told investors that Starship had developed its caffeinated chocolate snack, when, in reality, it had not done so. Indeed, in order to mislead investors into thinking that the product was further along than it actually was, BERSHAN, SCHWARTZ, and MARGULIES actually provided samples of normal chocolates to certain investors, falsely telling them that the chocolates were caffeinated as per Starship’s business plan.
In total, BERSHAN, SCHWARTZ, and MARGULIES raised over approximately $2 million from investors based on these false representations. Much of this amount was simply misappropriated by BERSHAN and SCHWARTZ (or paid to MARGULIES). Between August 2015 and July 2017, for example, BERSHAN and SCHWARTZ spent over $39,000 on plastic surgery; over $209,000 on retail purchases, including jewelry, clothes, and interior decorating; over $11,900 at a Mercedes dealership; and hundreds of thousands of dollars on luxury housing.
* * *
MARGULIES, 72, of Murfreesboro, Tennessee, BERSHAN, 65, and SCHWARTZ, 71, are each charged with one count of conspiring to commit securities and wire fraud, which carries a maximum prison sentence of five years in prison; one count of securities fraud, which carries a maximum sentence of 20 years in prison; and one count of wire fraud, which carries a maximum sentence of 20 years in prison. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Kim praised the exceptional work of the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission for its assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Robert Allen is in charge of the prosecution.
The allegations contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Complaint and the description of the Complaint set forth herein constitute only allegations, and every fact described should be treated as an allegation.
33 Charged with Racketeering, Narcotics, Firearms, and Bank Fraud Offenses in Connection with Violent Gang Activity and Drug Trafficking Near the Mill Brook Houses in the Bronx, New YorkRead the Press Release
Joon H. Kim, the Acting 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”), James J. Hunt, the Special Agent in Charge of the New York Field Division of the Drug Enforcement Administration (“DEA”), and James P. O’Neill, the Commissioner of the New York City Police Department (“NYPD”), announced the unsealing today of three Indictments and two Complaints charging 33 individuals with racketeering, narcotics, firearms, and bank fraud offenses in connection with violent gang and drug trafficking conduct near the Mill Brook Houses, in the Bronx, New York.
The indictment in U.S. v. Michael White, et al. charges a total of 14 individuals, eight of whom are charged with racketeering conspiracy in connection with their membership in a gang known as “MBG” (also known as “Money Bitches Guns” and “Millbrook Gangstas”) and 11 of whom are charged with racketeering conspiracy in connection with their association with the gang known as the “Young Gunnaz,” also known as the “YGz.” The indictment in U.S. v. Gary Davis, et al. charges a total of 15 individuals, four of whom are charged with racketeering conspiracy in connection with their membership in a gang known as “Killbrook.” The indictment in U.S. v. Algi Crawford, et al. charges two individuals with bank fraud. The complaint in U.S. v. Bernard Franklin, charges one individual with heroin distribution. The complaint in United States v. James Green, 17 Mag. 7566, charges one individual with crack cocaine distribution.
A total of 24 defendants were taken into custody today; five other defendants are already in state custody on other charges. Of the 33 defendants, 23 will be presented before U.S. Magistrate Judge Katharine H. Parker later today. DAVID OQUENDO was arrested in the Northern District of New York and will be presented and arraigned in the United States District Court for the Northern District of New York later today. U.S. v. Michael White is assigned to U.S. District Judge Robert W. Sweet. U.S. v. Gary Davis is assigned to U.S. District Judge Lorna G. Schofield. U.S. v. Algi Crawford is assigned to U.S. District Judge J. Paul Oetken. U.S. v. Bernard Franklin and U.S. v. Eric Green are not yet assigned to District Judges
Acting U.S. Attorney Joon H. Kim said: “As alleged, members and associates of these gangs and crews plagued the Mill Brook Houses for a decade, engaging in violence and selling drugs. One of the victims was Bolivia Beck, a 21-year-old who was shot dead in broad daylight. Thanks to the terrific investigative work of the FBI, DEA, and NYPD, the defendants will now face justice in federal court.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “The gang members we rounded up in this case, and in many other investigations, seem to not learn the lesson that they cannot act with impunity. These gangs have a significantly negative impact on the neighborhoods where they operate, but we can’t make these arrests in a vacuum. We need the community to seize the chance at a fresh start to rebuild a safer place to live. With that said, we have had tremendous success in bringing down crime in New York City through our collaboration on the FBI NY Metro Safe Streets Task Force. We will keep focusing our resources against these gangs, and we won’t ever stop pursing the most violent criminals who look to fill the void.”
DEA Special Agent in Charge James J. Hunt said: “The drug trafficking of all three gangs around the Mill Brook Houses was a breeding ground for violence. By working collaboratively with our partners, law enforcement removed these gang members who are allegedly responsible for jeopardizing the safety of their neighbors by putting them in the middle of their turf war.”
As alleged in the Indictments and Complaint unsealed today in Manhattan federal court and in other court papers[1]:
MBG was a criminal enterprise involved in committing numerous acts of violence, including attempted murders, in the vicinity of the Mill Brook Houses in the Bronx. Members and associates of MBG enriched themselves by selling drugs, such as crack cocaine and marijuana. In particular, on or about February 4, 2013, MBG member DAVID OQUENDO attempted to murder a rival gang member in the Mill Brook Houses. On August 17, 2014, CHRISTOPHER HOWARD, a/k/a “Juju,” attempted to murder rival gang members in the Mill Brook Houses.
The YGz was a criminal enterprise involved in committing numerous acts of violence, including attempted murders, in the vicinity of the Mill Brook Houses in the Bronx. Members and associates of the YGz enriched themselves by selling drugs, such as crack cocaine and marijuana. On October 28, 2012, YGz member MICHAEL WHITE, a/k/a “Mike,” attempted to murder rival gang members, causing injuries to multiple people.
Killbrook was a criminal enterprise involved in committing numerous acts of violence, including murder and attempted murders, in the vicinity of the Mill Brook in the Bronx. Members and associates of Killbrook enriched themselves by selling drugs such as crack cocaine and marijuana. On or about April 18, 2011, Killbrook member GARY DAVIS, a/k/a “Reckless,” a/k/a “Poppa,” murdered Bolivia Beck in the Mill Brook Houses.
* * *
Charts containing the names, charges, and maximum penalties for the defendants are set forth below. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.
Mr. Kim praised the outstanding investigative work of the FBI, DEA, and NYPD.
This case is being handled by the Office’s Violent and Organized Crime Unit. Assistant United States Attorneys Jordan Estes, Drew Skinner, and Alexandra Rothman are in charge of the prosecution.
The charges contained in the Indictments and Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
United States v. Michael White, et al.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Racketeering conspiracy
18 U.S.C. § 1962(d)
MICHAEL WHITE (age 29)
JOEY COLON (age 28)
DEMETRIUS WINGO (age 25)
ANTHONY BUSH (age 27)
DAVID OQUENDO (age 27)
CHRISTIAN PEREZ (age 24)
JAMES ROBINSON (age 30)
CHRISTOPHER HOWARD (age 25)
20 years in prison
2
Racketeering conspiracy
18 U.S.C. § 1962(d)
MICHAEL WHITE
JOEY COLON
DEMETRIUS WINGO
ANTHONY BUSH
DAVID OQUENDO
CHRISTIAN PEREZ
ALLEN KNIGHT (age 28)
MIGUEL CALDERON (age 23)
JAMESE SNIPES (age 19)
WESLEY MONGE (age 20)
OSCAR BRIONES (age 20)
20 years in prison
3
Narcotics conspiracy
21 U.S.C. § 846
JOEY COLON
DEMETRIUS WINGO
ANTHONY BUSH
DAVID OQUENDO
CHRISTIAN PEREZ
JAMES ROBINSON
ALLEN KNIGHT
MIGUEL CALDERON
JAMESE SNIPES
WESLEY MONGE
OSCAR BRIONES
ROY ROBINSON (age 38)
Life in prison
Mandatory minimum of 10 years in prison
4
Violent crime in aid of racketeering
18 U.S.C. § 1959(a)(3), (5)
MICHAEL WHITE
20 years in prison
5
Violent crime in aid of racketeering
18 U.S.C. § 1959(a)(3), (5)
DAVID OQUENDO
20 years in prison
6
Violent crime in aid of racketeering
18 U.S.C. § 1959(a)(3), (5)
CHRISTOPHER HOWARD
20 years in prison
7
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence or drug trafficking crime
18 U.S.C. § 924(c )
JOEY COLON
DEMETRIUS WINGO
ANTHONY BUSH
DAVID OQUENDO
CHRISTIAN PEREZ
JAMES ROBINSON
CHRISTOPHER HOWARD
Life in prison
Mandatory minimum of 10 years in prison
8
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence or drug trafficking crime
18 U.S.C. § 924(c )
MICHAEL WHITE
ALLEN KNIGHT
MIGUEL CALDERON
WESLEY MONGE
OSCAR BRIONES
Life in prison
Mandatory minimum of 10 years in prison
9
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a drug trafficking crime
18 U.S.C. § 924(c )
ROY ROBINSON
Life in prison
Mandatory minimum of 5 years in prison
United States v. Gary Davis, et al.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Racketeering conspiracy
18 U.S.C. § 1962(d)
GARY DAVIS (age 27)
RAMEL JACKSON (age 26)
ANDREW BURRELL (age 26)
QUENTIN STARKES (age 25)
For GARY DAVIS, life in prison
For all other defendants, 20 years in prison
2
Narcotics conspiracy
21 U.S.C. § 846
ANDRE COFIELD (age 40)
PATRICK INNIS (age 39)
GARY DAVIS
RAMEL JACKSON
ANDREW BURRELL
QUENTIN STARKES
MATTHEW COOPER (age 26)
JUSTIN COOPER (age 29)
NAYSEAN CHAVIS (age 25)
HASSAN MUHAMMAD (age 20)
CHIMBA CARLOS (age 31)
WILLIAM RAY (age 27)
JEFFREY GOODRIDGE (age 30)
MICHAEL LAMAR (age 36)
LUIS GOMEZ (age 24)
Life in prison
Mandatory minimum of 10 years in prison
3
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a crime of violence or drug trafficking crime
18 U.S.C. § 924(c )
GARY DAVIS
RAMEL JACKSON
ANDREW BURRELL
Life in prison
Mandatory minimum of 10 years in prison
4
Using or carrying a firearm during and in relation to, or possessing a firearm in furtherance of, a drug trafficking crime
18 U.S.C. § 924(c )
WILLIAM RAY
Life in prison
Mandatory minimum of 5 years in prison
United States v. Algi Crawford, et al.
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Bank fraud conspiracy
18 U.S.C. § 1349
ALGI CRAWFORD (age 35)
JONATHAN GRIFFIN (age 31)
30 years in prison
2
Bank fraud
18 U.S.C. § 1344
ALGI CRAWFORD
JONATHAN GRIFFIN
30 years in prison
United States v. Bernard Franklin
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Distribution of heroin
21 U.S.C. §§ 812, 841(a)(1), 841(b)(1)(C)
BERNARD FRANKLIN (age 32)
20 years in prison
United States v. James Green
COUNT
CHARGE
DEFENDANTS
MAX. PENALTIES
1
Possession with the intent to distribute crack cocaine
21 U.S.C. §§ 812, 841(a)(1), 841(b)(1)(B)
JAMES GREEN (age 49)
40 years in prison
[1] As the introductory phrase signifies, the entirety of the text of the Indictments and Complaint constitutes only allegations, and every fact described herein should be treated as an allegation.